RENO AIR, INC.
220 Edison Way
Reno, Nevada 89502
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held
May 22, 1997
--------------------
TO THE HOLDERS OF COMMON STOCK OF RENO AIR, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Reno
Air, Inc., a Nevada corporation (the "Company"), will be held at 9:00 o'clock
a.m., local time, on May 22, 1997, at the Reno Hilton, Reno, Nevada, for the
following purposes:
1. To elect eight directors of the Company to hold office until the 1997
Annual Meeting of Stockholders and until the election and qualification of their
respective successors.
2. To consider and act upon a proposal to approve an amendment to and
restatement of the Reno Air 1992 Stock Option Plan renaming the plan the
Employee Stock Incentive Plan, as described herein.
3. To consider and act upon a proposal to approve the Reno Air Director
Stock Option Plan, as described herein.
4. To transact such other business as may properly come before the meeting
or any and all adjournments thereof.
Only holders of record of the Company's common stock at the close of
business on April 4, 1997, are entitled to receive notice of, and to vote at,
the meeting and any adjournment thereof. Such stockholders may vote in person or
by proxy. The stock transfer books of the Company will not be closed.
Stockholders who find it convenient are cordially invited to attend the
meeting in person. Stockholders whose shares are registered in the name of a
broker, bank or other nominee should bring to the meeting a statement from their
nominee showing their ownership of Reno Air common stock (or other evidence of
such ownership), or they may not be admitted to the meeting. If such
stockholders desire to vote their shares, they must bring a proxy duly executed
by the record holder of their shares.
In any event, you are requested to fill in, sign, date and return the
accompanying proxy in the enclosed envelope. No postage is required if mailed in
the United States.
By Order of the Board of Directors,
ROBERT M. ROWEN
Secretary
Dated: April 11, 1997
<PAGE>
RENO AIR, INC.
220 Edison Way
Reno, Nevada 89502
--------------------
PROXY STATEMENT
-------------------
Annual Meeting of Stockholders
May 22, 1997
------------------
This proxy statement is furnished in connection with the solicitation
by the Board of Directors of Reno Air, Inc., a Nevada corporation (the
"Company"), of proxies to be used at the Annual Meeting of Stockholders of the
Company to be held at 9:00 a.m., local time, on May 22, 1997, at the Reno
Hilton, Reno, Nevada, and at any adjournments thereof. If proxy cards in the
accompanying form are properly executed and returned, the shares of the
Company's common stock, par value $.01 per share (the "Common Stock"),
represented thereby will be voted as instructed on the proxy, and if no
instructions are given, such shares will be voted (1) for the election as
directors of the nominees of the Board of Directors named below; (2) in favor of
the proposal to amend and restate the Corporation's 1992 Stock Option Plan and
to rename the plan the Employee Stock Incentive Plan; (3) in favor of the
proposal to adopt the Director Stock Option Plan; and (4) in the discretion of
the proxies named in the proxy card on any other proposals which may properly
come before the meeting or any adjournment(s) thereof.
Any proxy may be revoked in writing prior to its exercise. The
attendance at the meeting by any stockholder who has previously given a proxy
will not revoke the proxy unless such stockholder delivers written notice of
revocation to the secretary of the meeting prior to the exercise of the proxy.
The approximate date of mailing of this Proxy Statement and the accompanying
proxy card is April 21, 1997.
VOTING
Holders of record of the Company's Common Stock on April 4, 1997 (the
"Record Date") will be entitled to vote at the Annual Meeting and any
adjournment(s) thereof. As of that date there were 10,439,120 shares of Common
Stock outstanding and entitled to vote and a majority, or 5,219,560 shares, will
constitute a quorum for the transaction of business. Each share of Common Stock
entitles the holder thereof to vote on all matters to come before the meeting,
including the election of directors.
The favorable vote of a plurality of the shares duly represented in
person or by proxy and entitled to vote at the meeting is necessary to elect
each director nominated for election at the meeting. The favorable vote of a
majority of the shares duly represented in person or by proxy and entitled to
vote at the meeting is necessary to approve the proposal amending and restating
the 1992 Stock Option Plan and to approve the proposal to adopt the Director
Stock Option Plan. Abstentions will have the same effect as votes against the
proposals. Broker non-votes will be counted for purposes of determining a quorum
and otherwise considered not represented with regard to voting on any matter
with respect to which there is a broker non-vote. The Board of Directors
recommends a vote FOR each of the proposals.
<PAGE>
ELECTION OF DIRECTORS
Unless otherwise specified in the accompanying proxy, the shares voted
pursuant thereto will be cast FOR the election of each of Donald L. Beck, Barrie
K. Brunet, Lee M. Hydeman, Joe M. Kilgore, James T. Lloyd, Robert W. Reding,
Wayne L. Stern and Agnieszka Winkler, as directors to hold office until the 1998
Annual Meeting of Stockholders and until their respective successors shall be
duly elected and shall have qualified. If, for any reason, at the time of
election, any such nominee should be unwilling to accept nomination or election,
such proxy may be voted for the election, in his or her place, of a substitute
nominee recommended by the Board of Directors. However, the Board of Directors
has no reason to believe that any such person will be unwilling to serve as a
director.
Information with respect to the Company's nominees for director is set
forth below.
Has Been a
Positions and Offices Presently Director
Name Age Held with the Company Since
Lee M. Hydeman 68 Chairman of the Board of 1990
Directors
Donald L. Beck 70 Director 1990
Barrie K. Brunet 72 Director 1992
Joe M. Kilgore 78 Director 1992
James T. Lloyd 56 Director 1996
Robert W. Reding 47 President, Chief Executive 1994
Officer and Director
Wayne L. Stern, M.D. 54 Director 1990
Agnieszka Winkler 51 Director 1994
- - ---------------------
Lee M. Hydeman has been a director of the Company since September 1990 and
Chairman since December 1991. From April 1, 1994 through September 22, 1995, Mr.
Hydeman also served as Chief Executive Officer of the Company. Mr. Hydeman has
30 years experience in the airline industry, including 13 years as Washington,
D.C. counsel to and an officer of Continental Air Lines (prior to its
restructuring in 1982).
Donald L. Beck has been a director of the Company since October 1990. He is
and has been since 1988 the Chairman of the Board of The Pacific Group, an
airline consulting firm located in Manhattan Beach, California, and, since 1995,
a Director of Vision Expeditions (airline ticket consolidator). From 1988 until
1993, Mr. Beck was Chairman of Pacific Rim Development Corp., a land development
company, also located in Manhattan Beach, California. Mr. Beck has 30 years
experience in the airline industry, including 28 years as a senior officer of
Continental Air Lines, Western Airlines and World Airways.
Barrie K. Brunet has been a director of the Company since April 13, 1992.
From April 1986 until March 1990 (when he retired) Mr. Brunet was employed by
Bally Entertainment Company as the President and Chief Operating Officer of
Bally's Casino Resort-Reno and as the Vice President and Director of Bally
Grand, Inc., a subsidiary of Bally Manufacturing Company.
Joe M. Kilgore has been a director of the Company since September 18, 1992.
From October 1990 to September 1992, he acted as an advisor to the Board of
Directors. Since 1965, Mr. Kilgore has been a partner in the law firm of
McGinnis, Lochridge & Kilgore in Austin, Texas. He is also director of Texas
Regional Bancshares, Inc. and its subsidiary, Texas State Bank, both in McAllen,
Texas, and a director of Photo Control Corporation in Minneapolis. Mr. Kilgore
also has 10 years' experience as a director of Continental Air Lines (prior to
its restructuring in 1982).
James T. Lloyd has been a director of the Company since April 11, 1996.
From February 1987 through February 1996, Mr. Lloyd was an officer of USAir
Group, Inc., most recently Executive Vice President, General Counsel and
Secretary. Mr. Lloyd served as Chairman of the Law Council of the Air Transport
Association in Washington, D.C. in 1991 and 1992 and as a member of the Air
Transport Association's Audit Committee from 1992 to 1996. Prior to joining
USAir, Mr. Lloyd was engaged in the private practice of law.
Robert W. Reding has been President, Chief Executive Officer and a director
of the Company since September 22, 1995. From April 1994 until September 1995,
Mr. Reding was President and Chief Operating Officer and a director of the
Company. From January 1992 through March 1994, Mr. Reding was Vice President -
Operations of the Company and Mr. Reding was a consultant to the Company during
1991. Mr. Reding is a director of Clean Energy Technologies, Inc., based in
Sarasota, Florida and a director of the Reno-Sparks Convention and Visitors
Authority.
Wayne L. Stern, M.D. has been a director of the Company since its
inception. Since 1974, Dr. Stern has been the President of, and conducts his
medical practice as a specialist in pulmonary medicine through, Minnesota Lung
Center, Ltd., located in Minneapolis, Minnesota. Since 1984 he has been a
director of Special Medical Services, Inc., a home health care company in
Minneapolis, Minnesota. Since 1989, Dr. Stern has been the director of
respiratory care at Abbott-Northwestern Hospital in Minneapolis.
Agnieszka Winkler has been a director of the Company since January 21,
1994. She is a principal of, and the founder (in 1984) of Winkler Advertising,
an advertising agency based in San Francisco. Ms. Winkler is a member of the
Board of Directors of Lifeguard, Inc. and is a member of the Board of Trustees
of Santa Clara University.
John R. Hardesty, age 57, has been a director of the Company since March
18, 1995, but is not nominated for re-election. He is and has been since 1986
the Chairman of Thermo Dynamics, Inc., located in Laughlin, Nevada and
Electro-Dynamics Crystal Corporation, located in Overland Park, Kansas. He is
also a director of Video Lottery Technologies, Inc. and La Teko Resources, Ltd.
MEETINGS OF THE BOARD
During the fiscal year ended December 31, 1996, the Board of Directors held
five meetings, four of which were held in person and one of which was
telephonic. During such period, each of the current directors of the Company
attended 75% or more of the total number of meetings held by the Board of
Directors and by all committees of the Board on which such director served.
The Board has standing executive, nominating and compensation, strategic
planning and audit and ethics committees, which (other than the executive
committee) meet at each regularly scheduled meeting of the Board of Directors
and at other times when warranted.
The members of the executive committee are Lee M. Hydeman, who serves as
Chairman, Donald L. Beck, James T. Lloyd, Robert W. Reding and Dr. Wayne Stern.
The executive committee has the authority to act in place of the Board of
Directors on all matters except those required by law or by the Company's
Certificate of Incorporation or By-Laws to be acted upon exclusively by the
Board. The executive committee held three meetings during the fiscal year ended
December 31, 1996.
The members of the nominating and compensation committee are Agnieszka
Winkler, who serves as Chairman, Lee M. Hydeman, Joe M. Kilgore and James T.
Lloyd. The compensation committee's primary responsibilities are to nominate
persons for election as directors of the Company, to administer and make
recommendations to the Board regarding the Company's bonus and stock option
plans and to review the compensation arrangements relating to officers of the
Company. The compensation committee held five meetings during the fiscal year
ended December 31, 1996.
The members of the strategic planning committee are Donald L. Beck, who
serves as Chairman, John R. Hardesty, Lee M. Hydeman, Robert W. Reding and Wayne
L. Stern. The strategic planning committee's primary responsibilities are to
analyze and develop the Company's route structure. The strategic planning
committee held six meetings during the fiscal year ended December 31, 1996.
The members of the audit and ethics committee are Barrie K. Brunet, who
serves as Chairman, John R. Hardesty, Lee M. Hydeman and Wayne L. Stern. The
audit and ethics committee's primary responsibilities are to review the
Company's financial statements, to recommend the appointment of the Company's
independent public accountants, to review the overall scope of the audit, to
review the Company's credit and other financing arrangements, and to establish
and monitor ethical policies applicable to the Company's management. The audit
and ethics committee held five meetings during the fiscal year ended December
31, 1996.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 31, 1997, certain information
with respect to the Company's Common Stock owned of record or beneficially by
(i) each director of the Company; (ii) the Named Executives (as defined under
the caption "Executive Compensation"); (iii) all executive officers and
directors of the Company as a group; and (iv) each person or entity known to the
Company to own beneficially more than 5% of any class of voting security of the
Company.
Amount Percent
Beneficially of
Name of Beneficial Owner Owned(1) Ownership(2)
Officers and Directors:
Donald L. Beck 15,000 *
Barrie K. Brunet 60,000 *
Jeffrey C. Buckio 13,026 *
Jeffrey T. Fisher 12,063 *
John R. Hardesty 57,000(3) *
Lee M. Hydeman 56,000 *
Joe M. Kilgore 60,000 *
James T. Lloyd 11,000 *
Robert W. Reding 87,630 *
Robert M. Rowen 39,880 *
Paul H. Tate 25,130 *
Wayne L. Stern, M.D. 275,848(4) 2.6%
Agnieszka Winkler 60,000 *
All executive officers and 808,744(5) 7.6%
directors as a group (17 persons)(5)
5% Stockholders:
Fidelity Management & Research Company
82 Devonshire St.
Boston, MA 02109 934,800(6) 9.0%
*Less than 1%.
(1) Includes the following number of shares subject to options exercisable
within 60 days of March 31, 1997: Mr. Buckio: 13,000; Mr. Fisher: 12,000; Mr.
Hardesty: 20,000; Mr. Hydeman: 26,000; Mr. Lloyd: 10,000; Mr. Reding: 44,500;
Mr. Rowen: 39,000; Ms. Winkler: 60,000. Includes 130 shares each held for the
benefit of Mr. Reding, Mr. Rowen and Mr. Tate, 63 shares held for the benefit of
Mr. Fisher, and 26 shares held for the benefit of Mr. Buckio in the Company's
401(k) Plan. Shares held in the 401(k) Plan are subject to disposition by the
beneficial holder thereof and are voted by a 401(k) Plan Committee unless the
Committee determines to pass such vote through to the beneficial holders.
Includes 1,000 shares obtainable by Mr. Lloyd upon the conversion of convertible
notes held in an IRA.
(2) Based on 10,433,120 shares of Common Stock outstanding as of March 31,
1997. The Percent of Ownership is determined by assuming that in each case the
person only, or the group only, exercised his or her rights to purchase all
shares of Common Stock underlying outstanding stock options and warrants,
including those not currently exercisable.
(3) Includes 37,000 shares held by a corporation owned by Mr. Hardesty.
(4) Includes 50,324 shares held beneficially and of record by Dr. Stern's
spouse and 10,000 shares held beneficially and of record by Dr. Stern's
children.
(5) Includes 262,500 shares subject to options exercisable within 60 days
of March 31, 1997 and 646 shares held in the Company's 401(k) Plan.
(6)Voting power over these shares resides with the Board of Trustees of
Fidelity Advisor Strategic Opportunities Fund.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows, for the fiscal years ending December 31,
1994, 1995, and 1996, the cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to the Company's
five executive officers who were highest paid in 1996 (the "Named Executives").
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
(a) (b) (c) (d) (e) (f) (g) (h)
Other Securities All
Name and Annual Restricted Underlying other
Principal Compen- Stock Options/SARs Compen-
Position(1) Year Salary ($) Bonus ($)(2) sation(3) Award(s)($) (#) sation(4)
<S> <C> <C> <C> <C> <C> <C>
Robert W. Reding 1996 164,500 30,327 0 N/A 0 300
Chief Executive Officer 1995 153,375 300 0 N/A 60,000 300
and President 1994 135,992 0 0 N/A 109,800(5) 300
Jeffrey C. Buckio 1996 98,562 327 0 N/A 60,000 300
Vice President - Maintenance 1995 64,500 300 0 N/A 27,000 0
and Engineering 1994 62,650 0 0 N/A 0 0
Jeffrey T. Fisher 1996 103,000 20,327 0 N/A 0 300
Vice President - 1995 93,417 300 26,513 N/A 0 300
Corporate Development 1994 13,183 0 10,571 N/A 90,000 0
Robert M. Rowen 1996 103,000 20,327 0 N/A 0 300
Vice President, General Counsel 1995 102,250 300 29,562 N/A 0 300
and Secretary 1994 67,803 0 5,585 N/A 97,200(5) 300
Paul H. Tate 1996 103,000 20,327 0 N/A 0 300
Vice President - Finance and 1995 102,623 300 0 N/A 0 300
Chief Financial Officer 1994 99,403 0 13,361 N/A 97,200(5) 300
</TABLE>
- - ---------------------------
(1) See "Election of Directors" for information with respect to the
positions held by Mr. Reding. Messrs. Buckio, Fisher, Rowen and Tate joined the
Company on, respectively, January 1, 1992; November 2, 1994; April 13, 1994 and
September 20, 1993. Mr. Tate resigned in January 1997 and Mr. Fisher was then
appointed Chief Financial Officer.
(2) $300 in 1995 and $327 in 1996 reflect payments under the company's
profit sharing plan. Remaining amounts reflect bonuses related to the successful
completion of a public offering in 1995.
(3) Amounts indicated were in payment or reimbursement of moving expenses.
(4) Amounts indicated are the $300 annual Company match to the 401(k) Plan.
Does not include the value of a $30,000 rental car credit available to the
Company's officers as a group.
(5) 10,800 of the options awarded to Mr. Reding and 7,200 of the options
award to each of Mr. Rowen and Mr. Tate were canceled in early 1995 due to the
non-attainment of certain performance criteria.
<PAGE>
Stock Options
The following table sets forth stock options granted under the
Company's 1992 Stock Option Plan to the Named Executives during 1996. The
Company has never granted stock appreciation rights.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
(a) (b) (c) (d) (e) (f) (g)
% of Potential
Number of Total Realizable Value at
Securities Options Assumed Annual
Underlying Granted to Exercise Rates of Stock Price
Options Employees or Base Expira- Appreciation
Granted in Fiscal Price tion for Option Term
Name (#) Year ($/Sh) (Date) 5% ($) 10% ($)
---- --- ---- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Buckio 60,000(1) 9.0% $8.63 2/8/06 $326,214 $823,302
</TABLE>
- - ---------------------------
(1) Exercisable as follows: 4,500 shares on February 8, 1997; 7,500 shares
on February 8, 1998; 10,500 shares on February 8, 1999; 10,500 shares on
February 8, 2000; 13,500 shares on February 8, 2001; and 13,500 shares on
February 8, 2002. The stock option plan provides for acceleration of options
upon certain events deemed to constitute a change in control, including a
substantial change in the directors constituting the Board of Directors without
approval of the existing Board; a merger or recapitalization in which the
Company is not the controlling corporation; and the ownership by any one person
or entity of more than 40% of the common stock of the Company.
Option Exercises and Holdings
The following table sets forth, with respect to the Named Executives,
information concerning the exercise of options during the fiscal year ended
December 31, 1996, and the unexercised options held as of December 31, 1996:
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
(a) (b) (c) (d) (e)
Value of Unexercised
Actual Number of Unexercised In-the-Money Options
Shares Acquired Value Options at FY-End (#) at FY-End ($)
--------------------- -------------
Name On Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. Reding 38,000 $216,790 34,000 137,000 $97,632 $195,144
Jeffrey C. Buckio 5,000 $23,670 2,500 85,500 $5,608 $67,397
Jeffrey T. Fisher 7,000 $48,073 12,000 71,000 $26,916 $159,253
Robert M. Rowen 0 $0 24,000 66,000 $53,832 $148,038
Paul H. Tate 4,000 $33,220 35,000 51,000 $78,505 $114,393
</TABLE>
(1) Values are calculated by subtracting the exercise price from the
closing price of the stock as of the fiscal year-end. The closing price for the
Common Stock of the Company on December 31, 1996, was $7.313 per share.
Employment Contracts
The Company has employment agreements with certain of its executive
officers. Each of the contracts provides for reimbursement of moving expenses
incurred by the individual in relocating to Reno (subject to a cap) and a
continuation of the officer's salary for six months following the death of the
officer or a termination of his employment with the Company. Each employment
agreement may be terminated by the respective officer at any time.
Compensation Committee Interlocks and Insider Participation
The members of the Company's Compensation Committee are Ms. Winkler and
Messrs. Hydeman, Kilgore and Lloyd. From April 1, 1994, through September 22,
1995, Mr. Hydeman served as Chief Executive Officer of the Company without cash
compensation.
Report of the Nominating and Compensation Committee
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company and reviews and establishes
specific compensation plans, salaries, bonuses and other benefits payable to the
Company's executive officers, including the Chief Executive Officer. Following
review and approval by the Committee, all issues pertaining to executive
compensation are submitted to the entire Board of Directors for review and
approval.
In 1996, the Company contracted with a nationally recognized compensation
consulting firm to provide market data such that a comprehensive compensation
strategy for the Company could be developed. Additionally, the Committee
retained the services of an independent compensation consultant to provide a
further overview. The compensation review encompassed both executive and broad
based compensation programs. The process included, but was not limited to, a
review of market practices and compensation data for domestic airlines of
comparable size (revenue) and markets as well as practices for major carriers.
The review included base salaries, annual incentives, long term incentives and
employee benefits.
In November 1996, the Committee adopted the following objectives for both
executive and broad based employee compensation programs, in order to align
compensation strategy with corporate strategy for maximum corporate
profitability:
Develop a strong and ongoing linkage between employee performance and the
creation of stockholder value.
Provide a total compensation program to attract, develop, motivate and
retain exceptional employees.
Achieve competitiveness of total compensation over time.
Focus upon variable and incentive compensation to control fixed costs, and
to provide the opportunity for substantive rewards based upon Company
performance.
The Committee determined to place emphasis upon merit based compensation,
and has set in place a number of short (cash bonus) and long term (stock)
incentive compensation programs for both executive and non-executive level
employees. The Committee believes it is imperative for the Company to tie its
long term growth and profitability strategy to long term programs.
Key to this strategy is the approval by stockholders of an amendment to the
Company's Stock Option Plan which provides for sufficient option grants to
enable top performers to increase their ownership horizon over time. The
Committee intends that long term incentives (stock options) will also be made
available to a broader group of employees, most notably those in managerial and
supervisory roles, as well as key individual contributors below the executive
level.
Executive Compensation
Since its inception, Reno Air has targeted executive compensation at
significantly below market norms for comparable companies. This practice was
maintained during 1996. Executives did not receive any increase to their base
salaries. A discretionary bonus was awarded to certain members of the executive
staff, including the Chief Executive Officer, in the third quarter of 1996
related to the successful completion of a public offering in 1995. The amount of
the bonus was determined in recognition of each individual's contribution to the
offering.
The Board of Directors approved an officer incentive program for 1996,
contingent upon realization by the Company of not less than $3.6 million of net
profit in 1996. No awards were made under this program.
In November 1996, the Committee determined to target executive base
salaries conservatively within a range comparison established for each officer's
position by bench marking compensation at companies with comparable size
including other airlines. The Committee also approved an executive incentive
compensation plan for 1997 based upon the attainment of specified corporate and
individual objectives. Individual performance objectives will be reviewed
semi-annually. The evaluation of company performance objectives will be reviewed
at the conclusion of 1997. Payout will be contingent upon both the attainment of
objectives and the achievement of profitability.
The Committee seeks to grant additional stock options to executives and
non-executive employees annually based upon the Company's performance and each
employees' individual contributions to growth and profitability. All options
will be granted with an exercise price equal to the fair market value of the
Company's common stock at the time of grant.
1996 CEO Compensation
Mr. Reding's base salary is based upon the same criteria as other executive
officers. In 1996, Mr. Reding did not receive an increase in his base salary or
additional options.
Profit Sharing Plan
The Company's profit sharing plan provides for a profit sharing bonus to be
granted to all full time employees who satisfy the length of service eligibility
requirements (employees with at least six months of service) in an amount up to
10% of the Company's quarterly pre-tax net income. In 1996, each of the
Company's executive officers who satisfied the length of service requirements
participated with all other full time employees in receiving $327 each in profit
sharing bonuses.
Relationship of Corporate Performance to Compensation
The Committee believes that it is imperative to provide total compensation
that is competitive and rewards performance to both attract and retain excellent
contributors. In evaluating the performance of the Company's executives, the
Committee considers it appropriate to assess the competitive environment in
which the Company has operated and the Company's relative performance as
compared to its competitors. This forms the basis for assessing individual and
corporate performance.
NOMINATING AND
COMPENSATION COMMITTEE
Agnieszka Winkler, Chairman
Lee M. Hydeman
Joe M. Kilgore
James T. Lloyd
<PAGE>
Performance Graph
Comparison of Cumulative Total Stockholder Return for the Company, the
NASDAQ Composite Index and the Dow Jones 20 Transportation Companies Index.
The graph below assumes $100 is invested on May 28, 1992 in each of the
following: the Company's Common Stock, the NASDAQ Composite Index (U.S.), and
the Dow Jones 20 Transportation Companies Index, and compares the cumulative
total return of such investments for the period from May 28, 1992 (the date the
Company's Common Stock in effect commenced trading on the NASDAQ System) until
December 31, 1996. From May 28, 1992, until March 7, 1993, the Company's Common
Stock traded only as units consisting of two shares of stock and one common
stock purchase warrant.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
May 28, December 31, December 31, December 31, December 31, December 31,
1992 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Company $100 $242 $221 $125 $263 $244
NASDAQ
Composite Index $100 $130 $150 $147 $207 $254
Dow Jones 20
Transportation
Companies $100 $106 $129 $106 $145 $165
</TABLE>
Director Compensation
In 1996, the Company's outside directors received fees of $2,000 per
regularly scheduled meeting of the Board of Directors attended in person and
$1,000 per calendar quarter, in addition to reimbursement of their expenses
incurred in connection with attending meetings of the Board of Directors.
Committee members also received $1,000 for each meeting of the Committee
attended in person, other than meetings held in connection with meetings of the
Board of Directors.
PROPOSAL TO AMEND AND RESTATE THE 1992 STOCK OPTION PLAN
On March 24, 1997, the Board of Directors approved an amendment to the 1992
Stock Option Plan increasing the number of shares reserved for issuance under
the plan by 1.7 million shares, to an aggregate of 4.6 million shares. The Board
of Directors believes it is imperative to maintain a strong and ongoing linkage
between employee performance and the creation of stockholder value through
compensation programs that are tied to long term growth and profitability. To
accomplish this, the Board of Directors intends to place increased emphasis on
long term stock incentive programs for both executive and non-executive
employees.
Key to this strategy is the approval by stockholders of this proposal to
amend and restate the Company's 1992 Stock Option Plan as the Reno Air Employee
Stock Incentive Plan (the "New Plan"). As noted below, the increase in
authorized shares is required in large part due to the Company's recent practice
of broad-based grants of options to employees below the officer level.
Adoption of the proposal is integral to the Company's strategic long-term
plan to recruit, retain and develop key contributors to the Company. The New
Plan will allow key contributors to attain a larger ownership position in the
Company over time. Key contributors may include executives and non-executive
employees, including managers, supervisors and individual contributors, as well
as non-employee consultants to the Company.
The proposal also modifies the plan to allow for the grant of incentive
stock options, as well as non-qualified stock options. The proposal also amends
the plan to provide that grants are available only to employees and consultants,
and removes the eligibility of non-employee members of the Board of Directors
for grants under the plan. It is intended that grants to members of the Board of
Directors be provided under a separate plan, described under "Proposal to Adopt
the Director Stock Option Plan." The proposal also modifies the plan to allow
for other forms of stock-based awards, namely restricted stock and stock
appreciation rights. The exercise price of any options granted under the New
Plan shall be equal to or greater than the closing price of the Reno Air Common
Stock on the day prior to the date of grant. A full copy of the New Plan is
included as Exhibit A to this Proxy Statement.
As amended and restated, the New Plan will allow for the grant of 4.6
million shares as incentive compensation. As discussed under "Report of the
Nominating and Compensation Committee" incentive stock compensation is a key
component of the Company's overall compensation strategy.
Grants made to current executive officers of the Company account for
approximately 34% of the grants made under the plan (928,000 shares). Grants to
mid-level managers (employees below the level of Vice President) account for
710,000 options granted under the Plan. 592,000 shares have been utilized for
options granted to former officers and directors of the Company and 545,000
shares have been utilized for grants to current non-employee directors of the
Company. (The foregoing amounts are net of options canceled.) The Board of
Directors is proposing a separate plan for outside directors of the Company in
part to segregate the shares subject to each plan so that shares approved for
employee options are not utilized to grant options to outside directors.
Initial grants under the New Plan require Board approval and will be based
on job level responsibility and performance criteria. The Board of Directors
intends that annual refresher grants will be awarded under the same criteria.
The Board intends to authorize formula-based grants of options to middle
managers promoted into manager-level positions (including station managers and
sales managers). It is anticipated that future grants will vest (become
exercisable) ratably over five years, and terminate within 60 days of the
grantee's termination of employment (six months in the event such termination is
due to death or disability). It is also anticipated that, in accordance with
customary practice at public companies, the annual grants will result in the
Company's top performers increasing their unvested stock ownership over time.
Recommendation
The Board of Directors believes the proposal is in the best interest of the
Company and its stockholders and unanimously recommends a vote FOR the proposal
to amend and restate the 1992 Stock Option Plan.
PROPOSAL TO ADOPT THE RENO AIR DIRECTOR STOCK OPTION PLAN
The Board of Directors adopted the Reno Air Director Stock Option Plan on
March 24, 1997, subject to stockholder approval, under which options to purchase
up to 300,000 shares may be granted to non-employee members of the Company's
Board of Directors. The Board of Directors believes it is important to maintain
a strong and ongoing linkage between stockholder value and the interests of
outside directors (i.e. members of the Board of Directors who are not employees
of the Company). The Board of Directors believes that options granted to outside
directors should not be drawn against options reserved for employees and,
accordingly, proposes that outside director options be granted under a plan, the
Reno Air Director Stock Option Plan, separate from the employee plan. A copy of
the Director Stock Option Plan is included as Exhibit B to this Proxy Statement.
As compared to the current practice under the 1992 Stock Option Plan,
directors will receive smaller initial grants under the Director Stock Option
Plan and annual refresher grants.
Under this plan, outside directors of the Company will receive
formula-based awards of non-qualified stock options. Individuals who are not
current members of the Board and who become members of the Board after
stockholder approval of the Plan will receive options to purchase 30,000 shares
of the Company's Common Stock on the date of their election as a director, and
options to purchase an additional 10,000 shares of the Company's Common Stock
each year thereafter (provided they have served as a director for at least six
months preceding their reelection to the Board.) Individuals who are current
members of the Board will receive options to purchase an additional 10,000
shares of the Company's Common Stock in each June after they have served four
full years on the Board. Directors must be reelected by stockholders in order to
be eligible for annual refresher option grants.
All options will be granted with an exercise price equal to the closing
price of the Reno Air common stock on the last trading day prior to the date of
grant. All options will vest ratably over three years, and will terminate 60
days after termination of the individual's membership on the Board of Directors
(6 months if such termination is due to death or disability) unless extended by
the Board of Directors. All options granted under the plan will be non-qualified
options for tax purposes.
If the amendment and restatement of the 1992 Stock Option Plan is approved,
options will no longer be available under such plan for grant to outside
directors of the Company. Accordingly, adoption of the Director Stock Option
Plan would be necessary in order to allow the Company to attract qualified
directors through the grant of options under a stockholder-approved plan.
The Board of Directors believes that the Director Stock Option Plan will
provide sufficient shares for director grants in the foreseeable future.
Recommendation
The Board of Directors believes adoption of the Director Stock Option Plan
is in the best interest of the Company and its stockholders and recommends a
vote FOR the proposal to adopt the Director Stock Option Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax aspects of stock
options to be granted under the foregoing plans, based upon the laws in effect
on the date hereto.
Non-Qualified Stock Options. With respect to non-qualified stock options:
(a) no income is recognized by the participant at the time the option is
granted; (b) generally, upon exercise of the option, the participant recognizes
ordinary income in an amount equal to the difference between the option price
and the fair market value of the shares on the date of exercise; and (c) at
disposition, any appreciation after the date of exercise is treated either as
long-term or short-term capital gain, depending on whether the shares were held
for more than one year by the participant.
Incentive Stock Options. Generally, no taxable income is recognized by an
employee upon the grant of an incentive stock option ("ISO") or upon the
exercise of an ISO during the period of his employment with the Company or
within three months after termination. However, the exercise of an ISO may
result in an alternative minimum tax liability to the employee. If a participant
continues to hold the shares acquired upon exercise of an ISO for at least two
years from the date of grant and one year from the date of exercise, upon the
sale of the shares, any amount realized in excess of the option price will be
taxed as long-term capital gain. If common stock acquired upon the exercise of
an ISO is disposed of prior to the expiration of the one-year and two-year
holding periods described above, the participant will generally recognize
ordinary income in an amount equal to the excess, if any, of the fair market
value of the shares on the date of exercise (or, if less, the amount realized on
the disposition of the shares) over the option price. Any further gain
recognized by the participant on such disposition will be taxed as short-term or
long-term capital gain, depending on whether the shares were held for more than
one year.
Company Deductions. As a general rule, the Company will be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount that a participant recognizes ordinary income from awards under the Plan,
to the extent such income is considered reasonable compensation under the Code.
OTHER BUSINESS
The Board of Directors of the Company knows of no other matters that will
be presented at the Annual Meeting. However, if any other matters properly come
before the meeting, or any adjournment thereof, it is intended that proxies in
the accompanying form will be voted in accordance with the judgment of the
persons named therein.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of the Company's stockholders must be received by the Company for
consideration for inclusion in the Company's 1998 Proxy Statement on or prior to
December 22, 1997.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's financial statements for the years ended December 31, 1996
and 1995, have been audited by the firm Ernst & Young LLP, and the Company's
financial statements for the year ended December 31, 1994 have been audited by
the firm of Arthur Andersen LLP. Representatives of Ernst & Young LLP will be
present at the Annual Meeting to respond to appropriate questions and to make
such statements as they may desire.
The Company engaged Ernst & Young LLP as its independent auditors for the
fiscal year ending December 31, 1995, effective October 17, 1995, to replace the
firm of Arthur Andersen LLP, who were dismissed at the same time. The decision
to change accountants was approved by the Audit Committee of the Board of
Directors of the Company.
The report of Arthur Andersen LLP on the Company's financial statements for
the two years ended December 31, 1993 and 1994 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
In connection with the audits of the Company's financial statements for
each of the two years ended December 31, 1993 and 1994, and in the subsequent
interim period, there were no disagreements with Arthur Andersen LLP on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction of
Arthur Andersen LLP, would have caused Arthur Andersen LLP to make reference to
the matter in their report.
Following its audit of the Company's financial statements for the year
ended December 31, 1993, Arthur Andersen LLP stated that its audit had disclosed
conditions that it believed were material weaknesses in the Company's internal
control structure. Arthur Andersen LLP further stated that such conditions were
considered during its audit and that it did not modify the unqualified opinion
they expressed on March 24, 1994, with regard to the Company's financial
statements. The Board of Directors of the Company and the Audit Committee of the
Board of Directors discussed such conditions with Arthur Andersen LLP and with
management. Management had previously, in late 1993, initiated steps to correct
such weaknesses and no such weaknesses were noted by Arthur Andersen LLP
following its audit of the Company's financial statements for the year ended
December 31, 1994. The Company has authorized Arthur Andersen LLP to respond
fully to any inquiries from Ernst & Young LLP concerning such conditions.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Annual Report to Stockholders of the Company for the fiscal year ended
December 31, 1996 (the "Annual Report") is being furnished simultaneously
herewith. Such Annual Report and the financial statements included therein are
not to be considered a part of this Proxy Statement.
Upon the written request of any stockholder, management will provide, free
of charge, a copy of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, including the financial statements and schedules
thereto. Requests should be directed to Secretary, Reno Air, Inc., 220 Edison
Way, Reno, Nevada 89502.
The information under the caption "Report of the Nominating and
Compensation Committee" and under the caption "Performance Graph" shall not be
deemed to be incorporated by reference into any filing by the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company expressly states in any such
filing that the information under either or both such captions is incorporated
by reference therein.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to solicitation by mail, arrangements may be made with
brokerage houses and other custodians, nominees and fiduciaries to send proxies
and proxy material to their principals, and the Company may reimburse them for
any attendant expenses.
It is important that your shares be represented at the meeting. You are
respectfully requested to sign the enclosed proxy and return it in the enclosed
stamped and addressed envelope as promptly as possible.
By Order of the Board of Directors,
ROBERT M. ROWEN
Secretary
DATED: April 11, 1997
Reno, Nevada
<PAGE>
Exhibit A
RENO AIR, INC.
EMPLOYEE STOCK INCENTIVE PLAN
The Reno Air Employee Stock Incentive Plan is a restatement of the Reno Air 1992
Stock Option Plan. Options granted under the Reno Air Stock Option Plan prior to
its restatement are governed by the terms of the Plan as in existence prior to
its restatement. Shares previously subject to options granted under the Reno Air
Stock Option Plan, which become available for grant due to lapse or forfeiture
of such options, become available for grant under the plan as restated.
SECTION 1. Purposes
The purposes of the Reno Air Employee Stock Incentive Plan
(the "Plan") are to enable Reno Air, Inc. (including any consolidated
subsidiaries, the "Company") to attract, retain and reward employees and
consultants and strengthen the existing mutuality of interests between such
persons and the Company's stockholders by offering such persons an equity
interest in the Company.
SECTION 2. Types of Awards
2.1 Awards under the Plan may be in the form of (i) Stock
Options; (ii) Stock Appreciation Rights; and/or (iii) Restricted Stock. An
eligible employee may be granted one or more types of awards.
SECTION 3. Administration
3.1 The Plan shall be administered by the Company's Board of
Directors (the "Board") or such committee of directors as the Board shall
designate (the "Committee"), which shall consist of not less than two directors
each of whom is (a) a non-employee director, as such term is defined in Rule
16b-3 under the Securities Exchange Act of 1934 or any successor rule, and (b)
an outside director satisfying the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended, or any successor thereto (the
"Code"). The members of the Committee shall serve at the pleasure of the Board.
In the event and to the extent the Board does designate such a Committee,
references herein to the Board shall be references to the Committee.
3.2 The Board shall have the following authority with respect
to awards under the Plan: to grant awards to eligible employees under the Plan;
to adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall deem advisable; to interpret the terms and
provisions of the Plan and any award granted under the Plan; and to otherwise
supervise the administration of the Plan. In particular, and without limiting
its authority and powers, the Board shall have the authority:
(a) to determine whether and to what extent any award
or combination of awards will be granted hereunder, including whether
any awards will be granted in tandem with each other;
(b) to select the employees to whom awards will be
granted;
(c) to determine the number of shares of the common
stock of the Company (the "Stock") to be covered by each award granted
hereunder subject to the limitations contained herein;
(d) to determine the terms and conditions of any
award granted hereunder, including, but not limited to, any vesting or
other restrictions based on such performance objectives (the
"Performance Objectives") and such other factors as the Board may
establish, and to determine whether the Performance Objectives and
other terms and conditions of the award are satisfied;
(e) to determine the treatment of awards upon an
employee's retirement, disability, death, termination for cause or
other termination of employment, to the extent not otherwise set forth
herein;
(f) to determine pursuant to a formula or otherwise
the fair market value of the Stock on a given date; provided, however,
that if the Board fails to make such a determination, fair market value
of the Stock on a given date shall be the last reported sales price of
the Stock on the Nasdaq National Market (or the principal exchange upon
which the Stock is traded) on the last preceding date on which such
price was reported;
(g) to determine that amounts equal to the amount of
any dividends declared with respect to the number of shares covered by
an award (i) will be paid to the employee currently or (ii) will be
deferred and deemed to be reinvested or (iii) will otherwise be
credited to the employee, or that the employee has no rights with
respect to such dividends;
(h) to determine whether, to what extent, and under
what circumstances Stock and other amounts payable with respect to an
award will be deferred either automatically or at the election of an
employee, including providing for and determining the amount (if any)
of deemed earnings on any deferred amount during any deferral period;
(i) to provide that the shares of Stock received as a
result of an award shall be subject to a right of first refusal,
pursuant to which the employee shall be required to offer to the
Company any shares that the employee wishes to sell, subject to such
terms and conditions as the Board may specify; and
(j) to amend the terms of any award, prospectively or
retroactively; provided, however, that no amendment shall impair the
rights of the award holder without his or her written consent.
3.3 If the Plan is administered by the Committee, the
Committee shall have the right to designate awards as "Performance Awards."
Awards so designated shall be granted and administered in a manner designed to
preserve the deductibility of the compensation resulting from such awards in
accordance with Section 162(m) of the Code. The grant or vesting of a
Performance Award shall be subject to the achievement of Performance Objectives
established by the Committee based on one or more of the following criteria, in
each case applied to the Company on a consolidated basis and/or to a business
unit and which the Committee may use as an absolute measure, as a measure of
improvement relative to prior performance, or as a measure of comparable
performance relative to a peer group of companies: sales, costs, operating
profits, operating profits before interest expense and taxes, net earnings,
earnings per share, return on equity, debt to equity ratio, market share, stock
price, economic value added, and market value added employee retention/turnover.
The Performance Objectives for a particular Performance Award
relative to a particular fiscal year shall be established by the Committee in
writing no later than 90 days after the beginning of such year. The Committee's
determination as to the achievement of Performance Objectives relating to a
Performance Award shall be made in writing. The Committee shall have discretion
to modify the Performance Objectives or vesting conditions of a Performance
Award only to the extent that the exercise of such discretion would not cause
the Performance Award to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code.
3.4 All determinations made by the Board pursuant to the
provisions of the Plan shall be final and binding on all persons, including the
Company and Plan participants.
SECTION 4. Stock Subject to Plan
4.1 The total number of shares of Stock which may be issued
under the Plan shall be 4,600,000 shares (subject to adjustment as provided
below). Such shares may consist of authorized but unissued shares or treasury
shares. The exercise of a Stock Appreciation Right for cash or the payment of
any other award in cash shall not count against this share limit.
4.2 To the extent a Stock Option terminates without having
been exercised, or an award terminates without the employee having received
payment of the award, or shares awarded are forfeited, the shares subject to
such option or award shall again be available for distribution in connection
with future awards under the Plan. Shares of Stock equal in number to the shares
surrendered in payment of the option price, and shares of Stock which are
withheld in order to satisfy federal, state or local tax liability, shall not
count against the above limit, and shall again be available for grants under the
Plan.
4.3 No employee shall be granted Stock Options, Stock
Appreciation Rights, and/or Restricted Stock or any combination of the foregoing
with respect to more than 250,000 shares of Stock in any fiscal year (subject to
adjustment as provided in Section 4.4).
4.4 In the event of any merger, reorganization, consolidation,
sale of substantially all assets, recapitalization, Stock dividend, Stock split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Stock, a substitution or adjustment, as may be
determined to be appropriate by the Board in its sole discretion, shall be made
in the aggregate number of shares reserved for issuance under the Plan, the
number of shares as to which awards may be granted to any individual in any
fiscal year, the number of shares subject to outstanding awards and the amounts
to be paid by award holders or the Company, as the case may be, with respect to
outstanding awards; provided, however, that no such adjustment shall increase
the aggregate value of any outstanding award.
SECTION 5. Eligibility
5.1 Employees of the Company, including officers, are eligible
to be granted awards under the Plan. Directors of the Company who are not
employees are not eligible to be granted awards under the Plan. The participants
under the Plan shall be selected from time to time by the Board, in its sole
discretion, from among those eligible. As used throughout this Plan, the term
employee includes paid consultants to the Company, except that consultants shall
not be eligible to receive Incentive Stock Options.
SECTION 6. Stock Options
6.1 The Stock Options awarded to employees under the Plan may
be of two types: (i) Incentive Stock Options within the meaning of Section 422
of the Code or any successor provision thereto; and (ii) Non-Qualified Stock
Options. To the extent that any Stock Option does not qualify as an Incentive
Stock Option, it shall constitute a Non-Qualified Stock Option.
6.2 Subject to the following provisions, Stock Options awarded
to employees under the Plan shall be in such form and shall have such terms and
conditions as the Board may determine:
(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Board, but
shall not be less than the fair market value of the Stock on the date
of the award of the Stock Option.
(b) Option Term. The term of each Stock Option shall
be fixed by the Board, but shall not be more than ten (10) years from
the date the option is granted.
(c) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Board. The Board may waive
such exercise provisions or accelerate the exercisability of the Stock
Option at any time in whole or in part.
(d) Method of Exercise. Stock Options may be
exercised in whole or in part at any time during the option period by
giving written notice of exercise to the Company specifying the number
of shares to be purchased, accompanied by payment of the purchase
price. Payment of the purchase price shall be made in such manner as
the Board shall permit, which may include cash (including cash
equivalents), delivery of shares of Stock already owned by the optionee
or subject to awards hereunder, "cashless exercise", any other manner
permitted by law determined by the Board, or any combination of the
foregoing. If the Board determines that a Stock Option may be exercised
using shares of Restricted Stock, then unless the Board provides
otherwise, the shares received upon the exercise of a Stock Option
which are paid for using Restricted Stock shall be restricted in
accordance with the original terms of the Restricted Stock award.
(e) No Stockholder Rights. An optionee shall have
neither rights to dividends or other rights of a stockholder with
respect to shares subject to a Stock Option until the optionee has
given written notice of exercise and has paid for such shares.
(f) Surrender Rights. The Board may provide that
options may be surrendered for cash upon any terms and conditions set
by the Board.
(g) Non-transferability. Unless otherwise provided by
the Board, (i) Stock Options shall not be transferable by the optionee
other than by will or by the laws of descent and distribution, and (ii)
during the optionee's lifetime, all Stock Options shall be exercisable
only by the optionee or by his or her guardian or legal representative.
(h) Termination of Employment. Following the
termination of an optionee's employment with the Company, the Stock
Option shall be exercisable to the extent determined by the Board. The
Board may provide different post-termination exercise provisions with
respect to termination of employment for different reasons. The Board
may provide that, notwithstanding the option term fixed pursuant to
Section 6.2(b), a Stock Option which is outstanding on the date of an
optionee's death shall remain outstanding for an additional period
after the date of such death.
6.3 No Incentive Stock Option shall be awarded more than ten
years after the effective date of the Plan specified in Section 13. No Incentive
Stock Option granted to an employee who owns more than 10% of the total combined
voting power of all classes of stock of the Company or any of its parent or
subsidiary corporations, as defined in Section 424 of the Code, shall (A) have
an option price which is less than 110% of the fair market value of the Stock on
the date of award of the Incentive Stock Option or (B) be exercisable more than
five years after the date such Incentive Stock Option is awarded.
SECTION 7. Stock Appreciation Rights
A Stock Appreciation Right awarded to an employee shall
entitle the holder thereof to receive payment of an amount, in cash, shares of
Stock or a combination thereof, as determined by the Board, equal in value to
the excess of the fair market value of the number of shares of Stock as to which
the award is granted on the date of exercise over an amount specified by the
Board. Any such award shall be in such form and shall have such terms and
conditions as the Board may determine. The grant shall specify the number of
shares of Stock as to which the Stock Appreciation Right is granted.
SECTION 8. Restricted Stock
Subject to the following provisions, all awards of Restricted
Stock to employees shall be in such form and shall have such terms and
conditions as the Board may determine:
(a) The Restricted Stock award shall specify the
number of shares of Restricted Stock to be awarded, the price, if any,
to be paid by the recipient of the Restricted Stock and the date or
dates on which, or the conditions upon the satisfaction of which, the
Restricted Stock will vest. The grant and/or the vesting of Restricted
Stock may be conditioned upon the completion of a specified period of
service with the Company, upon the attainment of specified Performance
Objectives or upon such other criteria as the Board may determine.
(b) Stock certificates representing the Restricted
Stock awarded to an employee shall be registered in the employee's
name, but the Board may direct that such certificates be held by the
Company on behalf of the employee. Except as may be permitted by the
Board, no share of Restricted Stock may be sold, transferred, assigned,
pledged or otherwise encumbered by the employee until such share has
vested in accordance with the terms of the Restricted Stock award. At
the time Restricted Stock vests, a certificate for such vested shares
shall be delivered to the employee (or his or her designated
beneficiary in the event of death), free of all restrictions.
(c) The Board may provide that the employee shall
have the right to vote or receive dividends on Restricted Stock. Unless
the Board provides otherwise, Stock received as a dividend on, or in
connection with a stock split of, Restricted Stock shall be subject to
the same restrictions as the Restricted Stock.
(d) Except as may be provided by the Board, in the
event of an employee's termination of employment before all of his or
her Restricted Stock has vested, or in the event any conditions to the
vesting of Restricted Stock have not been satisfied prior to any
deadline for the satisfaction of such conditions set forth in the
award, the shares of Restricted Stock which have not vested shall be
forfeited, and the Board may provide that (i) any purchase price paid
by the employee shall be returned to the employee or (ii) a cash
payment equal to the Restricted Stock's fair market value on the date
of forfeiture, if lower, shall be paid to the employee.
(e) The Board may waive, in whole or in part, any or
all of the conditions to receipt of, or restrictions with respect to,
any or all of the employee's Restricted Stock, other than Performance
Awards whose vesting was made subject to satisfaction of one or more
Performance Objectives (except that the Board may waive conditions or
restrictions with respect to Performance Awards if such waiver would
not cause the Performance Award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m)
of the Code).
SECTION 9. Election to Defer Awards
The Board may permit an employee to elect to defer receipt of
an award for a specified period or until a specified event, upon such terms as
are determined by the Board.
SECTION 10. Tax Withholding
10.1 Each employee shall, no later than the date as of which
the value of an award first becomes includible in such person's gross income for
applicable tax purposes, pay to the Company, or make arrangements satisfactory
to the Board regarding payment of, any federal, state, local or other taxes of
any kind required by law to be withheld with respect to the award. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
employee.
10.2 To the extent permitted by the Board, and subject to such
terms and conditions as the Board may provide, an employee may elect to have the
withholding tax obligation, or any additional tax obligation with respect to any
awards hereunder, satisfied by (i) having the Company withhold shares of Stock
otherwise deliverable to such person with respect to the award or (ii)
delivering to the Company shares of unrestricted Stock. Alternatively, the Board
may require that a portion of the shares of Stock otherwise deliverable be
applied to satisfy the withholding tax obligations with respect to the award.
SECTION 11. Amendments and Termination
The Board may discontinue the Plan at any time and may amend
it from time to time, provided, that any amendment to the Plan increasing the
number of authorized shares or providing a material increase in the value of
awards granted under the Plan or materially increasing the cost of the Plan to
the Company shall require shareholder approval. No amendment or discontinuation
of the Plan shall adversely affect any award previously granted without the
award holder's written consent.
SECTION 12. General Provisions
12.1 Each award under the Plan shall be subject to the
requirement that, if at any time the Board shall determine that (i) the listing,
registration or qualification of the Stock subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body or (iii) an agreement by the
recipient of an award with respect to the disposition of Stock is necessary or
desirable (in connection with any requirement or interpretation of any federal
or state securities law, rule or regulation) as a condition of, or in connection
with, the granting of such award or the issuance, purchase or delivery of Stock
thereunder, such award shall not be granted or exercised, in whole or in part,
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Board.
12.2 Nothing set forth in this Plan shall prevent the Board
from adopting other or additional compensation arrangements. Neither the
adoption of the Plan nor any award hereunder shall confer upon any employee of
the Company any right to continued employment.
12.3 Determinations by the Board under the Plan relating to
the form, amount, and terms and conditions of awards need not be uniform, and
may be made selectively among persons who receive or are eligible to receive
awards under the Plan, whether or not such persons are similarly situated.
12.4 No member of the Board or the Committee, nor any officer
or employee of the Company acting on behalf of the Board or the Committee, shall
be personally liable for any action, determination or interpretation taken or
made with respect to the Plan, and all members of the Board or the Committee and
all officers or employees of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
SECTION 13. Effective Date of Plan
The Plan was effective on April 29, 1992. This restatement
shall be effective on May 22, 1997, subject to approval by the Company's
stockholders at the 1997 Annual Meeting of Stockholders.
<PAGE>
Exhibit B
RENO AIR, INC.
DIRECTORS STOCK OPTION PLAN
SECTION 1. Purposes
The purposes of the Reno Air Directors Stock Option Plan (the "Plan")
are to enable Reno Air, Inc. (including any consolidated subsidiaries, the
"Company") to attract and retain directors of the Company and strengthen the
existing mutuality of interests between such directors and the Company's
stockholders by offering such directors an equity interest in the Company.
SECTION 2. Authorization
2.1 The total number of shares of common stock of the Company (the
"Stock") which may be issued under the Plan shall be 300,000 shares (subject to
adjustment as provided below). Such shares may consist of authorized but
unissued shares or treasury shares.
2.2 To the extent a stock option terminates without having been
exercised, the shares subject to such option shall again be available for
distribution in connection with future awards under the Plan.
2.3 In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, Stock dividend, Stock split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Stock, a substitution or adjustment, as may be
determined to be appropriate by the Board in its sole discretion, shall be made
in the aggregate number of shares reserved for issuance under the Plan, the
number of shares as to which awards shall be granted to any individual in any
fiscal year, the number of shares subject to outstanding awards and the amounts
to be paid by optionees, as the case may be, with respect to outstanding awards;
provided, however, that no such adjustment shall increase the aggregate value of
any outstanding award.
SECTION 3. Administration
3.1 The Plan shall be administered by the Company's Board of Directors.
3.2 Each person who is not a member of the Board of Directors of the
Company and who first becomes a director of the Company after May 22, 1997 (a
"Qualified Director"), shall be granted, on the first trading day coincident
with or immediately following the date of his or her election as a director, an
option to purchase 30,000 shares of Stock. On the first trading day of June of
each year commencing in June 1998, each Qualified Director then serving on the
Board who has served for at least the preceding six months and each other
non-employee director of the Company who has served for at least the preceding
four years (and, in each case, who was reelected by stockholders), shall be
granted an option to purchase an additional 10,000 shares of Stock. For purposes
of this section, the term trading day shall mean a day on which the Stock is
traded on a national securities exchange, on the Nasdaq National Market, or in
the over-the-counter market. Notwithstanding the foregoing, if on any date on
which stock options are to be granted, the remaining shares available for
issuance under the Plan are insufficient to satisfy the grants then due, each
director entitled to an option shall receive an option to purchase his or her
pro rata portion of the remaining shares.
3.3 Each option granted under the Plan shall have the following terms:
(a) General. The option shall be a non-qualified option.
(b) Option Price. The option price shall be the fair market value of
the shares on the date of grant, determined as the last reported sales price of
the Stock on the Nasdaq National Market (or the principal exchange upon which
the Stock is listed) on the last preceding date for which such price was
reported.
(c) Term of Option. The option term shall be ten years from the date of
grant (the "Option Expiration Date"), unless earlier terminated under section
(e).
(d) Vesting. The option shall vest as to one-third of the shares
subject to the option on each anniversary of the grant date.
(e) Termination of Option. The option may be exercised at any
time after it vests and prior to the first of the following to occur:
(i) Sixty (60) days after the termination of the optionee's membership
on the Board of Directors for any reason except the optionee's death or
disability; provided that the Board of Directors of the Corporation may
extend such sixty (60) day period up to a period not to exceed two
years from such termination date, and such period shall be
automatically extended during any period the Company's policies
applicable to members of the Board of Directors would prohibit any sale
of the underlying shares, but in no event shall such expiration date be
extended beyond the Option Expiration Date, and
(ii) Six (6) months after the termination of the optionee's membership
on the Board of Directors by reason of the optionee's death or
disability, provided that the Board of Directors of the Corporation may
extend such six (6) month period up to a period not to exceed two years
from such termination date, but in no event beyond the Option
Expiration Date.
(f) Payment of Exercise Price. The option price may be payable by
cashier's or certified check, personal check, shares of common stock owned by
the optionee, surrender of vested options (if approved by the Board of
Directors) or for such other types of consideration as may have been approved by
the Board of Directors.
(g) Method of Exercise. The option may be exercised in whole or in part
at any time during the option period by giving written notice of exercise to the
Company specifying the number of shares to be purchased, accompanied by payment
of the purchase price.
(h) Non-transferability. No option shall be transferable by the
optionee other than by the laws of descent and distribution. During the
optionee's lifetime, all options shall be exercisable only by the optionee or by
his or her guardian or legal representative.
(i) No Stockholder Rights. An optionee shall have neither rights to
dividends nor other rights of a stockholder with respect to shares subject to an
option until the optionee has given written notice of exercise and has paid for
such shares.
SECTION 4. Tax Withholding
4.1 Each optionee shall, no later than the date as of which the value
of an award first becomes includible in such person's gross income for
applicable tax purposes, pay to the Company, or make arrangements satisfactory
to the Board regarding payment of, any federal, state, local or other taxes of
any kind required by law to be withheld with respect to the award. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
optionee.
4.2 To the extent permitted by the Board, and subject to such terms and
conditions as the Board may provide, an optionee may elect to have the
withholding tax obligation, or any additional tax obligation with respect to any
awards hereunder, satisfied by (i) having the Company withhold shares of Stock
otherwise deliverable to such person with respect to the award or (ii)
delivering to the Company shares of unrestricted Stock. Alternatively, the Board
may require that a portion of the shares of Stock otherwise deliverable be
applied to satisfy the withholding tax obligations with respect to the award.
SECTION 5. Amendments and Termination
The Board may discontinue the Plan at any time and may amend it from
time to time provided that any amendment (i) increasing the number of shares
subject to the Plan, (ii) changing the grant formula set forth in Section 3.2 of
the Plan, (iii) providing a material increase in the value of awards under the
plan, or (iv) materially increasing the cost to the Company of the Plan shall
require shareholder approval. No amendment or discontinuation of the Plan shall
adversely affect any award previously granted without the award holder's written
consent.
SECTION 6. General Provisions
6.1 Each award under the Plan shall be subject to the requirement that,
if at any time the Board shall determine that (i) the listing, registration or
qualification of the Stock subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any government regulatory body or (iii) an agreement by the recipient of an
award with respect to the disposition of Stock is necessary or desirable (in
connection with any requirement or interpretation of any federal or state
securities law, rule or regulation) as a condition of, or in connection with,
the granting of such award or the issuance, purchase or delivery of Stock
thereunder, such award shall not be granted or exercised, in whole or in part,
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Board.
6.2 Nothing set forth in this Plan shall prevent the Board from
adopting other or additional compensation arrangements. Neither the adoption of
the Plan nor any award hereunder shall confer upon any optionee of the Company,
any right to a continued position with the Company or membership on the Board.
6.3 Determinations by the Board under the Plan relating to awards need
not be uniform, and may be made selectively among persons who receive awards
under the Plan, whether or not such persons are similarly situated.
6.4 No member of the Board or the Board, nor any officer or employee of
the Company acting on behalf of the Board or the Board, shall be personally
liable for any action, determination or interpretation taken or made with
respect to the Plan, and all members of the Board or the Board and all officers
or employees of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
SECTION 7. Effective Date of Plan
The Plan shall be effective on May 22, 1997, subject to approval by the
Company's stockholders at the 1997 Annual Meeting of Stockholders.
