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 o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-12))
x Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to <section> 240.14a-11(c) or <section> 240.14a-
12
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required.
o 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:
- -----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------------------
(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):
- -----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------------------
(5) Total fee paid:
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o Fee paid previously with preliminary materials:
o 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>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
1954 AIRPORT ROAD
SUITE 200
ATLANTA, GEORGIA 30341
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
International Airline Support Group, Inc.
The Annual Meeting of Stockholders of International Airline Support
Group, Inc. (the "Company") will be held at the offices of the Company at the
address listed above, on Monday, September 21, 1998, at 10:00 a.m., local time,
to consider and vote on:
1. The approval of an amendment to the Company's 1996 Long Term Incentive
and Share Award Plan ("Plan") to increase by 128,000 the number of shares
available for grant under the Plan.
2. The ratification of the appointment of Grant Thornton LPP as independent
auditors for the fiscal year of the Company ending on May 31, 1999
("fiscal 1999").
3. Such other matters as may properly come before the meeting or any
adjournments thereof.
The close of business on August 12, 1998, has been fixed as the record
date for determination of stockholders entitled to notice of, and to vote at,
the Annual Meeting or any adjournments thereof. A list of stockholders entitled
to vote at the Annual Meeting will be maintained during the ten-day period
preceding the meeting at the offices of the Company in Atlanta, Georgia. Your
attention is directed to the proxy statement accompanying this notice.
By Order of the Board of Directors,
/s/ James M. Isaacson
JAMES M. ISAACSON
SECRETARY
Atlanta, Georgia
August 18, 1998
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
1954 AIRPORT ROAD
SUITE 200
ATLANTA, GEORGIA 30341
PROXY STATEMENT
______________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 21, 1998
This Proxy Statement is furnished to the holders of shares of the $.001
par value per share Common Stock (the "Common Stock") of International Airline
Support Group, Inc. (the "Company") in connection with the solicitation by the
Company's Board of Directors of proxies for use at the Annual Meeting of
Stockholders to be held at the offices of the Company at the address listed
above, on Monday, September 21, 1998, at 10:00 a.m. local time, and at any
adjournments thereof (the "1998 Annual Meeting"). This Proxy Statement and
accompanying form of proxy are first being sent to stockholders on or about
August 21, 1998.
The cost of this solicitation will be borne by the Company. In addition
to solicitation by mail, certain officers and employees of the Company, who
will receive no compensation for their services other than their regular
salaries, may solicit proxies in person or by telephone or by written
communication. The Company may also make arrangements with brokerage houses,
custodians, nominees and other fiduciaries to send proxy material to their
principals at the Company's expense. The Company has retained Corporate
Investors Communications, Inc. to aid in solicitation of proxies. The Company
will pay such firm a fee of approximately $2,500 and will reimburse it for
certain expenses.
VOTING PROCEDURES
VOTING STOCK
Only holders of record of the Company's Common Stock as of the close of
business on August 12, 1998 (the "Record Date") will be entitled to vote at the
1998 Annual Meeting. The Company had outstanding 2,563,967 shares of Common
Stock on the Record Date, each share being entitled to one vote on each matter
submitted to the stockholders.
Stockholders who do not expect to attend the 1998 Annual Meeting are
urged to execute and return the enclosed proxy card promptly. Any stockholder
signing and returning a proxy may revoke the same at any time prior to the
voting of the proxy by giving written notice to the Secretary of the Company or
by voting in person at the meeting. All properly executed proxy cards
delivered by stockholders and not revoked will be voted at the 1998 Annual
Meeting in accordance with the directions given. With respect to each proposal
being submitted to the stockholders for their consideration, stockholders may
(i) vote "FOR" such proposal, (ii) vote "AGAINST" such proposal, or (iii)
abstain from voting on such proposal. If no specific instructions are given
with regard to the matters to be voted upon, the shares represented by a signed
proxy card will be voted "FOR" the proposal to amend the 1996 Long Term
Incentive and Share Award Plan (the "Plan") to increase by 128,000 the number
of shares available for grant under the Plan and "FOR" ratification of the
appointment of Grant Thornton LLP as independent accountants for the Company's
1999 fiscal year. Management knows of no other matters that may come before
the meeting for consideration by the stockholders. However, if any other
matter properly comes before the meeting, the persons named in the enclosed
proxy card as proxies will vote upon such matters in accordance with their
judgment.
QUORUM AND VOTING REQUIREMENTS
A quorum at the Annual Meeting will consist of a majority of the votes
entitled to be cast by the holders of all shares of Common Stock that are
outstanding and entitled to vote. A majority of the votes entitled to be cast
by the holders of all shares of Common Stock that are present at the meeting
and entitled to vote will be necessary to approve each proposal. Abstentions
and proxies relating to "street name" shares for which brokers have not
received voting instructions from the beneficial owner ("Broker Non-Votes") are
counted in determining whether a quorum is present. With respect to all matters
submitted to the stockholders for consideration at the Meeting, abstentions
will be counted as part of the total number of votes cast on such proposals in
determining whether the proposals have received the requisite number of
favorable votes, whereas Broker Non-Votes will not be counted as part of the
total number of votes cast on such proposals. Thus abstentions will have the
same effect as votes against any given proposal, whereas Broker Non-Votes will
have no effect in determining whether any given proposal has been approved by
the stockholders.
INFORMATION AS TO DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, including ownership
of the Company's Common Stock, as of August 12, 1998, with respect to: (i)
each director; (ii) each executive officer and (iii) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OFFICER OR OF COMMON STOCK
DIRECTOR SINCE OWNED
NAME AGE POSITION PERCENTAGE
- -------------------- ----- -------------------------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Alexius A. Dyer III 42 Chairman of the Board, 1992 207,418{(3)} 8.1%
President and Chief Executive
Officer
George Murnane III 40 Executive Vice President, Chief 1996 88,491{(3)} 3.5%
Financial Officer and Director
Kyle R. Kirkland{ (1)(2)} 36 Director 1992 57,207{(3)} 2.2%
E. James Mueller{ (1)(2)} 52 Director 1991 104,072{(3)} 4.1%
James M. Isaacson 37 Vice President of Finance, 1997 24,673{(3)} 1.0%
Treasurer and Secretary
Officers and Directors as a Group 481,861 18.9%
</TABLE>
_____________________________
(1) Member of Audit Committee.
(2) Member of the Compensation Committee.
(3) Includes the following shares of Common Stock subject to options
exercisable presently or within sixty days: Mr. Dyer, 135,733; Mr. Murnane,
58,727; Mr. Kirkland, 57,207; Mr. Mueller, 64,072; and Mr. Isaacson, 24,673.
ALEXIUS A. DYER III has been the Chief Executive Officer of the Company
and Chairman of the Company's Board of Directors since February 1995 and
President of the Company since February 1994. Mr. Dyer has been a director of
the Company since 1992. From February 1991 to February 1994, Mr. Dyer served
as Executive Vice President of the Company. Additionally, during 1991, he
served as the President and director of the Company's subsidiary, Barnstorm
Leasing, Inc., which was merged into the Company in July 1992.
GEORGE MURNANE III has been Executive Vice President and Chief Financial
Officer of the Company since June 1996 and has served as a Director since
October 3, 1996. From March 1996 through June 1996, Mr. Murnane served as a
consultant for companies in the aviation industry. From October 1995 through
February 1996 he served as Executive Vice President and Chief Operating Officer
of Atlas Air, Inc., an air cargo company. From 1986 to 1995 he was affiliated
with the New York investment banking firm of Merrill Lynch & Co., most recently
as a Director in the firm's Transportation Group. Mr. Murnane was named to the
Board of Directors of CCAIR, Inc., a commuter airline, in January 1997. Mr.
Murnane is the general partner of Barlow Partners, L.P., which owns
approximately 6.6% of CCAIR, Inc.
-2-
<PAGE>
KYLE R. KIRKLAND has been a director of the Company since July 1992. Mr.
Kirkland has served as the President of Kirkland Messina, LLC, an investment
banking firm, since March 1994. Mr. Kirkland was employed as Senior Vice
President of Dabney/Resnick, Inc., an investment banking firm now known as
Dabney/Resnick/Imperial, LLC ("D/R"), from June 1991 until February 1994. D/R
acted as the placement agent for certain debt securities previously issued by
the Company. Mr. Kirkland was employed as an investment banker with Canyon
Partners, Inc. and with Drexel Burnham Lambert, Inc. from March 1990 through
June 1991 and from July 1988 through March 1990, respectively. Mr. Kirkland is
the Chairman and a director of Steinway Musical Instruments, Inc. and
Utilimaster Corporation. He also serves on the boards of several privately
held businesses.
E. JAMES MUELLER has been a director of the Company since 1991. Mr.
Mueller has been a principal with J.M. Associates, Inc., a business
development consulting firm, since January 1992. From June 1978 through
December 1991, Mr. Mueller was the Vice President of Sales/Marketing of Air
Cargo Associates, Inc., a Connecticut airline charter brokerage/sales
corporation. The Company has entered into a commission agreement with J.M.
Associates, Inc., pursuant to which J.M. Associates, Inc. is compensated for
originating transactions for the Company.
JAMES M. ISAACSON has been the Company's Vice President of Finance and
Treasurer since December 1996 and has served as Secretary since July 1997.
From April 1995 to December 1996 he served as Director of Corporate Finance and
Assistant Secretary for ValuJet Airlines, Inc. From May 1984 through April
1995 he served in a number of capacities for Delta Air Lines, Inc., where he
most recently served as Manager - Capital Markets & Analysis.
COMPOSITION OF THE BOARD
The number of directors of the Company is fixed at seven members; and the
number of directors constituting the Board shall not be changed without the
affirmative vote of at least 75% of the issued and outstanding shares of Common
Stock. The directors of the Company are elected at the annual meeting of the
stockholders. The Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws of the Company provide for a Board of Directors
divided into three classes, as nearly equal in size as possible, with staggered
terms of three years. As a result, approximately one-third of the Board will
be elected each year. Messrs. Dyer and Murnane will serve until the 2000
Annual Meeting of Stockholders. Messrs. Mueller and Kirkland will serve until
the 1999 Annual Meeting of Stockholders. There are currently three vacancies
on the Board. The Company has not nominated anyone for election to the Board
of Directors at the 1998 Annual Meeting of Stockholders.
COMMITTEES OF THE BOARD AND COMPENSATION COMMITTEE INTERLOCKS
The Compensation Committee of the Board of Directors reviews all aspects
of compensation of executive officers of the Company and makes recommendations
on such matters to the full Board of Directors. No executive officer of the
Company serves as a member of the Board of Directors or compensation committee
of any entity which has one or more executive officers serving as a member of
the Company's Board of Directors.
The Audit Committee makes recommendations to the Board concerning the
selection of outside auditors, reviews the financial statements of the Company
and considers such other matters in relation to the internal and external audit
of the financial affairs of the Company as may be necessary or appropriate in
order to facilitate accurate and timely financial reporting. The Audit
Committee also reviews proposals for major transactions.
The Company does not maintain a standing nominating committee or other
committee performing similar functions.
-3-
<PAGE>
COMPENSATION OF DIRECTORS
The non-employee members of the Company's Board of Directors received a
$25,000 fee for their service on the Board during fiscal 1998 pursuant to a
Director's Compensation Plan that was adopted during fiscal 1995. Directors
are also reimbursed for expenses incurred in connection with the attendance of
Board meetings.
CERTAIN TRANSACTIONS WITH DIRECTORS AND THEIR AFFILIATES
In December 1995, the Company entered into a commission agreement with
J.M. Associates, Inc., a business development consulting firm of which Mr.
Mueller is a principal. The commission agreement is non-exclusive and provides
that J.M. Associates will receive commissions of between 3% and 4% of lease
revenues or the purchase or sale price of completed parts acquisitions or sales
with parties introduced to the Company by J.M. Associates. In fiscal 1998, the
Company paid Mr. Mueller $96,108 for services rendered to the Company in
connection with the identification and consummation of aircraft, engine and
parts sales and leasing transactions.
In fiscal 1998, the Company paid Mr. Kirkland the amount of $85,811 for
services rendered to the Company in connection with identification and
evaluation of acquisition opportunities.
The Company believes the terms of such transactions were on terms no less
favorable than could be obtained from unaffiliated third parties. Any future
transactions between the Company and its officers or directors are subject to
approval by a majority of the disinterested directors of the Company.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock, as of August 12, 1998, by
each person who was known by the Company to own beneficially more than 5% of
the Company's Common Stock as of such date, based on information available to
the Company. Except as otherwise indicated, each person has sole voting and
dispositive power with respect to the shares beneficially owned by such person.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES BENEFICIALLY OWNED % OF SHARES OUTSTANDING
- ------------------ ------------------------- -----------------------
<S> <C> <C>
Kennedy Capital Management, Inc.{(1)} 440,244 17.2%
10829 Olive Blvd.
St. Louis, Missouri 63141
W. Robert Ramsdell{(2)} 131,000 5.1%
474 Paseo Miramar
Pacific Palisades, California 90272
Heartland Advisors, Inc.{(3)} 220,000 8.6%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
</TABLE>
**FOOTNOTES**
(1) Based on the Schedule 13G filed on February 10, 1998.
(2) Based on the Schedule 13D filed on December 31, 1997.
(3) Based on the Schedule 13G filed on February 13, 1998.
- 4 -
<PAGE>
EXECUTIVE COMPENSATION
The following sets forth certain information regarding the aggregate cash
compensation paid to the Company's Chief Executive Officer during fiscal 1996,
1997 and 1998 and the Company's Chief Financial Officer during fiscal 1997 and
1998 (the "Named Executives"). Compensation information is not required for
any other executive officer of the Company pursuant to the rules of the
Securities and Exchange Commission.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------ ---------------
<S> <C> <C> <C> <C>
NAME AND PRINCIPAL PAID
POSITION YEAR SALARY($) BONUS ($) OPTIONS/SARS(#)
- ---------------------------- ---- -------- --------- ---------------
Alexius A. Dyer III 1998 176,346 470,158 38,000
Chairman of the Board, 1997 161,154 125,911 224,543
President and Chief 1996 135,020 80,000
Executive Officer
George Murnane III 1998 151,077 237,164 15,000
Executive Vice President 1997 139,615 --- 104,787
and Chief Financial Officer
</TABLE>
STOCK OPTION GRANTS AND VALUES
The following table sets forth certain information regarding option
grants to the Named Executives during fiscal 1998.
<TABLE>
<CAPTION>
Potential
realizable
value
at assumed
annual
rates of stock
price
appreciation
INDIVIDUAL GRANTS for
---------------------------- option term
<S> <C> <C> <C> <C> <C> <C>
Number of Percentage of
securities total options Exercise or
underlying granted to base price
options employees in ($/SH) Expiration DATE 5% ($) 10% ($)
NAME GRANTED (#) FISCAL YEAR (%)
- -------------------- ----------- -------------- --------- --------------- ---------- ---------
Alexius A. Dyer III 38,000 29 4.50 6/4/07 107,541 272,530
George Murnane III 15,000 11 4.50 6/4/07 42,450 107,578
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES TABLE
The following table sets forth certain information with respect to option
exercises by the Named Executives during fiscal 1998 and the value of options
owned by the Named Executives at May 31, 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at FY-End(#) in-the-Money Options at
FY-End ($){(1)}
<S> <C> <C> <C> <C>
Shares Acquired on
EXERCISE (#) Exercisable Exercisable
NAME VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- -------------------- ----------------- ------------------ ----------------- -----------------
Alexius A. Dyer III 59,448 241,508 102,052 / 101,043 720,299 / 517,845
George Murnane III 29,624 120,348 43,009 / 47,154 197,921 / 241,664
</TABLE>
(1) Based on the closing price of the Company's Common Stock on the
American Stock Exchange on May 31, 1998 of $8.125 per share.
- 5 -
<PAGE>
EMPLOYMENT AGREEMENTS
As of October 3, 1996, the Company extended for an additional five years
the employment agreement with Alexius A. Dyer III, President, Chief Executive
Officer and Chairman of the Company. The employment agreement provides for
payment of a base salary of $175,000 per annum for each year during the
remaining term and annual cost-of-living increases, which base salary may be
increased as the Board deems appropriate. During the term of the employment
agreement and any extension thereof, Mr. Dyer shall serve as a member of the
Board.
Mr. Dyer's employment agreement also provides that he is entitled to an
annual bonus during the stated term in an amount not less than 5% of the
Company's net income before extraordinary and non-recurring items and income
taxes, subject to two adjustments. First, in computing net income, the Company
is required to exclude any item of revenue or expense attributable to any
litigation commenced by or against the Company. Second, items of revenue and
expense attributable to the sale of aircraft are not considered extraordinary
or non-recurring items.
Pursuant to the employment agreement, if Mr. Dyer is terminated without
cause prior to the end of the term of the employment agreement, the Company is
required to pay to Mr. Dyer the base salary for the remaining term of the
agreement plus an amount equal to a pro rata portion (based on months employed
during the current fiscal year) of the bonus paid to him during the previous
fiscal year. If Mr. Dyer terminates the employment agreement following the
occurrence of a "Change of Control" (as defined), the Company is obligated to
pay to him an amount equal to the average annual compensation paid to him
during the two most recent fiscal years by the Company.
As of October 3, 1996, the Company entered into a five-year employment
agreement with George Murnane III, the Executive Vice President and Chief
Financial Officer. The employment agreement provides for payment of a base
salary of $150,000 per annum for each year during the remaining term and annual
cost-of-living increases, which base salary may be increased as the Board deems
appropriate. During the term of the employment agreement and any extension
thereof, Mr. Murnane shall serve as a member of the Board.
Mr. Murnane's employment agreement also provides that he is entitled to
an annual bonus during the stated term in an amount not less than 3% of the
Company's net income before extraordinary and non-recurring items and income
taxes, subject to two adjustments. First, in computing net income, the Company
is required to exclude any item of revenue or expense attributable or to any
litigation commenced by or against the Company. Second, items of revenue and
expense attributable to the sale of aircraft are not considered extraordinary
or non-recurring items.
Pursuant to his employment agreement, if Mr. Murnane is terminated
without cause prior to the end of the term of the employment agreement, the
Company is required to pay to Mr. Murnane the base salary for the remaining
term of the agreement plus an amount equal to a pro rata portion (based on
months employed during the current fiscal year) of the bonus paid to him during
the previous fiscal year. If Mr. Murnane terminates the employment agreement
following the occurrence of a "Change of Control" (as defined), the Company is
obligated to pay to him an amount equal to the average annual compensation paid
to him during the two most recent fiscal years by the Company.
- 6 -
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors
consists of Messrs. Kirkland and Mueller, two non-employee members of the Board
of Directors. The Committee is responsible for administering the Plan.
EXECUTIVE COMPENSATION POLICIES
Generally, the Company's executive compensation program is designed to be
competitive with that offered by other companies against which the Company
competes for executive resources. At the same time, the Company links a
significant portion of executive compensation to the achievement of the
Company's short and long-term financial and strategic objectives and to the
performance of the Company's Common Stock. The Company's executive
compensation program consists of three primary elements: base salary, annual
incentive bonus and stock options or other stock benefits. Base salary is
intended to be competitive in the marketplace. However, although the Committee
considers competitive data, salaries are determined subjectively by the
Committee rather than by reference to any specific target group of companies.
Subject to the terms of any applicable employment agreement, base salary is
reviewed at least annually and adjusted based on changes in competitive pay
levels, the executive's performance as measured against individual and Company-
wide goals, as well as changes in the executive's role in the Company. The
Committee awards incentive bonuses to the Named Executives based on the
achievement of certain targets and objectives in a manner consistent with the
terms of their employment agreements. The Company does not make annual stock
option or other stock benefit grants to all executives. Rather, the Committee
determines each year which, if any, executives will receive benefits, based on
individual performance and each executive's existing stock option position.
EXECUTIVE OFFICER COMPENSATION
Alexius A. Dyer III, the Company's President, Chief Executive Officer and
Chairman, and George Murnane III, the Company's Executive Vice President and
Chief Financial Officer, each entered into employment agreements in connection
with the restructuring of the Company's capital structure on October 3, 1996.
See "Management -- Employment Agreements." The base compensation, incentive
bonus and stock option agreements entered into by the Company with such
individuals were determined by arm's-length negotiations between the
Compensation Committee and certain holders of the Company's then-outstanding
debt securities and such individuals. The Compensation Committee believes that
the specific base compensation, incentive bonus and stock option arrangements
were necessary to attract management of the caliber sought by the Board.
Future adjustments of such arrangements will be made in accordance with the
general principles outlined above.
The Company paid Mr. Dyer and Mr. Murnane a bonus in fiscal 1998 with
respect to performance in fiscal 1997, calculated under the terms of their
respective employment agreement. The Company awarded stock options to its
executive officers during fiscal 1998, either pursuant to their employment
agreement or at the discretion of the Committee, in light of the past and
prospective contributions of, and the need to provide adequate incentive for,
the recipients of such options.
The Board of Directors is also permitted to award discretionary cash
bonuses to senior executives of the Company who are designated as "Senior
Executives" by the Board of Directors. The Board of Directors is given the
discretion to make bonuses subject to conditions and to establish forfeiture
conditions, in each case as the Board deems appropriate. In fiscal 1998, the
Board awarded cash bonuses to Messrs. Dyer and Murnane in the amounts of
$336,815 and $157,158, respectively. The awards, were made subject to the
condition that the recipient use the proceeds of the award, net of any
withholding, to pay the exercise price of options to purchase shares of the
Company's Common Stock previously awarded to the recipient. Messrs. Dyer and
Murnane used the net proceeds of the awards to exercise options to purchase
59,448 and 26,624 shares of the Company's Common Stock, respectively. The
Committee believes that the awards made to Messrs. Dyer and Murnane, subject to
the conditions imposed, were an appropriate and efficient means of compensating
them for their efforts on behalf of the Company while increasing their
incentive to remain in the Company's employ and to enhance their incentive to
exert their best efforts to cause the value of the Company's Common Stock to
increase.
-7-
<PAGE>
COMPENSATION OF THE PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
The compensation of Mr. Dyer was determined, as noted above, based on the
terms of his employment agreement, which was negotiated at arm's-length. The
cash bonus awarded him was based on the Committee's desire to compensate Mr.
Dyer for his efforts on behalf of the Company during fiscal 1998 in a manner
that would increase his incentive to remain in the Company's employ and to
enhance his incentive to exert his best efforts to cause the value of the
Company's Common Stock to increase.
This report by the Committee shall not be deemed to be incorporated by
reference by a general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Exchange Act
and shall not otherwise be deemed filed under such Acts.
Respectfully submitted by
The Compensation Committee:
Kyle R. Kirkland
E. James Mueller
- 8 -
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth the total return on a $100 investment in
each of (i) the Company's Common Stock, (ii) the AMEX Major Market Index and
(iii) a Peer Group, from May 31, 1993 through May 31, 1998. The Peer Group
consists of AAR Corp., Aviall, Inc., AVTEAM, Inc., Aviation Distributors, Inc.,
and Banner Aerospace, Inc. (price data on AVTEAM, Inc. and Aviation
Distributors, Inc. is not available until 1997 and their year-to-year
performance does not affect the performance of the Peer Group until 1998). The
total return set forth with respect to the Company has been adjusted to give
effect to the Company's 1-for-27 reverse stock split consummated on October 3,
1996. The first reported sale of the Company's Common Stock following the
reverse stock split occurred on October 18, 1996 at $4.50 per share. The
Company's Common Stock closed at $8.125 per share on May 31, 1998.
[INSERT GRAPH]
<TABLE>
DATA POINTS AS OF MAY 31,
1993 1994 1995 1996 1997 1998
------ ------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
International Airline Support 100 24 7 5 3 6
Group, Inc.
Peer Group 100 97 76 105 130 149
AMEX Major Market Index 100 106 129 162 211 257
</TABLE>
- 9 -
<PAGE>
APPROVAL OF AMENDMENT TO PLAN (PROPOSAL NO. 1)
By unanimous written consent effective as of July 6, 1998, the Board of
Directors, subject to stockholder approval, amended of the Plan in order to
increase by 128,000 the number of shares of the Company's Common Stock for
which options may be granted. If the stockholders approve the amendment to the
Plan, options to purchase a total of 841,782 shares of the Company's Common
Stock may be granted under the Plan. The Compensation Committee has previously
granted options to purchase all of the 713,782 shares presently available for
issuance under the Plan. The Board recommends that the stockholders of the
Company approve the amendment of the Plan. The affirmative vote of the
majority of the issued and outstanding shares of the Company's Common Stock
present in person or represented by proxy at the 1998 Annual Meeting is
required for approval of the amendment of the Plan.
The Board of Directors recommends a vote FOR this proposal.
PLAN DESCRIPTION. The Plan was approved by the Company's stockholders at
a special meeting of the stockholders held on September 30, 1996. The Plan is
intended to provide a means to attract, retain and motivate selected employees
and directors of the Company. The Plan provides for the grant to eligible
employees of incentive stock options, non-qualified stock options, stock
appreciation rights, restricted shares and restricted share units, performance
shares and performance units, dividend equivalents and other share-based awards
(collectively, "awards"). All employees (approximately 28 persons) and non-
employee directors (two persons) are eligible to participate in the Plan. The
Plan is administered by the Compensation Committee. The Compensation Committee
has the full and final authority to select employees to whom awards may be
granted, to determine the type of awards to be granted to such employees and to
make all administrative determinations required by the Plan. The Compensation
Committee also will have authority to waive conditions relating to an award or
accelerate vesting of awards. The Plan provides for certain grants of
nonqualified stock options to directors who are not executive officers of the
Company. Upon adoption of the Plan, an aggregate of 598,782 shares of the
Company's Common Stock were reserved for issuance under the Plan, subject to
anti-dilution adjustments in the event of certain changes in the Company's
capital structure. The Company's stockholders approved at the fiscal 1997
Annual Meeting an amendment to the Plan to increase by 115,000 the number of
shares of the Company's Common Stock subject to the Plan.
STOCK OPTIONS. The Plan authorizes the granting of both incentive stock
options and non-qualified stock options. At the discretion of the Compensation
Committee, awards of options to employees under the Plan may be granted in
tandem with other types of awards, incentive stock options granted to employees
under the Plan, and any accompanying share appreciation rights, must generally
expire within 10 years after the date of grant. The exercise prices of
incentive stock options must be equal to at least 100% of the fair market value
of the Common Stock on the date of grant. The exercise price of non-qualified
stock options may be more or less than the fair market value of the Common
Stock on the date of grant. Awards under the Stock Option Plan to employees,
except for vested shares, are not transferable by the holder other than by will
or applicable laws of descent or distribution, except pursuant to a designation
filed by an employee with the Company as to who shall receive the benefits
specified under the Plan upon the death of such employee.
RESTRICTED STOCK. The Plan authorizes the Compensation Committee to
grant shares of restricted stock to employees, subject to the terms and
conditions imposed by the Compensation Committee. These terms may include a
restriction period during which the shares of restricted stock may not be sold,
assigned, transferred, pledged or otherwise encumbered and during which such
shares may be subject to forfeiture. Except for such restrictions on transfer
and such other restrictions as the Compensation Committee may impose, the
recipient of restricted stock will have all the rights of a holder of Common
Stock as to such restricted stock including the right to vote the shares and
the right to receive dividends. Except as provided by the Compensation
Committee at the time of grant or otherwise, upon a termination of employment
for any reason during the restriction period, all shares still subject to
restriction will be forfeited by the employee. The Plan also authorizes the
Compensation Committee to grant restricted share units to an employee, under
which shares of Common Stock or cash will be delivered to the employee after
the expiration of the restriction period.
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SHARE APPRECIATION RIGHTS. The Plan authorizes the Compensation
Committee to grant share appreciation rights to employees, subject to the terms
and conditions imposed by the Compensation Committee. Share appreciation
rights give an employee the right to receive the excess of the fair market
value of shares of Common Stock on the date of exercise over the exercise price
of the share appreciation rights, as set by the Compensation Committee. Terms
within the discretion of the Compensation Committee may include the time of
exercise, the form of consideration payable at exercise, and the method by
which shares of Common Stock will be delivered or deemed to be delivered to an
employee.
PERFORMANCE SHARES AND PERFORMANCE UNITS. The Plan also authorizes the
Compensation Committee to grant performance shares or performance units to
employees, subject to the terms and conditions imposed by the Compensation
Committee. These awards provide shares of Common Stock or cash to an employee
upon the satisfaction of certain performance objectives, as determined by the
Compensation Committee. Awards may be fixed or may vary in accordance with the
level of such performance. The Compensation Committee generally may revise the
performance objectives to reflect the occurrence of significant events which it
expects to have a substantial effect on the performance objectives. Except as
provided by the Compensation Committee at the time of grant or otherwise, upon
a termination of employment during the performance period, all shares and units
relating to such performance period will be forfeited by the employee.
DIVIDEND EQUIVALENTS. The Plan also authorizes the Compensation
Committee to grant dividend equivalents to employees. These awards may relate
to other awards of shares, rights or units and generally give an employee the
right to receive cash or other property equal to any dividends paid on the
shares of Common Stock underlying such other awards. Such dividend equivalents
may either be paid when accrued or deemed to have been reinvested in additional
shares of Common Stock. Dividend equivalents (other than freestanding dividend
equivalents) will be subject to all conditions and restrictions of the
underlying awards to which they relate.
In addition to the foregoing types of awards, the Plan also authorities
the Compensation Committee, subject to limitations under applicable law, to
grant employees any other award based on shares of Common Stock, including the
award of unrestricted shares purely as a bonus and not subject to any
conditions. Cash awards, as an element of or supplement to any other award,
are also authorized under the Plan. In all cases, the Compensation Committee
shall determine the terms and conditions of such awards.
The Plan generally may be amended, altered, suspended, discontinued or
terminated from time to time by the Board of Directors, except that stockholder
approval is required, in accordance with Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), for any amendment (a) to increase the
number of shares of Common Stock reserved for issuance under the Plan or (b) to
change the class of employees eligible to participate in the Plan; provided,
however, that no such amendment may impair the rights of any participant
without his consent.
The Plan provides that, if the Compensation Committee determines that a
stock dividend, recapitalization, stock split, reorganization, merger,
consolidation, spin-off, combination, or similar corporate transaction affects
the Common Stock such that an adjustment is appropriate to prevent dilution or
enlargement of rights of employees participating in the Plan, the Compensation
Committee has discretion to adjust the number and kind of shares to be issued
under the Plan, the number and kind of shares issuable in respect of
outstanding awards and the exercise price, grant price or purchase price of any
award. The Plan provides that such adjustments with respect to options of
directors who are not executive officers of the Company shall be made
automatically. In addition, the Compensation Committee is authorized to make
adjustments in the terms of awards in recognition of certain unusual or non-
recurring events affecting the Company and its financial statements.
FEDERAL INCOME TAX CONSEQUENCES OF OPTION GRANTS
The following discussion outlines generally the federal income tax
consequences of option awards under the Plan. Individual circumstances may
vary these results. The federal income tax law and regulations are frequently
amended, and each participant should rely on his own tax counsel for advice
regarding federal income tax treatment under the Plan.
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NON-QUALIFIED STOCK OPTIONS. The recipient of a non-qualified stock
option under the Plan is not subject to any federal income tax upon the grant
of such option nor does the grant of the option result in an income tax
deduction for the Company. As a result of the exercise of an option, the
recipient will recognize ordinary income in an amount equal to the excess, if
any, of the fair market value of the shares transferred to the recipient upon
exercise over the exercise price. Such fair market value generally will be
determined on the date the shares of Common Stock are transferred pursuant to
the exercise. However, if the recipient is subject to Section 16(b) of the
Exchange Act, the date on which the fair market value of the shares transferred
will be determined is delayed until the earlier of the last day of the six-
month period beginning on the date the "property" is "purchased" or the first
day on which a sale of the "property purchased" will not subject the recipient
to suit under Section 16(b) of the Exchange Act. Alternatively, if the
recipient is subject to Section 16(b) of the Exchange Act and makes a timely
election under Section 83(b) of the Code, such fair market value will be
determined on the date the shares are transferred pursuant to the exercise
without regard to the effect of Section 16(b) of the Exchange Act. The
recipient will recognize ordinary income in the year in which the fair market
value of the shares transferred is determined. The Company generally will be
entitled to a federal income tax deduction equal to the amount of ordinary
income recognized by the recipient when such ordinary income is recognized by
the recipient, provided, the Company satisfies applicable federal income tax
reporting requirements. The Company's deduction, however, is subject to a
$1,000,000 limitation on the deduction of certain employee remuneration under
Section 162(m) of the Code, unless an exception for performance-based
compensation under such section applies.
Depending on the period the shares of Common Stock are held after
exercise, the sale or other taxable disposition of shares acquired through the
exercise of a non-qualified stock option generally will result in a short- or a
long-term capital gain or loss equal to the difference between the amount
realized on such disposition and the fair market value of such shares when the
non-qualified stock option was exercised.
Special rules apply to a recipient who exercises a non-qualified stock
option by paying the exercise price, in whole or in part, by the transfer of
shares of Common Stock to the Company.
INCENTIVE STOCK OPTIONS. An employee is not subject to any federal
income tax upon the grant of an incentive stock option pursuant to the Plan,
nor does the grant of an incentive stock option result in an income tax
deduction for the Company. Further, an employee will not recognize income for
federal income tax purposes and the Company normally will not be entitled to
any federal income tax deduction as a result of the exercise of an incentive
stock option and the related transfer of shares of Common Stock to the
employee. However, the excess of the fair market value of the shares
transferred upon the exercise of the incentive stock option over the exercise
price for such shares generally will constitute an item of alternative minimum
tax adjustment to the employee for the year in which the option is exercised.
Thus, certain employees may increase their federal income tax liability as a
result of the exercise of an incentive stock option under the alternative
minimum tax rules of the Code.
If the shares of Common Stock transferred pursuant to the exercise of an
incentive stock option are disposed of within two years from the date the
option is granted or within one year from the date the option is exercised, the
employee generally will recognize ordinary income equal to the lesser of (1)
the gain recognized (i.e., the excess of the amount realized on the disposition
over the exercise price or (2) the excess of the fair market value of the
shares transferred upon exercise over the exercise price for such shares. If
the employee is subject to Section 16(b) of the Exchange Act, special rules may
apply to determine the amount of ordinary income recognized upon the
disposition. The balance, if any, of the employee's gain over the amount
treated as ordinary income on the disposition generally will be treated as
long- or short-term capital gain depending upon whether the holding period
applicable to long-term capital assets is satisfied. The Company generally
would be entitled to a federal income tax deduction equal to any ordinary
income recognized by the employee, provided the Company satisfies applicable
federal income tax reporting requirements and subject to the limitation on the
deduction of certain employee remuneration as mandated by Section 162(m) of the
Code, absent an exception for performance-based compensation under such
section.
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If the shares of Common Stock transferred upon the exercise of an
incentive stock option are disposed of after the holding periods have been
satisfied, such disposition generally will result in long-term capital gain or
loss treatment with respect to the difference between the amount realized on
the disposition and the exercise price. The Company will not be entitled to a
federal income tax deduction as a result of a disposition of such shares after
these holding periods have been satisfied.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS (PROPOSAL NO. 2)
The Board of Directors has appointed Grant Thornton LLP as independent
accountants of the Company for fiscal 1999. Although stockholder ratification
is not required, the Board of Directors has directed that such appointment be
submitted to the stockholders for ratification. The Board considers Grant
Thornton LLP to be well qualified and recommends that the stockholders vote to
ratify that appointment. A representative of Grant Thornton LLP is not expected
to attend the 1998 Annual Meeting.
The affirmative vote of the holders of a majority of the issued and
outstanding shares of Common Stock present in person or represented by proxy at
the 1998 Annual Meeting is required to adopt the proposal. If the proposal is
not adopted, the Board of Directors may reconsider the appointment.
The Board of Directors recommends a vote FOR this proposal.
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ADDITIONAL INFORMATION
PROPOSALS FOR 1998 MEETING
Any proposal of stockholders that is intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received at the Company's
principal executive offices no later than April 14, 1999 and must comply with
all other applicable legal requirements in order to be included in the
Company's proxy statement and form of proxy for that meeting.
ANNUAL REPORT
The Company's 1998 Annual Report on Form 10-K is being mailed to
Stockholders with this Proxy Statement.
OTHER MATTERS
The Board of Directors knows of no matter to come before the Annual
Meeting other than as specified herein. If other business should, however, be
properly brought before such meeting, the persons voting the proxies will vote
them in accordance with their best judgment.
THE STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, AND RETURN PROMPTLY THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ Alexius A. Dyer III
ALEXIUS A. DYER III
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
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