<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AVIALL, INC.
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(Name of Registrant as Specified in its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[AVIALL LOGO]
Aviall, Inc.
Notice of 1999 Annual Meeting
and Proxy Statement
<PAGE> 3
[AVIALL LOGO]
ERIC E. ANDERSON
Chairman, President and
Chief Executive Officer
November 12, 1999
Dear Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders to be
held at 2:00 p.m. on Thursday, December 16, 1999, at the Hotel Inter-Continental
New York, 111 East 48th Street, New York, New York. All stockholders of record
as of November 4, 1999 are entitled to vote at the Annual Meeting.
The proposals to be acted upon at the Annual Meeting include the election of
directors, the ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors for 1999, and a stockholder proposal relating
to Aviall's Stockholder Rights Plan. I hope you will carefully read these
proposals, which are described in the accompanying Proxy Statement.
It is important that your shares be represented at the Annual Meeting.
Accordingly, even if you plan to attend, please sign, date and promptly mail the
enclosed proxy card in the postage-prepaid envelope.
Sincerely,
/s/ ERIC E. ANDERSON
Eric E. Anderson
Chairman, President and Chief
Executive Officer
AVIALL, INC., 2075 Diplomat Drive, Dallas, TX 75234-8999 U.S.A.
<PAGE> 4
PROXY STATEMENT
AVIALL, INC.
2075 DIPLOMAT DRIVE
DALLAS, TEXAS 75234-8989
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being provided to you in connection with the
solicitation of proxies to be voted at the Annual Meeting of Stockholders of
Aviall, Inc. The Annual Meeting will be held on Thursday, December 16, 1999,
starting at 2:00 p.m., at the Hotel Inter-Continental New York, 111 East 48th
Street, New York, New York. Proxies are being solicited on behalf of the Board
of Directors of Aviall. This Proxy Statement and the enclosed proxy card are
first being mailed on or about November 12, 1999, to holders of Aviall's common
stock entitled to vote at the Annual Meeting.
A Proxy Committee will vote the shares of common stock represented by each
proxy card returned to Aviall. Jacqueline K. Collier, Jeffrey J. Murphy and
Cornelius Van Den Handel are the members of the Proxy Committee. Any stockholder
giving a proxy may change his or her vote at any time before it is voted at the
Annual Meeting by notifying the Secretary of Aviall in writing, by submitting a
new proxy card dated after the date of the proxy being revoked or by attending
the Annual Meeting and voting in person. Where a stockholder's proxy specifies a
choice with respect to a matter, the shares will be voted accordingly. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR
IDENTIFIED BELOW, FOR THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS AVIALL'S INDEPENDENT AUDITORS AND AGAINST THE
STOCKHOLDER PROPOSAL RECOMMENDING THAT THE BOARD OF DIRECTORS REDEEM THE RIGHTS
GRANTED UNDER AVIALL'S STOCKHOLDER RIGHTS PLAN.
PROCEDURES FOR THE ANNUAL MEETING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of common stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. Business at the Annual
Meeting will be conducted in accordance with the procedures determined by the
Chairman of the Annual Meeting and will be limited to matters properly brought
before the Annual Meeting pursuant to the procedures prescribed in Aviall's
By-Laws. Those procedures include the requirement that any stockholder who
desires either to bring a stockholder proposal before an annual meeting or to
nominate a person for election as a director at an annual meeting give written
notice to Aviall with respect to the proposal or nominee prior to the Annual
Meeting. The Chairman of the Annual Meeting may refuse to acknowledge any
stockholder proposal or any nomination for director not made in accordance with
these procedures.
The Board does not anticipate that any matters other than those described
in this Proxy Statement will be brought before the Annual Meeting. If, however,
other matters are properly brought before the Annual Meeting, proxies will be
voted by the Proxy Committee in accordance with their judgment.
RECORD DATE AND VOTING STOCK
November 4, 1999, has been set as the record date for the purpose of
determining stockholders entitled to notice of, and to vote at, the Annual
Meeting. As of the record date there were 18,271,576 shares of common stock
outstanding. Each outstanding share of common stock is entitled to one vote.
Only recordholders of common stock at the close of business on the record date
are entitled to vote at the Annual Meeting or any adjournment or postponement of
the Annual Meeting.
<PAGE> 5
A majority of the votes cast at the Annual Meeting is required to approve
the actions proposed to be taken at the Annual Meeting. Abstentions and broker
non-votes will be included in determining the number of shares of common stock
present or represented at the Annual Meeting or any adjournment or postponement
of the Annual Meeting thereof for purposes of determining whether a quorum
exists. However, abstentions with respect to any proposal brought to a vote at
the Annual Meeting will have the same effect as a vote against such proposal.
Broker non-votes are treated as shares not present for the purposes of the vote
with respect to a specific proposal and therefore will have no effect on the
outcome of the vote on any proposal.
PARTICIPANTS IN THE AVIALL EMPLOYEES' SAVINGS PLAN
If a stockholder is a participant in the Aviall, Inc. Employees' Savings
Plan and holds shares of common stock in the Savings Plan, the proxy card
represents the number of full shares of common stock held for the benefit of the
participant in the Savings Plan as well as any shares of common stock registered
in the participant's name. Thus, a proxy card for such a participant grants a
proxy for shares registered in the participant's name and serves as a voting
instruction for the trustees of the Savings Plan for the account in the
participant's name. Information as to the voting instructions given by
individuals who are participants in the Savings Plan will not be disclosed to
Aviall.
2
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Aviall has three classes of directors serving staggered three-year terms.
Richard J. Schnieders and Bruce N. Whitman are currently serving terms that
expire at the Annual Meeting. The Board has nominated Mr. Schnieders and Mr.
Whitman to continue to serve as directors for terms expiring at Aviall's annual
stockholders meeting in 2002.
Below is the name of each nominee and of each director continuing in
office, a description of positions and offices with Aviall, any other principal
occupation, business experience during at least the last five years, certain
directorships presently held, age and length of service as a director of Aviall.
THE PERSONS NAMED IN THE PROXY WILL VOTE FOR THE NOMINEES LISTED BELOW
EXCEPT WHERE AUTHORITY HAS BEEN WITHHELD.
NOMINEES FOR DIRECTOR
FOR A TERM OF OFFICE EXPIRING AT THE ANNUAL MEETING IN 2002
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<TABLE>
<S> <C> <C>
[PHOTO] RICHARD J. SCHNIEDERS Mr. Schnieders has served as an Executive
Executive Vice President of Vice President of SYSCO Corporation since
Director since 1997 SYSCO Corporation 1998. From 1992 to 1998 Mr. Schnieders was
Age 51 Chairman -- Audit Committee Senior Vice President
Member -- Compensation and Merchandising/Multi-Unit Sales of SYSCO
Nominating Corporation. He has been a director of
Committee SYSCO Corporation since 1997.
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[PHOTO] BRUCE N. WHITMAN Mr. Whitman has been an Executive Vice
Executive Vice President President of FlightSafety International,
Director since 1998 FlightSafety International, Inc. since 1962. Mr. Whitman is also a
Age 66 Inc. director of FlightSafety Boeing Training
Member -- Audit Committee International L.L.C., Petroleum
Member -- Compensation and Helicopters, Inc. and Megadata
Nominating Corporation.
Committee
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</TABLE>
3
<PAGE> 7
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2000
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<TABLE>
<S> <C> <C>
[PHOTO] ERIC E. ANDERSON Eric E. Anderson has served as Chairman of
Chairman, President and the Board of Aviall since December 1997.
Director since 1996 Chief Executive Officer He has also served as Aviall's President
Age 51 of Aviall since June 1996 and as Chief Executive
Officer since December 1996. He was the
Company's Chief Operating Officer from
June 1996 through December 1996 and was an
Executive Vice President of the Company
from February 1996 until June 1996. Mr.
Anderson was President of Inventory
Locator Service, Inc. ("ILS"), a wholly
owned subsidiary of the Company, from 1993
to 1996, and was an Executive Vice
President of ILS from 1991 to 1993.
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[PHOTO] DR. HENRY A. MCKINNELL Dr. McKinnell has served as President of
President of Pfizer Inc. Pfizer Inc. since 1999. He served as the
Director since 1993 Chairman -- Compensation and Executive Vice President of Pfizer Inc.
Age 56 Nominating prior to that, a position he had held
Committee since 1992. He has also served as a
Member -- Audit Committee director of Pfizer Inc. since 1997. He was
appointed President of Pfizer's Worldwide
Pharmaceuticals business in January 1997.
Pfizer's Worldwide Consumer Group and
Strategic Planning and Policy Group
continue to report to him. From 1992 to
1995 he served as Chief Financial Officer
of Pfizer Inc. and President of Pfizer's
Hospital Products Group. Dr. McKinnell is
also a director of John Wiley & Sons, Inc.
and The Dun & Bradstreet Corporation.
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</TABLE>
4
<PAGE> 8
DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2001
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<TABLE>
<S> <C> <C>
- ------------------- ROBERT G. LAMBERT Mr. Lambert retired as Chairman of the
Retired Chairman of the Board of Directors of Aviall in December
Director since 1993 Board of Aviall 1997, a position he had held since
Age 69 Member -- Audit Committee December 1993. He served as the Company's
President from December 1995 to June 1996
and as Chief Executive Officer from
December 1995 to December 1996.
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- ------------------- DR. DONALD R. MUZYKA Dr. Muzyka has served as President and
President and Chief Chief Executive Officer of Special Metals
Director since 1994 Executive Officer of Corporation ("SMC") since October 1996. He
Age 61 Special Metals Corporation served as President and Chief Operating
Member -- Audit Committee Officer of SMC from January 1990 to
Member -- Compensation and October 1996. Dr. Muzyka is also a
Nominating director of SMC and CSM Industries, Inc.
Committee
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</TABLE>
5
<PAGE> 9
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Board of Directors. The Board currently consists of six members. During
1998, the Board of Directors held seven meetings. The Board has established
standing Audit and Compensation and Nominating Committees to assist the Board in
the discharge of its responsibilities. The Board may also appoint other
committees for specialized functions as appropriate. All of the Directors of
Aviall are independent directors (as that term is defined in Aviall's By-Laws)
other than Messrs. Anderson and Lambert. Aviall's By-Laws provide that a
majority of the Board and each member of the Compensation and Nominating
Committee be an independent director. Each current Director attended all of the
Board and applicable committee meetings held in 1998.
Audit Committee. The members of the Audit Committee are Mr. Schnieders
(Chairman), Mr. Lambert, Dr. McKinnell, Dr. Muzyka and Mr. Whitman. The Audit
Committee met four times in 1998. The Audit Committee is responsible for
recommending an accounting firm to serve as Aviall's independent auditors,
reviewing the annual audit of Aviall, reviewing audit and any nonaudit fees paid
to Aviall's independent auditors, reviewing the scope and results of internal
audit activities and reviewing compliance with Aviall's conflict of interest and
business ethics policies as well as compliance with major regulatory
requirements. The Audit Committee reports its findings and recommendations to
the Board for appropriate action.
Compensation and Nominating Committee. The members of the Compensation and
Nominating Committee are Dr. McKinnell (Chairman), Dr. Muzyka, Mr. Schnieders
and Mr. Whitman. During 1998, the Compensation Committee met six times. The
Compensation Committee supervises Aviall's compensation policies, administers
incentive plans, reviews officers' salaries and bonuses, approves significant
changes in employee benefits and recommends to the Board such other forms of
compensation as it deems appropriate. The Compensation Committee also considers
nominations for prospective Board members. The Compensation Committee considers
nominees recommended by other directors, stockholders and management who provide
the Board with information with respect to a suggested candidate for Board
membership. Written nominations by stockholders for directors will be
considered, provided they are received by the Secretary of Aviall at its
principal executive offices pursuant to timely advance written notice in
accordance with Aviall's By-Laws (not less than 70 days nor more than 90 days
prior to the first anniversary of the previous year's annual meeting, subject to
certain exceptions) and contain all information specified in such By-Laws,
including the identity and address of the nominating stockholder, the class and
number of shares of common stock which are owned by such stockholder and all
information regarding the proposed nominee that would be required to be included
in a proxy statement soliciting proxies for the proposed nominee. Aviall's
By-Laws also provide that all members of the Compensation Committee shall be
independent directors who are not otherwise affiliated with Aviall. The report
by the Compensation Committee discussing compensation for Aviall's senior
executives appears elsewhere in this Proxy Statement.
6
<PAGE> 10
COMPENSATION OF DIRECTORS
Directors who are not employees of Aviall are entitled to receive an annual
retainer of $24,375 (the "Annual Retainer"), plus $1,000 for each Board or
committee meeting attended. Directors who are employees of Aviall or any of its
subsidiaries do not receive any fees for their Board or committee service.
Directors are also reimbursed for expenses incurred in attending Board and Board
committee meetings.
Directors who are not employees of Aviall are eligible to participate in
Aviall's Directors Stock Plan. Under the Directors Stock Plan, each eligible
director may make an election to receive shares of common stock in lieu of the
Annual Retainer. All eligible directors participated in the Directors Stock Plan
during 1998 and elected to participate in 1999. The number of shares of common
stock granted to a participant is the nearest number of whole shares of common
stock which can be purchased for $30,000 (the "Share Value"), based on the mean
of the highest and lowest sale price for the common stock on the grant date as
reported on the New York Stock Exchange. In the event that there is an increase
or decrease in the Annual Retainer, the Share Value adjusts automatically so
that the ratio between the Share Value and the Annual Retainer is maintained.
Under the Directors Stock Plan, common stock is granted automatically on the
first business day in July of any calendar year to each eligible director who
has elected to participate in the Directors Stock Plan at least six months prior
to that date.
A director who receives a grant of common stock pursuant to the Directors
Stock Plan is entitled to receive dividends on and to vote such shares. However,
the director's ownership rights in such shares do not vest until six months
after the date of grant and then only if the director continues to serve on the
Board at that date. However, a participating director who has completed a full
term of service prior to the end of such six-month period, or whose service
during such six-month period was interrupted due to death or disability, will be
vested in a pro rata number of such shares.
Further, under the Directors Stock Plan, non-employee directors are
eligible to receive options to purchase up to 3,000 shares of Aviall common
stock on the first trading day of July each year. No options were granted to
directors in 1998 or 1999.
7
<PAGE> 11
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of October 22, 1999, the directors of Aviall, the Chief Executive
Officer of Aviall, the other four most highly compensated executive officers of
Aviall at December 31, 1998 and all current directors and executive officers of
Aviall as a group, beneficially owned common stock as set forth in the following
table. For purposes of this Proxy Statement, Eric E. Anderson, Jacqueline K.
Collier, Charles M. Kienzle, Bruce Langsen and Jeffrey J. Murphy are referred to
as the "named executive officers."
<TABLE>
<CAPTION>
TOTAL SHARES
NAME OWNED SHARES(1) OPTION SHARES(2) BENEFICIALLY OWNED(3)
- ---- --------------- ---------------- ---------------------
<S> <C> <C> <C>
Eric E. Anderson(4)........................... 29,238 272,749 301,987
Robert G. Lambert(5).......................... 19,639 140,000 159,639
Henry A. McKinnell............................ 12,172 -- 12,172
Donald R. Muzyka.............................. 9,791 -- 9,791
Richard J. Schnieders......................... 5,845 -- 5,845
Bruce N. Whitman.............................. 13,845 -- 13,845
Jacqueline K. Collier(6)...................... 7,707 57,272 64,979
Charles M. Kienzle(7)......................... 10,498 116,693 127,191
Bruce Langsen(8).............................. 13,302 69,272 82,574
Jeffrey J. Murphy(9).......................... 24,557 158,909 183,466
All current directors and executive officers
as a group (12 persons)..................... 161,232 891,082 1,052,314
</TABLE>
- ---------------
1. Represents shares of common stock owned by such individuals, including
shares owned pursuant to the Aviall's Employees' Savings Plan and the
Directors Stock Plan. For each of Messrs. Lambert, McKinnell, Muzyka,
Schnieders and Whitman, includes 1,649 shares of restricted stock issued
under the Directors Stock Plan for which these directors have sole voting
power and no investment power.
2. Represents shares that may be acquired within 60 days of October 22, 1999,
through the exercise of stock options.
3. Unless otherwise noted, the holders of the shares of common stock included
in this table have sole voting and investment power with respect to all such
shares. As of October 22, 1999, Mr. Anderson beneficially owned 1.6% of
Aviall's outstanding common stock. As of this date, no other director or
named executive officer beneficially owned one percent or more of the
outstanding common stock. All current directors and executive officers as a
group beneficially owned approximately 5.5% of the outstanding common stock
as of October 22, 1999.
4. Includes 14,266 shares of common stock held jointly by Mr. Anderson and his
spouse and 200 shares held by Mr. Anderson's children. Mr. Anderson has
shared voting and investment power with respect to the shares held jointly
with his spouse. Mr. Anderson disclaims beneficial ownership of his
children's shares. Also includes 6,795 shares of restricted common stock for
which Mr. Anderson has sole voting power and no investment power.
5. Includes 225 shares of common stock held in trust for the benefit of Mr.
Lambert's children. Mr. Lambert is a co-trustee of such trust and has shared
voting and investment power with respect to such shares. Mr. Lambert
disclaims beneficial ownership of the 225 shares held in trust.
6. Includes 2,451 shares of restricted common stock for which Ms. Collier has
sole voting power and no investment power.
7. Includes 874 shares of restricted common stock for which Mr. Kienzle has
sole voting power and no investment power.
8. Includes 5,386 shares of restricted common stock for which Mr. Langsen has
sole voting power and no investment power.
9. Includes 9,769 shares of common stock held jointly by Mr. Murphy and his
spouse. Mr. Murphy has shared voting and investment power with respect to
these shares. Also includes 4,088 shares of restricted common stock for
which Mr. Murphy has sole voting power and no investment power.
8
<PAGE> 12
The following table sets forth information regarding the number and
percentage of shares of common stock held by all persons and entities who are
known by Aviall to beneficially own five percent or more of Aviall's outstanding
common stock. The information regarding beneficial ownership of common stock by
the entities identified below is included in reliance on a report filed with the
Securities and Exchange Commission by such entity, except that the percentage is
based upon Aviall's calculations made in reliance upon the number of shares
reported to be beneficially owned by such entity in such report and the number
of shares of common stock outstanding on November 4, 1999.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
---------------- ----------------------- --------
<S> <C> <C>
Neuberger & Berman, LLC 2,790,900 15.3%(1)
Nolan Acquisition Partners and 1,589,329 8.7%(2)
Aerogroup I Ltd. Co.
</TABLE>
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1. According to a Schedule 13G filed by Neuberger & Berman, LLC on February 9,
1999, Neuberger & Berman has sole voting power with respect to 1,511,800
shares of common stock, shared voting power with respect to 1,244,900 shares
of common stock and shared dispositive power with respect to 2,790,900 shares
of common stock. In the Schedule 13G, Neuberger & Berman reported that it
acts as an investment manager for various funds which hold the shares in the
ordinary course of business, that it does not have any economic interest in
the shares, that the actual owners of such shares are its clients and its
clients have the sole right to receive and the power to direct the receipt of
dividends or proceeds from the sale of the shares. The business address of
Neuberger & Berman, LLC is 605 Third Ave., New York, New York 10158-3698.
2. According to a Schedule 13D filed on October 20, 1999 by Nolan Acquisition
Partners, Nolan Acquisition Group, L.P., Kincaid Capital Group, Thomas R.
Kincaid, Dan Komnenovich, Richard Jones, Conese Capital, L.L.C., Conese
Family Partnership (Nevada), L.P., Conese General Partner (Nevada), Inc., and
Eugene P. Conese (collectively, the "Nolan Group"), and Aerogroup I, Ltd.
Co., Aeroequity, Inc. and Brian H. Rowe (collectively, the "Rowe Group"),
Nolan Acquisition Partners has sole voting and dispositive power with respect
to 1,452,900 shares of common stock and Aerogroup I Ltd. Co. has sole voting
and dispositive power with respect to 136,429 shares of common stock. The
other members of the Nolan Group share voting and dispositive power with
respect to the 1,452,900 shares of common stock and the other members of the
Rowe Group share voting and dispositive power with respect to the 136,429
shares of common stock. The business address of Nolan Acquisition Group,
L.P., Kincaid Capital Group, Mr. Kincaid, Mr. Komnenovich and Mr. Jones is
125 East John Carpenter Freeway, Suite 190, Irving, Texas 75062. The business
address of Conese Capital, L.L.C., Conese Family Partnership (Nevada), L.P.
and Conese General Partner (Nevada), Inc. is 101 Convention Center Drive,
Suite 850, Las Vegas, Nevada 89109. The business address of Mr. Conese is 55
Alhambra Plaza, Suite 600, Coral Cables, Florida 33134. The business address
of Aerogroup I Ltd. Co., Aeroequity, Inc. and Brian H. Rowe is 7414 Hodgson
Memorial Drive, Suite B, Savannah, Georgia 31406.
9
<PAGE> 13
COMPENSATION AND NOMINATING COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation and Nominating Committee has responsibility for Aviall's
executive compensation practices and policies. The Committee is currently
composed of four outside directors who are not officers or employees of Aviall
or its subsidiaries. The Committee members are not eligible to participate in
the compensation plans or programs administered by the Committee.
EXECUTIVE PAY POLICY
The Company's compensation programs are intended to attract, retain and
motivate the key people necessary to lead Aviall to achieve its strategic
objective of increased stockholder value over the long term, reflecting the
Committee's belief that executive compensation should seek to align the
interests of Aviall's executives with those of its stockholders. The program
utilizes three components: base salary, short-term incentives and long-term
compensation in the form of both stock options and restricted stock.
During 1997, the Compensation Committee engaged an outside consulting firm
to survey compensation practices of companies in similar businesses and to make
recommendations regarding compensation in 1998 for Aviall's chief executive
officer. The consulting firm selected a survey group comprised of companies in
aviation/industrial manufacturing, repairs and distribution businesses. The
survey data was adjusted for the relative size of the companies surveyed. In
connection with its review, compensation for Aviall's chief executive officer,
as well as its other executive officers, was assessed against the practices of
the survey group. In establishing base salaries, the Compensation Committee has
adopted a strategy of setting executive salaries below market while providing
incentive compensation pay opportunities targeted above market, based on
targeted performance achievement. The Compensation Committee set the salary
ranges in this manner to ensure that Aviall's base salary practices do not put
it at a competitive disadvantage in retaining and attracting key executives
while ensuring an appropriate cost structure for Aviall.
The Committee believes that its current mix of a base salary and
significant long- and short-term performance-based compensation which can be
earned by the Company's executive officers will increase long-term stockholder
value.
BASE SALARY
As part of the compensation review discussed above, the Compensation
Committee compared Mr. Anderson's base salary to chief executive officers at the
companies in the survey group. Based upon the Compensation Committee's
recommendation, in December 1997 the Board approved an increase in Mr.
Anderson's annual base salary for 1998 from $200,000 to $300,000. Mr. Anderson's
base salary was determined by reference to the median salary of chief executive
officers of the companies in the survey group described above. The base salaries
of three other executive officers were also increased to a lesser degree.
SHORT-TERM INCENTIVE PROGRAM
Under the 1998 short-term incentive program, Mr. Anderson was eligible to
receive an aggregate bonus award of up to 150% of his base salary subject to the
Company meeting specific earnings objectives. Each of Aviall's other executive
officers were eligible to earn a bonus award of up to either 150% or 120% of his
or her base salary. These bonus awards were payable two-thirds in cash and
one-third in restricted stock. In January 1999, Mr. Anderson was awarded a cash
bonus of $182,398 and was granted 6,795 shares of restricted common stock. The
restricted stock vests on the third anniversary of the grant date, and are
otherwise subject to the terms of the Company's 1998 Stock Incentive Plan.
10
<PAGE> 14
STOCK OPTIONS
The Stock Incentive Plan is administered by the Board and the Committee and
is designed to provide incentive compensation to Aviall's executive officers and
other key management personnel. The grants are long-term incentives for future
performance, which are designed to align the interests of management with those
of Aviall's stockholders.
At its March 1998 meeting, the Committee approved grants of stock options
to certain executive officers and key employees, including a grant to Mr.
Anderson of options to purchase 75,000 shares. The number of options granted to
specific individuals was dependent on the individual's current performance
potential for promotion and expected impact on the future performance of Aviall.
All grants were made at fair market value at the time of grant. One third of
these options vest each year commencing on the first anniversary of the grant.
STOCK OWNERSHIP
At the recommendation of the Committee in 1993, the Board approved
voluntary executive stock ownership guidelines for Aviall's chief executive
officer, executive officers and certain other executives. The guidelines are
intended to encourage executives to become substantial stockholders. Under the
guidelines, Aviall's chief executive officer is expected to own shares of common
stock with an aggregate value of three times his or her then-current base salary
within five years of appointment to such position. Within such time period, all
other executive officers are expected to own shares of common stock with a value
of 1.5 times their base salary and the remaining executives are expected to own
shares having a value of one-half times their annual base salary. The Committee
periodically reviews the progress of Mr. Anderson and the other executives of
the Company against these guidelines.
The Committee has reviewed the potential impact of the $1 million deduction
limitation on executive compensation for the top five executives which was
implemented as part of the Omnibus Budget Reconciliation Act of 1993. The
Committee currently believes that no action is necessary at this time. The
Compensation Committee intends to continue to evaluate Aviall's potential
exposure to the deduction limitation on an annual basis.
This report is submitted by the members of the Compensation and Nominating
Committee of the Board.
THE COMPENSATION AND NOMINATING COMMITTEE OF THE BOARD
<TABLE>
<S> <C> <C> <C>
Henry A. McKinnell Donald R. Muzyka Richard J. Schnieders Bruce N. Whitman
Chairman
</TABLE>
11
<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation paid
or accrued for the benefit of the named executive officers for services rendered
to Aviall during Aviall's last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------- -----------------------------------
OTHER ANNUAL RESTRICTED SHARES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARDS(2) OPTIONS/SARS(3) COMPENSATION(4)
- --------------------------- ---- -------- -------- --------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eric E. Anderson 1998 $300,000 $182,398 $ -- $ 76,019 75,000 $ 400
President and 1997 199,615 200,000 31,507 148,750 75,000 25,569
Chief Executive Officer 1996 174,904 247,716 -- -- 250,000 31,088
Jacqueline K. Collier 1998 125,000 65,799 -- 27,421 25,000 400
Vice President and
Controller 1997 116,800 93,440 -- 69,496 25,000 400
1996 116,800 113,134 -- -- 10,000 400
Charles M. Kienzle 1998 175,000 23,450 -- 9,778 30,000 400
Senior Vice President, 1997 175,000 175,000 -- 130,156 35,000 400
Operations 1996 171,346 233,019 -- -- 25,000 400
Bruce Langsen 1998 168,269 144,580 -- 60,256 40,000 400
President of ILS 1997 140,769 141,264 -- 105,062 45,000 400
1996 113,800 156,498 -- -- 18,000 400
Jeffrey J. Murphy 1998 177,000 109,739 -- 45,735 30,000 540
Senior Vice President, 1997 177,000 177,000 -- 131,644 35,000 525
Law and Human Resources, 1996 177,000 253,110 -- -- 25,000 511
Secretary and General
Counsel
</TABLE>
- ---------------
1. Includes amounts reimbursed for the payment of income taxes related to
relocation expenses paid by the Company and taxable to Mr. Anderson. Other
perquisites and personal benefits furnished to the named executive officers
do not meet the disclosure thresholds established under SEC regulations and
are not included in this column.
2. The grants of restricted stock are not currently vested. These grants will
vest on the third anniversary of the grant date. Recipients of restricted
stock awards are entitled to receive any dividends paid with respect to
these shares. The dollar amounts shown for 1998 in the table above were
determined based upon a price of $11.1875 per share, the closing price of
the common stock on January 26, 1999, the grant date. The dollar amounts
shown for 1997 were based upon a price of $14.875 per share, the closing
price of the common stock on January 2, 1998, the first trading day
following the grant date. As of December 31, 1998, the aggregate number of
shares of restricted stock and their value (based upon a price of $11.75,
the closing price of common stock on December 31, 1998) held by each named
executive officer was as follows: Mr. Anderson, 16,795 restricted shares and
$197,341; Ms. Collier, 7,123 restricted shares and $83,695; Mr. Kienzle,
9,624 restricted shares and $113,082; Mr. Langsen, 12,449 restricted shares
and $146,276; and Mr. Murphy, 12,938 restricted shares and $152,022.
3. Grants of stock options vest one-third each year commencing on the first
anniversary of the grant. No named executive officer received stock options
granted in tandem with SARs in 1997 or 1998. All options granted to the
named executive officers in 1996 were granted in tandem with a limited SAR.
4. For 1998 this column includes (a) contributions to Aviall's Employees'
Savings Plan in the amount of $400 for each named executive and (b) premiums
for compensatory split-dollar insurance payments in the amount of $140 for
Mr. Murphy.
SEVERANCE ARRANGEMENTS
Aviall is a party to Severance Agreements with its executive officers,
including each of the named executive officers, that become operative only upon
a change of control. The Severance Agreements provide that if, within a two-year
period following a change of control, Aviall terminates the employment of such
executive for reasons other than death, disability or cause, or the executive
terminates employment with Aviall for good reason, the executive is entitled to
receive a severance payment in an amount equal to a multiple of his or her (a)
then-current base salary, and (b) an amount equal to the greater of the
executive's (1) incentive compensation for the current fiscal year (assuming the
Company had reached target performance for that year), or (2) incentive
compensation paid or payable to the executive for the most recently completed
fiscal year. The executive is also entitled to continue to receive health and
life insurance benefits for a period of one year following his or her
termination following a change of control. The Severance
12
<PAGE> 16
Agreements further provide that if any amount payable thereunder or otherwise to
the executive is determined to be an "excess parachute payment" under the
Internal Revenue Code, such executive would be entitled to receive an additional
payment (net of income taxes) to compensate such executive for the excise tax
imposed by the Code on such payment. The multiple of base salary and incentive
compensation referred to above is two or three times for each of the named
executive officers.
Aviall maintains a Severance Pay Plan for the benefit of all full-time
employees, including executive officers. The Severance Pay Plan provides that if
Aviall terminates an eligible employee's employment for any reason other than
cause, the employee is entitled to receive severance pay in an amount determined
in accordance with the terms of the plan. For executive officers, the severance
pay is an amount equal to two times (a) the executive's then-current base salary
and (b) the greater of (1) the executive's target incentive payment for the year
in which his employment was terminated and (2) the executive's incentive payment
for the most recently completed fiscal year. Payments under the Severance Pay
Plan are made in installments (a two-year period for executive officers) unless
the employee's employment is terminated within one year following a change in
control. In that circumstance, the severance payment is made in a lump sum. The
Severance Pay Plan provides that in the event that an employee is terminated
under circumstances in which he is entitled to receive severance payment under
any written agreement (including the Severance Agreements referred to in the
preceding paragraph), he is not entitled to receive the benefits intended to be
provided under the Severance Pay Plan.
OPTION/SAR GRANTS IN 1998
The following table provides information regarding the grant of stock
options to the named executive officers in 1998. In addition, hypothetical gains
of 5% and 10%, along with a third column representing a 0% gain (listed in the
table under "Potential Realizable Value at Assumed Annual Rates of Stock Price
Appreciation for Option Term"), are shown for these stock options. These
hypothetical gains are based on assumed rate of annual compound stock price
appreciation of 0%, 5% and 10% from the date the stock options were granted over
the full option term of ten years.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENTAGE OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS/ OF STOCK PRICE
UNDERLYING SARS APPRECIATION
OPTIONS/ GRANTED TO EXERCISE FOR OPTION TERM
SARS EMPLOYEES PRICE PER EXPIRATION -----------------------------
NAME GRANTED(1) IN 1998 SHARE(2) DATE 0% 5% 10%
---- ---------- --------------- --------- ---------------- --- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Eric E. Anderson 75,000 18.3% $14.7813 March 16, 2008 $0 $697,191 $1,766,819
Jacqueline K. Collier 25,000 6.1% 14.7813 March 16, 2008 0 232,397 588,940
Charles M. Kienzle 30,000 7.3% 14.7813 March 16, 2008 0 278,876 706,728
Bruce Langsen 40,000 9.7% 14.7813 March 16, 2008 0 371,835 942,303
Jeffrey J. Murphy 30,000 7.3% 14.7813 March 16, 2008 0 278,876 706,728
</TABLE>
- ---------------
1. Each of the options shown in the table above vest one third each year,
beginning on the first anniversary of the date of the grant. Of the options
granted in 1998 (a) to Ms. Collier, 7,900 options are incentive stock options
and (b) to all other named executive officers, 6,964 options are incentive
stock options. All other options granted in 1998 to the named executive
officers are non-qualified stock options. No options granted to the named
executive officers in 1998 were granted in tandem with SARs.
2. The fair market value of the shares using the average of the high and low
trading prices on the date of grant.
13
<PAGE> 17
AGGREGATED OPTION/SAR EXERCISES IN 1998
AND DECEMBER 31, 1998 OPTION/SAR VALUES
The following table provides information, for each of the named executive
officers, regarding the exercise of Aviall options during 1998 and unexercised
options held as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT DECEMBER 31, 1998(1) DECEMBER 31, 1998(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric E. Anderson 7,266 $13,316 155,999 292,251 $195,718 $154,751
Jacqueline K. Collier -- -- 37,289 45,150 45,684 24,675
Charles M. Kienzle -- -- 86,643 61,951 103,060 36,713
Bruce Langsen -- -- 34,969 76,271 58,652 44,416
Jeffrey J. Murphy -- -- 128,859 61,951 194,453 40,963
</TABLE>
- ---------------
1. The number of unexercised options includes shares of common stock that may
be issued upon the exercise of replacement options that were granted in
December 1993 pursuant to an agreement entered into by Ryder System, Inc.
and Aviall in connection with the spin-off distribution by Ryder of all of
Aviall's common stock to the stockholders of Ryder (which agreement was
approved by the Board prior to the spin-off, at which time a majority of
Aviall's directors were executive officers of Ryder). The number of Aviall
options that were granted to replace the Ryder options was determined by
reference to the market value of Ryder's shares and Aviall's common stock in
order to preserve the economic value of the optionee's Ryder options. Each
replacement option has the same vesting status and remaining time period for
exercise as the corresponding Ryder options.
2. Based on a price of $11.6875 per share of Aviall's common stock, using the
average of the high and low trading prices on December 31, 1998.
14
<PAGE> 18
RETIREMENT BENEFITS
Aviall and certain of its subsidiaries maintain certain pension plans in
which Aviall's executive officers participate.
Aviall covers substantially all regular domestic full-time employees under
the Aviall, Inc. Retirement Plan. Benefits payable under the Retirement Plan are
based on an employee's career earnings with Aviall and its subsidiaries. At
normal retirement age of 65, a participant is entitled to a monthly pension
benefit payable for life. The annual pension benefit, when paid in the form of a
life annuity with no survivor's benefits, is generally equal to the sum of 1.45%
of the first $15,600 of compensation and bonus received, plus 1.85% of the
portion of the compensation and bonus in excess of $15,600 during each such year
while a Retirement Plan member.
Retirement Plan benefits vest at the earlier of the completion of five
years of credited service or upon reaching age 65. However, that in the event of
a change of control of Aviall, all participants will be fully vested and the
term "accrued benefit" will include the value of early retirement benefits for
any participant age 45 or above or with 10 or more years of service. These
benefits are not subject to any reduction for Social Security benefits or other
offset amounts. An employee's pension benefits may be paid in certain
alternative forms having actuarially equivalent values.
The maximum annual benefit under a qualified pension plan is currently
$130,000 beginning at the Social Security retirement age (currently age 65). The
maximum compensation and bonus that may be taken into account in determining
annual retirement accruals is currently $160,000. Aviall maintains a
non-qualified, unfunded benefit plan, called the Benefit Restoration Plan, which
covers those participants of the Retirement Plan, including those described
below, whose benefits are reduced by the Internal Revenue Code or other United
States laws. A participant in the Benefit Restoration Plan is entitled to a
benefit equaling the difference between the amount of benefits the participant
is entitled to without reduction and the amount of benefits the participant is
entitled to after the reductions.
Except as described below, the following table sets forth estimated annual
pension benefits (in the form of a single life annuity) assuming each named
executive officer remains continuously employed at current compensation levels
until retirement at the normal retirement date (age 65).
<TABLE>
<CAPTION>
NAME AMOUNT(1)
- ---- ---------
<S> <C>
Eric E. Anderson............................................ $114,128
Jacqueline K. Collier....................................... 60,780
Charles M. Kienzle.......................................... 83,814
Bruce Langsen............................................... 58,302
Jeffrey J. Murphy........................................... 72,484
</TABLE>
- ---------------
1. These amounts include benefits under the Retirement Plan and the Benefit
Restoration Plan combined.
15
<PAGE> 19
STOCK PERFORMANCE
The following graph compares the cumulative stockholder return on Aviall's
common stock with the S&P 500 Stock Index and the S&P SmallCap Aerospace/Defense
Index. The comparison assumes $100 was invested as of January 1, 1994 and the
reinvestment of all dividends.
COMPARISON OF CUMULATIVE STOCKHOLDER RETURN
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
31-DEC-93 31-DEC-94 31-DEC-95 31-DEC-96 31-DEC-97 31-DEC-98
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVIALL 100 50.20 62.03 61.21 98.83 77.75
S&P 500 100 101.32 139.40 171.40 228.59 293.91
S&P SMALLCAP AEROSPACE/DEFENSE 100 97.89 111.33 158.81 196.21 237.99
</TABLE>
16
<PAGE> 20
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 2)
On March 15, 1999, upon recommendation of the Audit Committee, the Board
unanimously selected, subject to ratification by Aviall's stockholders,
PricewaterhouseCoopers LLP to continue to serve as independent auditors for
Aviall and its subsidiaries for the fiscal year ending December 31, 1999.
PricewaterhouseCoopers has served as Aviall's independent auditors since 1994.
Representatives of PricewaterhouseCoopers are expected to be present at the
Annual Meeting and will have the opportunity to make statements and to respond
to appropriate questions raised at the Annual Meeting.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS AS INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSAL
(PROPOSAL NO. 3)
Thomas R. Kincaid, c/o Nolan Acquisition Partners, 125 East John Carpenter
Freeway, Suite 190, L.B.9, Irving, Texas 75062, has submitted the following
proposal and supporting statement for inclusion in this Proxy Statement and
stated his intention to present this proposal at the Annual Meeting.
PROPOSAL
RESOLVED, that it is recommended that the Board of Directors redeem the
"poison pill" rights granted under the 1993 Rights Agreement dated as of
December 7, 1993, terminate such Rights Agreement and not create or adopt any
new "poison pill" rights plan unless such action is approved by the affirmative
vote of the holders of a majority of the outstanding shares of voting stock of
the Company.
SUPPORTING STATEMENT
The proponent, Thomas R. Kincaid, together with certain other beneficial
owners of the Company's stock that have agreed to act as a group (the "Nolan
Group"), beneficially own over 1.4 million shares, or approximately 8% of the
Company's outstanding stock. The proponent believes that the Company's "poison
pill" Rights Plan is not in the stockholders' interest.
In 1993, the Company declared a dividend of "poison pill" rights that allow
the Company's Board of Directors to reject a takeover offer or significant
acquisition of shares it deems undesirable. Unless redeemed by the Board, the
acquisition by a person of 10% or more of the Company's stock or announcement of
a tender offer would trigger the "poison," diluting the value and voting power
of such person's holdings, making the proposed takeover or share acquisition
uneconomical.
The proponent believes that "poison pill" devices generally serve to
entrench and insulate managements of underperforming companies by deterring
credible acquisition proposals. In February 1999, the Company announced its
intention to explore "possible strategic alternatives," including a possible
sale of the Company. To date, management has been unable or unwilling to enter
into any such transaction. Moreover, since that announcement, the Company's
earnings and share price have deteriorated substantially. We believe that a
message must be delivered: the stockholders are displeased with the direction of
the Company, frustrated by its failure to perform or enter into a strategic
transaction and oppose the "poison pill" that we believe discourages a
transaction that is most needed.
Supporters of "poison pills" argue that they deter abusive takeover
tactics. Even if these arguments are true in some circumstances, with respect to
our Company, we are significantly more concerned about its chilling effects on
credible acquisition or restructuring opportunities. As an example, in March
1999 the Nolan Group offered to buy the Company at $15.50 per share. This offer
expired without substantive discussion because the group was unwilling to accept
what it believed to be overreaching terms demanded by the Company's Board to
move forward with our acquisition offer (i.e., including a "standstill" that
would have
17
<PAGE> 21
prohibited, among other things, buying more shares or initiating a proxy
contest). Because of the Company's "poison pill," the option of presenting an
offer directly to our fellow stockholders was foreclosed. Although the Nolan
Group does not have any present plan to launch a tender offer, we believe
stockholders should have the right to accept or reject any offer made to them.
We urge your support.
RESPONSE OF YOUR BOARD IN OPPOSITION TO THE PROPOSAL
Your Board of Directors believes that the rights granted under the 1993
Rights Agreement (the "Rights Plan") are an appropriate and effective mechanism
to maximize the value of the Company's stock in the context of a potential
takeover of the Company and that the Company's stockholders are best served by
the existence of the Rights Plan.
The purpose of the Rights Plan is to protect the interests of all of the
Company's stockholders. The Rights Plan allows your Board to negotiate more
effectively with a potential acquirer on behalf of all stockholders. The Rights
Plan is designed to protect against attempts to acquire the Company for an
inadequate price and other abusive practices that do not treat all stockholders
equally. In particular, the Rights Plan is intended to:
- mitigate against persons who through open market and/or private purchases
of Aviall's common stock may attempt to achieve a position of substantial
influence or control over your Company without paying a control premium
to Aviall's stockholders;
- restrict self dealing by a substantial stockholder;
- reduce the risk of coercive two-tiered, front-end loaded or partial
offers which may not offer fair value to all stockholders; and
- preserve your Board's negotiating position and flexibility to deal with
third parties and to otherwise seek to maximize value for all
stockholders.
The proponent contends that rights plans generally serve to deter credible
acquisition proposals and that the Rights Plan has had a chilling effect on
credible acquisition opportunities. There is no evidence that the Rights Plan
has in any way deterred credible acquisition proposals or had any sort of
negative effect on the business plans of the Company. In fact, empirical studies
demonstrate quite the contrary. Studies show that companies with rights plans
receive higher takeover premiums than those without such plans and that rights
plans do not decrease the likelihood that takeover bids will be made or
completed.
For example, a 1997 report by Georgeson & Company, Inc., a nationally
recognized proxy solicitation and investor relations firm, found that:
- premiums paid to companies with rights plans were on average 8% higher
than premiums paid to purchase target companies that did not have such
rights plans;
- the presence of a rights plan did not increase the likelihood that a
hostile takeover bid would be defeated or that a friendly bid would be
withdrawn; and
- a rights plan does not reduce the likelihood that a company would become
a takeover target.
During 1999, the Company undertook a review of strategic alternatives,
which included the possible sale of the Company. Your Board conducted this
review in the best interests of the Company and all stockholders in seeking to
maximize stockholder value. Your Board has not entered into a transaction as a
result of this review because it does not believe it has been presented with a
legitimate offer that is in the best interests of all stockholders. The Rights
Plan has not frustrated this process, nor has it discouraged any transaction.
One of the advantages of the Rights Plan is that it allows the Board to
determine whether a bidder is making a credible offer to acquire the Company. In
his proposal, the proponent made reference to a proposal made by the Nolan Group
to purchase your Company. What the proponent did not disclose was that the Nolan
Group proposal was highly conditional, being subject not only to a satisfactory
due diligence review, but
18
<PAGE> 22
to the receipt by the Nolan Group of both debt and equity financing to complete
the transaction. The Nolan Group was afforded the opportunity to make an offer
to acquire the Company on the same terms as any other interested party. Indeed,
the Company contacted the Nolan Group on several occasions and requested Nolan
to provide more details regarding its proposal, including sources of financing
and due diligence requirements. The Nolan Group declined the Company's requests
to clarify its proposal. The Nolan Group has also been afforded several
opportunities to meet with the Board to express its views as to management and
the strategic direction of the Company. Despite this access, the Nolan Group has
not made an offer for the Company that will provide a premium to stockholders,
nor has it attempted to conduct a proxy contest for control of the Company. In
fact, the Nolan Group declined to make any acquisition offer whatsoever. The
Nolan Group did propose that its representatives be appointed to the Board and
that one of its representatives serve as chairman, with senior management
reporting directly to him. The Company's Rights Plan does not prohibit the Nolan
Group or any other interested party from making an acquisition proposal, nor
does it deter the initiation of a proxy contest.
Your Board's commitment has always been to serve the best interests of all
of our stockholders. Your Board believes that the Rights Plan better enables the
Board to fulfill its fiduciary duty to act in the best interests of all
stockholders. As fiduciaries, your directors have an obligation to consider all
offers for the Company. The Rights Plan is not an entrenchment device for
management. The Rights Plan provides your Board with adequate time and
flexibility to negotiate on behalf of all the Company's stockholders and
enhances the Board's ability to negotiate the highest possible offer from a
potential acquirer, develop alternatives which may better maximize stockholder
value, preserve the long-term value of the Company for the stockholders, and
ensures that all stockholders are treated fairly. Again, the Rights Plan would
not prevent a takeover on terms fair and equitable to all stockholders, nor is
it intended as a deterrent to a stockholder's initiation of a proxy contest.
Indeed, at such time as the Board determines that an offer adequately reflects
the value of the Company and is in the best interests of all stockholders, it
may redeem the Rights Plan.
ACCORDINGLY, YOUR BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of the Company's common stock, to file with the SEC initial
reports of ownership and reports of changes in ownership of the common stock
beneficially owned by them. Directors, executive officers and greater than 10%
stockholders are required to furnish the Company with copies of all Section
16(a) reports that they file with the SEC.
To the Company's knowledge, based solely on review of copies of such
reports furnished to the Company or written representations from certain
reporting persons, during the year ended December 31, 1998, all Section 16(a)
filing requirements applicable to the directors, executive officers and greater
than 10% stockholders were complied with by such persons.
COST OF SOLICITING PROXIES
The cost of solicitation of proxies, including expenses to prepare and mail
this Proxy Statement, will be paid by Aviall. Aviall has retained Morrow & Co.
to assist in soliciting proxies. For its services, Morrow will receive a fee of
$15,000. Morrow will also be reimbursed its reasonable out-of-pocket expenses.
Aviall does not otherwise expect to pay any compensation for the solicitation of
proxies, but will reimburse brokers and nominees for their reasonable expenses
for sending proxy material to principals and obtaining their proxies. In
addition to soliciting proxies by mail, directors, officers and employees of
Aviall may solicit proxies in person, by telephone or by other means.
19
<PAGE> 23
ANNUAL REPORT
The Company's Annual Report to Stockholders, including financial statements
for the fiscal year ended December 31, 1998, was mailed to all stockholders
earlier this year. IF YOU WOULD LIKE ANOTHER COPY OF THE ANNUAL REPORT OR THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AS
FILED WITH THE SEC, PLEASE NOTIFY THE COMPANY, 2075 DIPLOMAT DRIVE, DALLAS,
TEXAS 75234-8989, ATTENTION: INVESTOR RELATIONS (TELEPHONE: 972-406-6671).
SUBMISSION OF STOCKHOLDER PROPOSALS FOR
AVIALL'S ANNUAL MEETING OF STOCKHOLDERS IN 2000
Pursuant to SEC regulations, in order to be included in Aviall's Proxy
Statement for Aviall's 2000 Annual Meeting of Stockholders, stockholder
proposals must be received at the principal office of Aviall, 2075 Diplomat
Drive, Dallas, Texas 75234-8989, Attention: Secretary, no later than December
31, 1999, as well as meet all other SEC requirements. In addition, Aviall's
By-Laws provide that any stockholder who desires either to bring a stockholder
proposal before an annual meeting or to present a nomination for director at an
annual meeting of stockholders must give advance notice to Aviall's Secretary
regarding the proposal or nominee. The By-Laws generally require that written
notice be delivered to the Secretary of Aviall not less than 70 days nor more
than 90 days prior to the anniversary of the preceding year's annual meeting of
stockholders and contain certain information regarding the stockholder desiring
to present a proposal or make a nomination and, in the case of a nomination,
information regarding the proposed director nominee. A copy of the By-Laws is
available upon request from the Secretary of Aviall.
AVIALL, INC.
/S/ JEFFREY J. MURPHY
Jeffrey J. Murphy
Senior Vice President, Law and Human
Resources, Secretary and General
Counsel
Dallas, Texas
November 12, 1999
20
<PAGE> 24
2770-PS-1999
<PAGE> 25
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Regardless of whether you plan to attend the Annual Meeting of Stockholders, you
can be sure your shares are represented at the Annual Meeting by promptly
returning your proxy in the enclosed envelope.
- --------------------------------------------------------------------------------
DETACH HERE
Please mark
[X] votes as in
this example.
This Proxy when executed will be voted in the manner directed herein. If no
direction is made this Proxy will be voted FOR the election of the Director
nominees, FOR Proposal 2, and AGAINST Proposal 3.
- --------------------------------------------------------------------------------
1. Election of two Directors to serve until Aviall, Inc.'s 2002 Annual Meeting
of Stockholders. NOMINEES: Richard J. Schnieders and Bruce N. Whitman
FOR WITHHELD
BOTH [ ] FROM BOTH [ ]
NOMINEES NOMINEES
[ ]
------------------------------------------
For both nominees except as noted above
- --------------------------------------------------------------------------------
2. Ratification of PricewaterhouseCoopers LLP as independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote
AGAINST the Stockholder Proposal
- --------------------------------------------------------------------------------
3. Stockholder proposal recommending the redemption of the Rights granted
under Aviall's Stockholder Rights Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
IMPORTANT: Whether or not you expect to attend
the meeting in person, please date, sign and
return this proxy. Please sign exactly as your
name appears hereon. Joint owners should each
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such.
Signature: Date:
----------------------------------- -------------------------
Signature: Date:
----------------------------------- -------------------------
<PAGE> 26
- --------------------------------------------------------------------------------
DETACH HERE
PROXY
AVIALL, INC.
PLEASE DATE AND SIGN ON REVERSE SIDE AND RETURN IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
The undersigned acknowledge(s) receipt of the Proxy Statement of Aviall,
Inc. relating to the 1999 Annual Meeting of Stockholders (the "Annual Meeting")
and hereby constitute(s) and appoint(s) Jacqueline K. Collier, Jeffrey J. Murphy
and Cornelius Van Den Handel, attorneys and proxies of the undersigned, with
full power of substitution and resubstitution to each and with all the powers
the undersigned would possess if personally present, to vote for and in the name
and place of the undersigned all shares of Common Stock of Aviall, Inc. held or
owned by the undersigned, or standing in the name of the undersigned, at the
Annual Meeting to be held on December 16, 1999, commencing at 2:00 p.m., at the
Hotel Inter-Continental New York, 111 East 48th Street, New York, New York, or
any adjournment or postponement thereof, upon the matters referred to in the
Proxy Statement for the Annual Meeting as stated below and on the reverse side.
The proxies are further authorized to vote, in their discretion, upon such other
business as may properly come before the Annual Meeting or any adjournment or
postponement thereof. A majority of said attorneys and proxies present and
acting at the Annual Meeting (or if only one shall be present and act, then that
one) shall have, and may exercise, all the powers of all said attorneys and
proxies hereunder.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AVIALL, INC. UNLESS OTHERWISE SPECIFIED ON THE REVERSE SIDE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES OF THE BOARD OF DIRECTORS LISTED ON THE REVERSE SIDE, FOR
THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS AVIALL, INC.'S INDEPENDENT
AUDITORS AND AGAINST THE PROPOSAL RECOMMENDING THAT THE BOARD OF DIRECTORS
REDEEM THE RIGHTS GRANTED UNDER AVIALL'S STOCKHOLDER RIGHTS PLAN. DISCRETIONARY
AUTHORITY IS HEREBY CONFERRED AS TO ALL OTHER MATTERS THAT MAY COME BEFORE THE
ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2, AND
AGAINST PROPOSAL 3.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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