aerocentury2020proxyAmend1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Amendment
No. 1
Filed by the Registrant ☒
Filed by a party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, For Use of the Commission Only (as permitted
by Rule 14a—6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material under Rule 14a-12
AeroCentury Corp.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
☐ Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction
applies:
(2)
Aggregate number of securities to which transactions
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and state how it
was determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:
▪☐
Fee paid previously with preliminary
materials:
☐
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
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(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed
Explanatory
Note: This Amendment No. 1 to Schedule 14A (this "Amendment")
is being filed solely to correct the table formatting in the
"SUMMARY COMPENSATION TABLE" which reported each officer's
compensation for 2018 and 2019 on a single line upon filing in
html. No other changes have been made to the body of the Proxy
Statement, and the table is correctly presented in the Proxy
Statement being mailed to the Company's
stockholders.
AEROCENTURY CORP.
NOTICE OF
2020 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 9, 2020
TO OUR
STOCKHOLDERS:
You are
cordially invited to attend the 2020 Annual Meeting of Stockholders
of AeroCentury Corp. (the “Company”), which will be
held at the Embassy Suites Hotel – San Francisco Airport
Waterfront, 150 Anza Blvd., Burlingame, California at 12:00 p.m.
(local time) on June 9, 2020, for the following
purposes:
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1.
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To elect two directors to the Company’s Board of
Directors;
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2.
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To
approve, in an advisory (non-binding) vote, the Company’s
executive compensation as disclosed in the accompanying Proxy
Statement;
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3.
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To
ratify the selection of BDO USA, LLP as independent registered
public accounting firm for the Company for the fiscal year ending
December 31, 2020; and
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4.
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To act
upon such other business as may properly come before the meeting or
any adjournment or postponement thereof.
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These
matters are more fully described in the Proxy Statement
accompanying this Notice.
Although
the 2020 Annual Meeting of Stockholders is currently scheduled to
occur at the date, time and location stated above, we are currently
monitoring matters related to the novel coronavirus (COVID-19)
pandemic. Accordingly, we may determine that it is in the best
interest of our stockholders to change the date, time or location
of the 2020 Annual Meeting of Stockholders, including the
possibility of changing to a “virtual” meeting instead
of holding the meeting at a physical location. If we determine to
make such a change, we will make a public announcement in advance,
and details on how to participate will be set forth in a press
release issued by us as promptly as practicable and available at
www.aerocentury.com/press_releases.php.
The
Board of Directors has fixed the close of business on April 1,
2020, as the record date for determining those stockholders who
will be entitled to vote at the 2020 Annual Meeting of
Stockholders. A list of stockholders entitled to vote at the
meeting will be available for inspection at the Company’s
principal executive offices for a period of 10 days prior to the
meeting. The stock transfer books will not be closed between the
record date and the date of the meeting.
A
quorum comprising the holders of a majority of the issued and
outstanding shares of common stock of the Company on the record
date, excluding shares held by the Company as treasury stock, must
be present or represented by proxy for the transaction of business
at the meeting. Accordingly, it is important that your shares be
represented at the 2020 Annual Meeting of Stockholders. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
Your proxy may be revoked at any time prior to the time it is
voted.
If you
plan to attend the meeting, please call the Company’s
Investor Relations Department at (650) 340-1888, so that your name
can be placed on the expected attendance list for the meeting.
Please read the accompanying proxy materials carefully. Your vote
is important, and the Company appreciates your cooperation in
considering and acting on the matters presented.
Sincerely
yours,
/s/
Michael G. Magnusson
Michael
G. Magnusson
President
April
27, 2020
Burlingame,
California
TABLE OF CONTENTS
VOTING
MATTERS AND SOLICITATION
HOUSEHOLDING
OF ANNUAL MEETING MATERIALS
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
INFORMATION REGARDING AUDITOR
AUDIT COMMITTEE REPORT
INFORMATION REGARDING THE COMPANY’S DIRECTORS AND EXECUTIVE
OFFICERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
RELATED PARTY TRANSACTIONS
DELINQUENT SECTION 16(A) REPORTS
CODE OF BUSINESS CONDUCT AND ETHICS
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
ANNUAL REPORT ON FORM 10-K
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETING TO BE HELD ON JUNE 9, 2020
OTHER MATTERS
AEROCENTURY CORP.
1440 Chapin Avenue, Suite 310
Burlingame, California 94010
PROXY STATEMENT FOR
2020 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 9, 2020
This
Proxy Statement and the enclosed proxy card are furnished in
connection with the solicitation by the Board of Directors (the
“Board”) of AEROCENTURY CORP. (the
“Company” or “AeroCentury”) of proxies to
be voted at the Company’s 2020 Annual Meeting of Stockholders
(the “2020 Annual Meeting” or the “Annual
Meeting”), which will be held at 12:00 p.m. (local time) on
June 9, 2020, at the Embassy Suites, San Francisco Airport
Waterfront, 150 Anza Blvd., Burlingame, California, or at any
adjournments or postponements thereof, for the purposes set forth
in the accompanying Notice of 2020 Annual Meeting of Stockholders
(the “Notice”). You do not need to attend the meeting
to vote your shares. Instead, you may simply complete, date, sign
and return the enclosed proxy card. This Proxy Statement and the
proxy card were first mailed to stockholders on or about April 27,
2020.
Although
the 2020 Annual Meeting of Stockholders is currently scheduled to
occur at the date, time and location stated above, we are currently
monitoring matters related to the novel coronavirus (COVID-19)
pandemic. Accordingly, we may determine that it is in the best
interest of our stockholders to change the date, time or location
of the 2020 Annual Meeting of Stockholders, including the
possibility of changing to a “virtual” meeting instead
of holding the meeting at a physical location. If we determine to
make such a change, we will make a public announcement in advance,
and details on how to participate will be set forth in a press
release issued by us as promptly as practicable and available at
www.aerocentury.com/press_releases.php.
The
Company's 2019 Annual Report, which includes its annual report on
Form 10-K for the fiscal year ended December 31, 2019, was mailed
to stockholders concurrently with this Proxy Statement. The 2019
Annual Report is not to be regarded as proxy soliciting material or
as a communication by means of which any solicitation of proxies is
to be made.
VOTING MATTERS AND SOLICITATION
Record Date and Required Quorum
The
close of business on April 1, 2020, was the record date for
stockholders entitled to notice of, and to vote at, the 2020 Annual
Meeting. As of that date, the Company had 1,545,884 shares of
common stock, $0.001 par value (the “Common Stock”),
outstanding. The presence at the Annual Meeting of a majority of
the issued and outstanding shares of Common Stock, or 772,943
shares, either present in person or represented by proxy, will
constitute a quorum for the transaction of business at the Annual
Meeting. All of the shares of the Company's Common Stock
outstanding on the record date are entitled to vote at the 2020
Annual Meeting, and stockholders of record entitled to vote at the
Annual Meeting will have one vote for each share of Common Stock so
held with regard to each matter to be voted upon.
How to Cast and Revoke Your Vote
Voting if you are the Registered Holder of Shares. If your
shares are registered directly in your name with the
Company’s transfer agent, Continental Stock Transfer &
Trust Co., you are considered the “stockholder of
record” with respect to these shares and the Company is
sending these proxy materials directly to you. As the stockholder
of record, you have the right to grant your voting proxy directly
to the Company by completing the enclosed proxy card or to vote in
person at the Annual Meeting. To grant your voting proxy, you
should complete, sign and return the enclosed proxy card to the
Company.
Voting if you Hold Shares in a Brokerage or Other Nominee
Account. If your shares are held by a broker or by a bank or
other nominee (each, a “Nominee”) in a brokerage or
other account, then you are considered the “beneficial
owner” of shares held “in street name.” Your
Nominee is considered the stockholder of record with respect to
these shares and has forwarded these proxy materials to you. As the
beneficial owner of your shares, you have the right to direct your
Nominee on how to vote. To direct your Nominee on how to vote your
shares, you must follow the procedure explained in the materials
provided to you by your Nominee, which procedure generally consists
of completing and returning to your Nominee a voting instruction
form that was sent to you by your Nominee along with this Proxy
Statement. Your Nominee may also have provided information on how
to give voting instructions to the Nominee by telephone or online
through the Internet. Notwithstanding that your Nominee will be
voting your shares on your behalf and as instructed by you, you may
still attend the Annual Meeting. If you plan to attend the Annual
Meeting and want to vote your shares in person rather than have
your Nominee vote your shares on your behalf, you must obtain from
your Nominee a proxy card issued in your name with respect to your
shares.
Effect of Returning the Proxy Card to the Company. Shares of
the Company's Common Stock represented by proxies in the
accompanying form that are properly executed and returned to the
Company will be voted at the 2020 Annual Meeting in accordance with
the instructions of the stockholder of record contained therein. In
the absence of contrary instructions, shares represented by such
proxies will be voted as follows:
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FOR the
election of the director nominees as described herein under
"Proposal 1: Election of Directors";
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FOR the
approval, in an advisory (non-binding) vote, of the Company’s
executive compensation as disclosed in this Proxy Statement as
described herein under “Proposal 2: Advisory Vote on
Executive Compensation”;
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FOR the
ratification of the selection of BDO USA, LLP as the
Company’s independent registered public accounting firm for
the fiscal year ending December 31, 2020, as described herein under
“Proposal 3: Ratification of Selection of Independent
Registered Public Accounting Firm.”
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The
Company does not know of any matters to be presented at the Annual
Meeting other than those set forth in this Proxy Statement and in
the Notice accompanying this Proxy Statement. If other matters
should properly come before the Annual Meeting, the proxy holders
will vote on such matters in accordance with their best judgment.
Proxies will confer upon the proxy holders discretionary authority
to vote upon matters that may properly be raised at the Annual
Meeting but are unknown to the Company as of the date hereof. In
addition, proxies will confer upon the proxy holders the authority
to adjourn or postpone the Annual Meeting if necessary or advisable
to permit further solicitation of proxies in the event there are
insufficient shares present to constitute a quorum or insufficient
votes at the time of the Annual Meeting to approve any or all of
the foregoing items of business.
Revocation of a Previously Submitted Proxy. Any stockholder
of record has the right to revoke his or her proxy at any time
before it is voted at the Annual Meeting by:
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Delivering
to the Company (to the attention of Harold M. Lyons, Secretary,
1440 Chapin Avenue, Suite 310, Burlingame, California 94010) a
written notice of revocation;
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Delivering
to the Company (to the attention of Harold M. Lyons, Secretary,
1440 Chapin Avenue, Suite 310, Burlingame, California 94010) a duly
executed proxy or voting instructions bearing a later date than the
proxy being revoked; or
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Attending
the Annual Meeting and voting in person.
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Any
beneficial owner of shares of Common Stock held in street name
should follow the instructions provided by your Nominee regarding
how to revoke a previously submitted proxy.
Broker Non-Votes
Effect of Broker Non-Votes. A “broker non-vote”
occurs when a beneficial owner fails to give its Nominee voting
instructions on a proposal and the Nominee lacks discretionary
power to vote uninstructed shares on that proposal. Broker
non-votes are, in all cases, counted for purposes of determining a
quorum for the Annual Meeting. Under the rules of the New York
Stock Exchange, however, whether a broker non-vote will occur
depends upon whether a proposal is “routine” or
“non-routine,” as discussed below.
Non-Routine Matters Presented at the 2020 Annual Meeting.
The election of directors (Proposal 1) and the advisory vote on
executive compensation (Proposal 2) are considered
“non-routine” proposals. As a result, if you are a
beneficial owner of your shares of Common Stock, your failure to
provide voting instructions to your Nominee in the manner directed
by your Nominee will result in your shares
not being voted by the Nominee on any of
these proposals. Your Nominee has enclosed or otherwise
provided to you a voting instruction form for you to use in
directing the Nominee on how to vote your shares. Your Nominee may
also have provided information regarding how to give voting
instructions through the Internet or by telephone.
Routine Matters Presented at the 2020 Annual Meeting. The
ratification of the selection of BDO USA, LLP as the
Company’s independent registered public accounting firm for
the year ending December 31, 2020 (Proposal 3) is considered a
“routine” proposal. As a result, your Nominee has
discretionary voting power to vote your shares on this proposal
even if you fail to provide voting instructions to your Nominee
regarding this proposal. Accordingly, broker non-votes are not
expected to occur in the vote on this proposal.
Voting Requirements
Stockholder Vote Required to Approve Proposal 1. The
election of directors will be determined by a plurality of the
votes cast by the stockholders of record entitled to vote on the
election and present in person or represented by proxy at the
Annual Meeting. The nominees receiving the greatest number of
affirmative votes of the shares present in person, or represented
by proxy, and entitled to vote at the Annual Meeting will be
elected, provided a quorum is present. Abstentions and broker
non-votes, if any, will not be counted toward a nominee’s
total and will have no effect on the outcome of Proposal
1.
Stockholder Vote Required to Approve Proposal 2. The
proposal to approve the Company’s executive compensation will
be approved in an advisory (non-binding) vote if the votes cast in
favor exceed the votes cast against the proposal. If you
“Abstain” from voting, it will have the same effect as
an “Against” vote. Broker non-votes will have no
effect.
Stockholder Vote Required to Approve Proposal 3. The
proposal to ratify the selection of BDO USA, LLP as the
Company’s independent registered public accounting firm will
be approved if the votes cast in favor exceed the votes cast
against the proposal. If you “Abstain” from voting, it
will have the same effect as an “Against”
vote.
Proxy Solicitation
The
entire cost of soliciting proxies will be borne by the Company.
Proxies will be solicited principally through the use of the mails,
but, if deemed desirable, may be solicited personally or by
telephone, email, or special letter by officers and Company
employees for no additional compensation. Although we have not
engaged employees for the specific purpose of soliciting proxies or
a proxy solicitation firm to assist us in soliciting proxies, we
may elect to engage and pay the cost of such employees or such a
proxy solicitation firm at any time. Arrangements may be made with
brokerage houses and other custodians, nominees and fiduciaries to
send proxies and other proxy materials to the beneficial owners of
the Company's Common Stock, and such persons may be reimbursed for
their expenses.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
The
Company is, and some Nominees may also be, participating in the
practice of “householding” proxy statements and annual
reports. This means that only one copy of this Proxy Statement and
the Company’s 2019 Annual Report may have been sent to
multiple stockholders sharing the same household, unless contrary
instructions have been received from one or more of the
stockholders. The Company will promptly deliver a separate copy of
either such document, and the same documents for the
Company’s future annual stockholder meetings if requested, to
any stockholder who contacts the Company’s Investor Relations
Department at (650) 340-1888 or by mail to 1440 Chapin Avenue,
Suite 310, Burlingame, California 94010. If stockholders sharing an
address are receiving multiple copies of this Proxy Statement and
the Company’s 2019 Annual Report at the stockholders’
household and would like to receive only a single copy of the
Company’s proxy materials in the future, the stockholders
should contact their Nominee, or the Company’s Investor
Relations Department as described above to request delivery of a
single copy of the Company’s proxy materials.
PROPOSAL 1: ELECTION OF DIRECTORS
Two of
the Company’s five directors will be elected at the 2020
Annual Meeting. The Board of Directors has nominated the nominees
set forth below. The proxy holders intend to vote all proxies
received by them in the accompanying form “FOR” the
director nominees listed below, unless instructions to the contrary
are marked on the proxy. In the event that the nominee is unable or
declines to serve as a director at the time of the 2020 Annual
Meeting, proxies will be voted for any nominee who shall be
designated by the Board of Directors to fill the vacancy. As of the
date of this Proxy Statement, the Board of Directors is not aware
that any of the nominees listed below are unable or will decline to
serve as a director. The term of office of the person(s) elected as
director(s) at the Annual Meeting will continue until the
Company’s 2023 Annual Meeting of Stockholders and until his
or her successor has been elected and qualified, or until the
director's earlier resignation or removal.
Nominees to Board of Directors
Mr. Roy E. Hahn, age 67. Mr. Hahn is the Chair of the Audit
Committee and a member of the Compensation Committee and has served
on the Board since 2007. Mr. Hahn is
currently Managing Director of Marbridge Group, LLC, an
alternative investment management firm he founded in 2004. Prior to
his founding of Marbridge Group, LLC, he was Managing Director of
Chenery Associates, an investment management firm. Mr. Hahn was a
Director at Coopers & Lybrand from 1987 to 1988, and a tax
partner with that firm from 1989 to 2003. Prior to Coopers &
Lybrand, he was a partner at Arthur Young & Co. His educational background includes a Bachelor's
Degree in Accounting from San Francisco State University. Mr. Hahn
is a certified public accountant and a member of the American
Institute of Certified Public Accountants and the California
Society of Certified Public Accountants.
The
Board of Directors concluded that Mr. Hahn should serve as a
director of the Company because of his knowledge of the
Company’s business and history, his status as an “audit
committee financial expert,” and his overall expertise in
accounting and finance principles and international finance
transactions.
Ms. Toni M. Perazzo, age 73. Ms. Perazzo is a member of the
Executive Committee of the Board of Directors and has served on the
Board since the Company’s inception in 1997. Prior to her
retirement in December 2019, she was the Company’s Chief
Financial Officer, Treasurer, Senior Vice President-Finance, and
Secretary and also President and Chief Financial Officer of
JetFleet Management Corp. (“JMC”), a subsidiary of the
Company, where she had been an officer in various capacities since
1997. Her prior positions include Assistant Vice President for a
savings and loan company, controller of an oil and gas syndicator
and a senior auditor with Arthur Young & Co., Certified Public
Accountants. She received her Bachelor’s Degree from the
University of California at Berkeley, and her Master’s Degree
in Business Administration from the University of Southern
California. Ms. Perazzo is a certified public accountant and member
of the California Society of Certified Public Accountants and the
American Institute of Certified Public Accountants.
The
Board of Directors concluded that Ms. Perazzo should serve as a
director of the Company because of her knowledge of the
Company’s business, history, capitalization structure and
finances, her accounting and audit experience, as well as her many
years of experience with JMC.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE DIRECTOR NOMINEES LISTED ABOVE.
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
The
Company is requesting your advisory approval of the compensation of
the Company’s named executive officers as disclosed in the
Summary Compensation Table and narrative discussion set forth in
this Proxy Statement. This non-binding advisory vote is commonly
referred to as a “say on pay” vote and is required to
be conducted pursuant to Section 14A of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). You are
encouraged to carefully review the information concerning the
compensation of the Company’s named executive officers set
forth in this Proxy Statement under “Information Regarding
the Company’s Directors and Officers—Executive
Compensation.”
The
Company asks you to indicate your support for the compensation of
the Company’s named executive officers as described in this
Proxy Statement. This vote is not intended to address any specific
item of compensation, but rather the overall compensation of the
named executive officers and the practices described in this Proxy
Statement in accordance with the SEC’s compensation
disclosure rules. Accordingly, the Company requests that you vote
“FOR” the following resolution at the Annual
Meeting:
“RESOLVED,
that the compensation of the Company’s named executive
officers, as disclosed in the Company's Proxy Statement for its
2020 Annual Meeting of Stockholders pursuant to Item 402 of
Regulation S-K promulgated by the Securities and Exchange
Commission, is hereby approved on an advisory, non-binding
basis.”
While
the results of this advisory say on pay vote are not binding, the
Board of Directors will consider the outcome of the vote in
deciding whether to take any action as a result of the vote and
when making future compensation decisions for the Company’s
named executive officers.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE COMPENSATION OF THE COMPANY’S NAMED
EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY
STATEMENT.
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The
firm of BDO USA, LLP served as independent registered public
accounting firm for the Company for the fiscal year ended December
31, 2019. The Audit Committee of the Board has appointed the firm
to continue in this capacity for the Company’s 2020 fiscal
year. Accordingly, this Proposal 3 will be presented at the Annual
Meeting to ratify the selection of BDO USA, LLP as the independent
registered public accounting firm to audit the accounts and records
of the Company for the fiscal year ending December 31, 2020, and to
perform other appropriate services as approved by the Audit
Committee. In the event that stockholders fail to ratify the
selection of BDO USA, LLP, the Audit Committee may reconsider such
selection. Even if stockholders ratify the selection of BDO USA,
LLP, the Audit Committee may choose to appoint a different
independent registered public accounting firm at any time during
the year if the committee determines that such a change would, in
its judgment, be in the best interests of the Company and its
stockholders.
A
representative of BDO USA, LLP will be present at the Annual
Meeting, will have the opportunity to make a statement if he or she
so desires and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE RATIFICATION OF THE SELECTION OF BDO USA, LLP
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.
INFORMATION REGARDING AUDITOR
Fees
Audit Fees. The aggregate fees accrued by the Company as
payable to BDO USA, LLP (the “Auditor”) for
professional services rendered for the audit of the Company's
financial statements for the fiscal year ended December 31, 2019,
and for the review of the financial statements included in the
Company's Forms 10-Q during the 2019 fiscal year were $400,550. The
Company did not pay the Auditor for any Sarbanes-Oxley internal
controls compliance review.
The
aggregate fees accrued by the Company as payable to the Auditor for
professional services rendered for the audit of the Company's
financial statements for the fiscal year ended December 31, 2018,
and for the review of the financial statements included in the
Company's Forms 10-Q during the 2018 fiscal year were $426,000. The
Company did not pay the Auditor for any Sarbanes-Oxley internal
controls compliance review.
Audit-Related Fees. The Company made no payments to the
Auditor for assurance or related services that are reasonably
related to the performance of the audit or review of the
Company’s financial statements and are not reported under
“Audit Fees” in the fiscal years ended December 31,
2018 and 2019.
Tax Fees. The Company made no payments to the Auditor for
tax-related services, including tax compliance, tax advice, tax
planning and preparation of returns, in the fiscal years ended
December 31, 2018 and 2019.
All Other Fees. No other fees were paid to the Auditor in
the fiscal years ended December 31, 2018 and 2019.
Audit Committee Pre-Approval Policies and Procedures
The
retainer agreements between the Company and the Auditor setting
forth the terms and conditions of and estimated fees to be paid to
the Auditor for audit and tax return preparation services were
pre-approved by the Audit Committee at the beginning of the
respective engagements. Pursuant to its charter, the Audit
Committee’s policy is to pre-approve all audit and non-audit
services provided by the Auditor, except as may be permitted by
applicable law. These services may include audit services,
audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category
of services and is generally subject to a specific budget. The
Audit Committee has delegated pre-approval authority to its Chair
when expedition of services is necessary. The Auditor and
management are required to periodically report to the full Audit
Committee regarding the extent of services provided by the Auditor
in accordance with this pre-approval, and the fees for the services
performed to date. None of the services rendered by the Auditor in
2019 or 2018 were rendered pursuant to the de minimis exception established by the
SEC, and all such services were pre-approved by the Audit
Committee.
AUDIT COMMITTEE REPORT
The following Audit Committee Report shall not be deemed to be
“soliciting material” or to be “filed” with
the Securities and Exchange Commission (the “SEC”) or
subject to Regulation 14A or 14C or to the liabilities of Section
18 of the Exchange Act, nor shall such information be deemed to be
incorporated by reference into any filing under the Securities Act
of 1933, as amended, or the Exchange Act, except to the extent the
Company specifically requests that the information be treated as
soliciting material or specifically incorporates it by reference
into such a filing.
The
Audit Committee of the Board serves as the representative of the
Board of Directors for general oversight of the Company's
accounting and financial reporting processes, internal controls,
audit process and process for monitoring compliance with laws and
regulations. The Audit Committee is solely responsible for the
appointment, compensation and oversight of BDO USA, LLP (the
“Auditor”). The Company's management has primary
responsibility for preparing the Company's financial statements and
the Company's financial reporting process. The Auditor is
responsible for expressing an opinion on the fairness and
conformity of the Company's audited financial statements to
accounting principles generally accepted in the United States of
America. In this context, the Audit Committee hereby reports as
follows:
1. The
Audit Committee reviewed and discussed the audited financial
statements with the Company's management.
2. The
Audit Committee discussed with the Auditor the matters required to
be discussed by the Public Company Accounting Oversight Board
(“PCAOB”) and the SEC.
3. The
Audit Committee has received the written disclosures and the letter
from the Auditor required by applicable requirements of the PCAOB
regarding the independent accountants’ communications with
the Audit Committee concerning independence, and has discussed with
the Auditor its independence from the Company and its
management.
4.
Based on the review and discussion referred to in paragraphs (1)
through (3) above, the Audit Committee recommended to the Board of
Directors of the Company, and the Board of Directors approved, that
the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
2019, for filing with the SEC.
Submitted
by the Audit Committee of the Board of Directors:
Roy E.
Hahn, Chair
Evan M.
Wallach
David
P. Wilson
INFORMATION REGARDING THE COMPANY’S DIRECTORS AND EXECUTIVE
OFFICERS
Current Board of Directors
When
considering whether directors and nominees have the experience,
qualifications, attributes, skills, diversity of experience and
background, taken as a whole, to enable the Board of Directors to
satisfy its oversight responsibilities effectively in light of the
Company’s business and structure, the Board of Directors
focused primarily on the information discussed in each of the
directors’ individual biographies set forth
below
The
following directors have terms expiring at the Company’s 2021
Annual Meeting of Stockholders:
Mr. David P. Wilson, age 66. Mr. Wilson has been a member of
the Company’s Board of Directors and the Audit Committee
since February 2015. He also serves as Chair of the Compensation
Committee. Mr. Wilson is currently a member of the Board of
Directors of Einn Volant Aircraft Leasing LLC. Mr. Wilson retired
in 2014 from General Electric Capital Aviation Services
(“GECAS”), where he was most recently a Senior Vice
President, concentrating on asset sales and aircraft
securitizations to a worldwide investor base. Prior to his 21-year
career at GECAS, Mr. Wilson spent 8 years at Citicorp's Equipment
Finance and Leasing Division as a product specialist in aircraft
finance marketing and working on several airline bankruptcies and
restructurings. Prior to joining Citicorp in 1985, he held various
financial positions at De Lage Landen (formerly Master Lease Corp.)
and Air Products and Chemicals at their headquarters. Mr. Wilson
started his career at Ernst & Ernst in 1977. He received his
Bachelor's Degree in Accounting and Finance from Boston College in
1977 and a MS/MBA in Finance from Drexel University in Philadelphia
in 1983.
The
Board of Directors concluded that Mr. Wilson should serve as a
director of the Company because of his knowledge of the aircraft
leasing and finance industry.
Mr. Michael G. Magnusson, age 62. Since 2016, Mr. Magnusson
has been the President and a director of the Company and the
Managing Director of JMC. Prior to joining the Company and JMC, he
was a principal of SAL Solutions, an aircraft leasing consulting
firm that he co-founded in 2015. Before that he was with Saab
Aircraft, which he joined in 1982 and where he held positions of
increasing responsibility culminating in tenure as Chief Executive
Officer of Saab Aircraft Leasing from 2001 until 2015. Mr.
Magnusson received a Master’s Degree in Aeronautical
Engineering in 1982 from KTH Royal Institute of Technology in
Stockholm, Sweden.
The
Board of Directors concluded that Mr. Magnusson should serve as a
director of the Company because of his knowledge of the aircraft
leasing industry.
The
following director has a term expiring at the Company’s 2022
Annual Meeting of Stockholders:
Mr. Evan M. Wallach, age 65. Mr. Wallach is President and
Chief Executive Officer of Global Airfinance Services, Inc., an
aviation consulting business he founded in 1998 and returned to in
June 2012. Mr. Wallach is the Chair of the Board of Directors of
the Company, and a member of the Audit Committee, the Compensation
Committee, and the Executive Committee. He has served on the Board
since 1997 and was appointed Chair in 2016. From December 2009
until June 2012, Mr. Wallach was Managing Director,
Aviation/Transportation Markets at Jefferies & Company, Inc.
From 2005 to 2009, Mr. Wallach was a Managing Director,
Airline/Aircraft Securities Sales at Guggenheim Capital Markets,
LLC, a securities broker/dealer. From 2001 to 2005, he served as
Managing Director, Fixed Income Institutional Sales, at Piper
Jaffray LLC, and from 1998 to 2001 he served as Vice President,
Finance of C-S Aviation Inc., an aviation consulting firm. Mr.
Wallach has specialized in aircraft and airline financing for over
thirty years, having held senior level positions with The CIT
Group, Bankers Trust Company, Kendall Capital Partners, Drexel
Burnham Lambert, and American Express Aircraft Leasing. Mr. Wallach
received a Bachelor’s Degree in Political Science from State
University of New York at Stony Brook and a Master’s Degree
in Business Administration from the University of
Michigan.
The
Board of Directors concluded that Mr. Wallach should serve as a
director of the Company because of his knowledge of the
Company’s business and history and his expertise in aircraft
finance.
Board Meetings and Committees
The
Board of Directors of the Company held 22 full board meetings
during the fiscal year ended December 31, 2019. During that year,
no incumbent director attended fewer than 75% of the meetings of
the Board of Directors and its committees on which he or she served
that were held during the period in which he or she was a
director.
The
Company has an Audit Committee, a Compensation Committee and an
Executive Committee of the Board of Directors, each of which is
discussed below.
Audit Committee. The Audit Committee operates under a
charter adopted and approved by the Board of Directors, which is
available on the Company’s website at
http://www.aerocentury.com/audit.php. The Audit Committee meets
with the Company's management and its independent registered public
accounting firm to review internal financial information, audit
plans and results, and financial reporting procedures. This
committee currently consists of Roy E. Hahn (Chair), Evan M.
Wallach and David P. Wilson. The Board has determined that Messrs.
Hahn, Wallach, and Wilson are independent within the meaning of
Sections 803A and 803B(2) of the NYSE American Company
Guide.
The
Board of Directors has determined that at least one member of the
Audit Committee, Mr. Hahn, is an “audit committee financial
expert” within the meaning of Item 407(d)(5) of Regulation
S-K promulgated by the SEC. In the course of his career, as
described under “Current Board of Directors” above, Mr.
Hahn acquired: (i) an understanding of generally accepted
accounting principles and financial statements, (ii) the ability to
assess the general application of such principles in connection
with the accounting for estimates, accruals and reserves, (iii)
experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and
complexity of issues that can reasonably be expected to be raised
by the Company’s financial statements, (iv) an understanding
of internal control over financial reporting, and (v) an
understanding of audit committee functions.
The
Audit Committee held 7 meetings during the fiscal year ended
December 31, 2019.
Compensation Committee.
The
Compensation Committee assists the Board in discharging its
responsibilities relating to compensation of the Company’s
directors and officers and complying with disclosure requirements
regarding such compensation, if and when required and in accordance
with applicable SEC and stock exchange rules and regulations. The
Compensation Committee operates under a charter adopted and
approved by the Board of Directors, which is available on the
Company’s website at http://www.aerocentury.com/compensation_committee.php.
The Compensation Committee currently consists of David P. Wilson
(Chair), Roy E. Hahn, and Evan M. Wallach. The Board has determined
that Messrs. Wilson, Hahn, and Wallach are independent within the
meaning of Sections 803A and 805(c) of the NYSE American Company
Guide and Rule 10C-1(b)(1) under the
Securities Exchange Act of 1934.
The
Compensation Committee held 4 meetings during the fiscal year ended
December 31, 2019.
Executive Committee. The Executive Committee has the
authority to acquire, dispose of and finance investments for the
Company and execute contracts and agreements, including those
related to the borrowing of money by the Company, and generally
exercises all other powers of the Board of Directors except for
those which require action by all of the directors or the
independent directors under the Certificate of Incorporation or the
Bylaws of the Company, or under applicable law or stock exchange
requirements. The Executive Committee currently consists of only
two directors, Toni M. Perazzo and Evan M. Wallach, and did not
hold any meetings during the fiscal year ended December 31,
2019.
Director Nominations. The Company does not have a formal
nominating committee. The independent directors separately consider
and make recommendations to the full Board of Directors regarding
any candidate being considered to serve on the Board of Directors,
and the full Board of Directors reviews and makes a determination
regarding such potential candidates. In light of this practice,
which is similar to the practices of many boards of directors that
have a standing nominating committee, the Board believes it is
unnecessary to formally establish such a committee.
The
Board has not adopted a formal procedure for considering nominees
recommended by stockholders, other than the procedures described
herein that are applicable to all director candidates and the
procedures set forth in the Bylaws of the Company for stockholder
nominations of directors. While the Board of Directors does not
have a specific policy for considering nominees recommended by
stockholders, this does not mean that a recommendation would not be
considered if received from a stockholder. The Board believes that
the current informal consideration process is adequate in light of
the historical absence of stockholder recommendations of director
nominees. In any event, the Board expects there would be no
difference between the manner in which the Board of Directors would
evaluate a director candidate recommended by a stockholder and a
director candidate recommended by any other source, such as an
existing member of the Board of Directors or one of the
Company’s executive officers.
Although
the Board of Directors does not have a formal policy with respect
to Board diversity, it strives to constitute the Board with
directors who bring to our Company a variety of perspectives,
cultural sensitivity, life experiences, skills, expertise, and
sound business understanding and judgment derived from a broad
range of business, professional, governmental, community
involvement, personal and aircraft leasing and finance experiences,
as well as directors who have skills and experience that are
relevant and helpful to the Company's industry and operations and
who have the desire and capacity to actively serve. In addition,
the Board is aware of the recently enacted California law requiring
publicly held corporations whose principal executive offices are
located in California to have at least one female director on their
boards by the end of the 2019 calendar year and at least one to
three female directors, depending on the size of the board, by the
end of the 2021 calendar year. Because our principal executive
offices are located in California, we are subject to these
requirements. The Company is currently in compliance with this
law.
In
reviewing a potential candidate for the Board, the Board of
Directors considers the individual's experience in the Company's
industry, the general business or other experience of the
candidate, the needs of the Company for an additional or
replacement director, the personality of the candidate, and the
candidate's interest in the business of the Company, as well as
numerous other subjective criteria. Of greatest importance is an
individual's integrity, willingness to actively participate and
ability to bring to the Company his or her experience and knowledge
in areas that are most beneficial to the Board. In addition, the
Board recognizes that at least a majority of the Company’s
directors must be independent under applicable NYSE American rules,
the members of certain Board committees must satisfy enhanced
independence and financial expertise standards under applicable
NYSE American and SEC rules, and one member of the Board should
meet the criteria for an “audit committee financial
expert” as defined by SEC rules.
Except
as described above, there are no specific minimum qualifications
that the Board believes must be met by a director nominee. The
Board intends to continue to evaluate candidates for election to
the Board on the basis of the foregoing criteria.
Board Leadership Structure
The
Board believes its current leadership structure best serves the
objectives of the Board’s oversight of management, the
Board’s ability to carry out its roles and responsibilities
on behalf of the stockholders, and the Company’s overall
governance. The Board believes that Evan M. Wallach is best
situated to serve as Chair of the Board because he is familiar with
the Company’s business and industry and most capable of
effectively identifying strategic priorities for the Company,
leading the Board in discussions regarding the Company’s
business and industry, and focusing the Board on execution of
strategy. As an independent director, Mr. Wallach brings a
different perspective than the Company’s management on the
strategy development for the Company, drawing upon not only his
deep knowledge of the Company but also his experience, oversight
and expertise from outside the Company and its industry. The Board
believes that having a non-executive Chair provides a check and
balance on the power of management and therefore enhances the
Board’s oversight of Company risks, strategies and policy
making.
Board of Directors’ Role in Risk Oversight
The
Company is exposed to a number of operational and financial risks,
and the Board plays an active role in overseeing management of
these risks. The Company’s President (who is a member of the
Board of Directors) is directly responsible for a number of
operational risks, such as the risks inherent in acquiring, owning,
leasing and disposing of used aircraft and engines. The Board
regularly receives reports from the President on these risks and
works closely with the Company’s management on strategies to
manage these risks and to develop contingency plans. The
Company’s Chief Financial Officer is directly responsible for
a number of financial risks, such as the risks associated with the
Company’s credit and liquidity. The Audit Committee and the
full Board regularly receive reports from the Chief Financial
Officer on these risks and work closely with the Company’s
management on strategies to manage these risks and to develop
contingency plans. The Board also meets and confers regularly with
the Company’s management to identify other risks faced by the
Company, and the General Counsel of the Company, the Chief
Financial Officer, and outside counsel attend all board meetings as
non-voting guests of the Board. The Company believes that this and
other interactions with senior management of the Company provide
the Board with visibility into and access to the details underlying
the risks the Company faces, and thereby enhances the quality of
the Board’s risk oversight. Among the risks over which the
Board exercises oversight are economic, financial, industrial,
legal, and operational risks, including cybersecurity
risks.
In
addition, the Board performs its risk oversight function in part
through its committees, which, except for the Executive Committee,
are comprised solely of independent directors. The Audit Committee
oversees management of risks related to financial reporting and
disclosure processes and accounting policies, as well as certain
specific financial risks, such as variable interest rate risk, and
risks related to related party or conflict-of-interest
transactions. The Compensation Committee oversees management of
risks related to compensation policies and practices. The Company
believes the role of these Board committees in the Board’s
performance of its risk oversight function, as well as the
Board’s leadership structure discussed above, which separates
the roles of Chair of the Board and President, provide an
appropriate level of independent oversight, including risk
oversight, of the Company’s management team.
Communication between Stockholders and Directors
The
Company’s Board of Directors currently does not have a formal
process for stockholders to send communications to the Board of
Directors and does not believe such procedures are necessary at
this time because it believes that informal communications are
sufficient to communicate questions, comments and observations that
could be useful to the Board. Stockholders wishing to communicate
to the Board informally can address written correspondence to the
Company’s Board of Directors at the Company’s address
at 1440 Chapin Avenue, Suite 310, Burlingame, California 94010,
Att’n: Board of Directors.
Director Attendance at Annual Meeting
It is
the policy of the Company and Board of Directors that directors
attend the Annual Meeting and be available for questions from
stockholders. All the then-seated directors, including the
directors nominated for election, attended the Company’s 2019
Annual Stockholders Meeting. Barring any adjustments to the format
of the 2020 Annual Meeting due to social distancing or other
restrictions related to the COVID-19 pandemic, it is anticipated
that the directors nominated for election at the 2020 Annual
Meeting will attend the 2020 Annual Meeting.
Board Independence
If the
nominees to the Board of Directors are elected, a majority of the
Board of Directors of the Company, consisting of Messrs. Hahn,
Wallach, and Wilson, will be independent directors, as defined in
Section 803A of the NYSE American Company Guide. Mr. Magnusson and
Ms. Perazzo are not considered
independent directors due to their employment by the Company within
the previous three years.
Involvement in Legal Proceedings
No
director, officer or affiliate of the Company, beneficial owner of
more than 5% of the Common Stock, or associate of any of the
foregoing is involved in a material proceeding as a party adverse
to the Company or with a material interest adverse to the
Company.
Family Relationships
There
are no family relationships among the Company’s directors or
executive officers.
Director Compensation
Non-employee
board members received an annual fee of $64,000 in 2019, paid in
quarterly installments, and were also reimbursed for all reasonable
out-of-pocket costs incurred in connection with their attendance at
meetings of the Board of Directors. Non-employee members of Board
committees also received $3,000 annually for each committee
membership, the Audit Committee Chair and Compensation Committee
Chair each received an additional $5,500 annually, and the Chair of
the Board received an additional $35,000 annually. An officer of
the Company who also serves as a Board member does not receive any
compensation for Board or committee service. No member of the
Company’s Board of Directors receives equity compensation for
his or her service as a member of the Company’s Board of
Directors or any of its committees.
The
table below provides the compensation of the Company’s
non-employee directors for the fiscal year ended December 31, 2019.
The compensation of the Company’s directors who also serve as
executive officers of the Company is set forth under
“Executive Compensation—Summary Compensation
Table” below.
DIRECTOR COMPENSATION TABLE
Name(1)
|
|
Fees Earned orPaid in Cash
($)
|
|
|
Total
($)
|
|
Roy E.
Hahn
|
|
|
75,500
|
|
|
|
75,500
|
|
Evan M.
Wallach
|
|
|
105,000
|
|
|
|
105,000
|
|
David
P. Wilson
|
|
|
75,500
|
|
|
|
75,500
|
|
(1) Each of Toni M. Perazzo and Michael G. Magnusson was an officer
of the Company and JMC during 2019 and therefore did not receive
compensation for service as a member of the Company’s Board
of Directors or committee thereof, in accordance with the
Company’s director compensation policy. Toni M. Perazzo began
receiving compensation as a non-employee Board member in the first
quarter of 2020.
|
|
Key
Employees
For the
biography of Michael G. Magnusson, see the description under
“Current Board of Directors” above.
Listed
below are certain key employees of the Company, who, together with
the Company’s executive officers, are responsible for the
management of various aspects of the Company’s business. The
executive officers and key employees of the Company are generally
appointed by, and serve at the direction of, the Board of
Directors, with the exception of Mr. Magnusson, the Company’s
President, who has an employment agreement with JMC, which sets
forth his term of office and other material terms of his employment
and compensation.
Mr. Brian J. Ginna, Vice President, Corporate Development,
age 51. Mr. Ginna is responsible for all corporate communications,
investor relations and public relations of the Company and JMC.
Since 1991, Mr. Ginna has been employed with JMC and JMC-affiliated
companies in positions of increasing responsibility. Mr. Ginna
received a Bachelor’s Degree in Finance from Babson
College.
Mr. Harold M. Lyons, Sr. Vice President, Finance, age 61.
Mr. Lyons was promoted to the executive officer position of Sr.
Vice President, Finance on January 1, 2020. Prior to that, while
serving as Vice President, Finance since 2003, he was responsible
for overseeing tax accounting and tax analysis as well as
Sarbanes-Oxley internal controls compliance review for the Company.
Mr. Lyons has been employed by JMC and JMC affiliated companies
since 1992. Mr. Lyons was previously a Manager in the Tax
Department of Coopers & Lybrand, Certified Public Accountants
and, before that, Mr. Lyons was a Manager in the Tax Department of
Arthur Young & Co., Certified Public Accountants. He received a
Bachelor’s Degree in Business Administration (specializing in
Accounting and Applied Economics) and a Master’s Degree in
Business Administration (specializing in finance and management
science) from the University of California, Berkeley. Mr. Lyons is
a certified public accountant and is a member of the American
Institute of Certified Public Accountants (and a member of the Tax
Section) and of the California Society of Public
Accountants.
Mr. Frank Pegueros, Senior Vice President, Operations, age
60. Mr. Pegueros is responsible for negotiation of aircraft
acquisitions and aircraft remarketing and sales, as well as
drafting of contractual documents. Mr. Pegueros joined JMC and the
Company in 2007 and was previously in a variety of positions with
United Airlines over a twenty‑year period. Initially as power
plant engineer and finally as a senior aircraft sales executive, he
was a member of the United's aircraft team responsible for aircraft
acquisitions and sales as well as lender negotiations. He is a
graduate of Cal Poly State University with BS in Aeronautical
Engineering.
Mr. Glenn Roberts, Vice President, Controller, age 55. Mr.
Roberts has been responsible for financial accounting and analysis
as the Company’s controller since 1997. He has been employed
by the Company and JMC and related companies since 1989 in various
capacities of increasing responsibility.
Mr. Christopher B. Tigno, General Counsel, age 58. Mr. Tigno
is responsible for all legal matters of the Company and JMC and all
of its related companies, including supervision of outside counsel,
documentation of aircraft asset acquisition transactions, corporate
governance, securities matters, risk management and regulatory
compliance. Prior to joining the Company, he was Senior Counsel
with the law firm of Wilson, Ryan & Campilongo from 1992 to
1996, and before that was associated with the law firm of Fenwick
& West from 1988 to 1992 and the law firm of Morrison &
Foerster from 1986 to 1988. Mr. Tigno received his Juris Doctor
Degree from the University of California at Berkeley, University of
California, Berkeley, School of Law, and was admitted to the
California Bar in 1986. He also holds a Bachelor's Degree in
Chemical Engineering from Stanford University.
Executive Compensation
The
following table reports the total compensation for 2018 and 2019
paid by JMC and/or the Company to (1) all individuals serving as
the Company’s principal executive officer during 2019
(consisting solely of the Company’s President, Mr.
Magnusson), and (2) all other individuals who served as executive
officers of the Company at any time in 2019 (consisting solely of
the Company’s CFO, Treasurer, Senior VP - Finance &
Secretary, Ms. Perazzo in 2019). These two individuals are referred
to as the Company’s “named executive
officers.”
SUMMARY COMPENSATION TABLE
Name
and Position
|
|
|
|
All
Other
Compensation
($)(1)
|
|
Michael G.
Magnusson, President of the Company; Managing Director of
JMC
|
2018
|
350,000
|
0
|
3,720
|
353,720
|
|
2019
|
366,462
|
75,000(3)
|
3,720
|
445,182
|
Toni M. Perazzo,
CFO, Treasurer, Senior VP - Finance & Secretary of the Company;
President & CFO of JMC(2)
|
2018
|
275,000
|
0
|
3,360
|
278,360
|
|
2019
|
290,336(4)
|
0
|
3,720
|
294,056
|
|
|
|
|
|
|
(1)
Consists of a matching contribution under employees’ 401(k)
plan and life insurance premiums paid by the Company for each
employee.
(2)
Ms. Perazzo retired from this position on December 31,
2019.
(3)
Amount includes bonus stipulated in employment
agreement.
(4)
Amount includes $15,336 in accrued vacation pay.
Narrative Disclosure to Summary Compensation Table
The
compensation paid to our named executive officers consists solely
of base salary plus cash bonus payments, if any. No named executive
officer of the Company receives equity compensation.
In
April of 2019, the Board approved a Bonus Plan for which all
employees of the Company were eligible. A bonus pool of $294,500
was established as the maximum potential bonus pool available. The
amount to be actually awarded under the Plan was determined based
on the Company’s 2019 performance against four target metrics
for Company revenue, income, asset on-lease percentage and volume
of acquisitions, and a discretionary piece, each weighted at 20%.
The metric for revenue growth was fully met and the metric for
on-lease percentage of assets surpassed the minimum floor but did
not reach the target metric for 2019, and no discretionary amount
was added to the pool. Thus, the total bonus pool for 2019 was
approximately 24% of the maximum pool bonus amount, or $71,416. The
bonus pool allocated to each employee participated in the bonus
pool based on a predetermined percentage set by management and
approved by the Compensation Committee. Mr. Magnusson and Ms.
Perazzo were paid bonuses under this plan in February of 2020, in
the amounts of $18,188 and $10,003 respectively.
Role of Compensation Consultant
The
Compensation Committee engaged McLagan, an Aon Company, in December
2017 to perform a benchmarking study of the executive officer and
director compensation practices of the Company’s peers. The
Compensation Committee did not engage McLagan for its determination
of the compensation of its named executive officers in 2019;
rather, in 2019 and going forward, the
Compensation Committee, which consists entirely of non-employee
directors, will exclusively determine annual compensation for the
Board of Directors and named executive officers, as well as
incentive targets and long‑term incentive compensation for
the named executive officers and other employees, and, when and if
other incentive or other bonus plans are adopted, any bonus or
other benefits granted to the named executive
officers.
The
Compensation Committee considered benchmarking information received
from McLagan, including compensation data from a sampling of
equipment and aircraft leasing companies, to review its executive
compensation practices for fiscal year 2019. In determining the level of salary and incentive
compensation, the Compensation Committee will not seek to
mechanically tie compensation levels to a formula based upon the
chosen sample of companies reviewed or employ any other formulaic
process in making compensation decisions. Rather, the Compensation
Committee intends to use its subjective judgment based upon a
review of all information, including an annual review for each
officer of his or her level of responsibility, contributions to the
Company’s financial results, adherence to the Company’s
business plan, and the Company’s overall performance. The
Compensation Committee makes a generalized assessment of these
factors and this information is not weighted in any specific
manner.
In 2019, using benchmarking information received from McLagan
including compensation data from a sampling of equipment and
aircraft leasing companies, the Compensation Committee reviewed
named executive officer compensation paid by the Company, and based
on the recommendations of the Compensation Committee, the current
named executive officer compensation was deemed
appropriate.
Named Executive Officer Employment Agreements.
Michael G. Magnusson. On May 9,
2019, AeroCentury Corp. (the “Company”) entered
into an Employment Agreement (“Agreement”) with Michael
G. Magnusson, its current President and Chief Executive
Officer. The Agreement supersedes and replaces Mr.
Magnusson’s prior employment agreement with JetFleet
Management Corp. (“JMC”), the management company for
the Company. JMC became a wholly-owned second tier subsidiary
of the Company on October 1, 2018, when the Company acquired
JetFleet Holding Corp., the parent corporation of JMC. Following is
a summary of the terms of the Agreement with Mr. Magnusson, which
does not purport to be complete and is qualified in its entirety by
reference to the complete text of the Employment Agreement, a copy
of which is filed as Exhibit 10.1 to the Company Form 8-K
report filed with the SEC on May 13, 2019.
● Term.
The initial term of the Agreement expires on December 31, 2021, and
is automatically renewable for additional one-year renewal terms
unless one party gives the other at least 90 days notice prior to
scheduled expiration of the Agreement that it will not be
renewed.
●
Termination. The Company may terminate
the Agreement at any time for “Cause,” defined as (1) a
material breach by Mr. Magnusson of his duties and responsibilities
as set forth under this Agreement, resulting from other than Mr.
Magnusson's complete or partial incapacity due to Disability (2)
gross misconduct, (3) a breach of the Agreement, the
Company’s employment standards of conduct or employee manual,
(4) neglect of duties under the Agreement, or (5) violation of a
federal or state law or regulation applicable to the business of
the Company. The Company may terminate Mr. Magnusson's employment
for Disability, defined as “any physical or mental
incapacitation that results in Mr. Magnusson's inability to perform
his duties and responsibilities for the Company for a period in
excess of 90 consecutive days or for more than 120 days during any
consecutive 12 month period. Mr. Magnusson may terminate his
employment with the Company for Good Reason, defined as one of the
following events: (i) a material and adverse change in Mr.
Magnusson's position, duties, responsibilities, or status; (ii) a
material reduction in Mr. Magnusson's salary or benefits then in
effect, other than a reduction comparable to reductions generally
applicable to similarly situated employees of the Company or (iii)
the Company materially breaches this Agreement.
●
Annual Compensation/Signing Bonus. Mr.
Magnusson’s annual base salary for Fiscal Year 2019 is
$375,000, with subsequent year base salary rates to be determined
at the sole discretion of the Compensation Committee of the Board
of Directors, but in no event less than $375,000. Mr. Magnusson
received a $75,000 bonus upon signing of the
Agreement.
●
Bonus Compensation. Mr. Magnusson shall
be entitled to participate in all executive cash bonus/long term
incentive compensation plan approved by the Board of Directors for
executive officers and key executives of the Company, when and if
established by the Compensation Committee, as determined by good
faith negotiation with the Compensation Committee.
●
Severance upon Termination. In the
event the Company terminates the Agreement for any reason other
than Cause or Disability, or in the event that Mr. Magnusson
terminates the Agreement for Good Reason, Mr. Magnusson will be
entitled to severance payments equal to his then effective base
salary payable on a semi-monthly basis until the date that is the
earlier of (i) the scheduled expiration date of the Employment
Agreement or (ii) twenty-four months after such event of
termination. If Mr. Magnusson commences subsequent employment
during such payment period, the payment amounts during such period
shall be reduced by an amount equal to 75% of the base compensation
received by Mr. Magnusson from his successor employer during the
overlapping period of the severance payment period and Mr.
Magnusson’s new employment.
Compensation Upon Acquisition of JetFleet.
Prior
to the JetFleet Acquisition, the Company received third-party
management services from JMC, and therefore had no employees and
did not pay any compensation to its executive officers. Upon
consummation of the JetFleet Acquisition on October 1, 2018, the
Company became responsible for the compensation paid by JMC to
JMC’s employees. Prior to the JetFleet Acquisition, Toni M.
Perazzo, in her capacity as President of JMC, had sole discretion
in determining annual salary and cash bonus amounts for JMC’s
employees (other than Mr. Magnusson, who had an employment contract
with JMC containing contractual provisions relating to minimum
salary and bonus calculation as discussed above), including Ms.
Perazzo’s own salary and bonus amounts. Following the
JetFleet Acquisition, the compensation of the Company’s
executive officers and the bonus and incentive programs applicable
to the Company’s employees are being determined by the
Compensation Committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 1, 2020, by:
(i) each person or entity that is known to the Company to own
beneficially more than five percent of the outstanding shares of
the Company's Common Stock; (ii) each director and nominee of the
Company; (iii) each named executive officer; and (iv) all directors
and executive officers of the Company as a group.
Name
|
|
Percentage
of
Common
Stock (2)
|
Michael
G. Magnusson,
Director,
President
|
15,000
|
*
|
Harold
M. Lyons,
CFO, Treasurer, Sr.
Vice President, Finance
and
Secretary
|
3,946
|
*
|
Toni
M. Perazzo
Director, Principal
Stockholder (3)
|
327,374
|
21.2%
|
Evan
M. Wallach
Director
|
1,770
|
*
|
Roy
E. Hahn
Director
|
0
|
*
|
David
P. Wilson
Director
|
1,215
|
*
|
All
directors and executive
officers
as a group
(6
persons)
|
349,305
|
22.6%
|
Dimensional Fund Advisors LP
(4)
|
84,683
|
5.5%
|
----------------------------------
* Less
than 1%
(1) Except as indicated in
the footnotes to this table, the stockholders named in the table
are known to the Company to have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially
owned by them, subject to community property laws where applicable.
Beneficial ownership of shares is determined in accordance with the
rules of the SEC and generally includes any shares over which a
person exercises sole or shared voting or investment power, or of
which a person has the right to acquire ownership within 60 days
after April 1, 2020.
(2) For purposes of
calculating percentages, 1,545,884 shares, consisting of all of the
outstanding shares of Common Stock (excluding Company treasury
stock) outstanding as of April 1, 2020, was
used.
(3) Includes (i) 16,007
shares of Common Stock held directly by Ms. Perazzo or as
beneficiary of a 401(k) custodial account, (ii) 152,433 shares held
by an irrevocable trust of which Ms. Perazzo is a beneficial owner;
(iii) 152,434 shares held by an irrevocable trust of which a child
of Ms. Perazzo is the beneficiary; and (iv) 6,500 shares held in a
joint tenancy account with such child. Ms. Perazzo’s mailing
address is c/o AeroCentury Corp., 1440 Chapin Avenue Suite 310,
Burlingame, California 94010.
(4) Based solely on a
Schedule 13G/A filed with the SEC on February 12, 2020
(“Dimensional Schedule 13G”), Dimensional Fund Advisors
LP has sole voting power and sole dispositive power with respect to
84,683 shares as of December 31, 2019. According to the Dimensional
Schedule 13G, Dimensional Fund Advisors LP, as an investment
adviser, furnishes investment advice to four investment companies
and serves as investment manager or sub-advisor to certain other
commingled funds, group trusts and separate accounts (collectively
referred to as the “Dimensional Funds”). In certain
cases, subsidiaries of Dimensional Fund Advisors LP may act as an
adviser or sub-adviser to certain Dimensional Funds. In its role as
investment adviser, sub-adviser and/or manager, Dimensional Fund
Advisors LP or its subsidiaries (collectively,
“Dimensional”) may be deemed to be the beneficial owner
of the shares of the Company held by the Dimensional Funds, but
Dimensional disclaims beneficial ownership of such shares. The
mailing address is Dimensional Fund Advisors LP, Building One, 6300
Bee Cave Road, Austin, Texas, 78746.
RELATED PARTY TRANSACTIONS
Acquisition of JetFleet by the Company
On October 1, 2018, pursuant to the Agreement and Plan of Merger,
dated as of October 26, 2017 (the "Merger Agreement"), by and among
the Company, JetFleet and Falcon Landing, Inc., a California
corporation and wholly owned subsidiary of the Company ("Merger
Sub") and certain other parties, the Company acquired JetFleet
(together with its wholly-owned subsidiary, JMC) by way of merger
(“Merger”) of JetFleet with Merger Sub, with JetFleet
surviving the Merger. The Merger was consummated following the
approval and adoption of the Merger and the Merger Agreement by
both the JetFleet and AeroCentury stockholders.
Under the terms of the Merger Agreement, each share of JetFleet
common stock issued and outstanding immediately before the Merger
was cancelled and converted into the right to receive (i) 0.357
shares of AeroCentury Common Stock and (ii) $7.83 in cash. As a
result, AeroCentury issued 129,217 shares of its common stock and
paid approximately $2.84 million in cash to the former JetFleet
stockholders at the closing of the Merger.
Prior
to the Merger, JetFleet beneficially owned 214,876 shares of
AeroCentury Common Stock, or approximately 15.2% of the
then-outstanding shares.
Until
its acquisition by the Company in 2018, JMC, the wholly-owned subsidiary of JetFleet,
acted as a third-party management company for the Company under the
Second Amended and Restated Management Agreement, dated August 17,
2015, between JMC and the Company (the “Management
Agreement”), and received management fees, acquisition fees
and remarketing expense reimbursements from the Company pursuant to
the terms of the Management Agreement totaling $7,010,800 and
$3,459,700 in 2017 and 2018 through the date of the Merger,
respectively.
Prior to the Merger, the
officers of the Company were also officers of JMC and the sole
member of JMC’s Board of Directors, Toni M. Perazzo, was on
the Board of Directors of the Company. Ms. Perazzo owned or
controlled approximately 56% of the outstanding shares of stock of
JetFleet, and thus had an indirect ownership interest in JMC of
approximately 56%. As a result of her indirect ownership interest
in JMC, until the closing of the Merger on October 1, 2018, Ms.
Perazzo had an indirect interest in approximately 56% of the
management fees, acquisition fees and remarketing expense
reimbursements paid by the Company to JMC, or $3,926,048 and $1,937,432 in 2017 and 2018 through
the date of the Merger, respectively. To the extent that the management fees,
acquisition fees, and remarketing expense reimbursements paid by
the Company to JMC were in excess of JMC’s expenses in
managing the Company’s portfolio in each such year, such
payments enhanced the value of JMC’s equity, and in turn the
value of JetFleet’s equity, to the JetFleet
shareholders.
Immediately
prior to consummation of the Merger, Ms. Perazzo, as a shareholder
of JetFleet, received from JetFleet a dividend of 114,436 shares of
AeroCentury Common Stock and $2,114,129 in cash with respect to her
shares of JetFleet. Upon consummation of the Merger, in exchange
for her shares in JetFleet, Ms. Perazzo received 68,850 shares of
AeroCentury Common Stock and $1,536,651 in cash from the Company as a
result of the Merger.
Before
completion of the JHC Acquisition, in April 2018, the Company,
JetFleet and JMC entered into a waiver and reimbursement agreement
(the “Waiver/Reimbursement Agreement”), pursuant to
which JHC and JMC agreed to waive their right to receive management
and acquisition fees (“Contract Fees”) otherwise owed
by the Company to JMC pursuant to the Management Agreement for all
periods after March 31, 2018 and until consummation of the Merger,
and in return, the Company agreed to reimburse JMC for expenses
(“Management Expense”) incurred in providing management
services set forth under the Management Agreement. During such
period, Contract Fees totaled $3,531,000 and Management Expense
totaled $2,013,000.
Office Space
The
Company maintains its principal office at 1440 Chapin Avenue, Suite
310, Burlingame, California 94010.
DELINQUENT SECTION 16(a) REPORTS
Section
16(a) of the Exchange Act requires the Company's directors and
officers and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the SEC
initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent beneficial owners are
required by SEC regulations to furnish the Company with copies of
all Section 16(a) reports they file.
Based solely upon a review of the copies of such reports furnished
to the Company and written representations that no other reports
were required, the Company believes the Company's officers,
directors and greater than ten percent beneficial owners complied
with all Section 16(a) filing requirements applicable to them in
the fiscal year ended December 31, 2019.
CODE OF BUSINESS CONDUCT AND ETHICS
It is
the policy of the Company to conduct its affairs in accordance with
all applicable laws, rules and regulations of the jurisdictions in
which it does business. As part of this policy, the Company
maintains a Code of Business Conduct and Ethics, which is available
on the Company’s website at
http://www.aerocentury.com/code-of-conduct.php.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Requirements for Stockholder Proposals to be Brought Before 2021
Annual Meeting
For stockholder proposals to be properly brought before an annual
stockholders meeting, the stockholder must have given timely notice
thereof in writing to the Secretary of the Company pursuant to the
provisions of the Company’s Bylaws. To be timely for the 2021
Annual Meeting, notice of any stockholder proposals must be
delivered to the Secretary of the Company at the principal
executive offices of the Company (1) if the 2021 Annual Meeting is
held between May 10, 2021 and July 9, 2021, between the close of
business on December 28, 2020 and the close of business on January
27, 2021, or (2) if the 2021 Annual Meeting is not held within
these dates, then no later than the close of business on the
90th
day prior to the 2021 Annual Meeting
or the 15th
day following the day on which public
announcement of the date of the 2021 Annual Meeting is first made,
whichever is later. A stockholder's notice to the Secretary must
set forth, as to each matter the stockholder proposes to bring
before the 2021 Annual Meeting: (i) a brief description of the
business desired to be brought before the meeting and the reasons
for conducting such business at the meeting, (ii) the name and
record address of the stockholder proposing such business, (iii)
the number of shares of the Company’s Common Stock which are
beneficially owned by the stockholder, (iv) any material interest
of the stockholder in such business and (v) certain other detailed
information as set forth in Article I, Section 7.11 of the Bylaws
of the Company.
Requirements for Director Nominations for 2021 Annual
Meeting
For nominations by a stockholder of persons for election to the
Board of Directors to be properly brought
before an annual stockholders meeting, the stockholder must have
given timely notice thereof in
writing to the Secretary of the Company pursuant to the provisions
of the Company’s Bylaws. To be timely for the 2021 Annual
Meeting, notice of any stockholder director nominations must be
delivered to the Secretary of the Company at the principal
executive offices of the Company by the same deadlines as described
under “Requirements for Stockholder Proposals to be Brought
Before 2021 Annual Meeting” above.
A stockholder's notice to the
Secretary must set forth, as to each person the stockholder
proposes to nominate for election as a director, all of the
detailed information set forth in Article II, Section 4
of the Company’s Bylaws.
Requirements for Stockholder Proposals to be Considered for
Inclusion in the Company's Proxy Materials for 2021 Annual
Meeting
In order to be considered for inclusion in the Company's proxy
materials for the 2021 Annual Meeting, stockholder proposals
submitted pursuant to Rule 14a-8 under the Exchange Act and
intended to be presented at the 2021 Annual Meeting must be
received by the Company no later than December 28, 2020 if the 2021
Annual Meeting is held between May 10, 2021 and July 9, 2021 or, if
the 2021 Annual Meeting is not held within these dates, a
reasonable time before the Company begins to print and send its
proxy materials for the meeting.
Discretionary Voting Authority
If the Company complies and a stockholder submitting a proposal or
director nominee as described above does not comply with the
requirements of Rule 14a-4(c)(2) under the Exchange Act, the
Company may exercise discretionary voting authority under proxies
it solicits to vote in accordance with its best judgment on any
such stockholder proposal or director nomination.
ANNUAL REPORT ON FORM 10-K
A copy of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2019, is available without charge to
each person solicited by this Proxy Statement upon the written
request of such person to Investor Relations, AeroCentury Corp.,
1440 Chapin Avenue, Suite 310, Burlingame, California
94010.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETING TO BE HELD ON JUNE 9, 2020
The
Notice, this Proxy Statement, and the Company’s Annual Report
on Form 10-K for the year ended December 31, 2019 are available
online at http://www.aerocentury.com/corporate_highlights.php.
OTHER MATTERS
Management
does not know of any matters to be presented at the Annual Meeting
other than those set forth herein, nor has it received any notice
of any matter by the deadline prescribed by Rule 14a-4(c)(1) under
the Exchange Act. Without limiting the Company’s ability to
apply the advance notice provisions in its Bylaws with respect to
the procedures that must be followed for a matter to be properly
presented at an annual meeting of its stockholders, if other
matters should properly come before the Annual Meeting, the proxy
holders will vote on such matters in accordance with their best
judgment.
It is
important that your shares be represented at the Annual Meeting,
regardless of the number of shares that you hold. YOU ARE,
THEREFORE, URGED TO EXECUTE PROMPTLY AND RETURN THE ACCOMPANYING
PROXY IN THE ENVELOPE THAT HAS BEEN ENCLOSED FOR YOUR
CONVENIENCE.
By
Order of the Board of Directors,
/s/
Michael G. Magnusson
Michael
G. Magnusson, President
April
27, 2020
Burlingame,
California