SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(AMENDMENT NO. )
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[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Baltic InternationalBALTIC INTERNATIONAL USA, Inc.INC.
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(Name of Registrant as Specified In Itsin its Charter)
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BALTIC INTERNATIONAL USA, INC.
1990 Post Oak Boulevard, Suite 1630
Houston, Texas 77056-3813
Notice of Annual Meeting of Stockholders
To Be Held on June 6, 1996NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 12, 1997
Notice is hereby given that the 19961997 Annual Meeting of StockholdersShareholders
of Baltic International USA, Inc. ("Company") will be held at the
University Club, Library Room, 5051 Westheimer, Post Oak Tower, Suite 355,
Houston, Texas at 9:00 a.m. on June 6,
1996September 12, 1997 for the following
purposes:
1. To elect sevennine directors;
2. To approve and ratify amendments to the Articles of Incorporation;
3. To ratify the selection of BDO Seidman, LLPArthur Andersen as independent auditors of
the Company for the fiscal year ending December 31, 1996;
3.1997;
4. To approve and ratify an amendment to the 1992 Equity Incentive Plan; and
4.5. To transact such other business as may properly come before the meeting.
Common stockholdersshareholders of record at the close of business on May 14, 1996August 12,
1997 will be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
/s/ Jo Ann Johnson
Jo Ann Johnson,David A. Grossman, Corporate Secretary
May 24, 1996August 18, 1997
BALTIC INTERNATIONAL USA, INC.
1990 Post Oak Boulevard, Suite 1630
Houston, Texas 77056-3813
(Principal Executive Office)
PROXY STATEMENT
Annual Meeting of StockholdersANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION
This Proxy Statement is being furnished to stockholdersshareholders in
connection with the solicitation of proxies by the Board of Directors of
Baltic International USA, Inc. ("Company") for use at the 19961997 Annual
Meeting of StockholdersShareholders of the Company ("Meeting") to be held at the
University Club, Library Room, 5051 Westheimer, Post Oak Tower, Suite 355,
Houston, Texas at 9:00 a.m. on June 6, 1996,September 12, 1997, and at any adjournments
thereof, for the purpose of considering and voting upon the matters set
forth in the accompanying Notice of Annual Meeting of Stockholders.Shareholders. This
Proxy Statement and the accompanying form of proxy are first being mailed
to stockholdersshareholders on or about May 17, 1996.August 18, 1997.
The close of business on May 14, 1996,August 12, 1997, has been fixed as the
record date for the determination of stockholdersshareholders entitled to notice of
and to vote at the Meeting and any adjournment thereof. As of the record
date, there were 5,937,0689,615,270 shares of the Company's common stock, par value
$.01 per share ("Common Stock"), issued and outstanding.
The presence, in person or by proxy, of a majority of the
outstanding shares of Common Stock entitled to vote on the record date is
necessary to constitute a quorum at the Meeting. Abstentions and broker
non-votes will be counted towards a quorum. If a quorum is not present or
represented at the Meeting, the shareholders present at the meeting or
represented by proxy, have the power to adjourn the Meeting from time to
time, without notice other than an announcement at the Meeting, until a
quorum is present or represented. At any such adjourned Meeting at which
a quorum is present or represented, any business may be transacted that
might have been transacted at the original Meeting.
With respect to the election of directors, votes may be cast in
favor or withheld. Directors are elected by a plurality of the votes cast
at the Meeting, and votes that are withheld will be excluded entirely from
the vote and will have no effect. StockholdersShareholders may not cumulate their
votes in the election of directors. The affirmative vote of two-thirds of
the shares of Common Stock present in person or by proxy at the Meeting
and entitled to vote is required for approval of Item 2. The affirmative
vote of a majority of the shares of Common Stock present in person or by
proxy at the Meeting and entitled to vote is required for approval of
Items 23 and 3.4. Abstentions will have the same effect as a vote against a
proposal.
Brokers who hold shares in street name for customers are required to
vote those shares in accordance with instructions received from the
beneficial owners. In addition, brokers are entitled to vote on certain
items, such as the election of directors, the ratification of auditors and
other "discretionary items," even when they have not received instructions
from beneficial owners. Brokers are not permitted to vote for other "non-discretionary""non-
discretionary" items without specific instructions from the beneficial
owners. Under applicable Texas law, broker non-votes will have no effect
on any of the proposals.
All shares represented by properly executed proxies, unless such
proxies previously have been revoked, will be voted at the Meeting in
accordance with the directions on the proxies. IF NO DIRECTION IS
INDICATED, THE SHARES WILL BE VOTED (i) TO ELECT SEVENNINE DIRECTORS (ii) TO
APPROVE AND RATIFY THE AMENDMENTS TO THE ARTICLES OF INCORPORATION; (iii)
TO RATIFY THE SELECTION OF BDO SEIDMAN, LLPARTHUR ANDERSEN AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996; (iii)1997; (iv) TO APPROVE AND
RATIFY THE AMENDMENT TO THE 1992 EQUITY INCENTIVE PLAN; AND (iv)(v) TO
TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. The
enclosed proxy, even though executed and returned, may be revoked at any
time prior to the voting of the proxy by one of the following methods:
(a) execution and submission of a revised proxy, (b) written notice to the
Secretary of the Company, or (c) voting in person at the Meeting.
1
ANNUAL REPORT
The Annual Report on Form 10-KSB covering the Company's fiscal year
ended December 31, 1995,1996, including audited financial statements, is
enclosed herewith. The Annual Report does not form any part of the
material for solicitation of proxies.
The Company will provide exhibits to its Annual Report on Form 10-KSB,10-
KSB, upon payment of the reasonable expenses incurred by the Company in
furnishing such exhibits, upon written request to the Corporate Secretary
of the Company, at 1990 Post Oak Boulevard, Suite 1630, Houston, Texas
77056-3813.
ITEM I
TO ELECT SEVENNINE DIRECTORS
Directors and Nominees
The directors are elected annually byfollowing table sets forth with respect to each nominee named
herein and each director whose term of office will continue for a period
after the stockholdersAnnual Meeting: (i) the name and age of such person; and (ii)
the year during which such person first became a director of the Company and hold office until the next annual meeting of the
stockholders of the Company and until their successors are
elected and qualified.Company.
The Bylaws of the Company provide that the number of directors will be
determined by the Board of Directors. The stockholdersshareholders will elect sevennine
directors for the coming year.year and the Company's Articles of Incorporation
require that the election of directors be in three staggered classes.
Three nominees in each class are proposed to be elected at this Annual
Meeting. The Class I directors will serve, if elected, for a one-year
term to expire at the 1998 Annual Meeting of Shareholders, the Class II
directors will serve, if elected, for a two-year term to expire at the
1999 Annual Meeting of Shareholders, and the Class III directors will
serve, if elected, for a three-year term to expire at the 2000 Annual
Meeting of Shareholders and until their successors are chosen and has
qualified. All of the director nominees, except for James W.
Goodchild,Jonas af Jochnick and
Adolf af Jochnick, presently serve as directors of the Company. Mr.
Goodchild serves as chief operating and financial officer of the Company. There is
no family relationship between or among any of the directors, director
nominees and executive officers of the Company.Company, except for Jonas af
Jochnick and Adolf af Jochnick who are brothers.
Unless otherwise instructed or unless authority to vote is withheld,
the enclosed proxy will be voted for the election of the director nominees
listed herein. Although the Board of Directors of the Company does not
contemplate that any of the director nominees will be unable to serve, if
such a situation arises prior to the Meeting, the persons named in the
enclosed proxy will vote for the election of such other person(s) as may
be nominated by the Board of Directors.
Name Age Director Since
Class I - Nominees; if elected, terms expire at the first succeeding
annual meeting (1998)
Homi M. Davier 49 1991
Paul R. Gregory 56 1991
Morris A. Sandler 50 1995
Class II - Nominees; if elected, terms expire at the second succeeding
annual meeting (1999)
James W. Goodchild 42 1996
Adolf af Jochnick 68 N/A
Ted Reynolds 66 1993
Class III - Nominees; if elected, terms expire at the third succeeding
annual meeting (2000)
Jonas af Jochnick 60 N/A
Robert L. Knauss (age 64).66 1991
Juris Padegs 65 1993
Mr. Knauss has served as chief executive officer since January 1994. Mr. Knauss also serves as
a member of the board of Baltic International Airlines ("BIA").
Mr. Knauss served as Dean of the University of Houston Law Center from
1981 through December 1993. Mr. Knauss was involved in establishing the
relationship between the University of Houston Law Foundation and the
former Soviet Union in 1991 whereby the University of Houston Law
Foundation assisted the former Soviet Union in creating the Petroleum
Legislation Project, and was involved with the government of Russia in the
development of privatization legislation. Mr. Knauss has served as a
director of Equus Investments, Inc. since 1984 and as one of the two
United States directors for the Mexico Fund since 1985, and1985. He was elected as
a director of Philip Services Corp. in 1997 following the merger of
Allwaste, Inc. since 1986.and Philip Services Corp. Securities of the Mexico Fund,
Allwaste, Inc.Philip Services Corp. and Equus Investments, Inc. are registered under the
Securities Exchange Act.Act of 1934 (the "Exchange Act"). Mr. Knauss is a
graduate of Harvard University and the University of Michigan Law School.
Mr. Knauss has traveled extensively to the former Soviet Union.
Mr. Knauss has served as chairman of the board of the Company since its
inception in March 1991.
Mr. Knauss is also a
memberGoodchild has served as chief operating officer since October
1994 and as chief financial officer of the Executive Committee.
Homi M. Davier (age 47).Company since September 1993.
Mr. Goodchild served as the Company's vice president of finance and
development from July 1992 to August 1993. From August 1989 through June
1992, Mr. Goodchild attended the University of Houston where he acquired a
B.A. degree in Russian and Soviet Studies, and a B.A. degree in
International Relations. Mr. Goodchild is fluent in Russian.
Mr. Goodchild was project administrator of the Russian Petroleum
Legislation Project from July 1992 to December 1992. From 1984 to March
1989, Mr. Goodchild was employed with MCorp, formerly a Dallas-based bank
holding company, where he served as senior vice president and manager of
credit administration of MCorp's Collection Bank. Additionally,
Mr. Goodchild acquired a B.S. degree in finance from the University of
Houston in 1978.
Mr. Davier served as president of the Company since its inception in
March 1991 until August 1995. Mr. Davier has served as a director and as
the Company's managing director to BIABaltic International Airlines ("BIA")
since June 1991. Mr. Davier served as senior traffic assistant of Air
India from April 1971 to May 1975, and assisted in the start-up of Gulf Air in Oman
from 1975 to 1978 and in the start-up of the Middle Eastern operations of
Air Bangladesh and Sabena Belgian Airlines.Airlines from 1978 to 1980. Mr. Davier
has served as chairman of the board and president of Capricorn Travel and
Tours, Inc. since April 1983. Mr. Davier is the founder and president of
Capricorn Computers, established in 1985, which developed and markets the
Capri 2020, a revenue accounting and management report system for travel
agencies. Mr. Davier has been chief executive officer of Travel Stop, a
Houston-based retail travel outlet, since 1990. Mr. Davier graduated from
Hislop College in Nagpur, India
Mr. Davier has been a director of the Company since its
inception in March 1991. Mr. Davier is also a member of the
Executive Committee.
2
Paul R. Gregory (age 54).India.
Dr. Gregory served as treasurer, on a part-time basis, of the
Company since its inception in March 1991 until August 1995. Dr. Gregory also serves as a member of
the board of BIA. Dr. Gregory
is the Cullen Professor of Economics and Finance at the University of
Houston where he has been a faculty member since 1972. Dr. Gregory was
involved in creating the Petroleum Legislation Project with Russia and he
served as project coordinator of the Russian Securities Project in
conjunction with the Russian State Committee for Property Management and
the various Russian stock exchanges. Dr. Gregory serves as advisor to a
number of major United States corporations on their Russian business
activities, and has been active in the former Soviet Union for 25 years.
Dr. Gregory has served as chairman of the board of Amsovco International
Consultants, Inc. since 1988. Dr. Gregory has also served as a consultant
to the World Bank. Dr. Gregory graduated from Harvard University with a
Ph.D. in economics and is fluent in Russian and German. Dr. Gregory is
the author of a text on the Soviet and Russian economies
Dr. Gregoryeconomies.
Mr. Adolf af Jochnick, a Swedish citizen, has served as vicebeen chairman of the
board and chief executive officer of ORESA Ventures S.A., a venture
capital company concentrating on Eastern Europe and listed on the
CompanyStockholm stock exchange, since its inception in March 1991. Dr. Gregory is also a
member of the Executive Committee.
Juris Padegs (age 64). Mr. Padegs serves as viceJanuary 1995. Since June 1990, he has
been chairman of the board and chief executive officer of BIA.Oriflame Eastern
Europe, S.A. and vice chairman of Oriflame International S.A. The two
Oriflame companies both manufacture cosmetic and skin care products which
are marketed on a global basis. Oriflame International is listed on the
London Stock exchange. Mr. Jochnick holds a law degree from the
University of Stockholm, Sweden and an MBA from Harvard Business School.
Mr. Jonas af Jochnick, an American citizen, has been general counsel
of Oriflame International, S.A. since 1990. He is admitted to the Bar in
New York and Connecticut. Mr. Jochnick holds an LLB from Harvard Law
School, an MA from the University of Kansas and a BA from the University
of Stockholm, Sweden.
Mr. Padegs has served as a managing director of Scudder, Stevens &
Clark, an international investment and management firm sincefrom 1985 andto 1996,
has been employed with Scudder, Stevens & Clark since 1964.1964 and is now
Advisory Managing Director at that firm. Mr. Padegs is the director of a
number of international investment companies, including Scudder New Europe
Fund and Scudder New Asia Fund. Mr. Padegs is the chairman and director
of the Korea Fund the Brazil Fund, and the First IberianBrazil Fund. Mr. Padegs was born in Latvia and
holds a Bachelor of Arts and a law degree from Yale University.
Mr. Padegs is fluent in Latvian and German. In July 1994, he was
appointed by President Clinton to the board of the Baltic American
Enterprise Fund, a $50 million fund to promote private enterprise in the
Baltic States. Mr. Padegs has been a director of the Company since December
1993. Mr. Padegs is also a member of the Audit Committee and
Compensation Committee.
Ted Reynolds (age 65).
Mr. Reynolds has been president of Houston Grain Company since 1983
and vice president of Mid-
AmericaMid-America Grain Commodities since 1976. He recentlyalso
formed and is owner of Red River Grain Company. He is actively involved
in various international business transactions. Mr. Reynolds is a
graduate of Texas Christian University. Mr. Reynolds has been a director of the Company since 1993.
Mr. Reynolds is also a member of
the Audit Committee and Compensation Committee.
Morris A. Sandler (age 49). Mr. Sandler has served as
executive vice president-strategic relations and director ofbeen a consultant to Global TeleSystems Group, Inc.
("GTS"), an independent telecommunications company in Russia, since 1994.1995.
Prior to that, Mr. Sandler served as executive vice president from
February 1994 to November 1995 and acting chief operating officer from
April 1993 to February 1994 of GTS. From 1990 to 1994, Mr. Sandler was an
employee of Alan B. Slifka and Company. From 1984 to 1994
he was a general partner of Griffis Sandler & Co., an
international private investment banking firm.Since November 1995, Mr. Sandler
served as vice presidenthas been a principal of Pennwood Capital Corporation, a venture capital
investment and director of marketing of the
merchant banking firm of J. Aron & Company, Inc. from 1976 until
its acquisition by Goldman, Sachs & Co. ("Goldman Sachs") in
1981, at which time he became a vice president of Goldman Sachs,
which position he held until 1984. He has also served as a
director of Vesta Technology, Ltd. since 1986.management firm. Mr. Sandler received a B.A. degree from
Cornell University in 1969, and an M.B.A. from the University of Chicago
Graduate School of Business in 1976. Mr. Sandler has been a director of the Company since 1995.
Mr. Sandler is also a member of the
Audit Committee and Compensation Committee.
James W. Goodchild (age 40). Mr. Goodchild has served as
chief operating officer since October 1994Meetings and as chief financial
officerCommittees of the Company since September 1993. Mr. Goodchild
served as the Company's vice president of finance and development
from July 1992 to August 1993. From August 1989 through June
1992, Mr. Goodchild attended the University of Houston where he
acquired a B.A. degree in Russian and Soviet Studies, and a B.A.
degree in International Relations. Mr. Goodchild is fluent in
Russian. Mr. Goodchild was project administrator of the Russian
Petroleum Legislation Project from July 1992 to December 1992.
From 1984 to March 1989, Mr. Goodchild was employed with MCorp,
formerly a Dallas-based bank holding company, where he served as
senior vice president and manager of credit administration of
MCorp's Collection Bank. Additionally, Mr. Goodchild acquired a
B.S. degree in finance from the University of Houston in 1978.
3
Board of Directors Committees and Meetings
The Board of Directors held twofour meetings in 1995,1996, and each director of
the Company was in attendance. The Executive Committee
of the Board reviews and monitors the operating decisions and
strategies of management. The Executive Committee held two meetings
during 1995. The Audit Committee reviews and reports to
the Board on the financial results of the Company's operations and the
results of the audit services provided by the Company's independent
accountants, including the fees and costs for such services. The Audit
Committee, consisting of Messrs. Padegs, Reynolds and Sandler, held one meetingtwo
meetings during 1995.1996. The Compensation Committee reviews compensation paid
to management and recommends to the Board of Directors appropriate executive
compensation. The Compensation Committee, consisting of Messrs. Reynolds,
Padegs and Sandler, held two meetingsone meeting during 1995.1996.
Director Compensation
Outside directors are entitled to receive options to purchase 10,000
shares in their first year of service and 5,000 shares of Common Stock per
year thereafter as compensation and reimbursement of out-of-pocket expenses
to attend board meetings. Messrs. Padegs
and Reynolds have each received options to purchase 5,000 shares of
Common Stock pursuant to this arrangement. In addition, Mr. Padegs
received an option to purchase 5,000 shares of Common Stock for
consulting services rendered. Such options are exercisable for
$1.125 per share and expire in October 1999. In December 1995, Messrs. Padegs, Reynolds and
Sandler each received options to purchase 15,000 shares of Common Stock at a
price of $1.375 per share pursuant to this arrangement. Also in December
1995, Messrs. Davier and Gregory each received options to purchase 50,000
shares at a price of $1.375 per share for services rendered. Such options
expire in December 2000. In addition, consulting fees in the amount
of $10,000, $20,000 and $0 respectively, were paid to Capricorn
Travel, a Company controlled by Mr.December 1996, Messrs. Davier, during 1993, 1994 and
1995.
Reports
In April 1994, the Company's Common Stock was registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), and Messrs. Knauss, Gregory, Davier, Padegs,
Reynolds and Goodchild, and Ms. Johnson became subjectSandler each received options to the filing and reporting requirementspurchase 5,000 shares of Common
Stock at a price of $0.8125 per share. Such options expire in December 2001.
Compliance with Section 16(a) of the Exchange Act. In October 1994, Mr. Glenister became subjectAct
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports with the Securities
and Exchange Commission relating to transactions and holdings in the
Company's common stock. The Company believes that during the fiscal year
ended December 31, 1996 all such requirements. In August 1995, Mr. Sandler became subject to such
requirements.filing requirements were satisfied.
THE BOARD OF DIRECTORS HAS NOMINATED THE ABOVE-REFERENCED DIRECTORS FOR
ELECTION BY THE STOCKHOLDERSSHAREHOLDERS AND RECOMMENDS A VOTE FOR SUCH ELECTION. THE
ELECTION OF THESE DIRECTORS REQUIRES A PLURALITY OF THE VOTES CAST BY THE
HOLDERS OF SHARES OF COMMON STOCK REPRESENTED IN PERSON OR BY PROXY AT THE
ANNUAL MEETING AND ENTITLED TO VOTE IN THE ELECTION OF DIRECTORS.
ITEM 2
TO APPROVE AND RATIFY AMENDMENTS TO THE ARTICLES OF INCOPORATION
The Company's Articles of Incorporation authorize for the issuance of
Twenty Million Five Hundred Thousand (20,500,000) shares, consisting of
Twenty Million (20,000,000) shares of Common Stock having a par value of $.01
per share and Five Hundred Thousand (500,000) shares of Preferred Stock
having a par value of $10.00 per share. In August 1997, the Board of
Directors determined it to be in the best interest of the Company that the
Articles of Incorporation be amended to increase the number of shares of
Common Stock authorized to be issued from 20,000,000 to 40,000,000. The
effect of this increase will be to allow the Company to issue additional
shares of Common Stock in connection with equity issued for general business
purposes and stock options and warrants exercised. As of the record date,
9,615,270 shares of Common Stock were outstanding.
The Company's Articles of Incorporation list the Company's previous
address as its registered office. The Board of Directors wish to amend the
Articles of Incorporation to reflect the Company's current address of 1990
Post Oak Boulevard, Suite 1630, Houston, Texas 77056 as its registered office
and the registered agent to be James W. Goodchild.
In August 1997, the Board of Directors approved these amendments to the
Articles of Incorporation, which would increase the number of authorized
shares of Common Stock to Forty Million (40,000,000) and change the address
of the Company's registered office to 1990 Post Oak Boulevard, Suite 1630,
Houston, Texas 77056. The Board of Directors is seeking approval and
ratification of this amendment from the Company's shareholders.
THE BOARD OF DIRECTORS HAS APPROVED THE AMENDMENTS TO THE ARTICLES
OF INCORPORATION AND RECOMMENDS A VOTE FOR THE APPROVAL AND RATIFICATION
OF SUCH AMENDMENTS. SUCH APPROVAL AND RATIFICATION REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF TWO-THIRDS OF SHARES OF COMMON STOCK
ENTITLED TO VOTE AND REPRESENTED IN PERSON OR BY PROXY AT THE MEETING.
ITEM 3
TO RATIFY THE SELECTION OF BDO SEIDMAN, LLPARTHUR ANDERSEN AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 19961997
The Board of Directors has approved the engagement of BDO
Seidman, LLPArthur Andersen
as independent auditors for the consolidated financial statements for the
fiscal year ending December 31, 1996 consolidated financial statements.1997. The Board of Directors wishes to
obtain from the stockholdersshareholders a ratification of the Board's action in
appointing BDO Seidman, LLPArthur Andersen as independent auditors of the Company for the
fiscal year ending December 31, 1996.1997. The engagement of BDO Seidman, LLPArthur Andersen for
audit services has been approved by the Board itself.
BDO Seidman LLP'sArthur Andersen's report on the Company's consolidated financial
statements for 19951996 contained a modified opinion to reflect that incurred
losses from operations have raised substantial doubt about the ability of the
Company to continue as a going concern. There have been no disagreements
with the independent auditors on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope procedure. The
independent auditors' report did not contain an adverse opinion or disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope
or accounting principles.
On July 14, 1995, the Company dismissed Price Waterhouse LLP as the
Company's independent accountants and, on July 28, 1995, approved the
engagement of BDO Seidman, LLP ("Price Waterhouse") as the Company's
independent accountant. This change was recommended by the Board of
Directors and approved by the Company's shareholders at its annual meeting on
August 29, 1995. There was no disagreement with Price Waterhouse on any
matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
On August 30, 1996, BDO Seidman, LLP ("Former Accountant") informed the
Company that it was resigning from its position as the Company's accounting
firm, and on November 8, 1996, the Company approved the engagement of Arthur
Andersen LLP ("Current Accountant") as the Company's independent accountant.
In the event the appointment of BDO Seidman, LLPArthur Andersen as independent
accountants for fiscal 19961997 is not ratified by the stockholders,shareholders, the adverse
vote will be considered as a direction to the Board of Directors to select
other accountants for the following year. However, because of the difficulty
in making any substitution of accountants so long after the beginning of the
current fiscal year, it is contemplated that the appointment for fiscal 19961997
will be permitted to stand unless the Board of Directors finds other good
reason for making a change.
4
Representatives of BDO Seidman, LLPArthur Andersen are expected to be present at the
Meeting, with the opportunity to make a statement if desired to do so. Such
representatives are also expected to be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS HAS RECOMMENDED THE RATIFICATION OF THE
APPOINTMENT OF BDO SEIDMAN, LLPARTHUR ANDERSEN AS INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1996.1997. SUCH RATIFICATION REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF SHARES OF COMMON STOCK
ENTITLED TO VOTE AND REPRESENTED IN PERSON OR BY PROXY AT THE MEETING.
ITEM 34
TO APPROVE AND RATIFY AN AMENDMENT TO THE 1992 EQUITY STOCK INCENTIVE PLAN
In September 1992, the Board of Directors of the Company adopted the
1992 Equity Incentive Plan ("Plan"), which Plan was approved and ratified by
the stockholdersshareholders of the Company in February 1994. The Plan, as amended in
AugustDecember 1995, authorized the grant thereunder of options to purchase up to
800,0001,500,000 shares of Common Stock of the Company.Company with evergreen provisions
included in the Plan. The original Plan was for five years and expires in
September 1997. In December 1995,August 1997, the Board of Directors determined it to be in
the best interest of the Company that the Plan be amended to increaseextend the numberterm of shares subject to
the Plan an additional five years from September 1997 to 1,500,000 and to add evergreen provisions to the Plan.September 30, 2002.
The effect of this increaseextension will be to allow the Company to grant additional
options to current and future executives and other employees, and for general
business purposes.purposes under the Plan. As of the record date, options to purchase
602,800569,000 shares were outstanding under the Plan. The granting of any additional
options under the Plan could have the effect of diluting earnings per share of
Common Stock and reducing book value per share of Common Stock.
In December 1995,August 1997, the Board of Directors approved these
amendmentsthis amendment to the
Plan, and registeredwhich would extend the shares subjectPlan's term to the
Plan under the Securities Act of 1933 pursuant to a registration
statement on Form S-8. See "Compensation - Stock Options."September 30, 2002. The Board of
Directors is seeking approval and ratification of these
amendmentsthis amendment from the
Company's stockholders.shareholders. All of the directors of the Company nominated for
election at the Meeting hold options granted pursuant to the Plan.
Description of Plan
Below is a summary of the principal provisions of the Plan, as amended.
Copies of the Plan are available upon written request to the Company. The only
amendment requested in this Proxy Statement is the extension of the life of the
Plan for an additional five years.
General Information
The Plan was adopted by the Board of Directors of the Company in
September 1992 and was approved and ratified by the stockholdersshareholders of the Company
in February 1994. The Plan was amended by the Board of Directors in March 1995
and such amendment was approved and ratified by the stockholdersshareholders of the Company
in August 1995. The Plan was amended again by the Board of Directors in
December 1995. The Plan provides for the issuance of up to 1,500,000 shares of
the Company's Common Stock, par value $.01 per share, pursuant to awards
granted under the Plan. Effective December 1, 1995 and continuing through
September 1997,2002, upon exercise of any outstanding Option, whether partial or in
full, the shares of Common Stock allocable to the exercised portion of such
Option may again be available for option grants under the Plan and the sum of
the number of shares subject to issued and outstanding Options plus the number
of shares available for Option grants shall remain constant at 1,500,000. In
the event that any outstanding Option shall for any reason expire or terminate
without having been exercised in full, the shares of Common Stock allocable to
the unexercised portion of such Option may again be subject to an Option under
the Plan. The purpose of the Plan is to advance the interests of the Company
by enhancing its ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company through ownership of shares of the Company's Common Stock. The
Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974.
Administration
The Plan is administered by the Compensation Committee of the Board of
Directors consisting of not less than two members. The Committee has authority
to: (a) grant Awards at such time or times as it may choose; (b) determine the
size of each Award; (d) determine the terms and conditions of each Award; (e)
waive compliance by a Participant with any obligations to be performed by the
Participant under an Award and waive any term or condition of an Award; (f)
amend or cancel an existing Award in whole or in part (and if an award is
canceled, grant another Award in its place on such terms as the Board shall
specify), except that the Board may not, without the consent of the holder of
an Award, take any action under this clause with respect to such Award if such
action would adversely affect the rights of such holder; (g) prescribe the form
or forms of instruments that are required or deemed appropriate under the Plan,
including any written notices and elections required of Participants, and
change such forms from 5
time to time; (h) adopt, amend and rescind rules and
regulations for the administration of the Plan; and (i) interpret the Plan and
decide any questions and settle all controversies and disputes that may arise
in connection with the Plan. A majority of the members of the Committee shall
constitute a quorum, and all determinations of the Committee shall be made by a
majority of its members. Any determination of the Committee under the Plan may
be made without notice or meeting of the Committee by a writing signed by a
majority of the Committee members.
The Committee currently consists of three members, one of which
is also an employee of the Company.members. All members of the
Committee have received awards under the Plan. The members of the Committee
are appointed by and serve at the pleasure of the Board of Directors, which
may from time to time change the Committee's membership.
Securities Subject to the Plan
The aggregate number of shares of Common Stock that may be delivered
under the Plan is 1,500,000, subject to adjustment in the event of a stock
dividend, stock split or combination of shares, recapitalization or other
change in the Company's capitalization, or other distribution to common
stockholdersshareholders other than normal cash dividends. Effective December 1, 1995
and continuing through September 1997,30, 2002, upon exercise of any outstanding
Option, whether partial or in full, the shares of Common Stock allocable to
the exercised portion of such Option may again be available for option grants
under the Plan and the sum of the number of shares subject to issued and
outstanding Options plus the number of shares available for Option grants
shall remain constant at 1,500,000. In the event that any outstanding Option
shall for any reason expire or terminate without having been exercised in
full, the shares of Common Stock allocable to the unexercised portion of such
Option may again be subject to an Option under the Plan. If any Award
requiring exercise by the Participant for delivery of Stock terminates
without having been exercised in full, or if any Award payable in Stock or
cash is satisfied in cash rather than Stock, the number of shares of Stock as
to which such Award was not exercised or for which cash was substituted will
be available for future grants. Stock delivered under the Plan may be either
authorized but unissued Stock or previously issued Stock acquired by the
Company and held in treasury. No fractional shares of Stock will be
delivered under the Plan.
Employees Who May Participate in the Plan
Participants under the Plan include persons who are employees of the
Company and other persons or entities who, in the opinion of the Board, are
in a position to make a significant contribution to the success of the
Company. The approximate number of participants at August 12, 1997 are 6
employees and 5 other persons.
Purchase of Securities Pursuant to the Plan and Payment for Securities Offered
Both "incentive stock options," as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") (any Option intended
to qualify as an incentive stock option being hereinafter referred to as an
"ISO"), and Options that are not incentive stock options, may be granted
under the Plan. ISOs shall be awarded to Employees.
Exercise Price. The exercise price of an Option will be determined by
the Board subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten-percent shareholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent shareholder" is any person who at the time
of grant owns, directly or indirectly, or is deemed to own by reason of the
attribution rules 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 of any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share of
the stock issued.
(3) The Board may reduce the exercise price of an Option at any time
after the time of grant, but in the case of an Option originally awarded as
an ISO, only with the consent of the Participant.
Duration of Options. The latest date on which an Option may be
exercised will be the seventh anniversary (third anniversary, in the case of
an ISO granted to a ten-percent shareholder) of the day immediately preceding
the date the Option was granted, or such earlier dates as may have been
specified by the Board at the time the Option was granted.
Exercise of Options. An Option will become exercisable at such time or
times, and on such conditions as the Board may specify. The Board may at any
time accelerate the time at which all or any part of the Option may be
exercised.
Any exercise of an Option must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (1) any
documents required by the Board and (2) payment in full for the number of
shares for which the Option is exercised.
Payment for Stock. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to an order of the Company or (2) if so permitted by the
instrument evidencing the Option (or in the case of an Option which is not an
6
ISO, by the Board at or after grant of the Option), (i) through the delivery
of shares of Stock which have been outstanding for at least six months
(unless the Board expressly approves a shorter period) and which have a fair
market value on the last business day preceding the date of exercise equal to
the exercise price, or (ii) by delivery of a promissory note of the Option
holder to the Company, payable on such terms as are specified by the Board,
and (iii) by delivery of an unconditional and irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the
exercise price, (iv) by any combination of the permissible forms of payment;
provided that if the Stock delivered upon exercise of the Option is an
original issue of authorized Stock, at least so much of the exercise price as
represents the par value of such Stock must be paid other than by the Option
holder's personal check or promissory note.
Discretionary Payments. If the market price of shares of Stock subject
to an Option exceeds the exercise price of the Option at the time of its
exercise, the Board may cancel the Option and cause the Company to pay in
cash or in shares of Common Stock (at a price per share equal to the fair
market value per share) to the person exercising the Option an amount equal
to the difference between the fair market value of the Stock which would have
been purchased pursuant to the exercise (determined on the date the Option is
canceled) and the aggregate exercise price which would have been paid. The
Board may exercise its discretion to take such action only if it has received
a written request from the person exercising the Option, but such a request
will not be binding on the Board.
Loans. The Company may make a loan to a Participant ("Loan"), either
on the date of or after the grant of any Award to the Participant. A Loan
may be either in connection with the purchase of Stock under the Award or
with the payment of any Federal, state and local income tax with respect to
income recognized as a result of the Award. The Board will have full
authority to decide whether to make a Loan, including the interest rate
(which may be zero), whether the Loan is to be secured or unsecured or with
or without recourse against the borrower, the terms on which the Loan is to
be repaid and the conditions, if any, under which it may be forgiven.
However, no Loan may have a term (including extensions) exceeding ten years
in duration.
Supplemental Grants. In connection with any Award, the Board may at
the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal
to (1) the amount of any federal, state and local income tax on ordinary
income for which the Participant may be liable with respect to the Award,
determined by assuming taxation at the highest marginal rate, plus (2) an
additional amount on a grossed-up basis intended to make the Participant
whole on an after-tax basis after discharging all the Participant's income
tax liabilities arising from all payments under the Plan. Any payment of a
Supplemental Grant will be made at the time the Participant incurs Federal
income tax liability with respect to the Award.
No Award may be granted under the Plan after September 1997,30, 2002, but
Awards previously granted may extend beyond that date.
Neither adoption of the Plan nor the grant of Awards to a Participant
will affect the Company's right to grant to such Participant awards that are
not subject to the Plan, to issue to such Participant Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock may be
issued to Employees.
The Board may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at
any time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholdersshareholders of the Company,
effectuate a change for which stockholdershareholder approval is required in order for
the plan to continue to qualify for the award of ISOs under section 422 of
the Code and to continue to qualify under Rule 16b-3 promulgated under
Section 16 of the Exchange Act.
Tax Effects of Plan Participation
The discussion below describes certain federal income tax aspects of
Awards which may be made under the Plan, based upon federal income tax laws
in effect on the date hereof. The summary below does not purport to be an
exhaustive discussion of all federal income tax aspects of the ownership and
exercise of the Awards, and no information is provided with respect to
estate, inheritance, state or local tax laws, although there may be certain
tax consequences under those laws upon the receipt or exercise of an Award or
upon the disposition of property acquired upon exercise or in connection with
an Award.
The exact federal income tax treatment of Awards will depend on the
specific nature of any such Award. Such an Award may, depending on the
conditions applicable to the Award, be taxable as an option, an Award of
restricted or unrestricted stock, an Award which is payable in cash, or
otherwise. Tax consequences will also vary depending upon whether the
recipient of the Award is permitted, as authorized by the Plan, to pay the
exercise or purchase price of Awards or applicable withholding taxes by
delivering previously owned shares or having shares withheld. Since tax
considerations will also vary with individual circumstances, Participants are
advised to consult their personal tax advisors with regard to all possible
tax consequences arising from the grant or exercise of an Award and the
ownership or disposition of stock or other property acquired upon exercise of
or in connection with an Award.
7
The Plan is not a qualified pension, profit-sharing or stock bonus plan
under Section 401(a) of the Code. The Plan is not subject to any provisions
of the Employee Retirement Income Security Act of 1974.
Incentive Stock Options. A grantee will generally have no taxable
income upon either the grant or exercise of an incentive stock option. If
the grantee does not dispose of shares acquired pursuant to the exercise of
an incentive stock option within two years of the grant or one year of the
exercise, any gain or loss realized in their subsequent disposition will be
capital gain or loss. If such holding period requirements are not satisfied,
the grantee will generally realize ordinary income at the time of disposition
in an amount equal to the excess of the fair market value of the shares on
the date of exercise (or if less, the amount realized upon disposition) over
the option price. Any remaining gain is taxed as long-term or short-term
capital gain.
Non-qualified Stock Options. The grant of a non-qualified stock option
generally is not a taxable event for the optionee. Upon exercise of the
option, the optionee generally will recognize ordinary income in an amount
equal to the excess of the fair market value of the stock acquired upon
exercise (determined as of the date of exercise) over the exercise price of
such option. The Company will be entitled to a deduction equal to the amount
of ordinary income recognized by the employee in the year in which such
taxable income is recognized and the Company is required to withhold federal
income taxes with respect to any amounts included in the employee's taxable
income.
If an optionee pays the exercise price with shares of previously
acquired Common Stock, no gain or loss will be recognized upon the
disposition of those previously acquired shares. Shares received by the
optionee, equal in number to the previously acquired shares used to pay the
exercise price, will have the same basis and holding period as the previously
acquired shares. The remaining shares received will have a basis equal to
their fair market value as of the date of exercise and the holding period for
such additional shares will commence as of the date of exercise.
Restricted Stock Awards. A grant of restricted stock generally
is not a taxable event for the grantee. However, when the
applicable restrictions lapse, the grantee generally will recognize
ordinary income equal to the excess of the fair market value of such
stock on the date of lapse over the amount, if any, paid for such
stock. Alternatively, the grantee may file an election under
Section 83(b) of the Code, in which case the grantee will recognize
ordinary income on the date of grant equal to the excess of the fair
market value of such stock on the date of grant over the amount, if
any, payable for such stock. An election under Section 83(b) of the
Code must be made within 30 days of grant.
Withholding Taxes. The Company will withhold from any cash payment
made pursuant to an Award an amount sufficient to satisfy all federal, state
and local withholding tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Board will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Board with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Board may permit
the Participant or such other person to elect at such time and in such manner
as the Board provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement.
If at the time an ISO is exercised the Board determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Board may require as a
condition of exercise that the person exercising the ISO agree (a) to inform
the Company promptly of any disposition (within the meaning of section 424(c)
of the Code) of Stock received upon exercise, and (b) to give such security
as the Board deems adequate to meet the potential liability of the Company
for the withholding requirements and to augment such security from time to
time in any amount reasonably deemed necessary by the Board to preserve the
adequacy of such security.
If the employee pays applicable withholding taxes by having the Company
withhold shares of Common Stock otherwise issuable upon exercise of an Award,
the employee will recognize ordinary income on the date of exercise equal to
the difference between the exercise price and the fair market value of all
shares with respect to which the Award is exercised, including those shares
withheld by the Company. If the employee pays such taxes by surrendering
shares of previously acquired Common Stock, the employee wilwill be treated as
having disposed of those shares in a taxable transaction and will recognize
capital gain or loss equal to the difference between the tax basis of such
shares and the fair market value of such shares on the date such shares are
surrendered to the Company.
Stock Sales. If an employee sells shares of Common Stock acquired
pursuant to the Plan, the employee generally will recognize capital gain or
loss equal to the difference between the sales prices and the tax basis of
such shares. Such gain or loss will be long-term or short-term, depending
upon whether the holding period for such shares is greater or less than one
year.
8
Withdrawal from the Plan; Assignment of Interest
Death. All Options held by the Participant immediately prior to death,
to the extent then exercisable, may be exercised by the Participant's
executor or administrator or the person or persons to whom the Option is
transferred by will or the applicable laws of descent and distribution, at
any time within the one year period ending the first anniversary of the
Participant's death (or such shorter or longer period as the Board may
determine), and shall thereupon terminate. In no even, however, shall an
Option remain exercisable beyond the latest date on which it could have been
exercised without regard to Participant's death. Except as otherwise
determined by the Board, all Options held by a Participant immediately prior
to death that are not then exercisable shall terminate at death.
Except as otherwise determined by the Board, all Restricted
Stock held by the Participant must be transferred to the Company
(and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so
transferred without any further action by the Participant).
Any payment or benefit under a Supplemental Grant to which the
Participant was not irrevocably entitled prior to death will be forfeited and
the Award canceled as of the time of death, unless otherwise determined by
the Board.
Termination of Service (Other Than By Death). If a Participant who is
an Employee ceases to be an Employee for any reason other than death, or if
there is a termination (other than by reason of death) of the consulting,
service or similar relationship in respect of which a non-Employee
Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
Except as otherwise determined by the Board, all Options held by the
Participant that were not exercisable immediately prior to the Status Change
shall terminate at the time of the Status Change. Any Options that were
exercisable immediately prior to the Status Change will continue to be
exercisable for a period of three months (or such longer period as the Board
may determine), and shall thereupon terminate, unless the Award provides by
its terms for immediate termination in the event of a Status Change or unless
the Status Change results from a discharge for cause which in the opinion of
the Board casts such discredit on the Participant as to justify immediate
termination of the Award. In no event, however, shall an Option remain
exercisable beyond the latest date on which it could have been exercised
without regard to a Participant's termination. For purposes of this
paragraph, in the case of a Participant who is an Employee, a Status Change
shall not be deemed to have resulted by reason of (i) a sick leave or other
bona fide leave of absence approved for purposes of the Plan by the Board, so
long as the Employee's right to reemployment is guaranteed either by statute
or by contract, or (ii) a transfer of employment between the Company and a
subsidiary or between subsidiaries, or to the employment of a corporation (or
a parent or subsidiary corporation of such corporation) issuing or assuming
an option in a transaction to which section 424(a) of the Code applies.
Except as otherwise determined by the Board, all Restricted
Stock held by the Participant at the time of the Status Change must
be transferred to the Company (and, in the event the certificates
representing such Restricted Stock are held by the Company, such
Restricted Stock will be so transferred without any further action
by the Participant).
Any payment or benefit under a Supplemental Grant to which the
Participant was not irrevocably entitled prior to the Status Change will be
forfeited and the Award canceled as of the date of such Status Change unless
otherwise determined by the Board.
Certain Corporation Transactions. In the event of a consolidation or
merger in which the Company is not the surviving corporation or which results
in the acquisition of substantially all the Company's outstanding Stock by a
single person or entity or by a group of persons and/or entities acting in
concert, or in the event of the sale or transfer of substantially all of the
Company's assets or a dissolution or liquidation of the Company (a "covered
transaction"), all outstanding Awards will terminate as of the effective date
of the covered transaction, and the following rules shall apply:
The Board may, in its sole discretion, prior to the effective date of
the covered transaction, (1) make each outstanding Option exercisable in
full, (2) remove the restrictions from each outstanding share of Restricted
Stock, (3) cause the Company to make any payment and provide any benefit each
outstanding Deferred Stock Award, Performance Award and Supplemental Grant
which would have been made or provided with the passage of time had the
transaction not occurred and the Participant not suffered a Status Change (or
died), and (4) forgive all or any portion of the principal of or interest on
a Loan.
If an outstanding Award is subject to performance or other
conditions (other than conditions relating to the mere passage of time and
continued employment) which will not have been satisfied at the time of
the covered transaction, the Board may in its sole discretion remove such
conditions. If it does not do so, however, such Award will terminate as
of the date of the covered transaction.
9
With respect to an outstanding Award held by a participant who,
following the covered transaction, will be employed by or otherwise
providing services to a corporation which is a surviving or acquiring
corporation in such transaction or an affiliate of such a corporation, the
Board may arrange to have such surviving or acquiring corporation or
affiliate grant to the Participant a replacement award which, in the
judgment of the Board, is substantially equivalent to the Award.
No Award (other than an Award in the form of an outright transfer of
cash or Unrestricted Stock) may be transferred other than by will or by
the laws of descent and distribution, and during an employee's lifetime an
Award requiring exercise may be exercised only by the Participant (or in
the event of the Participant's incapacity, the person or persons legally
appointed to act on the Participant's behalf).
THE BOARD OF DIRECTORS HAS APPROVED THE AMENDMENTSAMENDMENT TO THE 1992 EQUITY
INCENTIVE PLAN TO EXTEND THE PLAN AN ADDITIONAL FIVE YEARS AND RECOMMENDS
A VOTE FOR THE APPROVAL AND RATIFICATION OF SUCH AMENDMENTS.AMENDMENT. SUCH APPROVAL
AND RATIFICATION REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
MAJORITY OF SHARES OF COMMON STOCK ENTITLED TO VOTE AND REPRESENTED IN
PERSON OR BY PROXY AT THE MEETING.
10
EXECUTIVE OFFICERS
The following table lists the present executive officers of the
Company as of the date hereof and the capacities in which they serve:
Name of Individual Capacity
------------------ --------
Robert L. Knauss Chief Executive Officer
James W. Goodchild Chief Operating and Financial Officer
Thomas E. Glenister President, Aviation Group
Jo Ann JohnsonDavid A. Grossman Corporate Secretary
Biographical information with respect to Messrs. Knauss and
Goodchild is provided under Item 1 above. Officers are elected by and
serve at the direction and discretion of the Board of Directors. There
are no family relationships between or among any executive officers,
directors or director nominees.
Thomas E. GlenisterDavid A. Grossman (age 46). Mr. Glenister34) has served as president of the aviation groupcomptroller since November
1995 and as corporate secretary since December 1996. From 1985 to 1995,
Mr. Grossman was Audit Senior Manager for the Company since October 1994
and is the Company's liaison to BIA and servesDeloitte & Touche LLP.
Mr. Grossman was certified as the Company's
advisor to BIA. From September 1988 through September 1994,a CPA in 1986. Mr. Glenister was employed by Northwest Airlines. While at Northwest
Airlines, Mr. Glenister was the director of several major business
development projects including the establishment of a heavy
maintenance facility at Shanghai, China and the construction of a
heavy maintenance facility at Duluth, Minnesota. In addition to
project management responsibility, Mr. Glenister had public
relations and financial planning responsibility for these project.
Mr. Glenister also had considerable experience at Northwest AirlinesGrossman graduated from
Indiana University in the areas of flight operations and marketing. Mr. Glenister
developed the first all computer based pilot training program and
marketed it worldwide. Prior to joining Northwest Airlines, Mr.
Glenister served for 21 years in the U.S. Air Force. Mr. Glenister
received an MBA from New Hampshire College and1985 with a B.S. degree in accounting.
Other Key Personnel
The Company employs a number of persons to develop, manage, and
operate its aviation-related interests. They are assigned to the
Company's different ventures to manage operations, develop business
managementopportunities and to train local specialists.
Donald D. Janacek (age 28) is assigned to manage AIRO Catering
Services and to develop new business prospects in the Eastern European
region. He has been employed as manager of the Company's aviation group
since April 1994. From July 1993 to April 1994, Mr. Janacek was president
of Mosher International, an international investment firm. From August
1992 through July 1993, he was vice president of international marketing
for Dockside Incorporated, an international trading company focusing on
Eastern Europe and the former Soviet Union. Mr. Janacek graduated from
the University of New Hampshire.
Jo Ann JohnsonTexas at Austin in 1991 with a B.A. degree in economics.
Daniel P. Solon (age 38). Ms. Johnson66) has served as executive
assistantvice president of marketing
for the CompanyBIA in Europe since January 1993 and as secretary since
October 1993. Prior thereto, Ms. Johnson was employed by the
University of Houston Law Center since 1984has offices in London. Since
1982, Mr. Solon has been an independent corporate relations and marketing
consultant specializing in the capacityshipping and aviation industries. Mr.
Solon has over 30 years of assistant director ofexperience in the Russian Petroleum Legislation Projectinternational aviation
business and has worked in executive management positions with American
Airlines and TWA and as executive assistanta consultant to the Dean of thePeople Express. Mr. Solon
received an M.B.A. from Harvard University of Houston Law
Center.and a B.A. degree in Russian
studies from Fordham University.
STOCK OWNERSHIP
The following table sets forth, as of May 14, 1996,August 12, 1997, certain
information with respect to the beneficial ownership of the Company's
Common Stock by (i) each person known to the Company who beneficially owns
more than 5% of the Company's outstanding Common Stock; (ii) each director
and director nominee; (iii) alleach named executive officers;officer; and (iv) all
directors and officers as a group:
Shares Beneficially Owned
-------------------------
Name of Beneficial Owner(1)Owner (1) Number Percent
------ -------Jonas af Jochnick 2,500,000 (2) 23.31
Citibank (Switzerland) 1,000,000 16.9310.56
Paul R. Gregory 742,000(2) 12.09754,369 (3) 7.77
Robert L. Knauss 672,000(3) 11.07743,178 (4) 7.68
Homi M. Davier 615,000(4) 10.21
Richard H. Gibson 378,331(5) 6.02620,250 (5) 6.45
Juris Padegs 235,333(6) 3.93263,107 (6) 2.75
James W. Goodchild 155,334(7)245,939 (7) 2.56
Morris A. Sandler 95,000(8) 1.59125,000 (8) 1.31
Ted Reynolds 70,000(9) 1.18
Thomas Glenister 66,667(10) 1.12
Jo Ann Johnson 19,000(11) 0.3276,000 (9) 0.80
David A. Grossman 43,667 (10) 0.46
Adolf af Jochnick 0 0.00
All directors, director nominees and
executive officers as a group
(9(10 persons) 2,670,334(12) 39.06
117,871,510 (11) 45.99
(1) The business address of each individual is the same as the address of
the Company's principal executive offices except for Mr. Jonas af
Jochnick whose business address is Place Flagey 7, bte 7, 1050
Brussels, Belgium; Citibank (Switzerland) whose business address is P. O.P.O. Box
244, Zurich, Switzerland CH-8021; Mr. Gibson whose business address
is 2321 A. West Loop 281, Longview, Texas 75604; Mr. Padegs whose business
address is 345 Park Avenue, New York, New York 10154; Mr. Reynolds
whose business address is 1300 Post Oak Boulevard, Suite 770, Houston,
Texas 77056; and Mr. Sandler whose business address is 477 Madison Avenue,
8th Floor, New York, New York 10022.10022; and Mr. Adolf af Jochnick whose
business address is P.O. Box 71859, W. Hartford, Connecticut 06127.
(2) Includes an aggregate of 233,0001,250,000 shares subject to options and warrants which are
currently exercisable. Additionally, ORESA Ventures, N.V., an
affiliate of Mr. Jochnick, entered into a subscription agreement
with the Company in August 1997 to purchase an aggregate of
1,250,000 shares of Common Stock for $500,000. In connection with
this private placement, the Company will issue warrants to purchase
1,250,000 shares.
(3) Includes an aggregate of 142,000239,000 shares subject to options, warrants
and warrantsSeries A Preferred Stock which are currently exercisable and 25,000 shares to
be issued for services rendered.exercisable.
(4) Includes an aggregate of 115,000198,000 shares subject to options, warrants
and warrantsSeries A Preferred Stock which are currently exercisable.
(5) Includes an aggregate of 378,331140,250 shares subject to options, warrants
and warrantsSeries A Preferred Stock which are currently exercisable.
(6) Includes andan aggregate of 85,33385,666 shares subject to options, warrants and
Series A Preferred Stock which are currently exercisable.
(7) Includes 138,667142,000 shares subject to options, warrants and Series A
Preferred Stock which are currently exercisable, and 16,667
shares to be issued for services rendered..exercisable.
(8) Includes 70,000100,000 shares subject to options and a warrant which are
currently exercisable.
(9) Includes 20,000 shares subject to options which are currently
exercisable.
(10) Includes 40,00026,000 shares subject to options and warrants which are
currently exercisable and 26,667 shares to be issued
for services rendered.
(11)exercisable.
(10) Includes 19,00025,000 shares subject to options which are currently
exercisable.
(12)(11) Includes an aggregate of 863,0003,455,916 shares subject to options, warrants
and Series A Preferred Stock which are currently exercisable and 68,334 shares to be issued for services
rendered.exercisable.
COMPENSATION
The following table sets forth information with respect to the chief
executive officer and the only executive officersofficer of the Company who received
total annual salary and bonus for the fiscal year ended December 31, 1995,1996, in
excess of $100,000:
Summary Compensation Table
Long-Term Compensation
--------------------------
Annual Compensation (1) Securities
----------------------------------------- Restricted
Underlying
Name and Principal Fiscal All Other StockRestricted Options and
Position Year Salary Bonus Compensation Stock Awards and Warrants
- --------------------------------------------------------------------------------------------------------
Robert Knauss, Chief 19951996 $120,000 $75,000(2)$ 0 $0 $0 0
Chief Executive 1995 120,000 75,000 (2) 0 0 125,000 (4)
Executive(3)
Officer 1994 33,967 0 0 0 35,000
1993James Goodchild, 1996 $120,000 $ 0 $0 $0 0
Chief Operating and 1995 120,000 50,000 (2) 0 0 140,000 (3)
Financial Officer 1994 115,583 30,000 0 0 0
James Goodchild, Chief 1995 $120,000 $50,000(2) $0 $0 140,000 (4)
Operating and Financial 1994 115,583 30,000 0 0 50,000
Officer 1993 45,250 0 0 0 40,000
Thomas Glenister, 1995 $121,500 $50,000(2) $0 $0 80,000 (4)
President-Aviation 1994 35,000 0 0 60,000 (3) 20,000
Group 1993 -- -- -- -- --
_______________________
(1) None of the named executive officers received perquisites or other
benefits valued in excess of 10% of the total of reported annual
salary and bonus.
(2) The bonus for 1995 will consistconsists of cash payments of $37,500
$25,000 and $25,000
and the issuance of 25,000 16,667 and 16,667 shares of the Company's common
stock to Messrs. Knauss Goodchild and Glenister,Goodchild, respectively.
(3) The restricted stock award for Mr. Glenister in 1994 consists
of a grant of 20,000 shares of the Company's common stock of
which 10,000 shares vested in October 1995 and 10,000 shares
will vest in October 1996.
(4) Of these options and warrants, 35,000 50,000, and 20,00050,000 stock options were
originally granted in October 1994 to Messrs. Knauss Goodchild and Glenister,Goodchild,
respectively, at an exercise price of $2.875 per share. In August
1995, these options were repriced at $1.125 per share.
12
Employment Agreements
In January 1994, the Company entered into one-year employment
agreements with Messrs. Knauss and Davier which provide for an
annual base salary of $120,000 each. As of December 31, 1994,
Messrs. Knauss and Davier had received only an aggregate of $63,967
pursuant to these agreements due to the Company's lack of liquidity.
Each of Messrs. Knauss and Davier will receive an additional $40,000
under these agreements in 1995, and no additional amounts for 1994
will be paid. These agreements include provisions which prohibit
the employee from competing with or engaging in the same business as
the Company in any geographic area in which the Company is then
doing business for a period of one year following the expiration of
the employment period. The Company extended its agreement with Mr.
Knauss for an additional year on the same terms and expects to
extend the agreement again during 1996.
Stock Options
In September 1992, the Company adopted its 1992 Equity Incentive Plan
("Plan"), which was amended effective March 1995 and December 1995. The Plan
provides for the issuance of incentive stock options and non-qualified
options. An aggregate of 1,500,000 shares of the Company's Common Stock may
be issued pursuant to options granted under the Plan to employees, non-employeenon-
employee directors and consultants, subject to evergreen provisions included
in the Plan. The Plan is administered by the compensation committee of the
Company's Board of Directors. The compensation committee has the authority to
determine, among other things, the size, exercise price and other terms and
conditions of awards made under the Plan. Subject to certain restrictions,
the exercise price of incentive stock options may be no less than 100% of
fair market value of a share of Common Stock on the date of grant. As of the
date of this Prospectus,Proxy Statement, options to purchase an aggregate of 602,800589,000
shares were outstanding under the Plan. Such options include: (i) options
to purchase 247,000 shares of Common Stock at an exercise price of $1.125 per
share, which options are currently exercisable and expire in October 1999,
(ii) options to purchase 34,00032,000 shares of Common Stock at an exercise price
of $0.50 per share, which options are currently exercisable and expire in
October 1999; (iii) options to purchase 98,80042,000 shares of Common Stock at an
exercise price of $0.50 per share, which options vest ratably over a three-year period
commencing December 1994are currently exercisable and expire
in December 1999; (iv) options to purchase 213,000208,000 shares of Common Stock at
an exercise price of $1.375 per share, which options are currently
exercisable and expire in December 2000; and (v) options to purchase 10,000
shares of Common Stock at an exercise price of $1.875 per share, which
options are currently exercisable and expire in April 2001, (vi) options to
purchase 25,000 shares of common stock at an exercise price of $0.75 per
share, which options are currently exercisable and expire in September 2001,
and (vii) options to purchase 25,000 shares of common stock at an exercise
price of $0.8125 per share, which options are currently exercisable and
expire in December 2001. In August 1995, the Board of Directors repriced the
options that were previously exercisable for $2.875 per share to $1.125 per
share which is a price more consistent with current market prices. Such
repricing was in consideration of services rendered in lieu of granting
additional options to the holders.
In April 1995, the Company issued 150,421 shares of Common
Stock to a consultant at a price of $1.05 per share upon exercise of
an outstanding option. In July 1995, the Company issued 149,579
shares at $.80 per share and 18,000 shares at $0.50 per share to
consultants upon exercise of outstanding options. In December 1995
and January 1996, the Company issued an aggregate of 381,680 shares
of Common Stock to a consultant at a price of $.735 per share upon
exercise of an outstanding option.
The following table shows, as to the named executive officers,
information concerning individual grants of stock options and warrants during
1995.1996. These options and warrants are currently exercisable.
Option/Warrant Grants in Last Fiscal Year
Number of % of Total
Options/
Securities Options/Warrants
Underlying Granted to
Exercise
Options/Warrants Employees in Exercise Price Expiration
Name Granted in 19951996 Per Share Expiration Date
- -------------------------------------------------------------------------------
Robert L. Knauss 90,000 20.59 $1.375 December 2000
35,000 8.01 $1.125(1) October 199925,000 41.67 $0.75 May 2001
James W. Goodchild 90,000 20.59 $1.375 December 2000
50,000 11.44 $1.125(1) October 1999
Thomas Glenister 60,000 13.73 $1.375 December 2000
20,000 4.58 $1.125(1) October 19990 0.00 N/A N/A
David A. Grossman 25,000 41.67 $0.75 September 2001
_______________________
(1) These options were originally granted in October 1994 at an
exercise price of $2.875 per share. In August 1995, these
options were repriced at $1.125 per share.
13
The following table shows, as to the named executive officers,
information concerning aggregate stock option and warrant exercises
during 19951996 and the stock option and warrant values as of December 31,
1995.1996.
Aggregated Option and Warrant Exercises in Last Fiscal Year
and Year End Option and Warrant Values
Number of Securities
Underlying Value of
Underlying Unexercised
Unexercised In-the-Money
Options/Warrants at Options/WarrantsWarrnats at
Shares December 31, 19951996 December 31, 1995
Shares1996
Acquired on Value Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------
Robert L. Knauss 0 $0 79,500/60,000 $44,000/134,500/30,000 $0/$22,5000
James W. Goodchild 26,666 0 130,334/30,000 $2,083/$0
David A. Grossman 0 0 113,667/73,333 $81,084/$39,166
Thomas Glenister 25,000/0 $0/$0 40,000/40,000 $20,000/$15,000
The Company has not established, nor does it provide for, long-
termlong-term
incentive plans or defined benefit or actuarial plans.
Certain Transactions
In March 1991, Messrs. Knauss, Davier and Gregory were each
issued 500,000 shares of Common Stock for $37,000 each. In March
1991, Mr. Padegs subscribed for, and subsequently purchased, for an
aggregate amount of $88,140, a total of 150,000 shares of Common
Stock. In April 1992, Mr. Reynolds purchased 40,000 shares for
$100,000. In June 1993, Mr. Reynolds purchased an additional 10,000
shares of Common Stock for $25,000.
From March 1991 through December 1994, Mr. Knauss advanced to
the Company a total of $253,220 of which $128,220 was on an interest-
free basis. Of this amount, $40,000 was repaid in 1993, and $88,220
was repaid in May 1994 with proceeds from the Company's initial
public offering. In October and December 1994, Mr. Knauss advanced
an aggregate of $125,000, bearing interest at a rate of 10% per
annum. In connection with these advances, the Company issued Mr.
Knauss warrants to purchase an aggregate of 12,500 shares of Common
Stock at a price of $1.00 per share, which warrants became
exercisable in August 1995 and expire in October 1999.
Effective June 30, 1995, $125,000 in aggregate principal amount of
notes payable to Mr. Knauss was converted tointo 12,500 shares of Preferred
Stock, convertible into 62,500 shares of Common Stock. In August
1995, the Board of Directors approved a bonus to Mr. Knauss for his
efforts in connection with the Air Baltic transaction. Such bonus
will consist of 25,000 shares to be issued and a $37,500 cash
payment to be paid in 1996. In December 1995,
Mr. Knauss advanced an aggregate of $20,000 bearing interest at a rate of
10% per annum, which was repaid in March 1996. In connection with this
advance, the Company issued Mr. Knauss warrants to purchase an aggregate
of 2,000 shares of Common Stock at a price of $1.00 per share, which
warrants are currently exercisable and expire in December 2000. In December
1995,May
1996, Mr. Knauss loaned an aggregate of $250,000 to the Company, grantedwhich
loan bears interest at a rate of 14% per annum. In connection with this
loan, Mr. Knauss received a warrant to purchase 25,000 shares of Common
Stock at an exercise price of $0.75 per share, which warrant became
exercisable in May 1996 and expires in May 2001. Mr. Knauss has received
renewal fees aggregating $25,000 for renewals of this loan through March
12, 1997. In May 1997, Mr. Knauss advanced an aggregate of $10,000,
bearing interest at a rate of 12% per annum. In connection with this
advance, the Company issued Mr. Knauss warrants to purchase 90,000an aggregate
of 1,000 shares of Common Stockcommon stock at a price of $1.375$0.50 per share, for services
rendered, which
one-third of the warrants becameare currently exercisable and expire in December 1995, one-third in December 1996, and one-third in December
1997.
From January 1992 throughMay 2002.
In March 1995, the Gregory Family Partnership, an affiliate of Dr.
Gregory, advanced to the Company a
total of $447,161, of which $212,161 was on an interest-free basis.
Of this amount, $53,614 was repaid in 1993, and $158,547 was repaid
in May 1994 with proceeds from the Company's initial public
offering. In October and December 1994, this affiliate advanced an
aggregate of $135,000, bearing interest at a rate of 10% per annum,
and maturing on March 31, 1996. In connection with these advances,
the Company issued Dr. Gregory's affiliate warrants to purchase an
aggregate of 13,500 shares of Common Stock at a price of $1.00 per
share, which warrants became exercisable in August 1995 and expire
in October 1999. In March 1995, this affiliate loaned an additional $100,000 to the Company, which loan bears interest at a
rate of 10% per annum. In connection with this loan, Dr. Gregory's
affiliate received a warrant to purchase 10,000 shares at an exercise
price of $1.00 per share, which warrant became exercisable in August 1995
and expires in October 1999. Effective June 30, 1995, $235,000 in
aggregate principal amount of notes payable to Dr. Gregory or his
affiliates was converted to 23,500 shares of Preferred Stock, which are
convertible into 117,500 shares of Common Stock. In December 1995, an
affiliate of Dr. Gregory advanced an aggregate of $20,000 bearing interest
at a rate of 10% per annum, which was repaid in March 1996. In connection
with this advance, the Company issued Dr. Gregory's affiliate warrants to
purchase an aggregate of 2,000 shares of Common Stock at a price of $1.00
per share, which warrants are currently exercisable and expire in December
2000. 14
From January 1992 through October 1994,In May 1997, Mr. DavierGregory and the Gregory Family Partnership
advanced to
the Company a totalan aggregate of $150,736, of which $100,736 was on an
interest-free basis. Of this amount, $14,980 was repaid in 1993 and
$85,756 was repaid in May 1994 with proceeds from the Company's
initial public offering. The remaining balance of $50,000 was
advanced in October 1994, bears$10,000, bearing interest at a rate of 10%12% per
annum. In connection with the October 1994this advance, the Company issued Mr. Davier a warrantGregory
and the Gregory Family Partnership warrants to purchase 5,000an aggregate of
1,000 shares of Common Stockcommon stock at a price of $1.00$0.50 per share, which warrant becamewarrants
are currently exercisable and expire in August 1995
and expires in October 1999.May 2002.
Effective June 30, 1995, the 50,000a $50,000 note payable to Mr. Davier was
converted to 5,000 shares of Preferred Stock, which are convertible into
25,000 shares of Common Stock.
In June 1993, Baltic World Holdings, a company owned by Messrs.
Davier, Knauss and Gregory, on behalf of the Company, advanced
$144,000 to BIA, bearing interest at a rate of 12% per annum,
payable in four quarterly payments of principal and accrued
interest. In September 1993, such affiliate assigned all of its
rights as creditor to the Company and to date BIA has made no
payments to the Company. In addition, this affiliate originally
owned 50% of BCS on behalf of the Company, and, in September 1993,
assigned its 50% interest in BCS to the Company, effective March
1994.
Consulting fees in the amount of $10,000, $20,000 and $0 were
paid to Capricorn Travel, a company controlled by Mr. Davier, during
1993, 1994 and 1995, respectively.
During 1993, Messrs. Knauss, Davier and Gregory pledged 15% of
the then issued and outstanding shares of Company Common Stock to
secure the repayment of an aggregate principal amount of $623,340 of
bridge loan financing. Such bridge loans were repaid in May 1994
with proceeds from the Company's initial public offering and the
pledged shares were released.
In May 1994, Baltic World Holdings, a company owned by Messrs.
Knauss, Davier and Gregory, leased two Boeing 727 aircraft from an
unaffiliated third party for an aggregate monthly lease payment of
$61,378. These airplanes arewere subleased by this affiliate to BIA for an
aggregate monthly lease payment of $80,000. The Company believes
that this arrangement is fair for the following reasons: (i) the
Company guarantees the lease payments and manages the lease of the
aircraft; (ii) as a foreign entity, it is unlikely that BIA would
have had access to the aircraft without the assistance of the
Company; and (iii) the Company was able to negotiate a favorable
lease rate. The affiliate has assigned all of
the revenues and expenses under the leases and subleases to the Company
and the Company guaranteesguaranteed the affiliate's obligations under the leases.
The leases and subleases terminate in July 1996. The Company has
negotiated with the owner ofreturned the aircraft to return the aircraft
prior to the end of the leases.
In October 1994, Mr. Padegs advanced to the Company $25,000.
This indebtedness bears interest at a rate of 10% per annum. In
connection with the October 1994 advance, the Company issued Mr.
Padegs a warrant to purchase 2,500 shares of Common Stock at a price
of $1.00 per share, which warrant became exercisableowner in August 1995
and expires in October 1999.1996.
In March 1995, Mr. Padegs advanced $50,000 to the Company, which
loan bears interest at a rate of 10% per annum. In connection with this
loan, Mr. Padegs received a warrant to purchase 5,000 shares at an
exercise price of $1.00 per share, which warrant became exercisable in
August 1995 and expires in October 1999. Effective June 30, 1995, $75,000
in aggregate principal amount of notes payable to Mr. Padegs was converted
to 7,500 shares of Preferred Stock, which are convertible into 37,500
shares of Common Stock. In December 1995, Mr. Padegs advanced an
aggregate of $20,000, bearing interest at a rate of 10% per annum, which
was repaid in March 1996. In connection with this advance, the Company
issued Mr. Padegs warrants to purchase an aggregate of 2,000 shares of
Common Stock at a price of $1.00 per share, which warrants are currently
exercisable in December 1995 and expire in December 2000. In December 1994,October 1996, Mr. GoodchildPadegs
advanced to the Company
$50,000. This indebtedness bearsan aggregate of $10,000, bearing interest at a rate of 10%12% per
annum. In connection with this advance, the Company issued Mr. Goodchild received a
warrantPadegs
warrants to purchase 5,000an aggregate of 1,000 shares of common stock at an exercisea
price of $1.00$0.5625 per share, which warrant becamewarrants are currently exercisable in August 1995 and
expiresexpire in October 1999.2001. In May 1997, Mr. Padegs advanced an aggregate of
$10,000, bearing interest at a rate of 12% per annum. In connection with
this advance, the Company issued Mr. Padegs warrants to purchase an
aggregate of 1,000 shares of common stock at a price of $0.50 per share,
which warrants are currently exercisable and expire in May 2002.
In May 1997, Mr. Reynolds advanced an aggregate of $10,000, bearing
interest at a rate of 12% per annum. In connection with this advance, the
Company issued Mr. Reynolds warrants to purchase an aggregate of 1,000
shares of common stock at a price of $0.50 per share, which warrants are
currently exercisable and expire in May 2002.
Effective June 30, 1995, thea $50,000 note payable to Mr. Goodchild was
converted to 5,000 shares of Preferred Stock, which are convertible into
25,000 shares of Common Stock. In August
1995, the Board of Directors approved a bonus to Mr. Goodchild for
his efforts in connection with the Air Baltic transaction. Such
bonus will consist of 16,667 shares to be issued and a $25,000 cash
payment to be paid in 1996. In December 1995, Mr. Goodchild advanced an
aggregate of $20,000, bearing interest at a rate of 10% per annum, which
was repaid in March 1996. In connection with this advance, the Company
issued Mr. Goodchild warrants to purchase an aggregate of 2,000 shares of
Common Stock at a price of $1.00 per share, which warrants are currently
exercisable and expire in December 2000.
In December 1995, the Company granted Mr. Goodchild
warrants to purchase 90,000 shares of Common Stock at a price of
$1.375 per share, which one-third of the warrants became exercisable
in December 1995, one-third in December 1996, and one-third in
December 1997.
15
In December 1994, Mr. Knauss guaranteed a $50,000 bank loan to the
Company. In March 1995, the principal amount of this loan was increased
to $100,000, the interest rate was increased from 10.5% to 11.25% per
annum and Mr. Davier was added as a guarantor. The balance of the loan is
$75,000$41,000 at December 31, 1995 which matured in
January 1996. The Company has renegotiated an extension to July
1996 with a $25,000 principal reduction whichJune 30, 1997 and is being amortized through monthly payments
until the Company has made.end of 1997.
In June 1995, Mr. Sandler purchased 25,000 shares of Common Stock
for $25,000. In August 1995, the Company issued a warrant to purchase
55,000 shares at an exercise price of $1.00 per share to Mr. Sandler for
services rendered prior to his election to the board. This warrant
expires in August 2000.
In July 1997, ORESA Ventures N.V., an affiliate of Mr. Jonas af
Jochnick, advanced $500,000 to the Company, bearing interest at a rate of
13% per annum. This loan is due the earlier of November 11, 1997 or the
date in which the funding of an equity placement in the aggregate amount
of $2,500,000 is received by the Company.
In August 1997, Celox S.A., an affiliate of Mr. Jonas af Jochnick,
purchased an aggregate of 1,250,000 shares of Common Stock for $500,000.
In connection with this private placement, the Company issued warrants to
purchase 1,250,000 shares at an exercise price of $0.65 per share, which
warrants are currently exercisable and expire in August 2002.
Additionally in August 1997, ORESA Ventures, N.V. entered into a
subscription agreement with the Company to purchase an aggregate of
1,250,000 shares of Common Stock for $500,000. In connection with this
private placement, the Company will issue warrants to purchase 1,250,000
shares at an exercise price of $0. 65 per share, which warrants will be
currently exercisable and expire in August 2002. The Company expects the
funding of this $500,000 from ORESA Ventures, N.V. to occur during late
August. The shares underlying this private placement have not been issued
as of the record date, and therefore, are not entitled to vote at the
Meeting.
Management believes that all prior related party transactions are on
terms no less favorable to the Company as could be obtained from
unaffiliated third parties. All ongoing and future transactions with such
persons, including any loans to such persons, will be approved by a
majority of disinterested, independent outside members of the Company's
Board of Directors.
OTHER MATTERS
Management is not aware of any other matters to be presented for
action at the Meeting. However, if any other matter is properly
presented, it is the intention of the persons named in the enclosed form
of proxy to vote in accordance with their best judgment on such matter.
COST OF SOLICITATION
The Company will bear the costs of the solicitation of proxies from
its stockholders.shareholders. In addition to the use of mail, proxies may be
solicited by directors, officers and regular employees of the Company in
person or by telephone or other means of communication. The directors,
officers and employees of the Company will not be compensated additionally
for the solicitation but may be reimbursed for out-of-pocket expenses in
connection with the solicitation. Arrangements are also being made with
brokerage houses and any other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of the
Company, and the Company will reimburse the brokers, custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses.
STOCKHOLDERSHAREHOLDER PROPOSALS
Proposals by stockholdersshareholders intended to be presented at the 19971998
Annual Meeting of StockholdersShareholders must be received by the Company for
inclusion in the Company's proxy statement and form of proxy relating to
that meeting no later than January 18, 1997.1998.
By Order of the Board of Directors
/s/ Jo Ann Johnson
Jo Ann Johnson,David A. Grossman, Corporate Secretary
Houston, Texas
May 24, 1996
16August 18, 1997
PROXY BALTIC INTERNATIONAL USA, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 12, 1997
The undersigned hereby appoints Robert L. Knauss and James W. Goodchild the
true and lawful attorneys, agents and proxies of the undersigned with full
power of substitution for and in the name of the undersigned, to vote all the
shares of Common Stock of BALTIC INTERNATIONAL USA, INC. which the undersigned
may be entitled to vote at the Annual Meeting of Shareholders of BALTIC
INTERNATIONAL USA, INC. to be held at the University Club, Library Room, 5051
Westheimer, Post Oak Tower, Suite 355, Houston, Texas on Friday, September 12,
1997, 9:00 a.m., and any and all adjournments thereof, with all of the powers
which the undersigned would possess if personally present, for the following
purposes (the Board of Directors recommends a vote FOR each item):
1. Approval of the election of nine Directors for the terms set forth in the
attached Proxy Statement.
CLASS I
NOMINEES:
Homi M. Davier
Paul R. Gregory
Morris A. Sandler
CLASS II
NOMINEES:
James W. Goodchild
Adolf af Jochnick
Ted Reynolds
CLASS III
NOMINEES:
Jonas af Jochnick
Robert L. Knauss
Juris Padegs
[ ] FOR ALL NOMINEES
[ ] WITHHOLD ALL NOMINEES
[ ] FOR ALL NOMINEES
EXCEPT THE FOLLOWING:
_________________________________________
For Against Abstain
2. Approval and ratification of amendments to
the Articles of Incorporation [ ] [ ] [ ]
(Continued and to be signed on other side)
(Continued from other side)
For Against Abstain
3. Ratification of the selection of Arthur
Andersen as independent accountants of the
Company for the fiscal year ending
December 31, 1997. [ ] [ ] [ ]
4. Approval and ratification of an amendment to
the 1992 Equity Incentive Plan. [ ] [ ] [ ]
5. The proxies are authorized to vote as they
determine in their discretion upon such other
business as may properly come before the
meeting.
This Proxy will be voted for the choices specified. If no choice is specified
for Items 1, 2, 3 and 4, this Proxy will be voted FOR these items.
Receipt of the Notice of Annual Meeting and Proxy Statement is hereby
acknowledged.
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
DATED: ___________________________________
_____________________________
(Signature)
_____________________________
(Signature if jointly held)
Please sign exactly as name
appears on stock certificate(s).
Joint owners should each sign.
Trustees and others acting in a
representative capacity should
indicate the capacity in which
they sign.