April 5, 2000
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of
Shareholders at 10:00 a.m. on Tuesday, May 9, 2000, at the Company's
headquarters located at 7337 West Washington Street, Indianapolis, Indiana
46231. We will review Amtran's 1999 performance and answer any questions you may
have. Enclosed with this Proxy Statement are your voting card and 1999 Annual
Report.
I look forward to seeing you on May 9. Any shareholder requiring
directions to the meeting should contact our Secretary, Brian T. Hunt, at
317/240-7006.
Sincerely yours,
J. George Mikelsons
Chairman of the Board
<PAGE>
NOTICE OF THE
2000 ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
The Annual Meeting of Shareholders of Amtran, Inc. will be held on Tuesday,
May 9, 2000, at 10:00 a.m. at the Company's headquarters located at 7337 West
Washington Street, Indianapolis, Indiana. At the meeting, the shareholders will
consider and take action on the following:
1. Election of seven Directors: J. George Mikelsons, John P. Tague,
Kenneth K. Wolff, James W. Hlavacek, Robert A. Abel, William P. Rogers, Jr.
and Andrejs P. Stipnieks, each for a term of one year;
2. Approval of the 2000 Incentive Stock Plan for Key Employees of
Amtran, Inc., which has been approved by the Board of Directors and adopted
by the Company, subject to shareholder approval;
3. Ratification of Ernst & Young as independent accountants for the
fiscal year ending December 31, 2000; and
4. Transact any other business properly before the Annual Meeting.
The Amtran Board of Directors recommends a vote "in favor of" all proposals.
Shareholders of record at the close of business on March 9, 2000, will
be entitled to vote at the Annual Meeting or any adjournments thereof. A
complete list of shareholders entitled to vote will be available at Amtran's
offices for a period of ten days prior to the Annual Meeting.
This Proxy Statement, voting instruction card and Amtran, Inc.'s 1999
Annual Report to Shareholders are being distributed on or about April 5, 2000.
By order of the Board of Directors
Dated: April 5, 2000 Brian T. Hunt
Vice President and Secretary
<PAGE>
PROXY STATEMENT
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS............................................... 1
PROPOSALS TO BE VOTED UPON.......................................... 3
BOARD OF DIRECTORS ................................................. 6
Board Meetings and Committees.................................. 7
Directors' Compensation........................................ 7
Certain Relationships and Related-Party Transactions........... 8
REPORT OF THE COMPENSATION COMMITTEE................................ 9
BENEFICIAL OWNERSHIP TABLE.......................................... 11
SUMMARY COMPENSATION TABLE.......................................... 12
OPTION GRANTS TABLE ................................................ 14
OPTION EXERCISES AND YEAR-END OPTION
VALUES TABLE...................................................... 15
STOCK PERFORMANCE GRAPH............................................. 16
<PAGE>
Q U E S T I O N S A N D A N S W E R S
- --------------------------------------------------------------------------------
Q: What am I voting on?
A: Re-election of seven (7) directors (J. George Mikelsons, John P. Tague,
Kenneth K. Wolff, James W. Hlavacek, Robert A. Abel, William P. Rogers, Jr.,
and Andrejs P. Stipnieks);
Approval of a new Incentive Stock Plan for the Company's key employees which
the Board of Directors recommends for approval by the shareholders; and
Ratification of Ernst & Young LLP as Amtran's independent accountants.
(See pages 3-5 for more details.)
- --------------------------------------------------------------------------------
Q: Who is entitled to vote?
A: Shareholders as of the close of business on March 9, 2000 (the Record Date),
are entitled to vote at the Annual Meeting. Each share of common stock is
entitled to one vote.
- --------------------------------------------------------------------------------
Q: How do I vote?
A: Sign and date each proxy card you receive and return it in the prepaid
envelope. If you do not mark any selections, your proxy card will be voted in
favor of all proposals. You have the right to revoke your proxy any time before
the meeting by (1) notifying Amtran's Corporate Secretary, (2) voting in person,
or (3) returning a later-dated proxy. If you return your signed proxy card, but
do not indicate your voting preferences, Kenneth K. Wolff and James W. Hlavacek
will vote FOR the three proposals on your behalf.
- --------------------------------------------------------------------------------
Q: Is my vote confidential?
A: Yes. Proxy cards, ballots and voting tabulations that identify individual
shareholders are confidential. Only the inspector of election and certain
employees associated with processing proxy cards and counting the votes have
access to your card. Additionally, any comments directed to management (whether
written on the proxy card or elsewhere) will remain confidential, unless you ask
that your name be disclosed.
- --------------------------------------------------------------------------------
Q: Who will count the vote?
A: Representatives of National City Bank, our Stock Transfer Agent, will
tabulate the votes and act as inspector of election.
- --------------------------------------------------------------------------------
Q: What does it mean if I get more than one proxy card?
A: It is an indication that your shares are registered differently and are
in more than one account. Sign and return all proxy cards to insure that all
your shares are voted.
- --------------------------------------------------------------------------------
Q: What constitutes a quorum?
A: As of the Record Date, 12,280,245 shares of Amtran common stock were issued
and outstanding. A majority of the outstanding shares, present or represented by
proxy, constitutes a quorum for the transaction of business at the Annual
Meeting. If you submit a properly executed proxy card, then you will be con-
sidered part of the quorum. If you are present or represented by a proxy at the
Annual Meeting and you abstain from voting, your abstention will have the same
effect as a vote against such proposal.
- --------------------------------------------------------------------------------
Q: Who can attend the Annual Meeting?
A: All shareholders as of the Record Date can attend.
- --------------------------------------------------------------------------------
Q: What percentage of stock do the Amtran directors own?
A: Together, they own approximately 75% of our common stock as of the Record
Date. (See page 11 for more details.)
- --------------------------------------------------------------------------------
Q: Who are the largest principal shareholders?
A: J. George Mikelsons owned 8,271,200 shares, or 69%, as of March 9, 2000.
Dimensional Fund Advisors, Inc. owned 689,900 shares, or 5.55%, as of
December 31, 1999.
- --------------------------------------------------------------------------------
<PAGE>
Q: When are the 2000 shareholder proposals due?
A: In order to be considered for inclusion in next year's proxy statement,
shareholder proposals must be submitted to Amtran in writing no later than
December 2, 2000.
For a shareholder proposal that is not intended to be included in Amtran's
proxy materials but is intended to be raised by the shareholder from the floor
at next year's Annual Meeting, the shareholder must provide advance notice no
later than February 15, 2001. If a proposal is received after that date,
Amtran's proxy for next year's Annual Meeting may confer discretionary authority
to vote on such matter.
Shareholder proposals and related notices should be sent to Brian T. Hunt,
Corporate Secretary, 7337 West Washington Street, Indianapolis, Indiana 46231.
<PAGE>
P R O P O S A L S T O B E V O T E D U P O N
- --------------------------------------------------------------------------------
1. Re-election of Directors
Nominees for re-election this year are J. George Mikelsons, John P. Tague,
Kenneth K. Wolff, James W. Hlavacek, Robert A. Abel, William P. Rogers, Jr.,
and Andrejs P. Stipnieks. All directors are elected to serve one-year terms.
(See pages 6 and 7 for more information.
We need the affirmative vote of a majority of the outstanding shares of
common stock to elect the nominees. Your Board recommends a vote FOR these
directors. Abstentions and votes withheld for directors will have the same
effect as votes against.
2. Approval of Incentive Stock Plan
Since 1993, the Company's Compensation Committee has issued stock options to
certain key employees of the Company in order to attract, motivate and retain
such employees and furnish them with incentives by providing them with
opportunities to participate in the growth and profitability of the Company.
Such stock options were issued pursuant to plans adopted and approved by
shareholders in 1993 and 1996. The Compensation Committee has issued all stock
options permitted by the 1993 and 1996 plans.
The Board of Directors has authorized the Compensation Committee to continue
to issue stock options when the Board deems such issuance to be in the best
interests of the Company. To this end, a new stock option plan must be approved
by the shareholders of the Company. If a new plan is not approved, any awards
made under such plan will be null and void.
The complete text of the 2000 Incentive Stock Plan for Key Employees of
Amtran, Inc. is set forth as Exhibit A to this Proxy Statement. A summary of the
terms of the Plan is set forth below:
Administration. The Plan will be administered by the Compensation Committee,
each member of which qualifies as (a) an "outside director," and (b) a "non-
employee director" as defined by tax and security laws. The Committee has the
authority to decide all questions concerning the Plan.
Eligibility. All salaried employees, which shall include officers, of the
Company and its subsidiaries are eligible to receive an award under the Plan.
Stock Subject to Plan. There will be reserved for issuance under the Plan an
aggregate of 3,000,000 shares of Common Stock.
Stock Options. The Committee in its discretion may issue stock options
("Options") under the Plan. These Options may also qualify as incentive stock
options under the Internal Revenue Code. The Committee will determine the time
or times when each Option becomes exercisable, provided that no incentive Option
will be exercisable more than 10 years after it is granted, and further provided
that the purchase price of Stock under each Option will not be less than 100% of
the fair market value of the Stock on the date of grant of such Option.
The Board or the Committee may, in its discretion, prescribe when an
Option granted under the Plan will become fully vested and exercisable.
Restricted Share Awards. The Committee may grant restricted share awards
("Restricted Shares") consisting of Common Stock. The Committee will determine
the price, if any, to be paid for Restricted Shares, provided that the issuance
of Restricted Shares will be made for at least the minimum consideration
necessary to permit such shares to be deemed fully paid and non-assessable.
Adjustments. In the event of an Optionee's or Restricted Shareholder's
termination of employment by reason of death, disability or retirement after age
60, then, in the case of an Option, each outstanding Option will immediately
become exercisable in full in respect of the aggregate number of shares covered
by the Option; in the case of Restricted Shares, the restriction period will be
deemed to have expired, and all unpaid dividends and cash awards will become
vested.
Amendment or Termination. The Plan may be terminated, modified or amended by
the shareholders of the Company. In addition, the Committee may at any time
amend or terminate the Plan, provided that the Committee may not, without
approval by the shareholders of the Company, (i) increase the maximum number of
shares of stock as to which awards may be granted under the Plan other than
pursuant to the anti-dilution provisions thereof, (ii) change the class of
employees eligible to receive awards, or (iii) adopt any other amendments to the
Plan that are considered material for purposes of Rule 16b-3(b) under the
Securities Exchange Act of 1934. Moreover, no amendment or termination may be
made which adversely affects the rights and obligations of award grantees
without the consent of the affected grantees.
<PAGE>
Federal Income Tax Consequences. The following brief description of the tax
consequences of awards under the Plan is based on Federal tax laws currently in
effect and does not purport to be a complete description of such Federal tax
consequences.
Options. There are no Federal tax consequences either to the optionee or to
the Company upon the grant of an incentive stock option (an "ISO") or a
non-qualified stock option ("NQSO"). On the exercise of an ISO, the optionee
will not recognize any income, and the Company will not be entitled to a
deduction, although such exercise may give rise to alternative minimum tax
liability for the optionee. Generally, if the optionee disposes of shares
acquired upon exercise of an ISO within one year of the date of grant or one
year of the date of exercise, the optionee will recognize ordinary income, and
the Company will be entitled to a deduction, equal to the excess of the fair
market value of the shares on the date of exercise over the option price
(limited generally to the gain on the sale). The balance of any gain, and any
loss, will be treated as a capital gain or loss to the optionee. If the shares
are disposed of after the foregoing holding requirements are met, the Company
will not be entitled to any deduction, and the entire gain or loss for the
optionee will be treated as a capital gain or loss.
On exercise of a NQSO, the excess of the date-of-exercise fair market value
of the shares over the option price will generally be taxable to the optionee
as ordinary income and deductible by the Company. The disposition of shares
acquired upon exercise of a NQSO will generally result in a capital gain or loss
for the optionee, but will have no tax consequences for the Company.
Restricted Share Awards. A recipient of Restricted Shares will not recognize
taxable income at the time of the award unless the shares are issued at the
beginning of the Restricted Period and he elects otherwise. At the time any
restrictions applicable to the Restricted Shares lapse, the recipient will
recognize ordinary income, and the Company will be entitled to a corresponding
deduction equal to the excess of the fair market value of such stock at such
time over the amount paid therefor. Dividends paid to the recipient on the
Restricted Stock during the Restricted Period and retained distributions and
cash awards paid at the end of the Restricted Period will be ordinary
compensation income to the recipient and deductible as such by the Company.
Options Granted Under the Plan. The Compensation Committee granted options
in the amount of 547,475 shares and such awards are subject to shareholder
approval of the Plan. If the Plan is not approved by the Company's shareholders,
the awards will be null and void.
We need the affirmative vote of a majority of the outstanding shares of
common stock in order to approve the 2000 Incentive Stock Plan. Your Board
recommends a vote FOR this Plan.
3. Ratification of Ernst & Young as Independent Accountants
Ernst & Young has been our independent public accountants for the past
seven years. The Audit Committee and the Board believe that Ernst & Young's
long-term knowledge of Amtran is invaluable. Representatives of Ernst & Young
have direct access to members of the Audit Committee and regularly attend their
meetings. Representatives of Ernst & Young will attend the Annual Meeting to
answer any shareholder questions and to make a statement if they desire to do
so.
In 1999, the Audit Committee (1) reviewed all services provided by Ernst
& Young to insure that they were within the scope previously approved by the
Committee, and (2) concluded that the non-audit services performed by Ernst &
Young for Amtran or its subsidiaries did not impair its independence as Amtran's
accountants.
We need the affirmative vote of the majority of shares present in person or
by proxy and entitled to vote at the meeting in order to ratify Ernst & Young
as independent accountants for 2000-2001. The Audit Committee and the Board
recommend a vote FOR Ernst & Young as independent accountants for 2000-2001.
<PAGE>
B O A R D O F D I R E C T O R S
- --------------------------------------------------------------------------------
J. GEORGE MIKELSONS Director since 1993
J. George Mikelsons, age 62, is the founder, Chairman of the Board and, prior
to the Company's initial public offering in May 1993, was the sole shareholder
of the Company. Mr. Mikelsons founded American Trans Air, Inc. and Ambassadair
Travel Club, Inc. in 1973. Mr. Mikelsons currently serves on several boards of
directors, including The Indianapolis Zoo; the Indianapolis Convention and
Visitors Association, where he is a member of the Executive Committee; and IWC
Resources Corporation (formerly the Indianapolis Water Company). Mr. Mikelsons
has been an airline Captain since 1966 and remains current on several jet
aircraft.
Director 1993-95
JOHN P. TAGUE Director July 1997-present
John P. Tague, age 37, was named President and Chief Executive Officer of the
Company in July 1997. He had previously served as the Company's President and
Chief Operating Officer since October 1993 before resigning to form his own
aviation consulting company in 1995. Prior to his tenure as the Company's
President and Chief Operating Officer, he was Executive Vice President from June
1993 to October 1993. Prior to that time, he was Senior Vice President,
Marketing and Sales, of the Company. From May 1991 to November 1991, he was Vice
President of Marketing and Sales for the Company. Mr. Tague was employed at
Midway Airlines from 1985 to 1991. Prior to joining Midway Airlines in 1985, Mr.
Tague was a transportation consultant and held various positions at a regional
airline. Mr. Tague serves on the Board of Directors of the Air Transport
Association.
JAMES W. HLAVACEK Director since 1993
James W. Hlavacek, age 63, was appointed Chief Operating Officer of the Company
in 1995. He continues to serve as Executive Vice President of the Company and
President of ATA Training Corporation. From 1986 to 1989, he was the Company's
Vice President of Operations. Mr. Hlavacek has been a commercial airline pilot
for 35 years and has held the rank of Captain for over 30 years. He was ATA's
Chief Pilot from 1985 to 1986. Mr. Hlavacek is the Chairman of the Board of
Directors of the National Air Carrier Association. Mr. Hlavacek is a graduate
of the University of Illinois.
KENNETH K. WOLFF Director since 1993
Kenneth K. Wolff, age 54, was appointed Executive Vice President and the Chief
Financial Officer of the Company in 1991. From 1990 to 1991, he was the
Company's Senior Vice President and Chief Financial Officer. From 1989 to
1990, he was President and Chief Executive Officer of First of America Bank -
Indianapolis. From 1988 to 1989, he was President and Chief Operating Officer
of this bank. Prior to his appointment as President of the bank, he held various
positions at the bank since 1968. Mr. Wolff is a graduate of Purdue University
and also holds a Masters in Business Administration from Indiana University and
was a member of the faculty there for five years.
ROBERT A. ABEL Director since 1993
Robert A. Abel, age 47, is a director in the public accounting firm of
Blue & Co., LLC. Mr. Abel is a magna cum laude graduate of Indiana State
University with a B.S. Degree in Accounting. He is a certified public accountant
with over 20 years of public accounting experience in the areas of auditing and
corporate tax. He has been involved with aviation accounting and finance since
1976. Blue & Co., LLC provides tax and accounting services to the Company in
connection with selected matters.
WILLIAM P. ROGERS, JR. Director since 1993
William P. Rogers, Jr., age 50, is a partner in the New York law firm of
Cravath, Swaine & Moore. After graduating from Case Western Reserve University
School of Law in 1978, he served as a clerk in the United States Court of
Appeals for the Sixth Circuit based in Cincinnati. He joined the Cravath firm a
year later and became a partner in 1985. Cravath, Swaine & Moore provides legal
services to the Company in connection with selected matters.
ANDREJS P. STIPNIEKS Director since 1993
Andrejs P. Stipnieks, age 59, is a consultant on corporatization and priva-
tization of government business enterprises. He graduated from the University of
Adelaide, South Australia, and is a Barrister and Solicitor of the Supreme
Courts of South Australia, the Australian Capital Territory and of the High
Court of Australia. Until 1998, Mr. Stipnieks was a Senior Government Solicitor
in the Australian Attorney General's Department, specializing in aviation and
surface transport law and practice. He has represented Australia on the Legal
Committee of the International Civil Aviation Organization at Montreal.
<PAGE>
Board Meetings and Committees
During 1999, the Board of Directors held four (4) meetings. All directors
attended each Board meeting and each meeting of those Committees on which he
served. As described below, the Board of Directors has Audit and Compensation
Committees.
<TABLE>
<CAPTION>
Name of Committee Meetings
And Members Functions of Committee in 1999
<S> <C> <C>
Audit
William P. Rogers, Jr. - meets with the independent accountants of the Company 2
Robert A. Abel - reviews the audit plan for the Company
Kenneth K. Wolff - reviews the annual audit of the Company with the accountants
- recommends whether the accountants should be continued
as auditors for the Company
- reviews the Company's internal controls
Compensation
Robert A. Abel - establishes compensation policies and compensation 2
Andrejs P. Stipnieks for the Company's officers
The Company does not have a standing nominating committee.
</TABLE>
Directors' Compensation
We do not pay directors who are also officers of the Company additional
compensation for their service as directors. In 1999, non-employee directors
received the following:
- An annual retainer of $18,000 for serving on the Board
- An annual fee of $2,500 for serving as Chairman of a Committee
- A fee of $2,000 for each Board of Directors meeting attended in person
- A fee of $1,000 for each Committee meeting attended in person.
(Amtran also pays its non-employee directors if they participate in Board
and Committee meetings by telephone.)
- Options to purchase shares of the Company's Common Stock pursuant to the
Amtran, Inc. Stock Option Plan for Non-Employee Directors (a one-time
grant of an option to purchase 2,000 shares following his election or
appointment to the Board of Directors, and for as long as he remains
an Eligible Director, an annual grant of an option to purchase 500 shares
on the 30th day following each annual meeting of shareholders.)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of the Company's shares to file with the Securities and Exchange
Commission and Nasdaq reports on their ownership of shares of the Company
(so-called 16(a) forms). Based solely on its review of copies of such reports,
the Company believes that its directors complied with all such filing
requirements.
Certain Relationships and Related-Party Transactions
Mr. Mikelsons is the sole owner of Betaco, Inc., a Delaware
corporation ("Betaco"). Betaco currently owns two airplanes (a Cessna Citation
II and a Lear Jet) and three helicopters (a Bell 206B Jet Ranger III, an
Aerospatiale 355F2 Twin Star and a Bell 206L-3 LongRanger). The two airplanes
and the Twin Star and Jet Ranger III helicopters are leased or subleased to ATA.
The LongRanger helicopter is leased to American Trans Air ExecuJet, Inc.
("ExecuJet"). The Company believes that the current terms of the leases and
subleases with Betaco for this equipment are no less favorable to the Company
than those that could be obtained from third parties.
The sublease for the Cessna Citation currently requires a monthly
payment of $37,500. The sublease for the Lear Jet requires a monthly payment of
$42,000. The lease for the JetRanger III currently requires a monthly payment of
$7,000. The sublease for the Aerospatiale 355F2 Twin Star requires a monthly
lease payment of $22,500, and the lease for the LongRanger requires a monthly
payment of $11,200.
Betaco and Mr. Hlavacek own 100% of the interest in Delta Aviation
LLC, an Indiana limited liability corporation. Delta Aviation owns a Beech A36
Bonanza aircraft. The aircraft is leased to ExecuJet and subleased to ATA for
$55.00 per flight hour.
Mr. Rogers, Chairman of the Audit Committee, is a partner in the
law firm of Cravath, Swaine & Moore, which provided legal services to the
Company in 1999. Mr. Abel, Chairman of the Compensation Committee, is a partner
in the accounting firm of Blue & Co., LLC, which provided tax and accounting
services to the Company in 1999.
R E P O R T O F T H E C O M P E N S A T I O N C O M M I T T E E
- --------------------------------------------------------------------------------
What is our compensation philosophy?
The objectives of Amtran's executive compensation programs are to: (i)
attract and retain talented and experienced executives with compensation that is
competitive with other U.S. airlines of a size comparable to ATA, (ii) reward
outstanding performance and provide incentives based on individual and corporate
performance, and (iii) use restricted stock and stock options to align the
interests of management with those of the shareholders.
The Compensation Committee (the "Committee") is responsible for
administering the Company's compensation policies and programs, including its
officer incentive compensation programs. The Committee currently consists of two
independent non-employee directors, Robert A. Abel and Andrejs P. Stipnieks. Mr.
Abel, Chairman of the Committee, is a director in the accounting firm of Blue &
Co., LLC. Mr. Abel's firm provided tax and accounting service to the Company in
1999.
As discussed below, the elements of compensation used by the Company
include salaries and short-term and long-term incentive programs, including the
award of cash bonuses and stock options.
How do we determine base pay?
The base pay for Mr. Mikelsons and Mr. Tague reflects Amtran's objective
to maintain salary levels that are competitive with those offered by U.S.
airlines of a size comparable to ATA for comparable positions, taking into
consideration a number of factors, as described below.
Mr. Mikelsons' 1999 Base Pay
In establishing a base salary for Mr. Mikelsons, the Committee
considered:
- a compensation analysis prepared by an independent consultant.
- the fact that Mr. Mikelsons would not participate in any
equity-based incentive compensation plan or incentive cash bonus
of the Company and the fact that no increase in base salary over
1997 was being proposed.
- his age, experience and responsibilities.
Each of these listed factors was evaluated by the Committee on a
subjective basis, and no particular weighting was given to any particular
factor. The Committee also sought to maintain the same relative relationship
between the salary levels of different officers as exists for comparable
positions at other U.S. airlines. After considering the above factors, the
Committee approved a base salary for the Chairman for 1999 of $688,194. Based on
a compensation analysis available to the Committee, such base salary is higher
than the base salaries paid by other airlines to executives holding comparable
positions but, given the absence of any stock-based compensation or incentive
cash bonus, total compensation was in between the median and the 75th percentile
of total annual cash compensation paid by the other airlines included in the
analysis.
Mr. Tague's 1999 Base Pay
In establishing a base salary for Mr. Tague, the Committee considered:
- a compensation analysis prepared by an independent consultant.
- his age, experience and responsibilities.
Each of these listed factors was evaluated by the Committee on a
subjective basis, and no particular weighting was given to any particular
factor. The Committee also sought to maintain the same relative relationship
between the salary levels of different officers as exists for comparable
positions at other U.S. airlines. After considering the above factors, the
Committee approved an annual base salary for Mr. Tague of $500,000. Based on a
compensation analysis available to the Committee, such base salary is in between
the median and the 75th percentile of the base salary paid by most other
airlines to executives holding comparable positions. Mr. Tague's total
compensation, including bonus and long-term incentive compensation, is below the
median of the annual compensation paid by the other airlines included in the
analysis.
How are annual bonuses determined?
Annual bonuses are paid in cash in the year following performance, based
on achievement of predetermined corporate goals. Mr. Mikelsons was not eligible
for a bonus payment in 1999. Mr. Tague's 1999 bonus was $460,000.
How are Amtran's incentive compensation programs used to focus management on
increasing shareholder value?
In 1997, the Company adopted the 1996 Incentive Stock Plan for Key
Employees of Amtran, Inc. (the "Incentive Stock Plan"). Under the Incentive
Stock Plan, which is administered by the Committee, key employees may receive
awards of stock options and restricted stock. The purpose of the Incentive Stock
Plan is, among other things, to provide incentives to those key employees who
have the capacity for contributing substantially to the growth and profitability
of the Company, and to assist the Company in attracting, retaining and
motivating such employees. In addition, the Incentive Stock Plan provides a
means to more closely align the interests of management employees with those of
shareholders.
In 1999, the Committee awarded stock options covering an aggregate of
175,000 shares of Common Stock to the Company's President and two Executive Vice
Presidents. No awards of stock options or restricted stock were made to the
Chairman, who does not participate in this program. The option awards made in
1999 vest over a three-year period commencing approximately one year after the
grant date. Additional information on the awards made in 1999 appears elsewhere
in this Proxy Statement. The Company encourages participants to hold the stock
received through the exercise of stock options as a long-term investment.
Compensation Committee
Robert A. Abel, Chairman
Andrejs P. Stipnieks
<PAGE>
B E N E F I C I A L O W N E R S H I P
- --------------------------------------------------------------------------------
This table indicates the number of shares of Common Stock owned by (i)
the executive officers; (ii) the directors; (iii) any person known by management
to beneficially own more than 5% of such stock; and (iv) all directors and
executive officers of the Company as a group as of March 9, 2000.
<TABLE>
<CAPTION>
Percent of
Number of Shares Right to Outstanding
Name and Address of Individual/Group Owned (1) Acquire(2) Shares (3)
<S> <C> <C> <C>
J. George Mikelsons 8,271,200 -0- 69
7337 West Washington Street
Indianapolis, IN 46231
John P. Tague -0- 210,758 --
James W. Hlavacek 52,568 189,433 --
Kenneth K. Wolff 21,700 218,001 --
Robert A. Abel 4,000 4,500 --
William P. Rogers, Jr. 4,500 4,500 --
Andrejs P. Stipnieks 500 4,500 --
Stanley Pace -0- -0- --
Dalen D. Thomas -0- 25,000 --
Dimensional Fund Advisors Inc. 689,900 (4) -0- 5
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
All directors and executive officers
as a group(5) (excluding J. George Mikelsons) 83,268 656,692 6
</TABLE>
1 Includes shares for which the named person has shared voting and investment
power with a spouse.
2 Shares that can be acquired through presently exercisable stock options.
3 If more than 1%.
4 Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor regis-
tered under Section 203 of the Investment Advisors Act of 1940, furnishes
investment advice to four investment companies registered under the Invest-
ment Company Act of 1940, and serves as investment manager to certain other
investment vehicles, including commingled group trusts. (These investment
companies and investment vehicles are the "Portfolios"). In its role as
investment advisor and investment manager, Dimensional possesses both voting
and investment power over the securities of the Company that are owned by
the Portfolios. Such securities are owned by the Portfolios, and Dimensional
disclaims beneficial ownership of such securities.
5 Group consists of eight persons (Messrs. Tague, Hlavacek, Wolff, Abel,
Rogers, Stipnieks, Pace and Thomas).
<PAGE>
S U M M A R Y C O M P E N S A T I O N T A B L E
- --------------------------------------------------------------------------------
This table shows the compensation paid or accrued to the Chairman of the
Board, three executive officers and two former executive officers for services
rendered during the last three fiscal years.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Other
Annual Securities Restricted
Name and Compen- Underlying Stock All Other
Principal Position Year Salary($) Bonus($) sation($) Options (#) Awards($) Compensation($)
<S> <C> <C> <C> <C> <C> <C> <C>
J. George Mikelsons, 1999 688,194 None None None None 4,320 (1)
Chairman of the Board 1998 688,194 None None None None 3,840 (2)
1997 688,194 None None None None 2,249 (3)
John P. Tague, 1999 519,231(4) 460,000 None 75,000 (5) None 4,320 (1)
President and Chief Executive 1998 496,153 800,000 None 75,000 (6) None 2,308 (2)
Officer 1997 184,614 None None 300,000 (7) None None
James W. Hlavacek 1999 337,500(4) 224,250 None 50,000 (8) None 4,320 (1)
Executive Vice President 1998 323,942 390,000 None 50,000 (9) None 3,840 (2)
and Chief Operating Officer 1997 295,192 38,675 None 108,000(10) None 2,249 (3)
Kenneth K. Wolff 1999 337,500(4) 224,250 None 50,000 (8) None 4,320 (1)
Executive Vice President and 1998 323,942 390,000 None 50,000 (9) None 3,840 (2)
Chief Financial Officer 1997 295,192 38,675 None 108,000(10) None 2,249 (3)
Dalen D. Thomas (11) 1999 None None None None None None
Former Senior Vice President, 1998 221,684 300,877 None None None 3,840 (2)
Sales and Marketing 1997 206,154 32,500 None None None 1,082 (3)
Stanley L. Pace (12) 1999 None None None None None None
Former President and 1998 None None None None None None
Chief Executive Officer 1997 257,828 2,000,000 None None None None
- --------------------------------------------
1 Represents the amount of the Company's matching contribution to its 401(k) Plan in 1999.
2 Represents the amount of the Company's matching contribution to its 401(k) Plan in 1998.
3 Represents the amount of the Company's matching contribution to its 401(k) Plan in 1997.
4 Amtran pays on a bi-weekly basis. In 1999, there were 27 pay dates instead of the usual 26 pay dates.
5 Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran, Inc., the grant of options to Mr. Tague to
purchase 75,000 shares of the Company's stock shall become exercisable as to the following aggregate number of shares
on and after each of the following dates: January 5, 2000 - 25,000 shares; January 5, 2001 - 25,000 shares; and
January 5, 2002 - 25,000 shares.
6 Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran, Inc., the grant of options to Mr. Tague to
purchase 75,000 shares of the Company's stock shall become exercisable as to the following aggregate number of shares
on and after each of the following dates: January 10, 1999 - 25,000 shares; January 10, 2000 - 25,000 shares; and
January 10, 2001 - 25,000 shares.
7 Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran, Inc., the grant of options to Mr. Tague to
purchase 300,000 shares of the Company's stock shall become exercisable as to the following aggregate number of shares
on and after each of the following dates: June 20, 1998 - 100,000 shares; June 20, 1999 - 100,000 shares; and
June 20, 2000 - 100,000 shares.
8 Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran, Inc., the grant of options to Messrs. Hlavacek
and Wolff to purchase 50,000 shares each of the Company's stock shall become exercisable as to the following aggregate
number of shares on and after each of the following dates: January 5, 2000 - 16,667 shares; January 5, 2001 - 16,667
shares; and January 5, 2002 - 16,666 shares.
9 Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran, Inc., the grant of options to Messrs. Hlavacek
and Wolff to purchase 50,000 shares each of the Company's stock shall become exercisable as to the following aggregate
number of shares on and after each of the following dates: January 10, 1999 - 16,667 shares; January 10, 2000 - 1,667
shares; and January 10, 2001 - 16,666 shares.
10 Pursuant to the 1996 Incentive Stock Plan for Key Employees of Amtran, Inc., the grant of options to Messrs. Hlavacek
and Wolff to purchase 108,000 shares each of the Company's stock shall become exercisable as to the following
aggregate number of shares on and after each of the following dates: January 10, 1998 - 16,000 shares; June 20,
1998 - 20,000 shares; January 10, 1999 - 16,000 shares; June 20, 1999 - 20,000 shares; January 10, 2000 -
16,000 shares; and June 20, 2000 - 20,000 shares.
11 Mr. Thomas resigned from his position as Senior Vice President, Sales and Marketing, effective November 2, 1998.
12 Mr. Pace resigned from his position as President and Chief Executive Officer on May 24, 1997.
</TABLE>
O P T I O N G R A N T S T A B L E
- --------------------------------------------------------------------------------
This table shows the option grants in 1999 to the individuals named in
the Summary Compensation Table.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (1)
% of Total
Number of Options
Securities Granted
Underlying To Employees Exercise Expiration
Name Options Granted In Fiscal Year Price/Share($) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
J. George Mikelsons -0- -0- -- -- -- --
John P. Tague 75,000 (2) 13% 26.68 1/5/2009 1,258,772 3,189,975
James W. Hlavacek 50,000 (3) 9% 26.68 1/5/2009 839,181 2,126,650
Kenneth K. Wolff 50,000 (3) 9% 26.68 1/5/2009 839,181 2,126,650
Dalen D. Thomas -0- -0- -- -- -- --
Stanley L. Pace -0- -0- -- -- -- --
</TABLE>
1 Option values reflect Black-Scholes model output for options. The assumptions
used in the model were expected volatility of .46, risk-free rate of return
of 6.29%, dividend yield of 0% and time to exercise of five (5) years.
Additionally, a 5% discount was applied to reflect a three-year vesting
period.
2 See Footnote 5 to Summary Compensation Table on vesting of Options.
3 See Footnote 8 to Summary Compensation Table on vesting of Options.
<PAGE>
O P T I O N E X E R C I S E S AND
Y E A R-E N D O P T I O N V A L U E S
This table shows the number and value of stock options (exercised and
unexercised) for the named individuals during 1999.
<TABLE>
<CAPTION>
Value of
Number of Securities In-The-Money
Shares Underlying Unexercised Options At Fiscal
Acquired Value Options At Fiscal Year-End Year-End
On Exercise Realized Exercisable (E)/
Name (#) ($) Exercisable Unexercisable Unexercisable (U)
<S> <C> <C> <C> <C> <C>
J. George Mikelsons 0 0 0 0 0
John P. Tague 64,242 882,797 160,758 225,000 $1,734,398(E)
1,625,000(U)
James W. Hlavacek 0 0 156,099 103,333 1,229,365(E)
581,663(U)
Kenneth K. Wolff 1,000 6,315 184,667 103,333 1,505,947(E)
581,663(U)
Dalen D. Thomas 115,000 2,028,822 25,000 0 298,500(E)
0(U)
Stanley L. Pace 0 0 0 0 0
</TABLE>
Pension Plans
The Company has no pension plans.
401(k) Plan
Under the American Trans Air, Inc. Employees' Retirement Savings Plan
(the "401(k) Plan"), adopted on October 1, 1985, eligible employees could elect
to defer up to 15% of their salary into the 401(k) Plan, not to exceed statutory
limits. Generally, all employees meeting a minimum-hours requirement are
eligible to participate in the 401(k) Plan. The Company has the discretion to
make matching contributions to the 401(k) Plan on behalf of participants who
have made salary reduction contributions under the Plan. In 1999, the Company
contributed $.45 for each dollar contributed to the Plan by eligible
participants, up to 6% of their compensation. Moreover, an employee stock
ownership feature was added to the 401(k) Plan in May 1993. The ATA Employee
Stock Ownership Plan ("ESOP") is a mechanism for the Company to award shares of
Company stock for years in which profits occur. Addition of this benefit permits
eligible employees to become shareholders of the Company and share in its
potential future growth and profitability. Generally, the eligibility
requirements for the ESOP are identical to those of the 401(k) Plan, except an
employee may be eligible for an ESOP contribution of Company stock even if the
employee did not elect pre-tax 401(k) Plan contributions.
In those years in which the Company experiences profits and chooses to
make an ESOP contribution, the 401(k) Plan accounts of eligible employees will
be credited with full and/or fractional shares of Company stock. Shares will be
allocated based on compensation. In 1999, 33,029 shares of Company stock were
allocated to 401(k) Plan participant accounts.
<PAGE>
S T O C K P E R F O R M A N C E G R A P H
- --------------------------------------------------------------------------------
This performance graph compares the 1999 total shareholder return on the
Company's Common Stock with the Nasdaq Stock Market-U.S. Index and the Company's
peer group. The peer group selected by the Company consists of the following
companies: Alaska Air Group, Inc., America West Holdings Corporation, AMR Corp.
(American Airlines), Amtran, Inc., Continental Airlines, Inc., Delta Air Lines,
Inc., HAL, Inc. (Hawaiian Airlines), Northwest Airlines, Southwest Airlines Co.,
US Airways Group, Inc., UAL Corp. (United Airlines) and Worldcorp, Inc. (World
Airlines).
Comparison Of 5-Year Cumulative
Total Return* Among The Company,
Nasdaq Market-U.S. Index And A Peer Group
Date Amtran, Inc. Peer Group Nasdaq Stock Market - U.S.
1994 $100 $100 $100
1995 $204 $176 $141
1996 $112 $187 $174
1997 $126 $293 $213
1998 $434 $257 $300
1999 $310 $262 $542
*Total return based on $100 initial investment and reinvestment of dividends.
<PAGE>
Exhibit A
2000 INCENTIVE STOCK PLAN FOR KEY EMPLOYEES OF
AMTRAN INC. AND ITS SUBSIDIARIES
1. Adoption and Purpose of the Plan. Amtran, Inc., an Indiana
corporation (the "Company"), hereby adopts this incentive stock plan (the
"Plan") providing for the granting of stock options (the "Options") and shares
of restricted stock (the "Restricted Shares" and with the Options, the "Awards")
to key employees of the Company and its subsidiaries. The general purpose of the
Plan is to promote the interests of the Company and its subsidiaries by
providing to their key employees additional incentives to continue and increase
their efforts with respect to, and to remain in the employ of, the Company and
its subsidiaries.
The Plan provides for the granting of incentive stock Options ("Incentive
Stock Options") within the meaning of Section 422(b) of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), nonqualified stock
Options ("Nonqualified Stock Options") and Restricted Shares.
2. Stock Subject to the Plan. There will be reserved for issuance
upon the exercise of Options and the issuance of Restricted Shares to be granted
from time to time under the Plan an aggregate of 3,000,000 shares of common
stock, without par value (the "Stock"), as such number of shares shall be
adjusted in accordance with the terms set forth herein. Shares of Stock issued
pursuant to any Award may be authorized and unissued shares of Stock or issued
shares of Stock which shall have been reacquired by the Company, in whole or in
part, as the Board of Directors of the Company (the "Board") shall from time to
time determine. If any Option granted under the Plan shall expire, terminate or
be canceled for any reason without having been exercised in full or if any
Restricted Shares are forfeited or canceled under the terms of the Plan, the
relevant Stock subject thereto shall again be available for the purposes of the
Plan.
3. Administration. The Plan shall be administered by the
Compensation Committee of the Board (the "Committee") which shall be comprised
of two or more persons, each of whom shall qualify as (a) an "outside director"
within the meaning of Section 162(m) of the Code and (b) a "non-employee
director" within the meaning of Rule 16b-3(b)(3) promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Subject to the
express provisions of the Plan, the Committee shall have plenary authority, in
its discretion, to determine the terms of all Awards granted under the Plan
(which need not be identical) including, without limitation, the purchase price
of the shares covered by each Award, the individuals to whom and the time or
times at which Awards shall be granted, the number of shares to be subject to
each Award, whether an Option shall be an Incentive Stock Option or a
Nonqualified Stock Option, when an Option can be exercised and whether in whole
or in installments. In making such determinations, the Committee may take into
account the nature of the services rendered by employees, their present and
potential contributions to the Company's success and such other factors as the
Committee in its discretion shall deem relevant. Subject to the express
provisions of the Plan, the Committee shall have plenary authority to interpret
the Plan, to prescribe, amend and rescind the rules and regulations relating to
it and to make all other determinations deemed necessary or advisable for the
administration of the Plan. The determination of the Committee on the matters
referred to in this Section 3 shall be conclusive.
The Committee shall hold its meetings at such times and places as it
shall deem advisable, a majority of its members shall constitute a quorum and
all determinations shall be made by a majority of its members. Any determination
reduced to writing and signed by a majority of Committee members shall be fully
as effective as if it had been made by a majority vote at a meeting duly called
and held.
4. Eligibility. Awards may be granted only to full-time salaried
employees (which shall include officers) of the Company and of its subsidiaries
as defined in Section 424(f) of the Code ("Subsidiary"). In no event shall any
employee be granted Options in respect of and/or Restricted Shares representing
an aggregate of more than 3,000,000 shares, subject to adjustment as provided
herein. A director of the Company or of a Subsidiary who is not also an employee
of the Company or of one of its Subsidiaries will not be eligible to receive any
Awards under the Plan. Awards may be granted to employees who hold or have held
Awards under other plans. An employee who has been granted an Award may be
granted additional Awards.
<PAGE>
5. Option Prices. Subject to the provisions set forth in this
Section 5 relating to Incentive Stock Options, the purchase price of the Stock
under each Option shall be determined by the Committee, but shall not be less
than 100% of the fair market value of the Stock on the date of grant of such
Option. Such fair market value shall be determined by the Committee and, unless
otherwise determined by the Committee, shall not be less than Market Price (as
defined below) on the date of grant of the Option. No Incentive Stock Options
shall be granted to an employee who, at the time the Incentive Stock Options are
granted, owns (or is considered as owning within the meaning of Section 424(d)
of the Code) stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any Subsidiary, unless at the time the
Incentive Stock Options are granted the Option price is at least 110% of the
Market Price of the Stock, subject to the Incentive Stock Options and the
Incentive Stock Options by their terms are not exercisable after the expiration
of five years from the date they are granted. For purposes of the Plan, "Market
Price" shall mean at any date the (i) mean between the high and low sales prices
of a share of Stock underlying the Option on the New York Stock Exchange
("NYSE") or (ii) if the Stock is not listed on the NYSE, the mean between the
high and low sales prices of a share of such Stock on the principal national
securities exchange on which the Stock is listed, or (iii) if no shares of such
Stock were traded on such date, on the next preceding date on which such Stock
was so traded, or (iv) if the Stock is not then listed or admitted to trading on
any national securities exchange, on the basis of the average of the high bid
and low asked quotations for shares of such Stock on the day in question in the
over-the-counter market as reported by the Nasdaq Stock Market's National Market
System, or, (v) in all other cases, the value set in good faith by the
Committee.
6. Term of Options. The term of each Option shall be for such
period as the Committee shall determine, but not more than 10 years from the
date of granting thereof or such shorter period as is prescribed in Section 9
hereof.
7. Exercise of Options. The Committee may, in its discretion,
prescribe in the Option grant the installments, if any, in which an Option
granted under the Plan shall become exercisable, provided that no Option shall
be exercisable until the six month anniversary of the date of its grant, except
as provided in Section 11 or as the Committee otherwise determines. In no case
may an Option be exercised at any time for less than 50 shares (or the remaining
shares covered by the Option if less than 50).
Payment shall be made in cash or, unless otherwise provided in the
applicable agreement ("Agreement"), in whole shares of Stock already owned by
the holder of the Option or partly in cash and partly in such shares; provided,
however, that if shares of Stock are to be used to satisfy the exercise price
such shares shall have been acquired (i) at least six months prior to the
exercise date or (ii) in an open market purchase. An Option may be exercised by
written notice to the Company. Such notice shall state that the holder of the
Option elects to exercise the Option, the number of shares in respect of which
it is being exercised and the manner of payment for such shares, and shall
either (i) be accompanied by payment of the full purchase price of such shares
or (ii) fix a date (not more than 10 business days from the date of exercise)
for the payment of the full purchase price of such shares. Cash payments shall
be made by cash or check payable to the order of the Company. Stock payments
(valued at Market Price on the date of exercise) shall be made by delivery of
(i) stock certificates in negotiable form or (ii) a completed attestation form
prescribed by the Company setting forth the whole shares of Stock owned by the
holder which the holder wishes to utilize to satisfy the exercise price. If
certificates representing Stock are used to pay all or part of the purchase
price of an Option, a separate certificate shall be delivered by the Company
representing the same number of shares as each certificate so used, and an
additional certificate shall be delivered representing the additional shares to
which the holder of the Option is entitled as a result of the exercise of the
Option. Except as otherwise provided herein, no Option may be exercised at any
time unless the holder thereof is then a full-time employee of the Company or a
Subsidiary. The holder of an Option shall have none of the rights of a
shareholder with respect to the shares subject to the Option until such shares
are transferred to the holder upon the exercise of the Option.
8. Restricted Shares. The Board shall determine whether shares of
Stock covered by grants of Restricted Shares shall be issued at the beginning or
the end of the period during which the restrictions are in effect (the
"Restriction Period") and any restrictions, terms and conditions applicable to
the vesting of such Shares. The Board shall determine the price, if any, to be
paid by the holder for the Restricted Shares; provided, however, that the
issuance of Restricted Shares shall be made for at least the minimum
consideration necessary to permit such Restricted Shares to be deemed fully paid
and nonassessable. All determinations made by the Board pursuant to this
paragraph shall be specified in the applicable Agreement.
Restricted Shares issued at the beginning of the Restriction
Period shall constitute issued and outstanding shares of Stock for all corporate
purposes. The holder will have the right to exercise all other rights, powers
and privileges of a holder of Stock with respect to such Restricted Shares;
except that (a) the holder will not be entitled to delivery of the stock
certificate or certificates representing such Restricted Shares until the end
of the Restriction Period and unless all other vesting requirements with respect
thereto shall have been fulfilled or waived; (b) other than regular cash
dividends and such other distributions as the Board may in its sole discretion
designate, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Shares (and such
Retained Distributions will be subject to the same restrictions, terms and
vesting and other conditions as are applicable to the Restricted Shares) until
such time, if ever, as the Restricted Shares with respect to which such Retained
Distributions shall have been made, paid or declared shall have become vested,
and such Retained Distributions shall not bear interest or be segregated in
a separate account; (c) the holder may not sell, assign, transfer, pledge,
exchange, encumber or dispose of the Restricted Shares or any Retained Dis-
tributions or his interest in any of them during the Restriction Period; and (d)
a breach of any restrictions, terms or conditions provided in the Plan or
established by the Board with respect to any Restricted Shares or Retained
Distributions will cause a forfeiture of such Restricted Shares and Retained
Distributions. The stock certificate or certificates representing such Res-
tricted Shares shall be registered in the name of the holder to whom such
Restricted Shares shall have been awarded. During the Restriction Period,
certificates representing the Restricted Shares and any securities constituting
Retained Distributions shall bear a restrictive legend to the effect that
ownership of the Restricted Shares (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the restrictions,
terms and conditions provided in the Plan and the applicable Agreement.
Such certificates shall remain in the custody of the Company and the holder
shall deposit with the Company stock powers or other instrument of assignment,
endorsed in blank, so as to permit retransfer to the Company of all or any
portion of the Restricted Shares and any Retained Distributions that shall
not become vested in accordance with the Plan and the applicable Agreement.
If and to the extent that shares of Stock are to be issued at the
end of the Restriction Period, the holder shall be entitled to receive an amount
equal to the cash dividends payable ("Dividend Equivalents") with respect to the
shares of Stock covered thereby, either (a) during the Restriction Period or (b)
in accordance with the rules applicable to Retained Distributions, as the Board
may specify in the Agreement. Any such Restricted Shares shall not constitute
issued and outstanding shares of Stock and the holder shall not have any of the
rights of a stockholder with respect to the shares of Stock covered by such an
award of Restricted Shares until such shares shall have been transferred to the
holder at the end of the Restriction Period.
In connection with any grant of Restricted Shares, an Agreement
may provide for the payment of a cash amount to the holder of such Restricted
Shares at any time after such Restricted Shares shall have become vested ("Cash
Awards"). Such Cash Awards shall be payable in accordance with such additional
restrictions, terms and conditions as shall be prescribed by the Board in the
applicable Agreement and shall be in addition to any other salary incentive,
bonus or other compensation payments which such holder shall be otherwise
entitled or eligible to receive from the Company. At the end of the Restriction
Period, (a) the Restricted Shares shall become vested, (b) any Retained Dis-
tributions and any unpaid Dividend Equivalents with respect to such Restricted
Shares shall become vested to the extent that the Restricted Shares related
thereto shall have become vested and (c) any Cash Award to be received by the
holder with respect to such Restricted Shares shall become payable, all in
accordance with the terms of the applicable Agreement. Any such Restricted
Shares, Retained Distributions and any unpaid Dividend Equivalents that shall
not become vested shall be forfeited to the Company and the holder shall not
thereafter have any rights with respect to such Restricted Shares, Retained
Distributions and any unpaid Dividend Equivalents that shall have been so
forfeited.
9. Termination of Employment. If the holder's employment shall
terminate or the holder shall become a part-time employee prior to the complete
exercise of an Option, then such Option shall thereafter be exercisable solely
to the extent provided herein; provided, however, that (a) no Option may be
exercised after the scheduled expiration date of such Option; (b) if the
holder's employment terminates by reason of death, Disability (as defined in
Section 422(c)(6) of the Code) or retirement after age 60, the Option shall be
accelerated in accordance with Section 11 and shall remain exercisable for a
period of at least one year following such termination (but not later than the
scheduled expiration of such Option); (c) any termination by the Company for
cause will be treated in accordance with the provisions of the next succeeding
paragraph; and (d) if the holder's employment terminates for any other reason,
or the employee becomes a part-time employee, the Option shall remain
exercisable for a period of three months following the date of such termination
or such conversion to part-time employment (unless the Agreement provides
otherwise). If any holder whose employment has terminated for a reason other
than death shall die within the period during which his or her Option is
exercisable but prior to the complete exercise of the Option, such Option may be
exercised at any time within the greater of one year after such date of death or
the remainder of the period in which the holder could have exercised the Option
had he or she not died but in no event beyond the original term of the Option.
The holder must be a full-time salaried employee of the Company or a Subsidiary
on the vesting dates set forth in the Option Agreement in order to become vested
in the shares that are scheduled to become vested on such dates.
During the Restriction Period with respect to any Restricted
Shares or prior to the exercise of any Option, if the holder's employment with
the Company or a Subsidiary shall be terminated by the Company or such
Subsidiary for Cause, then (a) all Options held by such holder shall immediately
terminate and (b) such holder's rights to all Restricted Shares, Retained
Distributions, any unpaid Dividend Equivalents and any Cash Awards shall be
forfeited immediately. Cause shall have the meaning established by the Committee
or, in the absence thereof, shall mean (i) gross negligence or willful
misconduct in the performance of the material duties and services required of
him or her or (ii) the conviction of a felony or an act of moral turpitude;
provided, however, that if such termination occurs within 12 months after a
Significant Event (as defined herein), Cause shall mean only conviction of a
felony or commission of an act of moral turpitude.
The Committee may determine whether any given leave of absence
constitutes a termination of employment. Awards made under the Plan shall not be
affected by any change of employment so long as the holder continues to be a
full-time employee of the Company or a Subsidiary.
10. Nontransferability of Awards. Except as provided in this
Section 10, no Award granted under the Plan shall be transferable otherwise than
by will or the laws of descent and distribution. The designation of a
beneficiary by an Award holder shall not constitute a transfer. With the
approval of the Committee, a Nonqualified Stock Option may be transferred by
gift to any member of the holder's immediate family or to a trust for the
benefit of one or more of such immediate family members. For the purposes of
this Section 10, "immediate family" shall mean the spouse, children and
grandchildren, parents, grandparents, former spouses, siblings, nieces, nephews,
parents-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law,
including adoptive or step relationships and any person sharing the employee's
household (other than as a tenant or employee).
11. Acceleration of an Award. In the event of any Significant
Event (as defined in Section 12), or if a holder's employment shall terminate by
reason of death, Disability or retirement after age 60, then, notwithstanding
any contrary vesting period in any Agreement or in the Plan, and unless the
applicable Agreement provides otherwise: (a) in the case of an Option, each such
outstanding Option granted under the Plan shall immediately become exercisable
in full in respect of the aggregate number of shares covered thereby; and (b) in
the case of Restricted Shares, the Restriction Period shall be deemed to have
expired and all Restricted Shares, any related Retained Distributions, any
unpaid Dividend Equivalents and Cash Awards shall become vested.
12. Significant Event. Each of the following shall be a
Significant Event:
(a) the Board (or, if approval of the Board is not required as a
matter of law, the shareholders of the Company) shall approve (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of capital stock
of the corporation entitled to vote generally in any election of directors
("Voting Stock") would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the outstanding
Voting Stock immediately prior to the merger have the same proportionate voting
interests in the capital stock of the surviving corporation immediately after
the merger, or (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
the assets of the Company or (iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Company;
(b) any person (as such term is defined in Section 13(d) of the
Exchange Act), corporation or other entity other than the Company shall make a
tender offer or exchange offer to acquire any shares of outstanding Voting Stock
for cash, securities or any other consideration, or in the event that there is
any other transfer of such shares by the Company or the existing shareholders,
provided that (i) after consummation of such transaction, the person,
corporation or other entity in question is the "beneficial owner" (as such term
is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20%
or more of the votes represented by all outstanding shares of Voting Stock
(calculated as provided in paragraph (d) of such Rule 13d-3 in the case of
rights to acquire Voting Stock) and (ii) after the consummation of such
transaction, J. George Mikelsons is the "beneficial owner" (defined in the same
manner as in clause (i) above), directly or indirectly, in the aggregate of a
lesser percentage of the votes represented by all of the outstanding shares of
Voting Stock (calculated in the same manner as in clause (i) above) than such
person, corporation or other entity and does not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board; or
(c) during any period of two consecutive years, individuals who at
the beginning of such period constituted the entire Board ceased for any reason
to constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
13. Effect of Certain Changes. Notwithstanding any other
provisions of the Plan, unless the Agreement provides otherwise, the Committee
shall adjust the number of shares subject to each unexercised or unvested Award
and the Option prices upon the occurrence of an event described in the next
paragraph. Upon any such event, the aggregate number of shares available under
the Plan shall also be appropriately adjusted by the Committee, whose
determination shall be conclusive.
In the event of changes in the outstanding Stock by reason of any
stock dividend, stock split, recapitalization, combination, exchange of shares,
merger consolidation, liquidation, split-up, split-off, spin-off or other
similar change in capitalization, any distribution to common shareholders,
including a rights offering, other than cash dividends or any like change or in
the event of any reorganization, recapitalization, merger, consolidation,
acquisition of property or stock, separation or liquidation of the Company, or
any other event similarly affecting the Company, the Committee shall have the
right, but not the obligation to (a) adjust the number of shares of Stock
subject to outstanding Awards and the related Option prices or (b) provide that
outstanding Awards shall be canceled in respect of a cash payment or the payment
of securities or property, or any combination thereof, with a per share value
determined by the Committee in good faith.
Such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. Any
fractional shares resulting from such adjustment shall be eliminated.
14. Written Agreement. Each Award shall be evidenced by an
Agreement which may contain such terms as the Board from time to time shall
approve provided that such terms are not inconsistent with the provisions of the
Plan. Unless the Agreement specifies otherwise, the effective date of the
granting of an Award shall be the date on which the Board approves such grant.
Each grantee of an Option or Restricted Shares shall be notified promptly of
such grant and a written Agreement shall be promptly executed and delivered by
the Company and the grantee, provided that such grant of Options or Restricted
Shares shall terminate if such written Agreement is not signed by such grantee
(or his attorney) and delivered to the Company within 60 days after the
effective date of such grant.
15. Termination and Amendment. Unless the Plan shall theretofore
have been terminated as hereinafter provided, the Plan shall terminate on, and
no Award shall be granted after May 9, 2010 (the tenth anniversary of the date
this Plan is adopted by the Board). The Plan may be terminated, modified or
amended by the shareholders of the Company. The Board may at any time terminate,
modify or amend the Plan in such respects as it shall deem advisable; provided,
however, that the Board may not, without approval by the holders of a majority
of the outstanding shares of voting stock of the Company present and voting at a
duly held meeting at which a quorum is present, (i) increase the maximum number
of shares of Stock as to which Awards may be granted under the Plan other than
pursuant to the anti-dilution provision of Section 13 hereof, or (ii) change the
class of employees eligible to receive Awards. No termination, modification or
amendment of the Plan may, without the consent of the employee to whom any
Award shall theretofore have been granted, adversely affect the rights of such
employee under such Award.
16. Effectiveness of the Plan. The Plan shall become effective
upon its adoption by the Board, but its effectiveness and the grant of any
Option shall be subject to the approval of the holders of a majority of the
voting shares of the Company, which approval must occur within 12 months after
the date the Plan is adopted by the Board.
17. Tax Withholding. In connection with the transfer of shares of
Stock as a result of the exercise or vesting of an Award or upon any other event
that would subject the holder of an Award to taxation, the Company shall have
the right to require the holder to pay an amount in cash or to retain or sell
without notice, or to demand surrender of, shares of Stock in value sufficient
to cover any tax, including any Federal, state or local income tax, required by
any governmental entity to be withheld or otherwise deducted and paid with
respect to such transfer ("Withholding Tax"), and to make payment (or to
reimburse itself for payment made) to the appropriate taxing authority of an
amount in cash equal to the amount of such Withholding Tax, remitting any
balance to the employee. For purposes of this Section 17, the value of shares of
Stock so retained or surrendered shall be the Market Price on the date that the
amount of the Withholding Tax is to be determined (the "Tax Date"), and the
value of shares of Stock so sold shall be the actual net sale price per share
(after deduction of commissions) received by the Company.
Notwithstanding the foregoing, the employee shall be entitled to satisfy
the obligation to pay any Withholding Tax, in whole or in part, by providing the
Company with funds sufficient to enable the Company to pay such Withholding Tax
or by requiring the Company to retain or to accept upon delivery thereof shares
of Stock (other than unvested Restricted Stock) sufficient in value (determined
in accordance with the last sentence of the preceding paragraph) to cover the
amount of such Withholding Tax. Each election by an employee to have shares
retained or to deliver shares for this purpose shall be subject to the following
restrictions: (i) the election must be in writing and made on or prior to the
Tax Date; and (ii) the election shall be subject to the disapproval of the
Committee.
18. Section 16 Persons. With respect to persons subject to Section
16 of the Exchange Act, transactions under the Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provision of the Plan or action by the Committee fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
19. Pooling. If (a) the Board approves a merger or consolidation
of the Company which is intended by the Board to satisfy the accounting rules
related to the pooling of interest method of accounting (the "Pooling Rules")
and (b) any provision of this Plan would violate the Pooling Rules, then such
provision shall be null and void ab initio.
