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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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-12
</TABLE>
AVIALL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class 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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[ ] 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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[AVIALL LOGO]
Aviall, Inc.
Notice of 2000 Annual Meeting
and Proxy Statement
<PAGE> 3
[AVIALL LOGO]
PAUL E. FULCHINO
Chairman, President and
Chief Executive Officer
May 12, 2000
Dear Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders to be
held at 2:00 p.m. on Wednesday, June 28, 2000, at the Renaissance Hotel North
Dallas, 4099 Valley View Lane, in Dallas, Texas. All stockholders of record as
of May 2, 2000 are entitled to vote at the Annual Meeting.
The proposals to be acted upon at the Annual Meeting include the election of a
director, the ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors for 2000 and the approval of an amendment to
the Aviall, Inc. 1998 Stock Incentive Plan to increase the number of shares of
common stock authorized to be issued under the Plan. I hope you will carefully
read these proposals, which are described in the accompanying Proxy Statement,
and vote your shares for each proposal.
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/ PAUL E FULCHINO]
Paul E. Fulchino
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 Wednesday, June 28, 2000,
starting at 2:00 p.m., at the Renaissance Hotel North Dallas, 4099 Valley View
Lane, in Dallas, Texas. 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 May 12, 2000, 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 DIRECTOR NOMINEE
IDENTIFIED BELOW, FOR THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS AVIALL'S INDEPENDENT AUDITORS AND FOR THE APPROVAL
OF THE AMENDMENT TO THE AVIALL, INC. 1998 STOCK INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK AUTHORIZED TO BE ISSUED UNDER THIS 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 set forth 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
May 2, 2000, 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 18,311,844 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.
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
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the Annual Meeting 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 that 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.
ELECTION OF DIRECTOR
(PROPOSAL NO. 1)
Aviall has three classes of directors serving staggered three-year terms.
Paul E. Fulchino and Henry A. McKinnell are currently serving terms that expire
at the Annual Meeting. Dr. McKinnell, who has served as a director since 1993,
has decided not to stand for re-election. The Board has nominated Mr. Fulchino
to continue to serve as a director for a term expiring at Aviall's annual
stockholders meeting in 2003.
Below is the name of the 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 NOMINEE LISTED BELOW
EXCEPT WHERE AUTHORITY HAS BEEN WITHHELD.
NOMINEE FOR DIRECTOR
FOR A TERM OF OFFICE EXPIRING AT THE ANNUAL MEETING IN 2003
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<TABLE>
<S> <C> <C>
[FULCHINOPHOTO] PAUL E. FULCHINO Paul E. Fulchino has served as Chairman of
Chairman, President and the Board, President and Chief Executive
Director since 2000 Chief Executive Officer Officer of Aviall since January 2000. Mr.
Age 53 of Aviall Fulchino was President and Chief Operating
Officer of BE Aerospace, Inc., a leading
supplier of aircraft cabin interior
products and services, from 1996 to 1999.
From 1990 to 1996, Mr. Fulchino was
President and Vice Chairman of Mercer
Management Consulting, Inc., an
international general management
consulting firm.
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</TABLE>
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<TABLE>
<S> <C> <C>
DIRECTOR WHOSE TERM EXPIRES AT THE ANNUAL MEETING IN 2001
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[MUZYKA PHOTO] 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
Officer of SMC from January 1990 to
Member -- Audit Committee October 1996. Dr. Muzyka is also a
Member -- Compensation and director of SMC and CSM Industries, Inc.
Nominating
Committee
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DIRECTORS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2002
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[SCHNIEDERS PHOTO] RICHARD J. SCHNIEDERS Mr. Schnieders has served as Chief
Executive Vice President and Operating Officer of SYSCO Corporation
Director since 1997 Chief Operating Officer of since January 2000 and as an Executive
Age 52 SYSCO Corporation Vice President of SYSCO since 1998. From
1992 to 1998 Mr. Schnieders was Senior
Chairman -- Audit Committee Vice President Merchandising/Multi-Unit
Member -- Compensation and Sales of SYSCO. He has been a Director
Nominating since 1997.
Committee
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[WHITMAN PHOTO] BRUCE N. WHITMAN Mr. Whitman has been Executive Vice
Executive Vice President President and a director of FlightSafety
Director since 1998 FlightSafety International, International, Inc. since 1962. Mr.
Age 66 Inc. Whitman is also a director of FlightSafety
Boeing Training International L.L.C.,
Member -- Audit Committee Petroleum Helicopters, Inc. and Megadata
Member -- Compensation and Corporation.
Nominating
Committee
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</TABLE>
3
<PAGE> 7
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Board of Directors. The Board currently consists of five members. Following
the Annual Meeting, the Board will consist of four members. During 1999, the
Board of Directors held 24 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. All of the Directors of Aviall are independent directors
(as that term is defined in Aviall's By-Laws) other than Mr. Fulchino. 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 at least 75% of the Board and applicable committee meetings held in
1999.
Audit Committee. The current members of the Audit Committee are Mr.
Schnieders (Chairman), Dr. McKinnell, Dr. Muzyka and Mr. Whitman. The Audit
Committee met twice in 1999. 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 current members of the
Compensation and Nominating Committee are Dr. McKinnell (Chairman), Dr. Muzyka,
Mr. Schnieders and Mr. Whitman. During 1999, the Compensation Committee met
eight 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.
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<PAGE> 8
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 1999 and elected to participate in 2000. 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 1999.
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<PAGE> 9
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of April 11, 2000, the directors of Aviall, the Chief Executive Officer
of Aviall, the other four most highly compensated executive officers of Aviall
at December 31, 1999, Aviall's former Chief Executive Officer, 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,
Jacqueline K. Collier, Charles M. Kienzle, Bruce Langsen, Jeffrey J. Murphy and
Eric E. Anderson 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>
Paul E. Fulchino................................. 11,000 0 11,000
Henry A. McKinnell............................... 12,172 0 12,172
Donald R. Muzyka................................. 9,971 0 9,971
Richard J. Schnieders............................ 5,845 0 5,845
Bruce N. Whitman................................. 23,845 0 23,845
Jacqueline K. Collier(4)......................... 7,707 84,105 91,812
Charles M. Kienzle(5)............................ 13,098 146,617 159,715
Bruce Langsen(6)................................. 13,302 112,906 126,208
Jeffrey J. Murphy(7)............................. 24,557 179,680 204,237
Eric E. Anderson(8).............................. 27,323 0 27,323
All current directors and executive officers
as a group (12 persons)........................ 137,135 659,895 797,030
</TABLE>
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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.
2. Represents shares that may be acquired within 60 days of April 11, 2000,
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 April 11, 2000, Mr. Murphy beneficially owned 1.1% of Aviall's
outstanding common stock. As of that 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 4.2% of the outstanding common stock as of
March 31, 2000.
4. Includes 2,451 shares of restricted common stock for which Ms. Collier has
sole voting power and no investment power.
5. Includes 874 shares of restricted common stock for which Mr. Kienzle has
sole voting power and no investment power.
6. Includes 5,386 shares of restricted common stock for which Mr. Langsen has
sole voting power and no investment power.
7. 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. Includes 14,446 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.
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<PAGE> 10
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 April 11, 2000.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
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<S> <C> <C>
Neuberger Berman, LLC 1,658,054 9.1%(1)
Artisan Partners Limited Partnership 1,058,759 5.8%(2)
</TABLE>
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1. According to a Schedule 13G filed by Neuberger Berman, LLC on February 14,
2000, Neuberger Berman has sole voting power with respect to 631,354 shares
of common stock, shared voting power with respect to 1,005,200 shares of
common stock and shared dispositive power with respect to 1,658,054 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 13G filed by Artisan Partners Limited Partnership on
February 14, 2000, Artisan Partners has shared voting and dispositive power
with respect to 1,058,759 shares of common stock. In the Schedule 13G,
Artisan reported that it acts as an investment advisor to funds which hold
the shares in the ordinary course of business and that it does not have any
economic interest in the shares. The business address of Artisan Partners is
1000 North Water Street, #1770, Milwaukee, Wisconsin 53202.
7
<PAGE> 11
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.
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 the 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
In February 1999, the Board authorized management to examine a range of
strategic alternatives, including the sale, joint venture or other transaction
involving either of Aviall's operating business or company as a whole. The
Compensation Committee decided to defer consideration of changes in base salary
for Eric E. Anderson, Aviall's Chief Executive Officer, while the strategic
review process was ongoing. As a result, no change in Mr. Anderson's base salary
was made in 1999.
SHORT-TERM INCENTIVE PROGRAM
Under the 1999 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 in cash. In December 1999,
Mr. Anderson resigned as Chairman, President and Chief Executive Officer. Mr.
Anderson did not receive any award under the 1999 short-term incentive program.
Based on the Company's performance, only one executive officer received a bonus
award under this program for services rendered in 1999.
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 January 1999 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 100,000 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
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<PAGE> 12
grant. As a result of his resignation, the options granted to Mr. Anderson in
1999 expired.
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 the Company's executives 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. Due, in
part, to Aviall's existing net operating loss carryforward, 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> <C>
Henry A. McKinnell Donald R.Muzyka Richard J. Schnieders Bruce N. Whitman
Chairman
</TABLE>
9
<PAGE> 13
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>
Jacqueline K. Collier 1999 $125,000 $ 10,000 $ -- $ 0 30,000 $ 400
Vice President and 1998 125,000 65,799 -- 27,421 25,000 400
Controller 1997 116,800 93,440 -- 69,496 25,000 400
Charles M. Kienzle 1999 175,000 0 -- 0 35,000 400
Senior Vice President, 1998 175,000 23,450 -- 9,778 30,000 400
Operations 1997 175,000 175,000 -- 130,156 35,000 400
Bruce Langsen 1999 175,000 208,442 -- 0 45,000 400
President of ILS 1998 168,269 144,580 -- 60,256 40,000 400
1997 140,769 141,264 -- 105,062 45,000 400
Jeffrey J. Murphy 1999 177,000 0 -- 0 35,000 553
Senior Vice President, 1998 177,000 109,739 -- 45,735 30,000 540
Law and Human Resources, 1997 177,000 177,000 -- 131,644 35,000 525
Eric E. Anderson 1999 300,000 0 -- 0 100,000 27,622
Former President and 1998 300,000 182,398 -- 76,019 75,000 400
Chief Executive Officer 1997 199,615 200,000 31,507 148,750 75,000 25,569
</TABLE>
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1. Includes amounts reimbursed for the payment of income taxes related to
relocation expenses paid by the Company in 1997 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 existing grants of restricted stock 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. No restricted stock
awards were made for services rendered in 1999. 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, 1999, the
aggregate number of shares of restricted stock and their value (based upon a
price of $8.1875, the closing price of common stock on December 31, 1999)
held by each named executive officer was as follows: Ms. Collier, 7,123
restricted shares and $58,320; Mr. Kienzle, 9,624 restricted shares and
$78,797; Mr. Langsen, 12,449 restricted shares and $101,926; and Mr. Murphy,
12,938 restricted shares and $105,930. In connection with Mr. Anderson's
resignation from Aviall, 6,795 shares of his restricted stock granted in
1998 were vested and his rights to 10,000 shares of restricted stock granted
in 1997 were canceled in exchange for a cash payment of $83,500.
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.
4. For 1999 this column includes (a) contributions to Aviall's Employees'
Savings Plan in the amount of $400 for each named executive, (b) premiums
for compensatory split-dollar insurance payments in the amount of $153 for
Mr. Murphy, and (c) a payment of $27,222 in lieu of accrued vacation for Mr.
Anderson.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
Employment Agreement. Aviall is a party to an Employment Agreement with
Paul E. Fulchino pursuant to which he serves as Aviall's Chairman, President and
Chief Executive Officer. Under this Employment Agreement, Mr. Fulchino receives
an annual base salary of at least $450,000 and is eligible to receive incentive
compensation of not less than 100% of his base salary (although he is not
guaranteed any specific amount of incentive pay). Mr. Fulchino is also entitled
to supplemental term life insurance of $900,000, supplemental long-term
disability insurance such that he would receive 60 percent of his base salary
should he become permanently disabled, and other employee benefits made
available to Aviall's senior executives. The Employment Agreement has a
three-year term, expiring on December 31, 2002. In the event of an involuntary
termination of his employment (other than for cause or his death or disability),
Mr. Fulchino would receive severance pay in an amount equal to the greater of
two times his then-current base salary or the base salary for the remainder of
the term of the Employment Agreement. Pursuant to this Employment Agreement, on
December 21, 1999, Mr. Fulchino was granted options to purchase 500,000 shares
of common stock at an
10
<PAGE> 14
exercise price of $7.3125, the fair market value of the common stock on the
grant date. This option grant has a ten-year term and the options vest one-third
each year commencing on the first anniversary of the grant date.
Severance Agreements. Aviall is a party to Severance Agreements with each
of its executive officers, including Paul E. Fulchino, 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 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 executive officers.
Severance Pay Plan. 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 occurs 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 Employment
and Severance Agreements referred to in the preceding paragraphs), the employee
is not entitled to receive the benefits intended to be provided under the
Severance Pay Plan.
In connection with his resignation as Chairman, President and Chief
Executive Officer of Aviall on December 31, 1999, Eric E. Anderson is entitled
to receive severance pay from Aviall under the terms of the Severance Pay Plan.
Under the plan, he will receive a severance payment of $1.2 million, payable in
installments over a two-year period. Under the terms of his severance
arrangement, Aviall vested 6,795 shares of restricted common stock granted to
Mr. Anderson in 1998, and he received a payment of $83,500 in connection with
the cancellation of the grant of 10,000 shares of restricted stock he received
in 1997. Mr. Anderson has also agreed to not engage in any competitive activity
with Aviall for two years.
11
<PAGE> 15
OPTION/SAR GRANTS IN 1999
The following table provides information regarding the grant of stock
options to the named executive officers in 1999. 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 1999 SHARES(1) DATE 0% 5% 10%
- ---- ---------- -------------- --------- ---------- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Jacqueline K. Collier 30,000 2.8% $11.0625 01/25/09 $0 $208,714 $528,923
Charles M. Kienzle 35,000 3.3% 11.0625 01/25/09 0 243,500 617,077
Bruce Langsen 45,000 4.2% 11.0625 01/25/09 0 313,072 793,385
Jeffrey J. Murphy 35,000 3.3% 11.0625 01/25/09 0 243,500 617,077
Eric E. Anderson(2) 100,000 9.4% 11.0625 N/A 0 0 0
</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. For each of the
named executive officers, 9,039 options are incentive stock options and the
remainder are nonqualified stock options. No options granted to the named
executive officers in 1999 were granted in tandem with SARs.
2. Under the terms of this option grant, these options expired as of December
31, 1999, the date on which Mr. Anderson resigned his position as an
executive officer of Aviall.
AGGREGATED OPTION/SAR EXERCISES IN 1999
AND DECEMBER 31, 1999 OPTION/SAR VALUES
The following table provides information, for each of the named executive
officers, regarding the exercise of Aviall options during 1999 and unexercised
options held as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT DECEMBER 31, 1999 DECEMBER 31, 1999(1)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jacqueline K. Collier 0 0 57,272 55,167 $ 2,172 $0
Charles M. Kienzle 0 0 113,050 66,901 5,156 0
Bruce Langsen 0 0 69,272 86,968 1,627 0
Jeffrey J. Murphy 0 0 146,113 66,901 20,140 0
Eric E. Anderson(2) 0 0 272,749 0 7,656 0
</TABLE>
- ---------------
1. Based on a price of $8.1875 per share of Aviall's common stock, using the
closing price on December 31, 1999.
2. Mr. Anderson's unexercised options expired on March 31, 2000 under the terms
of these option grants.
12
<PAGE> 16
RETIREMENT BENEFITS
Aviall covers substantially all regular domestic full-time employees,
including executive officers, 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
$135,000 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 $170,000. 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 equal to 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>
Jacqueline K. Collier....................................... $62,606
Charles M. Kienzle.......................................... 84,465
Bruce Langsen............................................... 62,314
Jeffrey J. Murphy........................................... 75,529
Eric E. Anderson(2)......................................... 42,825
</TABLE>
- ---------------
1. These amounts include benefits under the Retirement Plan and the Benefit
Restoration Plan combined.
2. Mr. Anderson resigned as an executive officer of Aviall on December 31, 1999.
The amount of Mr. Anderson's accrued benefit is based on his earned
compensation through December 31, 1999.
13
<PAGE> 17
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, 1995 and the
reinvestment of all dividends.
COMPARISON OF CUMULATIVE STOCKHOLDER RETURN
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
31-Dec-94 31-Dec-95 31-Dec-96 31-Dec-97 31-Dec-98 31-Dec-99
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVIALL 100 123.56 121.91 196.86 154.86 107.91
S&P 500 100 137.58 169.17 225.60 290.08 351.12
S&P Smallcap Aerospace/Defense 100 113.73 162.24 200.44 243.12 122.06
</TABLE>
14
<PAGE> 18
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 2)
On March 14, 2000, 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, 2000.
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.
APPROVAL OF AN AMENDMENT
TO THE AVIALL, INC. 1998 STOCK INCENTIVE PLAN
(PROPOSAL NO. 3)
On March 14, 2000 the Board adopted, subject to approval by Aviall's
stockholders, an amendment to the Aviall, Inc. 1998 Stock Incentive Plan to
increase the number of shares of common stock authorized to be issued by 900,000
shares. Currently, 940,000 shares of common stock are authorized for issuance
under the Plan, of which options covering 736,152 shares have been issued,
leaving 203,848 shares reserved for issuance under the Plan.
The Board believes that it is in the best interests of the Company to
attract and retain the services of experienced and knowledgeable employees. The
Plan is designed to provide an incentive to officers and other key employees of
the Company and its subsidiaries and is intended to align the interests of these
officers and other employees with those of Aviall's stockholders. In order for
the Plan to continue to serve its purpose, the Board has determined that an
increase in the number of shares available for issuance is necessary and in the
best interests of Aviall's stockholders.
PLAN SUMMARY
General. The Plan was adopted by the Board in March 1998 and approved by
the Company's stockholders at the 1998 Annual Meeting. The Plan affords the
Board and the Compensation Committee the ability to design management incentives
that are responsive to the Company's needs. The Plan permits the grant of awards
consisting of not only stock options and stock appreciation rights, but also
restricted and deferred shares (which may include performance criteria), as well
as performance shares and performance units.
Shares Available Under the Plan. If the amendment is approved by Aviall's
stockholders and subject to adjustment as provided in the Plan, the number of
shares of common stock that may be issued or transferred (a) upon the exercise
of Option Rights or Appreciation Rights, (b) as Restricted Shares, (c) as
Deferred Shares, (d) in payment of Performance Shares or Performance Units that
have been earned, and (e) in payment of dividend equivalents paid with respect
to awards made under the Plan may not exceed 1,840,000 shares of common stock
plus any shares relating to awards that expire, are forfeited or transferred as
payment of the Option Price or in satisfaction of any withholding amount.
The aggregate number of shares of common stock actually issued or
transferred by the Company upon the exercise of Incentive Stock Options ("ISO")
may not exceed 1,840,000 shares. Further, no Participant may be granted Option
Rights or Appreciation Rights, in the aggregate, for more than 300,000 shares of
common stock during any year, subject to adjustment as provided in the Plan. In
no event may any Participant receive an award of Performance Shares or
Performance Units in any calendar year having an aggregate maximum value as of
their respective Dates of Grant in excess of $400,000, subject to adjustment as
provided in the Plan.
15
<PAGE> 19
Eligibility. Officers and key employees of the Company and its
subsidiaries, as well as any person who has agreed to serve in any such
capacity, may be selected by the Board to receive benefits under the Plan.
Option Rights. Option Rights may be granted which entitle the optionee to
purchase shares of common stock at a price not less than fair market value. The
option price is payable (a) in cash at the time of exercise; (b) by the actual
or constructive transfer to the Company of nonforfeitable, unrestricted shares
of common stock owned by the optionee having a value at the time of exercise at
least equal to the option price; (c) by surrender of any other award under the
Plan having a value at the time of exercise at least equal to the option price;
or (d) a combination of such payment methods. Any grant of Option Rights may
provide for deferred payment of the option price from the proceeds of sale
through a bank or broker of some or all of the shares of common stock to which
the exercise relates.
The Board may, at or after the date of grant of any Option Rights (other
than the grant of an ISO), provide for the payment of dividend equivalents to
the optionee on a current, deferred or contingent basis or may provide that such
equivalents be credited against the option price.
No Option Right shall be exercisable more than ten years from the date of
grant. Each grant must specify the period of continuous employment with the
Company or any subsidiary that is necessary before the Option Rights will become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change in Control or other similar transaction or event.
Successive grants may be made to the same optionee whether or not Option Rights
previously granted remain unexercised. Any grant of Option Rights may specify
Management Objectives (as described below) that must be achieved as a condition
to exercise such rights.
Appreciation Rights. An Appreciation Right is a right, exercisable by
surrender of the related Option Right (if granted in tandem with Option Rights)
or by itself (if granted as a Free-Standing Appreciation Right), to receive from
the Company an amount equal to 100%, or such lesser percentage as the Board may
determine, of the spread between the strike price (or Option Price if Tandem
Appreciation Right) and the then-current value of the shares of common stock.
Any grant may specify that the amount payable on exercise of an Appreciation
Right may be paid by the Company in cash, in shares of common stock, or in any
combination thereof, and may either grant to the optionee or retain in the Board
the right to elect among those alternatives.
Any grant may specify that such Appreciation Right may be exercised only in
the event of, or earlier in the event of, a Change in Control or other similar
transaction or event. Any grant of Appreciation Rights may specify Management
Objectives that must be achieved as a condition to exercise such rights.
Restricted Shares. A grant of Restricted Shares involves the immediate
transfer by the Company to a Participant of ownership of a specific number of
shares of common stock in consideration of the performance of services. The
Participant is entitled immediately to voting, dividend and other ownership
rights in such shares. The transfer may be made without additional consideration
or in consideration of a payment by the Participant that is at or less than
then-current Market Value per share, as the Board may determine.
Restricted Shares must be subject to a "substantial risk of forfeiture"
within the meaning of IRC Section 83 for at least one year. An example would be
a provision that the Restricted Shares would be forfeited if the participant
ceased to serve the Company as an officer or key employee during a specified
period of years. In order to enforce these forfeiture provisions, the
transferability of Restricted Shares will be prohibited or restricted in a
manner and to the extent prescribed by the Board for the period during which the
forfeiture provisions are to continue. The Board may provide for a shorter
period during which the forfeiture provisions apply in the event of a Change in
Control.
Any grant of Restricted Shares may specify Management Objectives which, if
achieved, will result in termination or early termination of the restrictions
applicable to such shares. Any such grant must also specify in respect of such
specified Management Objectives, a minimum acceptable level of achievement and
must set forth a formula for determining the number of Restricted Shares on
which restrictions will terminate if performance is at or above the minimum
level, but below full achievement of the specified Management Objectives.
16
<PAGE> 20
Deferred Shares. A grant of Deferred Shares constitutes an agreement by the
Company to deliver shares of common stock to the participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify. During the
Deferral Period, the participant has no right to transfer any rights under his
or her award and no right to vote such shares, but the Board may, at or after
the date of grant, authorize the payment of dividend equivalents on such shares
on either a current or deferred or contingent basis, either in cash or in
additional shares of common stock. Awards of Deferred Shares may be made without
additional consideration or in consideration of a payment by such participant
that is less than the market value per share at the date of award.
Deferred Shares must be subject to a Deferral Period of at least one year,
as determined by the Board at the date of the award, except that the Board may
provide for a shorter Deferral Period in the event of a Change in Control.
Performance Shares and Performance Units. A Performance Share is the
equivalent of one share of common stock and a Performance Unit is the equivalent
of $1.00. A Participant may be granted any number of Performance Shares or
Performance Units, subject to the limitations set forth under "Shares Available
Under the Plan." The Participant will be given one or more Management Objectives
to meet within a specified period (the "Performance Period"). The specified
Performance Period shall be a period of time not less than one year, except in
the case of a Change in Control, if the Board shall so provide. A minimum level
of acceptable achievement will also be established by the Board. If by the end
of the Performance Period, the specified Management Objectives have been
achieved, the participant will be deemed to have fully earned the Performance
Shares or Performance Units. The grant may provide that if the Management
Objectives have not been achieved, but the predetermined minimum level of
acceptable achievement has been attained or exceeded, the participant will be
deemed to have partly earned the Performance Shares or Performance Units in
accordance with a predetermined formula. To the extent earned, the Performance
Shares or Performance Units will be paid to the participant at the time and in
the manner determined by the Board in cash, shares of common stock or any
combination thereof. The grant may provide for the payment of dividend
equivalents thereon in cash or in shares of common stock on a current, defined
or contingent basis.
Management Objectives. The Plan requires that the Board establish
"Management Objectives" for purposes of Performance Shares and Performance
Units. When so determined by the Board, Option Rights, Appreciation Rights,
Restricted Shares and dividend credits may also specify Management Objectives.
Management Objectives may be described in terms of either Company-wide
objectives or objectives that are related to the performance of the individual
participant or subsidiary, division, department, region or function within the
Company or a subsidiary in which the participant is employed. Management
Objectives applicable to any award to a participant who is, or is determined by
the Board likely to become, a Covered Employee, shall be limited to specified
levels of or growth in (a) cash flow/net assets ratio; (b) debt/capital ratio;
(c) return on total capital; (d) return on equity; (e) return on net assets; (f)
earnings per share; (g) revenue; (h) total return to stockholders; (i) earnings
before interest and taxes; or (j) earnings before interest, taxes, depreciation
and amortization. Except where a modification would result in an award no longer
qualifying as performance based compensation within the meaning of IRC Section
162(m), the Board may modify such Management Objectives, in whole or in part, as
the Board deems appropriate and equitable.
Administration and Amendments. The Plan is to be administered by the Board,
except that the Board has the authority under the Plan to delegate any or all of
its powers under the Plan to a committee (or subcommittee thereof) consisting of
not less than two directors.
The Board is authorized to interpret the Plan and related agreements and
other documents. The Board may make awards to other officers and key employees
under any or a combination of all of the various categories of awards that are
authorized under the Plan, or in its discretion, make no awards. The Board may
amend the Plan from time to time without further approval by the stockholders of
the Company except where required by applicable law or the rules and regulations
of a national securities exchange. The Company reserves authority to offer
similar or dissimilar benefits in plans that do not require stockholder
approval.
17
<PAGE> 21
The Board may provide for special terms for awards to Participants who are
foreign nationals or who are employed by the Company or any of its subsidiaries
outside of the United States of America as the Board may consider necessary or
appropriate to accommodate differences in local law, tax policy or custom.
Transferability. In general, no Option Right or Appreciation Right or other
derivative security is transferable by an optionee or recipient except, upon
death, by will or the laws of descent and distribution. However, awards may be
transferred without consideration to members of the participant's immediate
family, or to trusts the only beneficiaries of which, or to partnerships the
only partners of which, are members of the participant's immediate family. Any
such transfer will require prior notice to the Company and acceptance of any
conditions imposed thereon by the Company or the Board. Except as otherwise
determined by the Board on a case-by-case basis, Option Rights and Appreciation
Rights are exercisable during the optionee's or recipient's lifetime only by him
or her or by his or her guardian or legal representative.
The Board may specify at the Date of Grant that part or all of the shares
of common stock that are (a) to be issued or transferred by the Company upon
exercise of Option Rights or Appreciation Rights, upon termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant of
Performance Shares or Performance Units or (b) no longer subject to the
substantial risk of forfeiture and restrictions on transfer, shall be subject to
further restrictions on sale or transfer.
Adjustments. The maximum number of shares that may be issued and delivered
under the Plan, the number of shares covered by outstanding Option Rights and
Appreciation Rights, and the prices per share applicable thereto, are subject to
adjustment in the event of stock dividends, stock splits, combinations of
shares, recapitalizations, mergers, consolidations, spin-offs, reorganizations,
liquidations, issuances of rights or warrants, and similar events. In the event
of any such transaction or event, the Board, in its discretion, may provide in
substitution for any or all outstanding awards under the Plan such alternative
consideration as it, in good faith, may determine to be equitable in the
circumstances and may require the surrender of all awards so replaced. The Board
may also make or provide for such adjustments in the numbers of shares specified
in "Shares Available Under the Plan," above, as the Board may determine
appropriate to reflect any transaction or event described above.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Plan based on federal income tax
laws currently in effect. This summary is not intended to be complete and does
not describe state, local or foreign tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
Non-Qualified Stock Options. In general, (a) no income will be recognized
by an optionee at the time a non-qualified Option Right is granted; (b) at the
time of exercise of a non-qualified Option Right, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise; and (c) at the time of sale of shares
acquired pursuant to the exercise of a non-qualified Option Right, appreciation
(or depreciation) in value of the shares after the date of exercise will be
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held. Such long-term capital gain may be eligible
for reduced rates if applicable holding period requirements are satisfied.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an ISO. If shares of common stock are
issued to the optionee pursuant to the exercise of an ISO, and if no
disqualifying disposition of such shares is made by such optionee within two
years after the date of grant or within one year after the transfer of such
shares to the optionee, then upon sale of such shares, any amount realized in
excess of the option price will be taxed to the optionee as a long-term capital
gain and any loss sustained will be a long-term capital loss. Such long-term
capital gain may be eligible for reduced rates if applicable holding period
requirements are satisfied.
18
<PAGE> 22
If shares of common stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of either holding period described above, the
optionee generally will recognize ordinary income in the year of disposition in
an amount equal to the excess (if any) of the fair market value of such shares
at the time of exercise (or, if less, the amount realized on the disposition of
such shares if a sale or exchange) over the option price paid for such shares.
Any further gain (or loss) realized by the participant generally will be taxed
as short-term or long-term capital gain (or loss) depending on the holding
period.
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of a tandem Appreciation Right or a free-standing
Appreciation Right. When the Appreciation Right is exercised, the participant
normally will be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any unrestricted shares of common stock received on the exercise.
Restricted Shares. The recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares (reduced by any amount paid by the participant for such
Restricted Shares) at such time as the shares are no longer subject to
forfeiture or restrictions on transfer for purposes of IRC Section 83
("Restrictions"). However, a recipient who so elects under IRC Section 83(b)
within 30 days of the date of transfer of the shares will have taxable ordinary
income on the date of transfer of the shares equal to the excess of the fair
market value of such shares (determined without regard to the Restrictions) over
the purchase price, if any, of such Restricted Shares. If a Section 83(b)
election has not been made, any dividends received with respect to Restricted
Shares generally will be treated as compensation that is taxable as ordinary
income to the participant.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of unrestricted
shares of common stock on the date that such shares are transferred to the
participant under the award (reduced by any amount paid by the participant for
such Deferred Shares), and the capital gains/loss holding period for such shares
will also commence on such date.
Performance Shares and Performance Units. No income generally will be
recognized upon the grant of Performance Shares or Performance Units. Upon
payment in respect of the earn-out of Performance Shares or Performance Units,
the recipient generally will be required to include as taxable ordinary income
in the year of receipt an amount equal to the amount of cash received and the
fair market value of any nonrestricted shares of common stock received.
Special Rules Applicable to Officers and Directors. In limited
circumstances where the sale of stock received as a result of a grant or award
could subject an officer or director to suit under Section 16(b) of the Exchange
Act, the tax consequences to the officer or director may differ from the tax
consequences described above. In these circumstances, unless a special election
under IRC Section 83(b) has been made, the principal difference (in cases where
the officer or director would otherwise be currently taxed upon his receipt of
the stock) usually will be to postpone valuation and taxation of the stock
received so long as the sale of the stock received could subject the officer or
director to suit under Section 16(b) of the Exchange Act of 1934, but no longer
than six months.
TAX CONSEQUENCES TO THE COMPANY OR SUBSIDIARY
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary business expense, is not an "excess parachute
payment" within the meaning of IRC Section 280G and is not disallowed by the $1
million limitation on certain executive compensation under IRC Section 162(m).
19
<PAGE> 23
MARKET VALUE OF THE SECURITIES
The market value of Aviall's common stock is $5.625, based on the closing
price of Aviall's common stock on May 2, 2000.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE AVIALL,
INC. 1998 STOCK INCENTIVE PLAN.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires Aviall's directors and executive officers, and persons who own more
than 10% of Aviall'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 Aviall'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, 1999, 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
$7,500. 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.
ANNUAL REPORT ON FORM 10-K
UPON THE WRITTEN REQUEST OF ANY STOCKHOLDER, AVIALL WILL FURNISH, WITHOUT
CHARGE, A COPY OF AVIALL'S ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE SEC. IF
YOU WOULD LIKE A COPY OF THIS ANNUAL REPORT, PLEASE CONTACT THE COMPANY, 2075
DIPLOMAT DRIVE, DALLAS, TEXAS 75234-8989, ATTENTION: INVESTOR RELATIONS.
20
<PAGE> 24
SUBMISSION OF STOCKHOLDER PROPOSALS FOR
AVIALL'S ANNUAL MEETING OF STOCKHOLDERS IN 2001
Pursuant to SEC regulations, in order to be included in Aviall's Proxy
Statement for Aviall's 2001 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 January 13,
2001, 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
May 12, 2000
21
<PAGE> 25
2770-PS-2000
<PAGE> 26
AVIALL, INC.
c/o EQUISERVE
P.O. BOX 9398
BOSTON, MA 02206-8386
VOTE BY TELEPHONE
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone
Phone 1-877-PRX-VOTE (1-877-778-8683).
FOLLOW THESE FOUR EASY STEPS:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number
1-877-PRX-VOTE (1-877-778-8683).
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the recoreded instructions.
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime!
VOTE BY INTERNET
It's fast, convenient, and your vote is immediately confirmed and posted.
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Go to the Website
http://www.eproxyvote.com/avl
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the instructions provided.
YOUR VOTE IS IMPORTANT!
Go to http://www.eproxyvote.com/avl anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
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
nominee, FOR Proposal 2 and FOR Proposal 3.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of one Director to serve until Aviall, Inc.'s 2. Ratification of PricewaterhouseCoopers FOR AGAINST ABSTAIN
2003 Annual Meeting of Stockholders. LLP as independent auditors. [ ] [ ] [ ]
NOMINEE: Paul E. Fulchino.
3. Approval of an amendment to the FOR AGAINST ABSTAIN
Aviall, Inc. 1998 Stock Incentive Plan [ ] [ ] [ ]
FOR [ ] [ ] WITHHELD to increase the number of shares of
NOMINEE FROM common stock authorized to be issued
NOMINEE thereunder.
</TABLE>
- --------------------------------------------------------------------------------
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> 27
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, or voting by telephone or the
Internet by following the instructions on the reverse side.
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 2000 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 Wednesday, June 28, 2000, commencing at 2:00 p.m.,
at the Renaissance Hotel North Dallas, 4099 Valley View Lane, Dallas, Texas, 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 NOMINEE OF THE BOARD OF DIRECTORS LISTED ON THE REVERSE SIDE, FOR
THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS AVIALL, INC.'S INDEPENDENT
AUDITORS AND FOR THE APPROVAL OF AN AMENDMENT TO THE AVIALL, INC. 1998 STOCK
INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED TO BE
ISSUED UNDER THIS 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, 2 AND 3.
- ------------------- -----------------
SEE REVERSE SEE REVERSE
SIDE SIDE
- ------------------- -----------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
