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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 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):
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:
(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:
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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<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 Wednesday, October 4, 2000, at 10:00 a.m., local time, to
consider and vote on:
1. The election of two (2) directors to serve until the 2003 Annual Meeting
of Stockholders.
2. The approval to effect a one-for-four reverse stock split with respect to
the Company's Common Stock.
3. The approval of an amendment to the Company's 1996 Long Term Incentive
and Share Award Plan ("Plan") to increase by 109,000 (27,250, if the reverse
stock split is approved) the number of shares available for grant under the
Plan.
4. The ratification of the appointment of Grant Thornton LLP as independent
auditors for the fiscal year of the Company ending on May 31, 2001 ("fiscal
2001").
5. Such other matters as may properly come before the meeting or any
adjournments thereof.
The close of business on August 10, 2000, 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 September 1, 2000
<PAGE>
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
1954 AIRPORT ROAD
SUITE 200
ATLANTA, GEORGIA 30341
PROXY STATEMENT
______________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 4, 2000
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 (the "Board") 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 Wednesday, October 4, 2000, at 10:00 a.m. local time, and at
any adjournments thereof (the "2000 Annual Meeting"). This Proxy Statement and
accompanying form of proxy are first being sent to stockholders on or about
September 1, 2000.
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 $3,500 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 10, 2000 (the "Record Date") will be entitled to vote at the
2000 Annual Meeting. The Company had outstanding 2,190,198 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 2000 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 2000 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 election of Messrs. Dyer and Murnane as Class III Directors
to serve a three-year term that will expire at the annual meeting of
stockholders in 2003, "FOR" the proposal to effect a one-for-four reverse stock
split with respect to the Common Stock, "FOR" the proposal to amend the 1996
Long Term Incentive and Share Award Plan (the "Plan") to increase by 109,000
(27,250, if the reverse stock split is approved) 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 2001 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, other than the
proposal to effect a one-for-four reverse stock split with respect to the Common
Stock. The reverse-stock-split proposal will require the affirmative vote of
the holders of a majority of the shares of Common Stock outstanding.
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 the
proposals which require the affirmative vote of majority of the votes entitled
to be cast, 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. With respect to the
reverse-stock-split proposal, abstentions and Broker Non-Votes will have the
same effect as votes against the proposal.
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
Under the Restated and Amended Certificate of Incorporation (the
"Certificate") and the Amended and Restated Bylaws (the "Bylaws) of the Company,
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 the Common Stock.
The directors of the Company are elected at the annual meeting of stockholders.
The Certificate and the Bylaws of the Company provide for a Board of Directors
divided into three classes, as nearly equal in size as possible, having
staggered terms of three years. As a result, approximately one-third of the
Board will be elected each year. Pursuant to the Certificate and the Bylaws,
the Board has nominated the persons set forth below as Class III directors to
serve a three-year term that will expire at the annual meeting of stockholders
in 2003.
ALEXIUS A. DYER III
GEORGE MURNANE III
Management of the Company and the Board recommend the election of Mr.
Alexius A. Dyer III and Mr. George Murnane III for the office of Class III
director to hold office for a three-year term and until their successors are
duly elected and qualified. In addition to the two nominees, there are two
other directors continuing to serve on the Board, Messrs. F. Dixon McElwee, Jr.
and E. James Mueller, whose terms expire in 2002. There are currently three
vacancies on the Board. The Company has not nominated anyone to fill such
vacancies.
The Board has no reason to believe that either of the nominees for the
office of director will be unavailable for election as director. However, if at
the time of the Annual Meeting either of the nominees should be unable or
decline to serve, the persons named in the enclosed proxy card will vote as
recommended by the Board to elect substitute nominees or vote to allow the
vacancy created thereby to remain open until filled by the Board, as recommended
by the Board. In no event, however, can a proxy be voted to elect more than
five directors.
The Board of Directors recommends a vote FOR this proposal.
<PAGE>
INFORMATION AS TO DIRECTORS AND EXECUTIVE OFFICERS
STOCK OWNERSHIP
The following table sets forth certain information, including ownership of
the Company's Common Stock, as of August 10, 2000, with respect to: (i) each
director; (ii) each executive officer and (iii) all directors and executive
officers as a group.
NUMBER OF
SHARES OF
OFFICER OR COMMON
NAME AGE POSITION DIRECTOR SINCE STOCK OWNED(3) PERCENT
---- --- -------- -------------- ----------- -------
Alexius A. 44 Chairman of
Dyer III the Board,
President and Chief
Executive Officer 1992 368,489 15.5
George
Murnane III 42 Executive Vice
President, Chief
Operating Officer
and Director 1996 144,587 6.4
E. James
Mueller
(1)(2) 54 Director 1991 104,072 4.6
F Dixon McElwee,
Jr.(1)(2) 53 Director 1999 -- --
James M.
Isaacson 39 Chief Financial
Officer 1997 35,373 1.6
-----------------------------------------------------------------------------
Officers and Continuing Directors as a Group 649,321 25.7
(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, 187,724; Mr. Murnane,
76,978; Mr. Mueller, 64,072; and Mr. Isaacson, 33,173.
DIRECTORS AND EXECUTIVE OFFICERS
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. Mr. Dyer, who currently serves as a member of
the Company's Board of Directors in Class III, has been re-nominated for
election as a Class III Director for a term expiring at the Annual Meeting of
the Company to be held in 2003.
GEORGE MURNANE III has been the Chief Operating Officer of the Company
since March 1999, Executive Vice President of the Company since June 1996 and
has served as a director of the Company since October 1996. From June 1996 to
March 1999, he served as Chief Financial Officer of the Company. 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 Mesa Air Group, Inc. ("Mesa"), a commuter airline, in June 1999.
Mr. Murnane is the President of Barlow Management, Inc., the general partner of
Barlow Partners II, L.P., a shareholder of Mesa. Prior to joining Mesa's Board
of Directors, Mr. Murnane served since January 1997 as a Director of CCAIR,
Inc., a commuter airline acquired by Mesa in June 1999. Mr. Murnane, who
currently serves as a member of the Company's Board of Directors in Class III,
has been re-nominated for election as a Class III Director for a term expiring
at the Annual Meeting of the Company to be held in 2003.
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. 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.
F. DIXON MCELWEE, JR., has been the Senior Vice President of Frozen Food
Express Industries, Inc., a motor carrier specializing in the transportation of
perishable commodities, since September 1998. From May 1995 until July 1998,
Mr. McElwee was Executive Vice President and Chief Financial Officer of
Cameron-Ashley Building Products.
JAMES M. ISAACSON has served as the Company's Chief Financial Officer since
May 1999, the Company's Treasurer since December 1996 and Secretary of the
Company 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.
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.
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 2000 pursuant to a
Director's Compensation Plan that was adopted during fiscal 1995. The Company
has amended its Director's Compensation Plan to provide that, beginning in
fiscal 2001, Directors will receive an annual fee of $10,000, plus options to
purchase 10,000 shares of Common Stock. Directors are also reimbursed for
expenses incurred in connection with the attendance of Board meetings.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership on Forms 3, 4
and 5 with the Securities and Exchange Commission. Officers, directors and
greater than ten percent stockholders are required by law to furnish the Company
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and representations from certain reporting persons, the Company
believes that its officers, directors and greater than ten percent beneficial
owners complied with all filing requirements applicable to them with respect to
transactions during fiscal 2000.
<PAGE>
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 2000, the Company paid
Mr. Mueller $60,000 for services rendered to the Company under this agreement
and in connection with Mr. Mueller's participation in the Company's outside
consulting activities.
The Company believes the terms of such transactions were 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 10, 2000, by
each person who was known by the Company to own beneficially more than 5% of the
Company's outstanding 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.
NAME AND ADDRESS SHARES BENEFICIALLY OWNED % OF SHARES
---------------- ------------------------- -----------
OUTSTANDING
-----------
Cohanzick Partners, L.P. (1)
427 Bedford Road, Suite 230
Pleasantville, New York 10570 167,000 7.6%
Heartland Advisors, Inc.(2)
790 North Milwaukee Street
Milwaukee, Wisconsin 53202 332,200 15.2%
Alexius A. Dyer III(3)
1954 Airport Road, Suite 200
Atlanta, Georgia 30341 368,489 15.5%
W. Robert Ramsdell(4)
474 Paseo Miramar
Pacific Palisades, California 90272 162,633 7.4%
Northeast Investors Trust(5)
50 Congress Street
Boston, Massachusetts 02109-4096 224,540 10.3%
(1) Based on Amendment No. 1, filed on March 31, 2000, to a Schedule 13D
filed on behalf of a group consisting of (i) Cohanzick Partners, L.P., a
Delaware limited partnership; (ii) Cohanzick Capital, L.P., a Delaware limited
partnership that is the sole general partner of Cohanzick Partners, L.P.; (iii)
Sunnyside L.L.C., a Delaware limited liability company that is the sole general
partner of Cohanzick Capital, L.P.; and (iv) David K. Sherman, who is the sole
managing member of Sunnyside, L.L.C. Under the rules and regulations of the
Securities and Exchange Commission, each of the entities referred to in the
previous sentence is deemed to be the beneficial owner of 167,000 shares of
Common Stock.
(2) Based on Amendment No. 3, filed on February 3, 2000, to a Schedule 13G
filed by Heartland Advisors, Inc., a registered investment advisor. According
to Amendment No. 3 to the Schedule 13G, it has sole voting power with respect to
82,200 shares of Common Stock and sole dispositive power with respect to 332,200
shares of Common Stock.
(3) Based on a Schedule 13D filed on January 22, 1999 and a Form 4 filed on
February 4, 2000. Includes 187,724 shares that are subject to options that are
exercisable presently or within sixty days. Mr. Dyer is the Chairman of the
Board, President and Chief Executive Officer of the Company.
(4) Based on a Schedule 13D filed on October 19, 1998.
(5) Based on Amendment No. 2, filed on February 10, 1999, to a Schedule 13G
filed by Northeast Investors Trust, a registered investment company.
<PAGE>
EXECUTIVE COMPENSATION
The following sets forth certain information regarding the aggregate cash
compensation paid to the Company's Chief Executive Officer and the Company's
Chief Operating Officer during fiscal 1998, 1999 and 2000 (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>
ANNUAL LONG -TERM
COMPENSATION COMPENSATION
------------------------ ------------------------------------
AWARDS PAYOUTS
--------- ---------
NAME AND PAID
PRINCIPAL POSITION YEAR SALARY BONUS ($) OPTIONS/SARS(#) LTIP PAYOUTS ($)
------------------ ---- ------ --------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Alexius A. Dyer III 2000 183,842 194,677 -- --
Chairman of the Board, 1999 180,000 288,709 63,180(1) 336,815(2)
President and Chief 1998 176,346 470,158 38,000 336,815(2)
Executive Officer
George Murnane III 2000 157,273 116,806 -- --
Executive Vice President 1999 154,000 173,225 30,000(1) 157,158(2)
and Chief Operating Officer 1998 151,077 237,164 15,000 157,158(2)
</TABLE>
(1) On December 3, 1998, the Company's Board of Directors approved the
repricing of certain stock options outstanding under the Company's existing
stock option plans (the "Stock Option Repricing"). The Stock Option Repricing
was consummated on December 3, 1998 based on the market value of the Company's
Common Stock on such date. 131,173 outstanding stock options were repriced to
$3.31. Pursuant to the Stock Option Repricing, Messrs. Dyer and Murnane had
options repriced from $4.50 to $3.31 with 22,180 and 15,000 shares of Common
Stock underlying such options, respectively.
(2) Represents amounts awarded to Messrs. Dyer and Murnane subject to the
condition that the net proceeds be used to pay the exercise price of options to
purchase shares of the Company's Common Stock. The amount paid in fiscal 1998
was awarded in fiscal 1997; the amount paid in fiscal 1999 was awarded in fiscal
1998. Messrs. Dyer and Murnane purchased (i) 56,371 and 28,185 shares of the
Company's Common Stock, respectively, with the net proceeds of such awards in
fiscal 1999 and (ii) 59,448 and 29,624 shares of the Company's Common Stock,
respectively, with the net proceeds of such awards in fiscal 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES TABLE
The following table sets forth certain information with respect to the
value of options owned by the Named Executives at May 31, 2000. The Named
Executives did not exercise any options during fiscal 2000.
<PAGE>
NUMBER OF SECURITIES UNDERLYING VALUE
UNEXERCISED OPTIONS AT FY-END(#) OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END ($)(1)
EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
------------- -------------
NAME
----
Alexius A. Dyer III 154,043/33,681 0/0
George Murnane III 61,260/15,718 0/0
(1) Based on the closing price of the Company's Common Stock on the American
Stock Exchange on May 31, 2000 of $2.625 per share.
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 $180,000 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 in the employment agreement),
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
Operating Officer. The employment agreement provides for payment of a base
salary of $154,000 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 in the employment agreement),
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.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors
consists of Mr. Mueller and Mr. McElwee, both of whom are 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 Operating 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 2000 with
respect to performance in fiscal 1999, calculated under the terms of their
respective employment agreements. 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 2000, the Board did not award discretionary cash bonuses to Messrs.
Dyer or Murnane.
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
Board of Directors did not award stock options or a discretionary cash bonus to
Mr. Dyer during fiscal 2000.
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:
F. Dixon McElwee, Jr.
E. James Mueller
<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, 1995 through May 31, 2000. The Peer Group
consists of AAR Corp., Aviall, Inc., Aviation Sales, Inc., AVTEAM, Inc.,
Aviation Distributors, Inc., and Kellstrom, 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; price
data for Kellstrom, Inc. is not available until 1996 and its year-to-year
performance does not affect the performance of the Peer Group until 1997). 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 $2.625 per share on May 31, 2000.
[GRAPHIC OMITED]
[GRAPHIC OMITED]
YLF PEER GROUP AMEX
------ --------- -----
May 31, 1995 100 100 100
May 31, 1996 67 113 126
May 31, 1997 44 141 163
May 31, 1998 80 197 199
May 28, 1999 41 163 235
May 31, 2000 26 55 228
<PAGE>
16
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION (PROPOSAL NO. 2)
By unanimous written consent effective as of August 28, 2000, the Board of
Directors approved an amendment to the Company's Certificate of Incorporation to
effect a reverse stock split pursuant to which each four shares of the Company's
outstanding Common Stock will be combined into one share of Common Stock (the
"Reverse Stock Split Amendment"). If adopted, the Reverse Stock Split Amendment
would become effective on the date of the 2000 Annual Meeting (the "Effective
Date"). The authorized capitalization of the Company will not be affected by
the Reverse Stock Split Amendment. Adoption of the Reverse Stock Split
Amendment requires the affirmative vote of the holders of a majority of the
shares of Common Stock outstanding.
The Board of Directors have approved the Reverse Stock Split Amendment to
reduce the number of shares of Common Stock outstanding in an effort to increase
the market value for the Company Stock. If the Reverse Stock Split Amendment
had been approved on August 10, 2000, the record date for the 2000 Annual
meeting, the number of shares of Common Stock outstanding would have been
reduced from 2,190,198 to 547,549. Pursuant to adjustment provisions contained
in all the Company's outstanding stock options, the number of shares of Common
Stock that may be obtained upon exercise of a stock option will be adjusted to
give effect to the Reverse Stock Split Amendment.
If the Reverse Stock Split Amendment is approved by the Company's
stockholders, the Company will instruct its transfer agent to act as its
exchange agent (the "Exchange Agent") and to act for holders of the Common Stock
in implementing the exchange of their certificates. Commencing on the Effective
Date, stockholders will be notified and requested to surrender to the Exchange
Agent their certificates representing shares of old Common Stock in exchange for
certificates representing new Common Stock. One share of new Common Stock will
be issued in exchange for each four shares presently issued and outstanding
shares of Common Stock. Beginning on the Effective Date, each certificate
representing shares of the Common Stock will be deemed, for all corporate
purposes, to evidence ownership of shares of new Common Stock. The Company will
not issue fractional shares to any stockholder who owns less than one share of
Common Stock as a result of the approval of the Reverse Stock Split Amendment.
Instead, the Company will pay cash for the fractional share based on the closing
sale price of a share of Common Stock on the American Stock Exchange on the day
prior to the 2000 Annual Meeting.
The Board of Directors recommends a vote FOR this proposal.
APPROVAL OF AMENDMENT TO PLAN (PROPOSAL NO. 3)
By unanimous written consent effective as of August 28, 2000, the Board of
Directors, subject to stockholder approval, amended the Plan in order to
increase by 109,000 (27,250, if the Reverse Stock Split Amendment is approved)
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 1,076,782 (269,195, if the Reverse Stock Split Amendment is
approved) shares of the Company's Common Stock may be granted under the Plan.
The Compensation Committee has previously granted options to purchase 801,575 of
the 967,782 shares presently available for issuance under the Plan. As of
August 10, 2000 there were 529,947 unexercised options. If the Reverse Stock
Split Amendment is approved, the unexercised options will represent the right to
purchase 132,486 shares of Common Stock. 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 proxies at the 2000 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 and non-employee directors 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. In fiscal
1998, the Plan was amended again by a vote of stockholder to increase by 128,000
the number of shares of the Company's Common Stock subject to the Plan. During
fiscal 1999, an additional 12,000 options were issued pursuant to the Plan. The
Plan was further amended in fiscal 1999 to increase by 109,000 the number of
shares of the Company's Common Stock subject to the Plan. The numbers of shares
and options set forth in this paragraph do not give effect to the Reverse Stock
Split Amendment.
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.
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.
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.
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. 3)
The Board of Directors has appointed Grant Thornton LLP as independent
accountants of the Company for fiscal 2001. 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 2000 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 2000 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.
ADDITIONAL INFORMATION
PROPOSALS FOR 2001 MEETING
Any proposal of stockholders that is intended to be presented at the
Company's 2001 Annual Meeting of Stockholders must be received at the Company's
principal executive offices no later than April 14, 2001 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 2000 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
