SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
AMENDMENT TO ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File Number 0-227238
WESTERN PACIFIC AIRLINES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 86-0758778
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
2864 SOUTH CIRCLE DRIVE, SUITE 1100
COLORADO SPRINGS, COLORADO 80906
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (719) 579-7737
The undersigned registrant hereby amends the following items, financial
statements, exhibits, or other portions of its Annual Report for the year
ended December 31, 1996 on Form 10-K as set forth in the pages attached
hereto:
(List all such items, financial statements, exhibits or other portions
amended)
PART III Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 25, 1997 WESTERN PACIFIC AIRLINES, INC.
------------------------------
Registrant
/s/ ROBERT A. PEISER
------------------------------
By: Robert A. Peiser, President, Chief
Executive Officer and Authorized Signer
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
Edward R. Beauvais. Mr. Beauvais, age 60, founded the Company in 1994 and is
Chairman of the Board. From 1994 until November 1996, Mr. Beauvais was
President, Chief Executive Officer and Chairman of the Company's Board of
Directors. Prior to founding the Company, Mr. Beauvais served as General
Manager of Aviation Consulting Group from 1992 through 1994. From 1981 through
1992, Mr. Beauvais was Chairman and Chief Executive Officer of America West
Airlines ("America West"). America West filed for Chapter 11 protection in
June 1991, and Mr. Beauvais resigned as Chairman of America West on July 31,
1992. America West emerged from Chapter 11 in August 1994.
Ivan Irwin, Jr. Mr. Irwin, age 63, was elected to the Board of Directors of
the Company in 1995. Since 1994, Mr. Irwin has been Vice President of Hunt
Petroleum of Texas, Inc. ("HPTI"), a significant stockholder of the Company,
and Vice Chairman and Executive Vice President of Hunt Petroleum Corporation,
the parent company of HPTI and a corporation primarily engaged in oil and gas
exploration and production. See "Security Ownership of Certain Beneficial
Owners and Management" and "Certain Relationships and Related Transactions."
Prior to assuming his position with HPTI, Mr. Irwin was engaged for over 30
years in the private practice of law in Dallas, Texas, including from February
1990 through June 1994, when he was a partner in the Dallas, Texas office of
the law firm of Vinson & Elkins, L.L.P.
Glenn M. Stinchcomb. Mr. Stinchcomb, age 69, was elected to the Board of
Directors of the Company in 1995. From October 1991 until his retirement in
1996, Mr. Stinchcomb was a director of The Oklahoma Publishing Company
("OPUBCO"), a publishing company. He was Vice President and Treasurer of
OPUBCO from October 1991 to July 1995. Mr. Stinchcomb also serves as a
director of Gaylord Entertainment Company ("GEC"), a diversified entertainment
and communications company. He was Chief Financial Officer and Treasurer of
GEC from 1974 to 1991, and he was Vice President of GEC from 1986 to 1991.
Edward L. Gaylord, a significant stockholder of the Company, is an affiliate of
GEC. See "Security Ownership of Certain Beneficial Owners and Management" and
"Certain Relationships and Related Transactions."
James R. Wikert. Mr. Wikert, age 48, was elected to the Board of Directors of
the Company in 1995. Since 1993, Mr. Wikert has been Chief Executive Officer of
Express One International, Inc. ("Express One"), a cargo and charter airline,
and is the controlling stockholder of Aircorp, Inc., an enterprise engaged in
the ownership, lease and/or sale of commercial and general aviation aircraft.
From 1987 to 1993, Mr. Wikert was the President of Express One. Mr. Wikert is
the son-in-law of a controlling shareholder of HPTI, a significant stockholder
of the Company. See "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Relationships and Related Transactions."
Robert A. Peiser. Mr. Peiser, age 49, was elected to the Board of Directors
of the Company in November 1996, when he joined the Company as President and
Chief Executive Officer. Prior to joining the Company, Mr. Peiser served as
Vice Chairman and Chief Executive Officer of FoxMeyer Drug Company from August
1996 through November 1996. In addition, Mr. Peiser was Executive Vice
President - Finance and Chief Financial Officer of Trans World Airlines, Inc.
("TWA") from August 1994 through August 1996, following TWA's emergence from
Chapter 11 bankruptcy. Prior to his employment with TWA, Mr. Peiser was a
consultant with BBK, Ltd., a turnaround consulting firm based in Southfield,
Michigan, from November 1992 through July 1994. Prior to his employment with
BBK, Ltd., Mr. Peiser was the President and Chief Executive Officer of Orange-
co, Inc., a citrus processing company based in Bartow, Florida.
Clayton I. Bennett. Mr. Bennett, age 37, was elected to the Board of
Directors of the Company in 1995. Since prior to April 1992, he has been the
Real Estate and Investment Manager for The Oklahoma Publishing Company, a
publishing company. Mr. Bennett is the son-in-law of Edward L. Gaylord, a
significant stockholder of the Company. See "Security Ownership of Certain
Beneficial Owners and Management" and "Certain Relationships and Related
Transactions."
George E. Leonard. Mr. Leonard, age 56, was elected to the Board of Directors
of the Company in November 1996, when he joined the Company as Vice President -
Finance and Chief Financial Officer. Prior to joining the Company, Mr. Leonard
was President and Chief Executive Officer of GEL Management, Inc., a company
engaged in real estate and financial management and consulting services, for
two separate periods, from July 1996 through October 1996, and from December
1991 through December 1995. From January 1996 through July 1996, Mr. Leonard
was Chairman and Chief Executive Officer of Consumer Guaranty Corporation, an
asset restructuring company.
EXECUTIVE OFFICERS
Set forth below is certain information relating to the current executive
officers of the Company. Each executive officer serves at the pleasure of the
Board of Directors, subject to the employment agreements described below.
NAME AGE POSITION
- -------------------- --- ------------------------------------------------
Robert A. Peiser(1) 49 President, Chief Executive Officer and Director
Edward R. Beauvais(1) 60 Chairman of the Board and Director
George E. Leonard(1) 56 Vice President - Finance, Chief Financial Officer
and Director
Mark Coleman 50 Senior Vice President - Marketing and Planning
Timothy D. Komberec 48 Vice President - Flight Operations
Donald E. Applegarth 34 Vice President - Information Systems and Chief
Information Officer
Glenn S. Goldberg 39 Vice President - Human Resources and
Administration
Martin J. Wax 43 Vice President - Technical Operations and Vendor
Administration
(1) Biographical information with respect to Messrs. Peiser, Beauvais and
Leonard is provided under "Directors" above.
Mark Coleman. Mr. Coleman joined the Company as Senior Vice President -
Marketing and Planning in November 1996. From July 1994 until August 1996, he
was Senior Vice President of Marketing for Trans World Airlines, Inc. ("TWA"),
working on TWA's restructuring and reorganization following TWA's emergence
from Chapter 11 bankruptcy. From September 1992 through July 1994, Mr. Coleman
was Vice President and General Manager of Avis Wiscom International, Ltd., a
company providing technology services to the travel industry. From December
1981 through September 1992, Mr. Coleman was Senior Vice President of America
West Airlines, Inc.
Timothy D. Komberec. Mr. Komberec joined the Company as Vice President-Flight
Operations in September 1994. Prior to joining the Company, Mr. Komberec was
employed by Empire Airlines as Director of Operations from January 1993 through
August 1994, and by International Airlines Services as an Aviation Consultant
from September 1991 through December 1992. Prior to Empire Airlines, Mr.
Komberec was Vice President of Flight Operations for NPA Inc. dba United
Express (which merged in October 1990 into WestAir Airlines) from April 1987 to
September 1991. Mr. Komberec is a licensed Airline Transport Pilot, Commercial
Pilot, Flight Instructor and Ground Instructor with turbojet and rotary ratings
and 12,700 hours in flight time as pilot in command and 2,200 hours as a flight
instructor.
Donald E. Applegarth. Mr. Applegarth has been Vice President-Information
Systems since September 1, 1995. Mr. Applegarth joined the Company as Manager,
Marketing Automation in October 1994 and was promoted to Director of Market
Automation in June 1995. Prior to Joining the Company, he served as Manager of
Systems Services for Morris Air from March 1993 through October 1994, and as
Station Manager-Seattle Station for America West Airlines from November 1983
through February 1993, where he also served as chairman of America West's
system review board with responsibility for review and design of field station
software development. Mr. Applegarth has extensive experience in client-server
architecture and software design, and since June 1992 has owned his own
computer systems company.
Glenn S. Goldberg. Mr. Goldberg joined the Company as Vice President-Human
Resources and Administration in January 1995. From 1992 until joining the
Company, Mr. Goldberg served as Vice President-Human Resources and
Administration for Amvest Corporation, a coal and natural gas energy company,
as Manager of Human Resources Programs for General Electric Capital
Corporation, a finance company, from 1990 to 1992, and as Director of Human
Resources & Administration for Kelly Communications from 1987 to 1990. From
1981 to 1987 Mr. Goldberg was employed with People Express Airlines/Continental
Airlines in various capacities including Operations and Facilities Director,
Training Director and Employment Manager.
Martin J. Wax. Mr. Wax joined the Company in January 1995 and is currently
Vice President-Technical Operations and Vendor Administration. From August
1995 through February 1997, Mr. Wax was the Company's Vice President -
Purchasing, and from January 1995 through July 1995, he served as the Company's
Director of Purchasing. From August 1994 through December 1994, he was a
consultant to AAR Corporation in connection with the reengineering of materials
programs for the airline industry. From September 1994 to December 1994 he was
a consultant to UltrAir in connection with the liquidation of airline
inventory. Mr. Wax was Director of Vendor Administration, Traffic and
Materials Sales for Continental Airlines from February 2, 1992 through July
1994.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission reports of ownership and changes in ownership of common
stock and other equity securities of the Company. Officers, directors and
greater-than-10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished to the Company
or written representations that no other reports were required, the Company
believes that, during the 1996 calendar year, all filing requirements
applicable to its officers, directors and greater-than-10% beneficial owners
were complied with, except that an initial statement of beneficial ownership
(Form 3) was filed late by George E. Leonard and Robert A. Peiser, and
Clayton L. Bennett was late in filing a statement of changes in beneficial
ownership (Form 4).
ITEM 11 EXECUTIVE COMPENSATION.
COMPENSATION OF DIRECTORS
During 1996, each Director of the Company who was not an employee of the
Company or any parent or subsidiary of the Company (each a "Non-Employee
Director") was entitled to receive an annual retainer of $20,000, to be paid
July 1, 1996. In 1996, one half of such annual retainer was paid to each Non-
Employee Director in the form of an award under the Company's 1996 Restricted
Stock Plan for Non-Employee Directors of 701 shares of restricted stock having
an agreed value for this purpose of 100% of the fair market value on the date
of grant, July 1, 1996. Such shares have not been registered under the
Securities Act of 1933, and have been issued with appropriate restrictive
legends. The Company paid the $10,000 cash portion of the 1996 annual
retainer to its Non-Employee Directors at the March 1997 meeting of the
Company's Board of Directors. In 1996, Directors who received the stock award
portion of their annual retainer, and who received in 1997 the cash portion of
their annual 1996 retainer, were Messrs. Bennett, Irwin, Stinchcomb and Wikert
as well as John S. Lancy, who served as a director of the Company until his
resignation in November 1996. All Non-Employee Directors also receive
reimbursement of usual and ordinary expenses incurred in connection with their
service as a director.
During 1995, each of Messrs. Bennett, Irwin, Lancy, Stinchcomb and Wikert was
granted an option, pursuant to the 1995 Directors' Option Plan, to purchase
25,000 shares of Common Stock at an exercise price equal to the fair market
value of such shares on the date of grant. On the grant date of such options,
July 28, 1995, the exercise price per share was $6.00. Of the 25,000 options
granted to each of the aforementioned non-employee directors, 40%
(representing 10,000 shares of Common Stock) were exercisable on the date of
grant, 30% (representing 7,500 shares of Common Stock) became exercisable on
July 28, 1996, and the remaining 30% (representing 7,500 shares of Common
Stock) will become exercisable on July 28, 1997. The term of all options
granted under the Directors' Plan is five years, and subject to limited
exceptions for termination as director, disability and death, such options are
exercisable only while the Director remains a director of the Company or for a
period of three months thereafter.
In addition, each Director of the Company receives a positive space pass
which allows him to book positive space travel on Company flights for himself
and a guest traveling with him. In addition, each spouse of a Director and
each dependent child also receives a positive space pass. In addition,
Margaret Hill, a director of Hunt Petroleum Corporation, and her children
Alinda Hill (spouse of James R. Wikert), Lyda Hill and Al Hill, Jr. each
received a positive space pass.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS
The Summary Compensation Table set forth below provides, for the period from
April 12, 1994 (inception) to December 31, 1996, information concerning annual
and long-term compensation paid or accrued by the Company for the Company's
(i) two Chief Executive Officers who served in 1996, (ii) next five most
highly compensated executive officers who served in 1996, and (iii) two
additional officers who where employed by the Company in 1996 and who, had
they remained employed by the Company at December 31, 1996, would have been
included in the next four most highly paid officers for 1996, in each case for
services rendered in all capacities to the Company.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------- ------------------------------------------
RESTRICTED SECURITIES ALL
STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARD($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ---- -------- ---------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Peiser <F1>
President and Chief
Executive Officer 1996 $ 25,000 $300,000<F1> $ 0<F1> 300,000<F1> $0
Edward R. Beauvais <F2>
Chairman of the Board,
President and Chief
Executive Officer 1996 218,938 0 0 0 28,693 <F6>
1995 175,500 0 0 0 780 <F6>
1994 93,750 0 90,000<F4> 90,000<F5> 0
Glenn Goldberg
Vice President - Human
Resources and
Administration 1996 113,400 0 0 0 4,455 <F6>
1995 90,708 0 0 0 1,567 <F6>
Martin J. Wax
Vice President -
Technical Operations and
Vendor Administration 1996 113,400 0 0 0 3,888 <F6>
1995 79,055 0 0 0 1,632 <F6>
Timothy D. Komberec
Vice President - Flight
Operations 1996 113,400 0 0 0 3,530 <F6>
1995 93,625 0 0 0 2,752 <F6>
1994 23,333 0 50,000<F4> 0 0
Donald E. Applegarth
Vice President -
Information Systems 1996 113,400 0 0 0 3,390 <F6>
1995 65,505 0 0 0 0
Thomas DeNardin <F2>
Vice President -
Sales and Marketing 1996 113,400 0 0 0 4,617 <F6>
1995 93,625 0 0 0 1,757 <F6>
1994 23,333 0 50,000<F4> 0 0
Martin J. Dugan, Jr.<F2>
Vice President -Finance
and Chief Financial
Officer 1996 95,200 0 0 0 7,434 <F6>
1995 93,625 0 0 0 1,446 <F6>
1994 23,333 0 60,000<F4> 0 0
Nolan A. Wiley <F2>
Vice President -
Maintenance 1996 113,400 0 0 0 2,498 <F6>
1995 93,625 0 0 0 1,789 <F6>
1994 23,333 0 50,000<F4> 0 0
<FN>
<F1>
Peiser commenced employment with the Company on November 21, 1996. Mr.
Peiser's listed salary includes salary paid from November 21, 1996 through
December 31, 1996. Mr. Peiser received a signing bonus of $300,000 upon
execution of his employment agreement. For a discussion of the terms of Mr.
Peiser's employment agreement, including stock and stock option awards, see
discussion under "Employment Agreements- Robert A. Peiser" below.
<F2>
Mr. Beauvais commenced employment with the Company on April 15, 1994. Mr.
Dugan, Mr. DeNardin, and Mr. Wiley commenced employment with the Company on
September 1, 1994. Mr. Dugan resigned as an officer of the Company effective
November 1, 1996. In November 1996, Mr. Beauvais resigned his positions as
President and Chief Executive Officer, retaining his position as Chairman of
the Board. Mr. DeNardin resigned his position in December 1996, and Mr. Wiley
resigned his position in April 1997.
<F3>
The aggregate amount of any perquisites or other personal benefits was
less than 10% of the total annual salary and bonus and is not included in the
above table.
<F4>
Reflects a stock bonus award of 45,000 and 30,000 shares of Common Stock
to Mr. Beauvais and Mr. Dugan, respectively, and 25,000 shares of Common Stock
to each of Mr. Wiley, Mr. Komberec, and Mr. DeNardin, on September 29, 1994.
Such awards vested upon receipt. The fair market value of such shares at
December 31, 1996 was $315,000, $210,000, $175,000, $175,000 and $175,000,
respectively, based on the closing price of the Common Stock on December 31,
1996 of $7.00.
<F5>
All such options were granted on September 29, 1994 at an exercise price
of $6.00 per share and vest over a three-year period with one-third vesting on
each of the first, second and third anniversaries of the date of grant.
<F6>
Consists of life insurance premiums paid by the Company in the applicable
year for the benefit of the named officer.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
Robert A. Peiser. Mr. Peiser has an employment agreement with the Company,
dated November 21, 1996, for his employment as President and Chief Executive
Officer at a minimum compensation of $300,000 per annum for a three year term,
with automatic one year extensions thereafter unless terminated by either
party on specified prior written notice. Mr. Peiser also received (1) a
$300,000 signing bonus upon execution of his employment agreement, (2) a grant
of 100,000 shares of the Company's common stock, of which shares 34,000 vest
on November 21, 1997, 33,000 vest on November 21, 1998 and 33,000 vest on
November 21, 1999, (3) a grant of 300,000 options under the Company's Amended
and Restated 1994 Stock Option Plan, vesting at a rate of 100,000 shares per
year and exercisable at $7.75 per share, (4) an allowance of $650 per month in
automobile expenses, and reimbursement for reasonable living expenses during
the first twelve months of the employment agreement, and (5) lifetime positive
space passes on the Company's flights for himself and his eligible dependents.
Upon termination of Mr. Peiser's employment by the Company for cause, as
defined in the employment agreement, Mr. Peiser shall be entitled to all
outstanding amounts then due him under the employment agreement. Upon
termination of Mr. Peiser's employment by the Company without cause, as
defined in the employment agreement, Mr. Peiser shall be entitled to (1) a
lump sum payment equal to his base salary for the longer of the remaining term
of the Employment agreement or twelve months, (2) continuation of certain
benefits through the remaining term of the employment agreement, (3) immediate
vesting of all granted but unvested stock and options and (4) continuation of
lifetime positive space passes on the Company's flights for Mr. Peiser and his
eligible dependents.
Edward R. Beauvais. Mr. Beauvais has an Amended and Restated Employment
Agreement with the Company, dated November 21, 1996. for his employment as
Chairman of the Board of Directors of the Company at a minimum compensation of
$350,000 per year for a three year term. Mr. Beauvais also receives an
allowance of $550 per month in automobile expenses and reimbursements for
travel, entertainment and mileage expenses incurred in promoting the Company's
business. Upon termination of Mr. Beauvais' Employment Agreement by the
Company for cause, as defined in the Employment Agreement, or voluntarily by
Mr. Beauvais, Mr. Beauvais shall be entitled to all outstanding amounts and
benefits then due him under the Employment Agreement through the date of
termination. Upon termination of Mr. Beauvais' Employment Agreement by the
Company without cause, as defined in the Employment Agreement, Mr. Beauvais
shall be entitled to (1) payment of his base salary through the term of the
Employment Agreement, either as a lump sum or in periodic installments, at Mr.
Beauvais' election, (2) continuation of certain benefits through the term of
the Employment Agreement, (3) at his election, within 60 days of such
termination, immediate vesting and exercise of all granted but unexercised
stock options and (4) a lifetime positive space pass on the Company's flights
for Mr. Beauvais and his spouse.
Mark Coleman. Mr. Coleman has a three-year employment agreement with the
Company, dated as of December 9, 1996, for his employment as Senior Vice
President - Marketing and Planning at a minimum compensation of $175,000 per
year for a three year term, with automatic one year extensions thereafter
unless terminated by either party on specified prior written notice. In
addition, Mr. Coleman received (1) a grant of 200,000 options under the
Company's Amended and Restated 1994 Stock Option Plan, vesting at a rate of
67,000 options on December 9, 1997, 67,000 options on December 9, 1998 and
66,000 on December 9, 1999, such options exercisable at $8.25 per share and
(2) an allowance of $550 per month in automobile expenses and reimbursement of
reasonable living expenses from December 9, 1996 through March 31, 1997. Upon
termination of Mr. Coleman's employment agreement by the Company for cause, as
defined in the employment agreement, Mr. Coleman shall be entitled to all
outstanding amounts then due him through the date of termination under the
employment agreement. Upon termination of the employment agreement by the
Company without cause, as defined in the employment agreement, Mr. Coleman
shall be entitled to (1) a lump sum payment equal to his base salary for the
longer of the remaining term of the employment agreement or twelve months, (2)
continuation of certain benefits through the remaining term of the employment
agreement, (3) immediate vesting of all granted but unvested stock and
options.
Martin J. Dugan, Jr., Thomas J. DeNardin, Nolan A. Wiley, Glenn S. Goldberg,
Martin J. Wax, Timothy D. Komberec and Donald E. Applegarth. The Company's
employment agreements with Messrs. Dugan, DeNardin, and Wiley were terminated
on November 1, 1996, December 19, 1996, and April 11, 1997, respectively.
Pursuant to severance agreements with each of Mr. Dugan, Mr. DeNardin, and Mr.
Wiley, the Company is paying to each former executive up to 24 months of his
base salary at the time of his resignation, paid over a 24 month period, and
providing to each executive continuation of certain benefits, including
insurance coverage, for the same 24 month period. In addition, each former
executive received a one year extension of the exercise period applicable to
all stock options vested as of the date of the termination, and lifetime
positive space passes for themselves and their spouses on the Company's
flights. The Company's employment agreements with Messrs. Goldberg, Wax,
Komberec and Applegarth, as well as the terminated contracts with Mr. Dugan,
Mr. DeNardin, and Mr. Wiley when they were in effect, provide for a three-year
term and are automatically extended on each anniversary of the date of the
agreement to a new termination date three years from the date of such
anniversary. Each agreement with Mssrs. Goldberg, Wax, Komberec and
Applegarth provides for an annual base salary of $109,200, and entitles each
such executive officer to participate in medical, life and disability
insurance plans established by the Company for its executive officers and
specifies that term life insurance will be maintained at three times the
executive's annual salary. Each such agreement provides for continuation of
salary and benefits payable to the executive officer for the balance of the
term of the agreement in the event the agreement is terminated other than for
cause. If the executive officer is terminated as a result of a long-term
illness or disability, salary and benefits continue for 12 months from the
date of termination. Each such executive officer's agreement also entitles
him to reimbursement of ordinary and necessary business expenses and to an
automobile allowance equal to $550 per month.
EMPLOYEE STOCK OPTIONS
The Company has an Amended and Restated 1994 Stock Option Plan (the "1994
Plan") pursuant to which stock options may be granted to the Company's
employees. Stock options granted under the 1994 Plan may be either incentive
stock options or nonstatutory stock options. Incentive stock options granted
to employees who own more than ten percent of the voting power of the
Company's stock are granted at 110% of fair market value at the time of grant,
and incentive stock options granted to all other employees are granted at 100%
of fair market value at the time of grant. Nonstatutory stock options may be
granted at 85% of fair market value at the time of grant. However, to date no
stock options have been granted at less than 100% of fair market value as of
the date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding individual grants of
stock options made during the fiscal year ended December 31, 1996 to the
executive officers named in the summary compensation table.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF POTENTIAL VALUE AT ASSUMED
SHARES UNDERLYING TOTAL OPTIONS GRANTED TO EXERCISE OR BASE EXPIRATION ANNUAL RATES OF STOCK PRICE
NAME OPTIONS GRANTED (#) EMPLOYEES IN FISCAL YEAR PRICE PER SHARE ($) DATE APPRECIATION FOR OPTION TERM
- ------------------ ------------------ ------------------------ ------------------- ---------- ----------------------------
<S> <C> <C> <C> <C> <C>
5%($) 10%($)
Robert A. Peiser 300,000 45% $7.75 11/20/06<F1> $366,478 $769,575
Mark Coleman 200,000 30% $8.25 12/8/06<F2> $260,081 $546,150
<FN>
<F1>
Such options were granted on November 15, 1996 and vest over a three year
period with one-third vesting on each of the first, second and third
anniversaries of the grant date.
<F2>
Such options were granted on December 3, 1996 and vest over a three year
period, with 67,000 vesting on December 9, 1997, 67,000 vesting on December 9,
1998, and 66,000 vesting on December 9, 1999.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information regarding option exercises during
the fiscal year ended December 31, 1996 as well as any unexercised options
held as of December 31, 1996 by each named executive.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END($)<F1>
------------------------- -------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Peiser -0- -0- -0- 300,000 -0- -0-
Edward R. Beauvais -0- -0- 60,000 40,000 60,000 40,000
Thomas J. DeNardin 16,666 166,660 16,668 -0- 16,668 -0-
Glenn S. Goldberg 14,000 140,000 36,000 25,000 36,000 25,000
Mark Coleman -0- -0- -0- 200,000 -0- -0-
Martin J. Dugan, Jr. -0- -0- 40,000 -0- 40,000 -0-
Martin J. Wax 5,000 50,000 25,000 45,000 25,000 45,000
Timothy D. Komberec 16,666 166,660 15,667 16,667 15,667 16,667
Donald E. Applegarth 5,000 50,000 25,000 45,000 25,000 45,000
Nolan A. Wiley 111,166 184,239 22,167 16,667 22,167 16,667
<FN>
<F1>
Fair market value of each unexercised in-the-money option at December 31,
1996 is based on the positive spread between the exercise price of the options
and $7.00, the closing price of Common Stock on December 31, 1996.
</FN>
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Ivan Irwin, Jr.
(Chairman) and Clayton I. Bennett.
On December 18, 1996, the Company borrowed $2.5 million from Hunt Petroleum of
Texas, Inc. ("HPTI"), and on December 20, 1996, the Company borrowed $2.5
million from GFI Company ("GFI") under terms that anticipated repayment in
thirty days. HPTI and GFI are major stockholders of the Company. Ivan Irwin,
Jr., a Director of the Company, Chairman of the Legal and Compensation
Committees, and a member of the Audit Committee, is Vice President of HPTI and
James R. Wikert, a Director of the Company, is the son-in-law of a related
party to HPTI. Clayton L. Bennett, a Director of the Company, is the son-in-
law of Edward L. Gaylord, a significant stockholder of the Company and a
controlling person of GFI, and Glenn M. Stinchcomb, a Director of the Company,
is also a director of Gaylord Entertainment Company, a company controlled by
Edward L. Gaylord, a controlling person of GFI.
On January 31, 1997, the Company's Board of Directors created Series B
Preferred Stock, $0.001 par value per share (the "Preferred Stock"), and began
a series of transactions which resulted in the sale of 200,000 shares of such
Preferred Stock to HPTI and GFI. On that same date, each of HPTI and GFI
loaned to the Company the principal amount of $10,000,000, which included the
$2,500,000 previously loaned by each of HPTI and GFI to the Company in December
1996 (the "Loans"), such Loans evidenced by Promissory Notes. Pursuant to the
terms of the Stock Purchase Agreement entered into among HPTI, GFI and the
Company on February 27, 1997, each of HPTI and GFI purchased 100,000 shares of
the Company's Preferred Stock at a purchase price of $100 per share. The
Preferred Stock is subject to certain redemption rights of the Company and the
investors, respectively. Payment of the purchase price for the Preferred Stock
was made by cancellation of the Promissory Notes. In addition, the Company
issued to each of HPTI and GFI warrants to purchase, subject to certain vesting
conditions, an aggregate of 2,650,000 shares of the Company's common stock,
$0.001 par value per share, at a price of $0.01 per share.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSHIP AND MANAGEMENT.
The following table sets forth, as of April 21, 1997, the record date for the
Company's 1997 Annual Meeting of Stockholders, the beneficial ownership, as
defined by regulations of the Securities and Exchange Commission (the
"Commission") of Common Stock held by: (i) each person or group of persons
known to the Company to beneficially own more than five percent of the
outstanding shares of Common Stock; (ii) each director of the Company and each
nominee for director; (iii) each current executive officer named in the Summary
Compensation Table below; (iv) up to two executive officers who were employed
by the Company in 1996 and who, had they remained employed by the Company at
December 31, 1996, would have been included among the executive officers
required to be named in the Summary Compensation Table; and (v) all executive
officers and directors as a group. Except as noted below, each of the persons
listed has sole investment and voting power with respect to the shares of
Common Stock included in the table. The number of shares and percentage of
ownership of Common Stock for each person assumes that shares of Common Stock
issuable upon the exercise of stock options to such person (exclusive of
others) exercisable within sixty days after the Record Date are outstanding.
All information is taken from or based upon ownership filings made by such
persons with the Commission or upon information provided by such persons.
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------------------- -------------------- ----------------
Edward R. Beauvais 1,676,075 (2) 12.5%
Edward L. Gaylord 2,276,120 (3) 17.0%
GFI Company 1,798,620 (4) 13.4%
Hunt Petroleum of Texas, Inc. 1,606,120 (5) 12.0%
James R. Wikert 404,342 (6) 3.0%
Robert A. Peiser 6,000 Less than 1%
Ivan Irwin, Jr. 28,535 (7) Less than 1%
Glenn M. Stinchcomb 29,201 (8) Less than 1%
Clayton I. Bennett 23,201 (9) Less than 1%
Glenn S. Goldberg 39,413 (10) Less than 1%
Martin J. Wax 29,741 (11) Less than 1%
Timothy D. Komberec 41,667 (12) Less than 1%
Donald E. Applegarth 26,229 (13) Less than 1%
Thomas DeNardin 44,808 (14) Less than 1%
Martin J. Dugan, Jr. 113,434 (15) Less than 1%
George E. Leonard 1,002 Less than 1%
All executive officers and directors
as a group (13 persons) 2,035,785 (16) 15.2%
(1) The addresses of the more than five percent holders listed in the table
are as follows: Edward R. Beauvais -2864 South Circle Drive, Suite 1100,
Colorado Springs, Colorado 80906; Edward L. Gaylord-9000 North Broadway,
Oklahoma City, Oklahoma 73114; GFI Company ("GFI")-530 Las Vegas Boulevard
South, Las Vegas, Nevada 89101; and Hunt Petroleum of Texas, Inc.-5000
Thanksgiving Tower, Dallas, Texas 75201.
(2) Includes 1,551,075 shares of Common Stock held in the name of Aviation
Holdings Limited Company ("AHLC"). Under the AHLC Operating Agreement, Mr.
Beauvais has management rights and voting and investment power with respect to
all 1,551,075 shares of Common Stock held in the name of AHLC. Mr. Beauvais'
interest in AHLC, which currently represents a 68.3% interest in all
allocations and distributions from AHLC (equivalent to 1,058,774 shares or
7.9% of the outstanding Common Stock), is held in the name of Aviation
Consulting Group Limited Partnership, an Arizona limited partnership ("ACGLP")
of which Mr. Beauvais is a general partner and Mr. Beauvais, along with his
spouse and children, is a beneficial owner. Also includes 60,000 shares of
Common Stock issuable upon the exercise of stock options.
(3) Includes 1,225,000 shares of Common Stock owned of record by GFI and
437,500 shares of Common Stock owned of record by the Broadmoor Hotel, Inc.
Mr. Gaylord, individually and through certain trusts, may be deemed a
controlling person of GFI and GFI may be deemed a controlling stockholder of
the Broadmoor Hotel, Inc. As a result, Mr. Gaylord may be deemed to be the
beneficial owner of the shares of Common Stock owned of record by GFI and the
Broadmoor Hotel, Inc. Also includes 10,000 shares owned of record by Mr.
Gaylord's spouse, and currently exercisable warrants to purchase 136,120
shares of Common Stock held by GFI. Mr. Gaylord disclaims beneficial
ownership of shares of Common Stock not owned of record by him.
(4) All of the shares of Common Stock reflected as beneficially owned by GFI
are also reflected as beneficially owned by Mr. Gaylord. See Note (3) above.
Includes 437,500 shares of Common Stock owned of record by the Broadmoor
Hotel, Inc. GFI may be deemed to be a controlling stockholder of the
Broadmoor Hotel, Inc. As a result, GFI may be deemed to be the beneficial
owner of the shares of Common Stock owned of record by the Broadmoor Hotel,
Inc. Also includes currently exercisable warrants to purchase 136,120 shares
of Common Stock held by GFI. GFI disclaims beneficial ownership of shares of
Common Stock not owned of record by GFI.
(5) The shares held of record by HPTI may be deemed beneficially owned by its
sole stockholder, Hunt Petroleum Corporation, which is owned by two trusts
with all voting and dispositive powers exercised by the trustees, Tom Hunt and
James L. Parker, 5000 Thanksgiving Tower, Dallas, Texas 75201. Also includes
currently exercisable warrants to purchase 136,120 shares of Common Stock held
by HPTI.
(6) Includes 50,400 shares held in the name of the Wisenbaker/Wikert 1986
Trusts for the benefit of Mr. Wikert's four children and 75,000 shares
reflected as beneficially owned by Mr. Wikert and held in the name of the Lyda
Hunt-Margaret Trusts, a testamentary trust for the benefit of Mr. Wikert's
spouse. Mr. Wikert disclaims beneficial ownership of all 125,000 shares held
in the name of such trusts. Also includes 20,300 shares held of record by Mr.
Wikert's stepsons, 4,600 shares held of record by Mr. Wikert's spouse and 200
shares held of record by Mr. Wikert's spouse as custodian for Mr. Wikert's
children, as to all of which shares Mr. Wikert disclaims beneficial ownership.
Also includes 17,500 shares of Common Stock issuable upon the exercise of
stock options.
(7) Includes 17,500 shares of Common Stock issuable upon the exercise of stock
options. Also includes 300 shares held by Mr. Irwin as trustee of three
educational trusts for the benefit of Mr. Irwin's children and grandchildren,
as to which shares Mr. Irwin disclaims beneficial ownership.
(8) Includes 17,500 shares of Common Stock issuable upon the exercise of stock
options. Also includes 1,000 shares held of record by Mr. Stinchcomb's
spouse, as to which shares Mr. Stinchcomb disclaims beneficial ownership.
(9) Includes 17,500 shares of Common Stock issuable upon the exercise of stock
options. Also includes 5,000 shares held of record by Mr. Bennett's spouse,
as to which shares Mr. Bennett disclaims beneficial ownership.
(10) Includes 1,843 shares held in the name of AHLC and reflected as
beneficially owned by Mr. Goldberg. Mr. Goldberg disclaims beneficial
ownership as to such shares. Also includes 36,000 shares of Common Stock
issuable to Mr. Goldberg upon the exercise of stock options.
(11) Includes 1,843 shares held in the name of AHLC and reflected as
beneficially owned by Mr. Wax. Mr. Wax disclaims beneficial ownership as to
such shares. Also includes 25,000 shares of Common Stock issuable to Mr. Wax
upon the exercise of stock options.
(12) Includes 16,667 shares of Common Stock issuable to Mr. Komberec upon the
exercise of stock options.
(13) Includes 479 shares held in the name of AHLC and reflected as
beneficially owned by Mr. Applegarth. Mr. Applegarth disclaims beneficial
ownership as to such shares. Also includes 25,000 shares of Common Stock
issuable to Mr. Applegarth upon the exercise of stock options.
(14) Mr. DeNardin resigned his position with the Company in December 1996.
Includes 25,570 shares held in the name of AHLC and reflected as beneficially
owned by Mr. DeNardin. Mr. DeNardin disclaims beneficial ownership as to such
shares. Also includes 16,668 shares of Common Stock issuable to Mr. DeNardin
upon the exercise of stock options.
(15) Mr. Dugan resigned his position with the Company on November 1, 1996.
Includes 15,934 shares held in the name of AHLC and reflected as beneficially
owned by Mr. Dugan. Mr. Dugan disclaims beneficial ownership as to such
shares. Also includes 40,000 shares of Common Stock issuable to Mr. Dugan
upon the exercise of stock options and 500 shares of Common Stock issuable to
Mr. Dugan's spouse upon the exercise of stock options. Mr. Dugan disclaims
beneficial ownership of shares issuable upon the exercise of stock options
held by his spouse.
(16) The shares reflected as beneficially owned by all directors and officers
as a group include (i) 1,551,075 shares held by AHLC and reflected as
beneficially owned by Mr. Beauvais, (ii) 208,000 additional shares issuable
upon the exercise of stock options and (iii) 272,238 additional shares
issuable upon the exercise of warrants held by HPTI and GFI. Excludes shares
held by Mssrs. DeNardin and Dugan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On May 5, 1995, the Company entered into an Aircraft Lease Agreement with
Aircorp, Inc. ("Aircorp"). Aircorp is owned by James R. Wikert, who was
elected to the Board of Directors of the Company in 1995. Pursuant to the
Lease Agreement, the Company leases a Boeing 737-300 aircraft from Aircorp.
The Company paid Aircorp lease payments totaling $4,800,000 in 1996.
Management believes that the Lease Agreement with Aircorp constitutes an arms-
length transaction at fair market value.
Effective January 1, 1996, the Company entered into a consulting agreement
with AVFORS, Inc., a company owned by John Beauvais, the son of Edward R.
Beauvais, to provide market analysis, forecasting, scheduled service pattern
development, pricing policy analysis, yield management, economic analysis and
related services for the Company. The agreement provided for payment of
consulting fees to AVFORS and John Beauvais in the amount of $8,750 per month,
plus additional fees for services rendered. The Company paid AVFORS and John
Beauvais a total of $176,435 under this agreement in fiscal 1996. The Company
terminated this agreement with AVFORS in December 1996.
Effective January 1, 1995, the Company entered into a consulting agreement
with InnoVision Incorporated ("InnoVision"). InnoVision is owned, operated
and controlled by Paul Beauvais, the son of Edward R. Beauvais, and Michael
Lancy, brother of John S. Lancy, a former member of the Company's Board of
Directors. Under the agreement, InnoVision provided creative media and
related services, including advertising liaison, promotion and marketing.
Compensation to InnoVision was based upon hourly rates for services performed
by InnoVision personnel, with minimum monthly compensation of $12,500.
InnoVision received an aggregate of $3,172,393 under the agreement in 1996.
The Company terminated this agreement with InnoVision in December 1996.
In 1996, the Company ordered uniforms and logo merchandise from Looks Like A
Pro, Inc., a company owned by Matthew Beauvais, the son of Edward R.
Beauvais. The Company had no written agreement with Looks Like A Pro, Inc.
Looks Like A Pro, Inc. received a total of $436,400 for merchandise ordered by
the Company in 1996. The Company ceased ordering merchandise from Looks Like
A Pro, Inc. in December 1996.
In June 1996, the Company entered into a short-term lease agreement with
Express One International, Inc. ("Express One") for two Boeing 727-200
aircraft. James R. Wikert, a Director of the Company, is the Chief Executive
Officer of Express One. The lease covered the cost of the aircraft, in-flight
crews, maintenance and insurance. The agreement was terminated on September
5, 1996. The Company paid Express One lease payments totaling $2,787,583 in
1996. Management believes that the lease agreement with Express One
constituted an arms-length transaction at fair market value.
Pursuant to an agreement that became effective on April 26, 1996 between the
Company and DC9-41, Inc., a Florida corporation of which James R. Wikert owns
a 50% interest, the Company paid commissions to DC9-41, Inc. in the amount of
$800,000 in connection with the purchase by the Company of a Boeing 737-300
aircraft from Aerovias Venezolanas, S.A. DC9-41, Inc. assisted in the
negotiation of and otherwise accomplished the procurement of the aircraft for
the Company. Management believes that the Agreement with DC9-41, Inc.
constitutes an arms-length transaction at fair market value.
The Company was a party to a consulting agreement with John S. Lancy, who was
the Company's Vice Chairman of the Board until his resignation in November 21,
1996, pursuant to which Mr. Lancy served as the Company's outside general
counsel. The Company terminated its agreement with Mr. Lancy on November 11,
1996, and paid Mr. Lancy a lump sum of $348,000 in connection with such
termination. Not including the lump sum termination payment, the Company paid
Mr. Lancy monthly stipends totaling $159,000.00 in 1996. Management believes
that the consulting agreement with Mr. Lancy constituted an arms-length
transaction at fair market value.
The law firm in which Mr. Lancy is a partner provided legal services to the
Company until November 1996. The Company paid an aggregate of $552,573.15 in
fees (in addition to monthly stipends totaling $159,000.00) and $31,258.50 in
cost reimbursement to such firm in 1996, which included $118,658.25 in fees
and $2,658.42 in costs paid by Mr. Lancy's firm in 1996 for contract services
to the law practice owned by C. Steven Rorke, the Company's Secretary until
February 1997.
See also the discussion of certain transactions under the heading
"Compensation Committee Interlocks and Insider Participation" in Item 11
above.
