RENO AIR, INC.
220 Edison Way
Reno, Nevada 89502
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held
May 22, 1998
--------------------
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, 1998, at the Reno Hilton, Reno, Nevada, for the following
purposes:
1. To elect nine directors of the Company to hold office until the 1999
Annual Meeting of Stockholders and until the election and qualification of their
respective successors.
2. 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 2, 1998, 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 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 complete, 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,
/s/ ROBERT M. ROWEN
ROBERT M. ROWEN
Secretary
Dated: April 8, 1998
<PAGE>
RENO AIR, INC.
220 Edison Way
Reno, Nevada 89502
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PROXY STATEMENT
-------------------
Annual Meeting of Stockholders
May 22, 1998
------------------
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, 1998, 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; and (2) 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 13, 1998.
VOTING
Holders of record of the Company's Common Stock on April 2, 1998 (the
"Record Date") will be entitled to vote at the Annual Meeting and any
adjournment(s) thereof. As of that date there were 10,593,680 shares of Common
Stock outstanding and entitled to vote and a majority, or 5,296,840 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. Broker non-votes will be counted
for purposes of determining a quorum but otherwise will be considered not
represented with regard to voting on any matter with respect to which there is a
broker non-vote.
<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, Emmett E. Mitchell,
Joseph R. O'Gorman, Wayne L. Stern and Agnieszka Winkler, as directors to hold
office until the 1999 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
Joseph R. O'Gorman 54 President, 1998
Chief Executive Officer
and Chairman of the Board
Lee M. Hydeman 69 Director, Chairman 1990
of Executive Committee
Donald L. Beck 71 Director 1990
Barrie K. Brunet 73 Director 1992
Joe M. Kilgore 79 Director 1992
James T. Lloyd 57 Director 1996
Emmett E. Mitchell 42 Director 1998
Wayne L. Stern, M.D. 55 Director 1990
Agnieszka Winkler 52 Director 1994
- ---------------------
Joseph R. O'Gorman has been Chairman of the Board, Chief Executive Officer
and President since February 19, 1998. From April 1995 through October 1997, Mr.
O'Gorman was Executive Vice President - Fleet Operations and Administration for
United Airlines. Prior to April 1995, Mr. O'Gorman held various positions at
United and USAir. Mr. O'Gorman has also served as Senior Vice President -
Airline Operations for AirCal, as Chief Exeuctive Officer of Aloha Airlines and
as Chief Exeuctive Officer of Frontier Airlines.
Lee M. Hydeman has been a director of the Company since September 1990 and
served as Chairman from December 1991 until February 1998. From April 1, 1994
through September 22, 1995, Mr. Hydeman also served as Chief Executive Officer
of the Company. Mr. Hydeman has over 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 located in Manhattan Beach, California. Mr. Beck has over 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.
Since August 1997, Mr. Lloyd has been Of Counsel to Bryan Cave, LLP. 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.
Emmett E. Mitchell has been a director of the Company since January 28,
1998. Since July 1991, Mr. Mitchell has been an employee of Paradise Valley
Securities, a registered broker dealer. Mr. Mitchell is currently a minority
owner of the firm where he is employed in the Corporate Finance Department.
Paradise Valley Securities provided investment services for the Company in 1992,
1993 and 1994. Mr. Mitchell is also a director of Prolux Corporation, a private
company, and is a certified public accountant.
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.
MEETINGS OF THE BOARD
During the fiscal year ended December 31, 1997, the Board of Directors held
twelve meetings, seven of which were held in person and five of which were
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 a standing Executive Committee, Audit and Ethics Committee,
Corporate Governance and Nominating Committee, Human Resources Committee, and
Strategic Planning Committee. Other than the Executive Committee, these
committees meet at each regularly scheduled meeting of the Board of Directors
and at other times when warranted. The Chairman of the Board is an ex-officio
member of each committee. The following committee membership information is as
of March 1, 1998.
The members of the Executive Committee are Lee Hydeman, who serves as
Chairman, Donald Beck, James Lloyd, 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
six meetings in 1997.
The members of the Audit and Ethics Committee are Barrie Brunet, who serves
as Chairman, Lee Hydeman, James Lloyd, and Dr. Wayne 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
internal controls, and to establish and to monitor ethical policies applicable
to the Company's management. The audit and ethics committee held seven meetings
during 1997.
The members of the Corporate Governance and Nominating Committee are
Agnieszka Winkler, who serves as Chairman, Barrie Brunet, and Dr. Wayne Stern.
The Corporate Governance and Nominating Committee was formed in October 1998 to
review and make recommendations regarding the composition of the Board, to
evaluate the performance of the Board and to develop missions, objectives and
succession plans for the Company's senior management. The Corporate Governance
and Nominating Committee held two meetings in 1997.
The members of the Human Resources Committee are James Lloyd, who serves as
Chairman, Lee Hydeman, Joe Kilgore, and Agnieszka Winkler. The Human Resources
Committee reviews and makes recommendations regarding the Company's compensation
strategy, the compensation arrangements pertaining to the officers of the
Company and the Company's bonus, stock option and 401(k) plans. The Human
Resources Committee has authority to grant options under the Company's Stock
Option Plan, except for initial grants to newly-hired officers. The Human
Resources Committee (including its predecessor, the Nominating and Compensation
Committee) held eleven meetings during 1997.
The members of the Strategic Planning Committee are Donald Beck, who serves
as Chairman, Lee Hydeman, and Dr. Wayne Stern. The Strategic Planning Committee
held seven meetings during 1997.
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 1999 Proxy Statement on or prior to
December 22, 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's financial statements for the years ended December 31, 1997,
1996, and 1995 have been audited by the firm Ernst & Young LLP. Representatives
of such firm will be present at the Annual Meeting to respond to appropriate
questions and to make such statements as they may desire.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 31, 1998, 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 *
Lee M. Hydeman 56,000 *
Joe M. Kilgore 34,100 *
James T. Lloyd 21,000 *
Emmett E. Mitchell 9,500 (3) *
Annette Murphy 18,000
Joseph R. O'Gorman 50,000 *
Robert W. Reding 252,174 2.3%
B.J. Rone 182,000 1.7%
Robert M. Rowen 55,924 *
Steve Sarner 24,107 *
Wayne L. Stern, M.D. 275,848(4) 2.6%
Agnieszka Winkler 60,000 *
All executive officers and 1,210,827 10.7%
directors as a group (21 persons)(5)
5% Stockholders:
Fidelity Advisor Series VIII:
Fidelity Advisor Strategic Opportunities Fund
82 Devonshire St.
Boston, MA 02109 1,427,554(6) 12.9%
Manley Fuller Asset Management LP 639,800(7) 6.0%
1185 Avenue of the Americas
New York, New York 10036
Anthony Silverman 536,955(8) 5.1%
11811 N. Tatum Blvd, Suite 4040
Phoenix, AZ 85028
*Less than 1%.
(1) Includes the following number of shares subject to options exercisable
within 60 days of March 31, 1998: Mr. Hydeman: 26,000; Mr. Lloyd: 20,000; Ms.
Murphy: 18,000; Mr. O'Gorman: 50,000; Mr. Reding: 209,000; Mr. Rone: 180,000;
Mr. Rowen: 54,000; Mr. Sarner: 24,000; Ms. Winkler: 60,000. Includes 174 shares
each held for the benefit of Messrs. Reding and Rowen and 107 shares held for
the benefit of Mr. Sarner 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 10,583,775 shares of Common Stock outstanding on March 31,
1998. 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 500 shares held by his minor children, and 6,000 shares
obtainable upon exercise of warrants.
(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 717,000 shares subject to options exercisable within 60 days
of March 31, 1998 and 629 shares held in the Company's 401(k) Plan.
(6) Based on a Schedule 13G dated February 14, 1998. Voting power over
these shares resides with the Board of Trustees of Fidelity Advisor Strategic
Opportunities Fund. Includes 492,574 shares obtainable upon conversion of shares
of the Company's Series A Cumulative Convertible Exchangeable Preferred Stock.
(7) Based on a Schedule 13G filed on March 5, 1998.
(8) Based on a Schedule 13D dated September 12, 1997. Mr. Silverman is a
principal of Paradise Valley Securities, which acted as placement agent for the
Company's sale of convertable notes in 1993 and 1994 and as managing underwriter
for the Company's initial public offering in 1992. Includes 16,500 shares held
in an individual retirement account, 12,000 shares held for the benefit of Mr.
Silverman's children, 44,000 shares held for the estate of William Silverman,
21,300 shares issuable upon exercise of warrants held by Mr. Silverman and 7,581
shares issuable upon exercise of warrants held by Paradise Valley Securities.
Also includes 296,878 shares held by Kay Silverman (including shares held in an
individual retirement account), as to which Mr. Silverman disclaims beneficial
ownership.
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows, for the fiscal years ending December 31,
1995, 1996, and 1997, 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 1997 (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 Position Compen- Stock Options/SARs Compen-
Year Salary ($) Bonus ($)(1) sation(2) Award(s)($) (#) sation(3)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. Reding(4) 1997 195,188 1,896 0 N/A 50,000 300
Chief Executive Officer 1996 164,500 30,327 0 N/A 0 300
and President 1995 153,375 300 0 N/A 60,000 300
B.J. Rone 1997 85,682 0 9,000 N/A 180,000 0
Senior Vice President 1996 N/A N/A N/A N/A N/A N/A
Finance(4) 1995 N/A N/A N/A N/A N/A N/A
Annette Murphy 1997 94,614 4,275 18,248 N/A 135,000 300
Senior Vice President 1996 N/A N/A N/A N/A N/A N/A
Customer Service(4) 1995 N/A N/A N/A N/A N/A N/A
Steve Sarner 1997 122,947 4,219 0 N/A 24,000 300
Vice President 1996 87,546 327 9,540 N/A 78,000 300
Marketing and Sales 1995 60,963 300 1,191 N/A 0 0
Robert M. Rowen 1997 112,062 3,300 0 N/A 14,400 300
Vice President, General Counsel 1996 103,000 20,327 0 N/A 0 300
and Secretary 1995 102,250 300 29,562 N/A 0 300
</TABLE>
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(1) $300 in 1995 and $327 in 1996 reflect payments under the Company's profit
sharing plan.
(2) Amounts indicated were in payment or reimbursement of moving expenses,
or temporary housing allowance.
(3) Amounts indicated are the $300 annual Company match to the 401(k) Plan.
Does not include the value of a $30,000 rental car credit available to the
Company's officers as a group.
(4) Mr. Reding's employment terminated in 1998.
Mr. Rone commenced employment on June 25, 1997 and terminated employment
in 1998.
Ms. Murphy commenced employment on March 1, 1997.
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth stock options granted under the Company's
Employee Stock Incentive Plan to the Named Executives during 1997. The Company
has never granted stock appreciation rights.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
% of
Number of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base Grant
Granted in Fiscal Price Expiration Date
Name (#) Year ($/Sh) (Date) Value(5)
---- --- ---- ------ -------- -------
<S> <C> <C> <C> <C> <C>
Robert Reding 50,000(1) 3.8% $7.44 3/12/07 $129,500
B.J. Rone 180,000(2) 13.6% 7.44 6/25/07 390,600
50,000(3) 3.8% 7.44 6/25/07 0(3)
Annette Murphy 90,000(4) 6.8% 7.44 3/12/07 436,500
45,000(4) 3.4% 7.38 10/8/07 216,450
Steve Sarner 24,000(4) 1.8% 7.75 9/15/07 121,440
Robert Rowen 14,400(4) 1.1% 7.75 9/15/07 72,864
</TABLE>
1. Vested in connection with Mr. Reding's termination of employment.
2. Vested in connection with Mr. Rone's termination of employment.
3. Expired in connection with Mr. Rone's termination of employment
4. Vested 20% per year. All of Ms. Murphy's options and 50% of Mr. Sarner's
and Mr. Rowen's options set forth in this chart are accelerated upon a
termination of employment following a change of control.
5. Determined by the Black-Scholes method, with the following assumptions:
expected volatility: 0.692; no dividends; 6% risk-free interest rate. In
the case of the options granted to Mr. Reding and 180,000 of the options
granted to Mr. Rone, the expected life was 1.42 years and 1.00 years,
respectively, based on the provisions of their termination agreements
discussed elsewhere herein. 50,000 of the options granted to Mr. Rone have
been assigned no value because they have terminated unexercised. In all
other cases, the expected life used was 5.6 years.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
The following table sets forth, with respect to the Named Executives,
information concerning the exercise of options during the fiscal year ended
December 31, 1997, and the unexercised options held as of December 31, 1997:
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of Unexercised
Actual Number of Unexercised In-the-Money Options
Shares Acquired Value Options at FY-End (#) at FY-End ($)
--------------------- -------------
Name On Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Reding 0 0 54,500 166,500 $57,808 $ 37,714
B.J. Rone 0 0 0 230,000 $ 0 $ 0
Annette Murphy 0 0 0 135,000 $ 0 $ 0
Steve Sarner 0 0 15,000 99,000 $ 2,958 $ 2,958
Robert Rowen 0 0 39,000 65,400 $19,227 $ 25,143
</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, 1997, was $5.563 per share.
Employment Contracts and Change-in-Control Agreements
The Company has a termination agreement with Ms. Murphy that provides for
salary continuation and full vesting of outstanding options upon a termination
of employment without cause. The Company has an employment agreement with Mr.
Rowen that provides for salary continuation for six months following a
termination of employment.
The Company has change-in-control agreements with the named executive
officers. These agreements provide for salary continuation for up to one year
and acceleration of the vesting of up to 100% of the officer's unvested options
upon a termination of employment or constructive termination of employment
without cause following a change-in-control, as defined in the agreement. As
discussed under the Report of the Human Resources Committee, the options granted
to Mr. O'Gorman accelerate upon a change of control.
Mr. Reding's employment as Chief Executive Officer terminated February 19,
1998. Mr. Reding's salary and health benefits will continue through March 20,
1999; all of Mr. Reding's options have vested and are exercisable through August
19, 1998; and Mr. Reding is entitled to lifetime space-available travel
privileges on the Company's flights.
Mr. Rone's employment as Senior Vice President - Finance terminated March
3, 1998. Mr. Rone's salary and health benefits will continue through March 29,
1999; 180,000 of Mr. Rone's options have vested and are exercisable through July
31, 1998; and Mr. Rone is entitled to space available travel privileges on the
Company's flights through March 29, 1999.
Human Resources Committee Interlocks and Insider Participation
The members of the Company's Human Resources Committee are Messrs. Lloyd,
Hydeman, Kilgore, and Ms. Winkler. From April 1, 1994, through September 22,
1995, Mr. Hydeman served as Chief Executive Officer of the Company without cash
compensation.
Director Compensation
In 1997, 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.
Report of the Human Resources Committee
The Human Resources 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.
The Committee has adopted the following objectives for both executive and
broad based employee compensation, in order to align compensation with corporate
performance. The goals of the compensation program are as follows:
- 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 specifically
linked to Company performance.
The Committee emphasizes merit based compensation, including short term
cash bonus and long term stock incentive compensation programs for both
executive and non-executive level employees. The Committee intends that a
substantial portion of executive compensation should be performance-based. The
Committee believes it is imperative for the Company to tie its long term growth
and profitability strategy to incentive compensation based upon the performance
of the Company as well as the executive.
Executive Compensation. The Committee targets executive base salaries
conservatively within a range established for each officer's position by bench
marking compensation at companies of comparable size, including other airlines.
The Committee believes it is important to pay base salaries at comparative
levels in order to attract and retain highly-qualified individuals. The
Committee believes it is in the best interest of the Company to attract fewer,
highly-qualified executives, at competitive compensation levels instead of a
greater number of less-qualified executives at below-market compensation levels.
The Committee has approved an executive incentive compensation plan for
1998 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 1998.
Payout will be contingent upon both the attainment of objectives and the
achievement of profitability.
The Committee intends to grant additional stock options to executives and
non-executive employees annually based upon the Company's performance and each
employees's individual contribution. 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.
CEO Compensation. On February 18, 1998, the Company hired Joseph R.
O'Gorman as Chairman of the Board, Chief Executive Officer and President. Mr.
O'Gorman is paid $250,000 per year and received a grant of options to purchase
250,000 shares of the Company's common stock at an exercise price equal to the
fair market value of the Company's common stock at the time of grant. Of such
options, 50,000 are immediately vested, and 50,000 additional vest every six
months following February 18, 1998. All options are accelerated upon the
occurrence of a change of control of the Company, defined as the acquisition of
50% or more of the Company's common stock or control of the Company's Board of
Directors. Mr. O'Gorman's compensation was based upon his prior track record as
a seasoned airline executive and the Company's need for seasoned executive
leadership to enable it to make a successful transition from a start-up company
to an established, profitable airline.
Mr. Reding's salary during 1997 was based on the criteria discussed herein.
Mr. Reding received no incentive bonus for 1997.
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. There were no payments under the Profit Sharing Plan in 1997.
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
operated and the Company's relative performance as compared to its competitors.
This analysis forms the basis for assessing individual and corporate
performance.
Human Resources Committee
James T. Lloyd, Chairman
Lee M. Hydeman
Joe M. Kilgore
Agnieszka Winkler
<PAGE>
Performance Graph
The graph below compares the cumulative total stockholder return for the
Company, the NASDAQ composite index and the Dow Jones 20 transportation
companies index. The graph assumes $100 is invested on December 31, 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 December 31, 1992 until
December 31, 1997. 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>
December 31, December 31, December 31, December 31, December 31, December 31,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Company $100 $ 90 $ 51 $107 $ 99 $ 75
NASDAQ
Composite Index $100 $115 $112 $159 $195 $240
Dow Jones 20 $100 $123 $103 $142 $163 $244
Transportation Companies
</TABLE>
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Annual Report to Stockholders of the Company for the fiscal year ended
December 31, 1997 (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, 1997, 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 Human Resources 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 8, 1998
Reno, Nevada
