SCHEDULE 14A INFORMATION
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of the Securities Exchange Act of 1934
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Baltic InternationalBALTIC INTERNATIONAL USA, Inc.INC.
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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 22, 1998
Notice is hereby given that the 19961998 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 9:0030 a.m. on June 6,
1996September 22, 1998 for the following purposes:
1. To elect seventhree Class I directors;
2. To ratify the selection of BDO Seidman,Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31, 1996;1998;
3. To approve and ratify an amendment to the 1992 Equity
Incentive Plan; and
4. 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 21,
1998 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
David A. Grossman, Corporate Secretary
May 24, 1996August 28, 1998
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 19961998 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
9:0030 a.m. on June 6, 1996,September 22, 1998, 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 28, 1998.
The close of business on May 14, 1996,August 21, 1998, 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
5,937,06815,586,785 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 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 2 and 3.Item 2. 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 SEVEN DIRECTORSTHREE CLASS I DIRECTORS; (ii) TO RATIFY THE SELECTION OF
BDO SEIDMAN,ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1996;1998; AND (iii) TO APPROVE AND RATIFY THE AMENDMENT TO
THE 1992 EQUITY INCENTIVE PLAN; AND (iv) 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 Corporate 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, 1995,1997, 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,
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 SEVENTHREE CLASS I DIRECTORS
Directors and Nominees
The directors are elected annually by the stockholders 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.
The Bylaws of the Company provide that the number of directors will be
determined by the Board of Directors. The stockholders will elect sevenCompany's Articles of Incorporation
require that the election of directors be in three classes when the Board
consists of nine persons. The term of office of Class I directors expires at
this Annual Meeting of Shareholders to be held September 22, 1998; the term of
office of Class II directors expires at the 1999 Annual Meeting of
Shareholders (i.e., one year of the term remaining); and the term of office of
the Class III directors expires at the 2000 Annual Meeting of Shareholders
(i.e., two years of the term remaining).
The Board of Directors currently consists of nine directors. Three
nominees for Class I Directors are proposed to be elected at this Annual
Meeting to serve for a three-year term to expire at the coming year.2001 Annual Meeting of
Shareholders and until their successors are chosen and have qualified. All of
the director nominees, except for James W.
Goodchild,David A. Grossman, 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,
except for Jonas af Jochnick and Adolf af Jochnick who are brothers.
The following table sets forth with respect to each nominee named herein
and each director whose term of office will continue for a period after the
Annual Meeting: (i) the name and age of such person; and (ii) the year during
which such person first became a director of the Company. 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 third succeeding
annual meeting (2001)
Homi M. Davier 50 1991
Paul R. Gregory 57 1991
David A. Grossman 35 N/A
Class II - Nominees; if elected, terms expire at the first succeeding
annual meeting (1999)
James W. Goodchild 43 1996
Adolf af Jochnick 69 1997
Ted Reynolds 67 1993
Class III - Nominees; if elected, terms expire at the second succeeding
annual meeting (2000)
Jonas af Jochnick 61 1997
Robert L. Knauss (age 64). 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 in67 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, as one of the two United
States directors for the Mexico Fund since 1985, and as a
director of Allwaste, Inc. since 1986. Securities of the Mexico
Fund, Allwaste, Inc. and Equus Investments, Inc. are registered
under 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
member of the Executive Committee.
Homi M. Davier (age 47).Juris Padegs 66 1993
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. Gregory has served as vice chairman of the board of the
Company since its inception in March 1991. Dr. Gregory is also a
member of the Executive Committee.
Juris Padegs (age 64).economies.
Mr. Padegs serves as vice chairman
of the board of BIA. Mr. Padegs has served as a managing
director of Scudder, Stevens & Clark, an international investment
and management firm, since 1985 and has been employed with
Scudder, Stevens & Clark since 1964. 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 Iberian 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-
America Grain Commodities since 1976. He recently 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 of
Global TeleSystems Group, Inc., an independent telecommunications
company in Russia, since 1994. 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. Mr. Sandler
served as vice president 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. 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. GoodchildGrossman has served as chief financial officer since September 1997
and as corporate secretary since December 1996. He served as comptroller of
the Company from November 1995 to September 1997. From 1985 to 1995,
Mr. Grossman was Audit Senior Manager for Deloitte & Touche LLP. Mr. Grossman
was certified as a CPA in 1986. Mr. Grossman graduated from Indiana
University in 1985 with a B.S. degree in accounting.
Mr. Goodchild has been senior credit officer of AMRESCO Builders Group,
Inc. since March 1998. He served as president of the Company from September
1997 and as chief operating officer sincefrom October 1994 anduntil March 1998. He
served as chief financial officer of the Company sincefrom September 1993.1993 until
September 1997. 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.
3Mr. Adolf 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. Reynolds has been president of Houston Grain Company since 1983 and
vice president of Mid-America Grain Commodities since 1976. He also 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 is also a member of the Audit Committee
and Compensation Committee.
Mr. Jonas af Jochnick, a Swedish citizen, has been 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 Stockholm Stock Exchange,
since January 1995. Since June 1990, he has been chairman of the board and
chief executive officer of 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. Knauss has served as chief executive officer since January 1994.
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. He was elected as a director of Philip Services Corp. in 1997
following the merger of Allwaste, Inc. and Philip Services Corp. and was
elected chairman of the board of Philip Services Corp. in May 1998.
Securities of the Mexico Fund, Philip Services Corp. and Equus Investments,
Inc. are registered under the Securities Exchange 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. Padegs served as a managing director of Scudder, Stevens & Clark, an
international investment and management firm from 1985 to 1996, has been
employed with Scudder, Stevens & Clark since 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 and the Brazil 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 is also a member
of the Audit Committee and Compensation Committee.
Meetings and Committees of the Board of Directors Committees and Meetings
The Board of Directors held twofour meetings in 1995, and1997. During 1997, each
director of the Company was in attendance. The Executive Committeemember of the Board reviewsof Directors, except for Dr. Gregory, attended at least
75% of all meetings of the Board of Directors and monitorscommittees of the operating decisions and
strategiesBoard of
management. The Executive Committee held two meetings
during 1995.Directors of which such director is a member. 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, Davier and Adolf af Jochnick, held
one meeting during 1995.1997. 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,
Gregory and Morris A. Sandler, held twoone meeting during 1997. The Nominating
Committee selects director nominees for election to the Board of Directors.
The Nominating Committee consisting of Messrs. Knauss, Jonas af Jochnick and
Padegs, held no meetings during 1995.in 1997.
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. In December 1996, Messrs. Davier, Gregory, Padegs,
Reynolds and Reynolds haveSandler each received options to purchase 5,000 shares of Common
Stock pursuant to this arrangement.at a price of $0.8125 per share. Such options expire in December 2001.
In addition, Mr. PadegsDecember 1997, Adolf af Jochnick and Jonas af Jochnick each received
an optionoptions to purchase 5,00010,000 shares of Common Stock for
consulting services rendered. Such options are exercisable for
$1.125common stock at a price of $0.40625 per
share and expire in October 1999. In December 1995,
Messrs. Davier, Gregory, Padegs, Reynolds and Sandler each received
options to purchase 15,0005,000 shares of Common Stockcommon stock at a price of $1.375$0.40625 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.share. 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. 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 subject to
the filing and reporting requirements of2002.
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, 1997 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-REFERENCEDTHREE CLASS I 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 RATIFY THE SELECTION OF BDO SEIDMAN,ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 19961998
The Board of Directors has approved the engagement of BDO
Seidman,Arthur Andersen LLP
as independent auditors for the consolidated financial statements for the
fiscal year ending December 31, 1996 consolidated financial statements.1998. The Board of Directors wishes to obtain
from the stockholdersshareholders a ratification of the Board's action in appointing
BDO Seidman,Arthur Andersen LLP as independent auditors of the Company for the fiscal year
ending December 31, 1996.1998. The engagement of BDO Seidman,Arthur Andersen LLP for audit
services has been approved by the Board itself.
BDO Seidman LLP's report on the Company's consolidated
financial statements for 1995 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 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,Arthur Andersen LLP as independent
accountants for fiscal 19961998 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 19961998
will be permitted to stand unless the Board of Directors finds other good
reason for making a change.
4
Representatives of BDO Seidman,Arthur Andersen LLP 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,ARTHUR ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS OF THE COMPANY
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996.1998. 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 3
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 stockholders of the Company in February
1994. The Plan, as amended in August 1995, authorized the grant
thereunder of options to purchase up to 800,000 shares of Common
Stock of the Company. In December 1995, the Board of Directors
determined it to be in the best interest of the Company that the
Plan be amended to increase the number of shares subject to the Plan
to 1,500,000 and to add evergreen provisions to the Plan. The
effect of this increase will be to allow the Company to grant
additional options to current and future executives and other
employees, and for general business purposes. As of the record
date, options to purchase 602,800 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, the Board of Directors approved these
amendments to the Plan, and registered the shares subject to the
Plan under the Securities Act of 1933 pursuant to a registration
statement on Form S-8. See "Compensation - Stock Options." The
Board of Directors is seeking approval and ratification of these
amendments from the Company's stockholders. 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.
General Information
The Plan was adopted by the Board of Directors of the Company
in September 1992 and was approved and ratified by the stockholders
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 stockholders 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, 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. 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 stockholders other than normal cash
dividends. Effective December 1, 1995 and continuing through
September 1997, 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.
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,
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 stockholders of the Company, effectuate a change
for which stockholder 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 wil 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 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 AMENDMENTS TO THE 1992
EQUITY INCENTIVE PLAN AND RECOMMENDS A VOTE FOR THE APPROVAL AND
RATIFICATION OF SUCH AMENDMENTS. 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. GoodchildDavid A. Grossman Chief Operating and Financial Officer Thomas E. Glenister President, Aviation Group
Jo Ann Johnsonand Corporate Secretary
Biographical information with respect to Messrs. Knauss and Goodchild isGrossman are
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. Glenister (age 46). Mr. Glenister has served as
president of the aviation groupnominees, except for the Company since October 1994Jonas af Jochnick and is the Company's liaison to BIA and serves as the Company's
advisor to BIA. From September 1988 through September 1994, 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 Airlines
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 and a B.S. degree in
business management from the University of New Hampshire.
Jo Ann Johnson (age 38). Ms. Johnson has served as executive
assistant for the Company since January 1993 and as secretary since
October 1993. Prior thereto, Ms. Johnson was employed by the
University of Houston Law Center since 1984 in the capacity of
assistant director of the Russian Petroleum Legislation Project and
as executive assistant to the Dean of the University of Houston Law
Center.Adolf af Jochnick who are brothers.
STOCK OWNERSHIP
The following table sets forth, as of May 14, 1996,August 21, 1998, 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 12,510,000 (2) 57.26
Citibank (Switzerland) 1,000,000 16.936.42
Robert L. Knauss 1,100,749 (3) 6.88
Paul R. Gregory 742,000(2) 12.09
Robert L. Knauss 672,000(3) 11.07897,304 (4) 5.62
Homi M. Davier 615,000(4) 10.21
Richard H. Gibson 378,331(5) 6.02648,027 (5) 4.11
James W. Goodchild 482,976 (6) 3.05
Juris Padegs 235,333(6) 3.93
James Goodchild 155,334(7) 2.56332,129 (7) 2.11
David A. Grossman 131,667 (8) 0.84
Morris A. Sandler 95,000(8) 1.59130,000 (9) 0.83
Ted Reynolds 70,000(9) 1.18
Thomas Glenister 66,667(10) 1.12
Jo Ann Johnson 19,000(11) 0.32114,000 (10) 0.73
Adolf af Jochnick 10,000 (11) 0.06
All directors director nominees
and executive officers
as a group (9(10 persons) 2,670,334(12) 39.06
1116,356,851 (12) 69.75
(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 Waterloo Office Park, Building O,
Dreve Richelle, 161, B-1410 Waterloo, Belgium; Citibank (Switzerland)
whose business address is 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 233,0006,260,000 shares subject to warrants which are
currently exercisable. Celox S.A., which is 100% owned by Jonas af
Jochnick, owns 2,500,000 shares and 2,500,00 warrants. ORESA Ventures,
N.V., an affiliate of Mr. Jochnick, owns 3,750,000 shares and 3,750,000
warrants.
(3) Includes an aggregate of 423,720 shares subject to options, warrants and
Series A Preferred Stock which are currently exercisable. Excludes an
aggregate of 183,525 shares subject to options which are not currently
exercisable and shares to be issued for services to be rendered.
(4) Includes an aggregate of 381,935 shares subject to options, warrants and
Series A Preferred Stock which are currently exercisable.
(5) Includes an aggregate of 175,598 shares subject to options, warrants and
Series A Preferred Stock which are currently exercisable.
(6) Includes an aggregate of 273,348 shares subject to options, warrants and
Series A Preferred Stock which are currently exercisable. Excludes an
aggregate of 108,000 shares subject to options which are not currently
exercisable and shares to be issued for services to be rendered.
(7) Includes 134,688 shares subject to options, warrants and Series A
Preferred Stock which are currently exercisable.
(8) Includes 69,000 shares subject to options and which are currently
exercisable. Excludes an aggregate of 66,000 shares subject to options
which are not currently exercisable and shares to be issued for services
to be rendered.
(9) Includes 105,000 shares subject to options and warrants which are
currently exercisable.
(3)(10) Includes an aggregate of 142,000 shares subject to options and
warrants which are currently exercisable and 25,000 shares to
be issued for services rendered.
(4) Includes an aggregate of 115,000 shares subject to options and
warrants which are currently exercisable.
(5) Includes an aggregate of 378,331 shares subject to options and
warrants which are currently exercisable.
(6) Includes and aggregate of 85,333 shares subject to options,
warrants and Preferred Stock which are currently exercisable.
(7) Includes 138,667 shares subject to options, warrants and
Preferred Stock which are currently exercisable, and 16,667
shares to be issued for services rendered..
(8) Includes 70,000 shares subject to options and a warrant which
are currently exercisable.
(9) Includes 20,00031,000 shares subject to options which are currently
exercisable.
(10) Includes 40,000 shares subject to options and warrants
which are currently exercisable and 26,667 shares to be issued
for services rendered.
(11) Includes 19,000an aggregate of 10,000 shares subject to options which are
currently exercisable.
(12) Includes an aggregate of 863,0007,863,288 shares subject to options, warrants
and Series A Preferred Stock which are currently exercisable. Excludes
an aggregate of 357,525 shares subject to options which are not
currently exercisable and 68,334 shares to be issued for services to be
rendered.
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, 1995,1997, 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, 1997 $120,000 $ 0 $0 $51,616 (4) 244,700 (4)
Chief 1995 $120,000 $75,000(2) $0 $0 125,000 (4)
Executive Officer 1994 33,967 0 0 0 35,000
19931996 120,000 0 0 0 0
Officer 1995 120,000 75,000 (2) 0 0 125,000 (5)
James Goodchild, 1997 $120,000 $ 0 $ 0 $30,375 (4) 144,000 (4)
President and Chief 1995 $120,000 $50,000(2) $0 $0 140,000 (4)
Operating and Financial 1994 115,583 30,0001996 120,000 $ 0 13,333 (3) 0 0
Operating Officer 1995 120,000 50,000 Officer 1993 45,250(2) 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 -- -- -- -- --140,000 (5)
_______________________
(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 awardOther compensation for Mr. GlenisterGoodchild in 19941996 consists of a grantpayment of 20,000the
exercise price by the Company on options that were exercised
(4) In August 1997, the Company granted 122,350 and 72,000 shares of the
Company's common stock and 244,700 and 144,000 options to Messrs. Knauss
and Goodchild, respectively, for services to be rendered. Half of which 10,000the
shares and options were vested in October 1995February 1998 and 10,000 shares
willthe remaining half
vest in October 1996.
(4)August 1999.
(5) Of these options and warrants, 35,000 50,000, and 20,00050,000 stock options wereere
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(6) Mr. Goodchild resigned as President 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 agreementsChief Operating Officer 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.March
1998.
Stock Options
In September 1992, the Company adopted its 1992 Equity Incentive Plan
("Plan"), which was amended effective March 1995, December 1995 and December 1995.September
1997. The Plan provides for the issuance of incentive stock options and non-qualifiednon-
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-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 602,8001,072,366 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. In August 1995,
the Board2001, (vi)
options to purchase 25,000 shares of Directors repriced the options that were previously
exercisable for $2.875 per share to $1.125common stock at an exercise price of
$0.75 per share, which is a
price more consistent with current market prices. Such repricing
wasoptions are currently exercisable and expire in
consideration of services rendered in lieu of granting
additionalSeptember 2001, and (vii) options to the holders.
In April 1995, the Company issued 150,421purchase 25,000 shares of Common
Stock to a consultantcommon stock at
aan exercise price of $1.05$0.8125 per share, upon exercise of
an outstanding option. In July 1995, the Company issued 149,579
shares at $.80 per sharewhich options are currently
exercisable and 18,000 shares at $0.50 per share to
consultants upon exercise of outstanding options. Inexpire 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.2001.
The following table shows, as to the named executive officers,
information concerning individual grants of stock options and warrants during
1995.1997. 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 19951997 Per Share Expiration Date
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Robert L. Knauss 90,000 20.59 $1.375 December 2000
35,000 8.01 $1.125(1) October 1999244,700 51.33 $0.421875 August 2004
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 1999144,000 30.21 $0.421875 August 2004
David A. Grossman 88,000 18.46 $0.421875 August 2004
_______________________
(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
19951997 and the stock option and warrant values as of December 31, 1995.1997.
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/Warrants at
Shares December 31, 19951997 December 31, 1995
Shares1997
Acquired on Value Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Robert L. Knauss 0 $0 79,500/60,000 $44,000/165,500/244,700 $0/$22,5000
James W. Goodchild 13,334 0 147,000/144,000 $0/$0
David A. Grossman 0 0 113,667/73,333 $81,084/113,000/88,000 $0/$39,166
Thomas Glenister 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.May 1996, Mr. Knauss Davier and Gregory were each
issued 500,000loaned an aggregate of $250,000 to the Company
bearing interest at a rate of 14% per annum, which was repaid in September
1997. In connection with this loan, Mr. Knauss received a warrant to purchase
25,000 shares of Common Stock for $37,000 each. In March
1991, Mr. Padegs subscribed for,at an exercise price of $0.75 per share, which
warrant become exercisable in May 1996 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,expires in May 2001. Mr. Knauss
advanced to
the Company a totalhas received renewal fees aggregating $25,000 for renewals 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 inloan. In
May 1994 with proceeds from the Company's initial
public offering. In October and December 1994,1997, Mr. Knauss advanced an aggregate of $125,000,$10,000, 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 to 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%12% per annum, which was repaid in March 1996.August 1997. In connection with
this advance, the Company issued Mr. Knauss warrants to purchase an aggregate
of 2,0001,000 shares of Common Stockcommon stock at a price of $1.00$0.50 per share, which warrants
are currently exercisable and expire in December 2000.May 2002.
In December
1995, the Company grantedMay 1997, Mr. Knauss warrants to purchase 90,000
shares of Common Stock at a price of $1.375 per share for services
rendered, which one-third of the warrants became exercisable in
December 1995, one-third in December 1996,Gregory and one-third in December
1997.
From January 1992 through 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,$10,000, 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%12% per annum, which was
repaid in March 1996.August 1997. In connection with this advance, the Company issued
Dr.
Gregory's affiliateMr. Gregory and the Gregory Family Partnership warrants to purchase an
aggregate of 2,0001,000 shares of Common Stockcommon stock at a price of $1.00$0.50 per share, which
warrants are currently exercisable and expire in December 2000.
14
From January 1992 throughMay 2002.
In October 1994,1996, Mr. DavierPadegs 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 interest at a rate of 10% per annum.
In connection with the October 1994 advance, the Company issued Mr.
Davier a warrant to purchase 5,000 shares of Common Stock at a price
of $1.00 per share, which warrant became exercisable in August 1995
and expires in October 1999. Effective June 30, 1995, the 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,$10,000, 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 are 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 guarantees the affiliate's obligations under the leases.
The leases and subleases terminate in July 1996. The Company has
negotiated with the owner of 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 exercisable in August 1995
and expires in October 1999. 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.August 1997. In
connection with this advance, the Company issued Mr. Padegs warrants to
purchase an aggregate of 2,0001,000 shares of Common Stockcommon 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, Mr. Goodchild advanced to the Company
$50,000. This indebtedness bears interest at a rate of 10% per
annum. In connection with this advance, Mr. Goodchild 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, the $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$0.5625
per share, which warrants are currently exercisable and expire in December 2000.October
2001. In December 1995,May 1997, Mr. Padegs advanced an aggregate of $10,000, bearing
interest at a rate of 12% per annum, which was repaid in August 1997. In
connection with this advance, the Company grantedissued Mr. GoodchildPadegs warrants to
purchase 90,000an aggregate of 1,000 shares of Common Stockcommon stock at a price of $1.375$0.50 per
share, which one-thirdwarrants 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, which was repaid in August 1997. In
connection with this advance, the Company issued Mr. Reynolds warrants becameto
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 December 1995, one-third in December 1996, and one-third in
December 1997.
15May 2002.
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$8,711 at December 31, 1995 which matured1997 and was
repaid in January 1996. The Company has renegotiated1998.
In July 1997, ORESA Ventures N.V., an extensionaffiliate of Jonas af Jochnick,
advanced $500,000 to July
1996 with a $25,000 principal reduction which the Company, has made.bearing interest at a rate of 13% per annum.
This loan was repaid in September 1997.
In June 1995, Mr. SandlerAugust and September 1997, Celox S.A., an affiliate of Jonas af
Jochnick, purchased 25,000an aggregate of 2,500,000 shares of Common Stock for
$25,000.$1,000,000. In August 1995,connection with this private placement, the Company issued
a warrantwarrants to purchase 55,0002,500,000 shares of Common Stock at an exercise price of
$1.00$0.65 per share, to
Mr. Sandler for services rendered prior to his election to the
board. This warrant expireswhich warrants are currently exercisable and expire in August
2000.
Management believes that all prior related party transactions
are on terms no less favorable2002. Additionally in August and September 1997, ORESA Ventures N.V.
purchased an aggregate of 3,750,000 shares of Common Stock for $1,500,000. In
connection with this private placement, the Company issued warrants to
purchase 3,750,000 shares of Common Stock at an exercise price of $0.65 per
share, which warrants will be currently exercisable and expire in August 2002.
In October 1997, ORESA Ventures N.V. advanced $2,000,000 to the
Company, as couldbearing interest at a rate of 13% per annum. Principal and interest
are due at the maturity date of January 29, 1999.
In April 1998, the Company obtained a line of credit in the aggregate
amount of $800,000 from ORESA Ventures N.V. and Celox S.A. This line of
credit matures on December 31, 1999 and any outstanding balance will bear
interest at a rate of 13%. No advances are to be obtained
from unaffiliated third parties. All ongoingmade under the line of
credit until the $2,000,000 loan to ORESA Ventures N.V. is repaid, and future
transactions with such persons, including any loans to such persons,
will be approvedthe
line of credit is secured by a majoritythe shares of disinterested, independent outside
members of the Company's Board of Directors.stock owned in AIRO.
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 19971999 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, 1997.1999.
By Order of the Board of Directors
/s/ Jo Ann Johnson
Jo Ann Johnson,DAVID A. GROSSMAN
David A. Grossman, Corporate Secretary
Houston, Texas
May 24, 1996
16August 28, 1998