SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
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))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Vanguard Airlines, Inc.
(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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
____________________________________________________________
2) Aggregate number of securities to which transaction
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:
____________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] 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.
1) Amount Previously Paid:
____________________________________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________________________________
3) Filing Party:
____________________________________________________________
4) Date Filed:
____________________________________________________________
<PAGE>
VANGUARD AIRLINES, INC.
30 N.W. ROME CIRCLE, TERMINAL B
KANSAS CITY INTERNATIONAL AIRPORT
KANSAS CITY, MISSOURI 64153
________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29, 1997
________________________________
NOTICE IS HEREBY GIVEN that an Annual Meeting of
Stockholders of Vanguard Airlines, Inc., a Delaware corporation
(the "Company"), will be held on Thursday, May 29, 1997, at 10:00
a.m., Central Daylight Time, at Embassy Suites Hotel, 7640 N.W.
Tiffany Springs Parkway, Kansas City, Missouri 64153, and
thereafter as it may from time to time be adjourned for the
following purposes:
1. To elect one Class II Director to serve for a
three-year term expiring at the 2000 Annual Meeting of
Stockholders and until his successor is duly elected and
qualified;
2. To consider and act upon ratification and approval
of the selection of Ernst & Young LLP as the Company's
independent accountants for the year ending December 31,
1997; and
3. To consider and act upon any other matters which
may properly come before the Annual Meeting of Stockholders or
any adjournment thereof.
The foregoing matters are more fully described in the
accompanying Proxy Statement.
In accordance with the provisions of the Bylaws of the
Company, the Board of Directors has fixed the close of business
on May 1, 1997, as the record date for the determination of the
holders of shares of Common Stock, par value $.001 per share, of
the Company (the "Common Stock"), entitled to notice of, and to
vote at, the Annual Meeting of Stockholders and any adjournment
thereof.
You are cordially invited to attend the Annual Meeting.
IF THERE IS A POSSIBILITY THAT YOU MAY BE UNABLE TO ATTEND,
PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE ANNUAL MEETING. A
return envelope is enclosed for your convenience. If you are
able to attend the meeting and wish to vote your shares in
person, your proxy will not be used.
BY ORDER OF THE BOARD OF DIRECTORS,
Brian S. Gillman
Vice President, General Counsel
and Secretary
Kansas City, Missouri
May 5, 1997
<PAGE>
VANGUARD AIRLINES, INC.
30 N.W. ROME CIRCLE, TERMINAL B
KANSAS CITY INTERNATIONAL AIRPORT
KANSAS CITY, MISSOURI 64153
____________________________
PROXY STATEMENT
____________________________
ANNUAL MEETING
OF STOCKHOLDERS
MAY 29, 1997
____________________________
INTRODUCTION
This Proxy Statement is furnished in connection with
the solicitation of proxies by the Board of Directors of Vanguard
Airlines, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders to be held on Thursday, May
29, 1997, commencing at 10:00 a.m., Central Daylight Time, at
Embassy Suites Hotel, 7640 N.W. Tiffany Springs Parkway, Kansas
City, Missouri 64153, and all adjournments and postponements
thereof (the "Annual Meeting"). The Company anticipates mailing
this Proxy Statement, the accompanying form of proxy and the
Notice of Annual Meeting of Stockholders to the holders of the
outstanding shares of Common Stock, par value $.001 per share, of
the Company (the "Common Stock") on or about May 5, 1997.
Only the holders of record of shares of Common Stock as
of the close of business on May 1, 1997 (the "Record Date") are
entitled to notice of and to vote at the Annual Meeting.
Holders of shares of Common Stock are entitled to one vote per
share standing in their names on the Record Date with respect to
the matters being brought before the Annual Meeting. At the
close of business on the Record Date, there were outstanding and
entitled to vote a total of 14,984,108 shares of Common Stock,
constituting all of the outstanding voting securities of the
Company.
You are requested to complete, date and sign the
accompanying form of proxy and return it promptly in the enclosed
postage prepaid envelope. Such proxy may be revoked at any time
prior to its exercise by written notice of revocation delivered
to the Secretary of the Company. Attendance at the Annual
Meeting will not in and of itself constitute a revocation of a
proxy, but your proxy will not be used if you attend the Annual
Meeting and prefer to vote in person. The persons designated as
proxies were selected by the Board of Directors and are officers
or directors of the Company. Proxies duly executed and received
in time for the Annual Meeting will be voted in accordance with
stockholders' instructions. If no instructions are indicated,
such shares will be voted as follows:
1. To elect John P. Tague as a Class II Director to
serve for a three-year term expiring at the 2000 Annual
Meeting of Stockholders and until his successor is duly
elected and qualified;
2. To ratify and approve the selection of Ernst &
Young LLP as the Company's independent public accountants
for the year ending December 31, 1997; and
3. In the discretion of the proxy holder as to any
other matter coming before the Annual Meeting.
SOLICITATION OF PROXIES
The solicitation of proxies for the Annual Meeting is
being made by the Company's Board of Directors. The Company will
bear all costs of such solicitation, including the cost of
preparing and mailing this Proxy Statement and the enclosed form
of proxy. After the initial mailing of this Proxy Statement,
proxies may be solicited in person or by <PAGE> telephone or telegraph
by directors and officers of the Company who will not receive
compensation for their soliciting activities. Brokerage houses
and other nominees will solicit proxies or authorizations from
beneficial owners and will be reimbursed for their reasonable
expenses of forwarding proxy materials to beneficial owners. The
Company will bear all of the costs of the solicitation.
A list of stockholders entitled to vote at the Annual
Meeting will be available for examination at least ten days prior
to the date of the Annual Meeting during normal business hours at
the offices of the Company located at 30 N.W. Rome Circle,
Terminal B, Kansas City, Missouri. The list also will be
available at the Annual Meeting.
QUORUM REQUIREMENTS
The presence in person or by proxy of stockholders
holding a majority of the outstanding shares of Common Stock is
required for a quorum to transact business at the Annual Meeting,
but if a quorum should not be present, the Annual Meeting may be
adjourned from time to time until a quorum is obtained. Shares of
Common Stock represented by a proxy which directs that the shares
be voted to abstain or to withhold a vote on any matter will be
counted in determining whether a quorum is present.
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation of the
Company provides that the number of directors of the Company
shall be fixed by, or in the manner provided in, the Bylaws of
the Company and divided into three classes as nearly equal as
possible, each having a term of three years. The Bylaws provide
that the number of directors shall be fixed by resolution of the
Board of Directors. The Board of Directors currently has fixed
the number of directors at seven. Each year the term of office
of one class of directors expires.
The Board of Directors intends to present for action at
the Annual Meeting the election of John P. Tague, a present Class
II director, whose term expires at the Annual Meeting, to serve
for a three-year term expiring at the 2000 Annual Meeting of
Stockholders and until his successor is duly elected and
qualified. There is currently one vacancy on the Board of
Directors, which the Company does not intend to fill at the
Annual Meeting.
The Directors in Class I (Edmund H. Shea, Jr. and
Robert J. Spane) and the Directors in Class III (Robert J.
McAdoo, Richard D. Pearson and Denis T. Rice) have been elected
to terms expiring at the time of the Annual Meetings of
Stockholders in 1999 and 1998, respectively. Stockholders do not
have cumulative voting rights in the election of directors.
Directors will be elected by the plurality vote of the holders of
shares of Common Stock entitled to vote at the Annual Meeting and
present in person or by proxy.
One director is to be elected as the only member of
Class II at this meeting, for a term of three years and until his
successor is duly elected and qualified. It is intended that
shares represented by a proxy given pursuant to this solicitation
will be voted in favor of the election of John P. Tague as the
Class II Director, unless such authority is specifically
withheld. In the event that Mr. Tague should become unavailable
for election, it is intended that the shares of Common Stock
represented by the Proxy will be voted for such substitute
nominee as may be nominated by the Board of Directors. The above
named person has indicated his willingness to serve if elected
and it is not anticipated that he will become unavailable for
election.
The Restated Certificate of Incorporation and the
Bylaws of the Company provide that advance notice of stockholder
nominations for an election of directors must be given. Written
notice of the stockholder's intent to make a nomination at a
meeting of stockholders must be received by the Secretary of the
Company not later than 30 days prior to the first anniversary of
the preceding year's annual meeting in advance of the date of
such meeting and of the beneficial owner, if any, on whose behalf
the nomination is made, in the case of an annual meeting and, in
the case of a special meeting, not later than the close of
business on the later of (i) the 30th day prior to such special
meeting or (ii) the 10th day following the day on which public
announcement is first made of the date of the special meeting.
The notice must contain (i) the name <PAGE> and address of the
stockholder who intends to make the nomination and of the person
or persons to be nominated, (ii) a representation that such
stockholder is a holder of record of stock of the Company
entitled to vote in the election of directors at such meeting and
intends to appear in person or by proxy at the meeting to
nominate the person specified in the notice, (iii) the name and
address, as it appears on the Company's books, of such
stockholder, and of the beneficial owner, if any, on whose behalf
the nomination is made, (iv) the class and number of shares of
the Company which are owned beneficially and of record by such
nominating stockholder and each nominee proposed by such
stockholder, (v) a description of all arrangements or
understandings between the nominating stockholder and each
nominee and any other person (naming such persons) pursuant to
which the nomination or nominations are to be made by the
stockholder, (vi) such other information regarding each nominee
proposed by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, as then in effect, had
the nominee been nominated, or intended to be nominated, by the
Board of Directors, and (vii) the consent of each nominee to
serve as a director of the Company if so elected. No such notice
has been received, and the Chairman of the Annual Meeting is
entitled to refuse to acknowledge the nomination of any person
which is not made in compliance with the foregoing procedure. In
any event, the Board of Directors has no reason to believe that
anyone will attempt to nominate another candidate for director.
The following table sets forth certain information as
to the person nominated by the Board of Directors for election as
a Class II Director of the Company and each director whose term
of office will continue after the Annual Meeting:
Name Age Director Since
NOMINEES
CLASS II: TERM TO EXPIRE IN 2000
John P. Tague 34 1996
DIRECTORS CONTINUING IN OFFICE
CLASS I: TERM TO EXPIRE IN 1999
Edmund H. Shea, Jr./1/ 67 1994
Robert J. Spane 56 1996
CLASS III: TERM TO EXPIRE IN 1998
Robert J. McAdoo 51 1994
Richard D. Pearson /1/ 61 1995
Denis T. Rice 64 1997
________________
/1/ Member of Audit Committee.
The business experience of each of the directors of the
Company during the last five years is as follows:
JOHN P. TAGUE joined the Company on November 1, 1996 as
Chairman of the Board, Chief Executive Officer and President.
Mr. Tague also has served, since July 1996, and continues to
serve, as Chairman of the Board, Chief Executive Officer and
President of Air South Airlines, and therefore does not spend
all of his business-related time in furtherance of the interests
of the Company. Since 1995, he was and remains a principal of
The Pointe Group, L.L.C. ("Pointe Group") and its Co-Chairman and
Chief Executive Officer. Pointe Group is an aviation and
transportation consulting firm that has been retained to provide
consulting and management services for the Company (see "Pointe
Group Consulting Agreement" and "Certain Transactions"), as well
as for Air South Airlines. Prior to 1995, for more than five
years, he was with American Trans Air, Inc., the United States'
10th largest airline, most recently as President and Chief
Operating Officer.
ROBERT J. MCADOO has been a director of the Company
since the Company's inception in April 1994. From April 1994 to
November 1996, Mr. McAdoo was Chairman of Board, Chief Executive
Officer and President of the Company. Mr. McAdoo was an airline
analyst with Prudential Securities from 1991 to 1994 and with
Oppenheimer and <PAGE> Company, Inc., from 1986 to 1991. In 1980, he
was one of the original officers of People Express, where he
served from 1980 to 1986 as the Chief Financial Officer and from
1981 to 1983 as the Chief Marketing Officer.
RICHARD D. PEARSON was elected a director of the
Company in June 1995. From 1994 until his retirement in April
1995, he was Chairman of the Board and Chief Executive Officer of
Buffalo Airways, Inc., a cargo airline. From 1992 to 1994, Mr.
Pearson was retired. From 1987 to 1992, Mr. Pearson was Senior
Vice President -- Field Services and Vice President of Operations
Administration for American Airlines, Inc. From 1984 to 1986, he
was President of Trans World Airlines.
DENIS T. RICE was elected a director of the Company in
April 1997. Mr. Rice has been a partner in the law firm of
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, P.C., San
Francisco, California for more than the past five years, and has
engaged in the practice of law since 1961.
EDMUND H. SHEA, JR. was elected a director of the
Company in May 1994. He has been the Vice President of J.F. Shea
& Co., Inc., a privately held real estate development,
construction and venture capital company since 1954. Mr. Shea is
also a director of Hambrecht & Quist Group, an investment banking
firm, ADAC Laboratories, Inc., a developer of medical imaging and
information systems for hospitals, Ironstone Group, Inc., a
property tax services company, and Zymed, Inc., a cardiac
instrumentation company.
VICE ADMIRAL ROBERT J. SPANE USN (RET.) was elected a
director of the Company in May 1996. Vice Admiral Spane served
in the U.S. Navy for 35 years where his last position was
Commander, Naval Air Force Pacific, which he held from October
1993 to February 1996. Vice Admiral Spane, as Commander, Naval
Air Force Pacific, was responsible for all finances, training,
logistics and the material condition of all aircraft carriers,
aircraft and naval air stations in the Pacific. Vice Admiral
Spane retired from the U.S. Navy in February 1996. Vice Admiral
Spane is a 1962 graduate of the U.S. Naval Academy.
With the possible exception of Mr. Tague's appointment
as a director of the Company in connection with the agreement by
Pointe Group to provide consulting and management services for
the Company, there is no arrangement or understanding between any
director and any other person pursuant to which such person was
selected as a director of the Company. See "Pointe Group
Consulting Agreement" and "Certain Transactions."
COMPENSATION OF DIRECTORS
Directors do not receive any cash compensation for
their service as members of the Board of Directors, although they
are reimbursed for travel and out-of-pocket expenses in attending
Board and committee meetings. The Company has granted to each of
the outside directors options to purchase 25,000 shares of Common
Stock under the Company's 1994 Stock Option Plan, including
options to purchase 25,000 shares of Common Stock granted to Mr.
Spane in 1996. All such options were granted with an exercise
price equal to or greater than the fair market value of the
Common Stock on the respective date of grant. Mr. Pearson and
Mr. Shea have exercised their stock options, while Mr. Spane and
Mr. Rice have not. See "Stock Option Plan."
Directors who are also employees of the Company receive no
additional compensation and receive no stock options for serving
as directors. As described below under "Pointe Group Consulting
Agreement" and Certain Transactions," in connection with the
agreement by Pointe Group to provide consulting and management
services for the Company, Mr. Tague became Chief Executive
Officer and President of the Company and a member of the Board of
Directors. Mr. Tague is Co-Chairman and Chief Executive Officer
of Pointe Group, which receives cash and stock options in
exchange for its services. See "Pointe Group Consulting
Agreement" and Certain Transactions."
MEETINGS OF THE BOARD AND COMMITTEES
During 1996, the Board of Directors held eight
meetings. Each incumbent director attended at least seventy five
percent of the meetings of the Board of Directors and committees
on which they served. It should be noted that <PAGE> the Company's
directors discharge their responsibilities throughout the year,
not only at Board of Directors and Committee meetings, but
through personal meetings and other communications with members
of management and others regarding matters of interest and
concern to the Company.
The Board of Directors established an Audit Committee
in connection with its initial public offering in October 1995.
The Audit Committee assists the Board of Directors in fulfilling
its responsibilities with respect to the accounting and financial
reporting practices of the Company and in addressing the scope
and expense of audit and related services provided by the
Company's independent accountants. During 1996, the Audit
Committee met one time. There currently is not a Nominating or
Compensation Committee, or committees performing similar
functions, of the Board of Directors.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
This report has been prepared by the members of the
Board of Directors who were responsible for establishing,
directing and administrating the compensation policies and
programs for the Company's executive officers in 1996. Denis
Rice was elected as a member of the Board of Directors in April
1997 and therefore had no responsibility for such matters in
1996.
The Board of Directors reviews, evaluates and approves
the structure and implementation of the Company's compensation
program for its executive officers. The Board of Directors also
determines the form and amount of compensation for the Chief
Executive Officer. Except as noted below, the compensation of
the Company's executive officers is determined by the Board of
Directors on an annual basis. In doing so, the Board of
Directors subjectively considers all elements of its compensation
program when making its compensation decisions, including the
level and scope of responsibility, experience, and performance of
the executive, the internal fairness and equity of the Company's
overall compensation structure and the compensation of executives
employed by other emerging companies in the airline industry.
With respect to the executive officers who do not serve on the
Company's Board of Directors, the Board of Directors also
considers the recommendation of the Company's Chairman of the
Board and Chief Executive Officer.
The Vanguard Executive Compensation Program
Elements of Executive Compensation. The compensation
program of the Company has been structured, in part, to enable
the Company to attract, motivate and retain experienced and
qualified executives. The Company seeks to provide a
compensation package to its executive officers that, in its
totality, is competitive. In addition, the Company intends to
grant stock options to executive officers upon their commencement
of employment with the Company, and at other times the Company
deems appropriate, in an effort to strengthen the mutuality of
interests between such executives and the Company's stockholders.
Stock option grants provide the right to purchase shares of
Common Stock at a specified exercise price. All stock options
have exercise prices equal to or greater than the fair market
value of the Common Stock on the date of grant of the stock
option. On February 6, 1997 the Company adopted a stock option
repricing plan for executive officers and employees of the
Company that had exercise prices greater than the fair market
value of the stock on such date. The Board of Directors believes
stock options are an integral part of the total compensation of
such executive officers.
Annual Compensation. Currently, the Company's
compensation program is not performance-based. Upon a review of
certain publicly available salary information for executive
officers at other emerging airline companies, the Board of
Directors made a subjective determination as to the salary
component of its executive compensation program and further
determined to maintain such base salary at present levels until
the Company has had a sufficient operating history. In 1996 the
Board of Directors reaffirmed its determination to maintain base
salaries at present levels.
Bonuses and Incentives. The Company currently does not
have a formal bonus plan or long-term incentive plan for its
executive officers.
<PAGE>
Stock Options. The Board of Directors has determined
to grant stock options to executive officers upon their
commencement of employment with the Company, and at other times
the Company deems appropriate, to provide additional incentive to
its executive officers and to strengthen the mutuality of
interests between the executive officers and the Company's
Stockholders. The Board of Directors believes that stock option
grants advance the long-term interests of the Company and its
stockholders by rewarding executive officers for increasing
shareholder value (i.e., appreciation in the price of the
Company's Common Stock).
Payment of the total annual compensation for the Chief
Executive Officer and the other named executives appearing in the
Summary Compensation Table and other tables included in this
Proxy Statement is based on the previously discussed factors.
1996 Compensation of the Chief Executive Officer
The 1996 salary of Mr. Robert J. McAdoo, former
Chairman, Chief Executive Officer and President, was based
primarily on the factors discussed above. For 1996, which was
the second full year of the Company's operations, the Board of
Directors set Mr. McAdoo's salary at $200,000. The Board
believed the total cash compensation paid to Mr. McAdoo was
appropriate in light of the review of salaries discussed above,
and therefore, prior to Mr. McAdoo's resignation as Chief
Executive Officer and President, the Board of Directors
determined to maintain and not increase Mr. McAdoo's base salary
until the Company had a sufficient operating history.
Mr. John P. Tague commenced employment with the Company
as Chief Executive Officer and President on November 1, 1996.
Mr. Tague's service to the Company in such capacities is provided
pursuant to the Company's consulting agreement with Pointe Group.
As such, Mr. Tague is not compensated directly by the Company,
but rather performs his services as a representative, employee or
agent of Pointe Group in exchange for such compensation as Pointe
Group provides. The compensation package provided by the Company
to Pointe Group is the result of arms-length negotiations and is
believed by the Board of Directors to be reasonable and
appropriate under the circumstances. In arriving at this
compensation package, the Board of Directors took into account
the incentive to achieve earnings growth and return on investment
objectives that is inherent in the ownership of shares of the
Company's Common Stock and made the determination to give
disproportionate weight to the grant of stock options.
Accordingly, the Company agreed to pay an annual $225,000 fee to
Pointe Group with the grant of 1,700,000 stock options that vest
over a two-year period. In authorizing this package, the Board
of Directors made the subjective determination that Pointe Group
directly, and Mr. Tague indirectly, would be appropriately
motivated to achieve shareholder returns over the long term while
receiving sufficient short-term compensation in the meantime.
See "Pointe Group Consulting Agreement" and "Certain
Transactions."
Submitted by:
THE BOARD OF DIRECTORS
John P. Tague Edmund H. Shea, Jr.
Robert J. McAdoo Robert J. Spane
Richard D. Pearson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Currently, the Company does not have a Compensation
Committee. The Board of Directors determines the structure of
the Company's compensation system. As a result, John P. Tague,
Chairman of the Board, Chief Executive Officer and President of
the Company, and Robert J. McAdoo, the former Chairman of the
Board, Chief Executive Officer and President, each participated
in decisions regarding their respective direct or indirect
compensation.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with
respect to the Chief Executive Officer and the most highly
compensated executive officers of the Company as to whom the
total salary and bonuses for the year ended December 31, 1996
exceeded $100,000 (collectively, the "Named Executive Officers"):
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term Insurance,
Annual Compensation Premiums
Compensation Awards (no threshold)
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
Other Securities All Other
Name and Principal Annual Underlying Compensation
Position Year Salary ($) Bonus ($) Compensation($)/1/ Options (#)/2/ ($)
<S>
John P. Tague, Chairman, 1996 37,500 -- -- 1,700,000 ---
Chief Executive Officer
and President/3/
Robert J. McAdoo 1996 200,000 -- -- -- ---
Former Chairman, 1995 200,000 -- -- -- ---
Chief Executive 1994/5/ 121,282 -- -- 120,000/6/ ---
Officer and President
/4/
Ronald L. McClellan, 1996 100,000 -- -- --- ---
Vice President- 1995 100,000 -- -- --- ---
Maintenance 1994/5/ 57,244 -- -- 40,000 ---
</TABLE>
/1/ Excludes perquisites and other benefits, unless the
aggregate amount of such compensation exceeds the lesser of
$50,000 or 10% of the total salary and bonus for the Named
Executive Officer.
/2/ The number in the Securities Underlying Options column
reflects the number of shares of Common Stock into which
such options are exercisable.
/3/ Mr. Tague joined the Company as Chairman, Chief Executive
Officer and President on November 1, 1996. Compensation
reported for Mr. Tague consists of fees paid and stock
options granted by the Company to Pointe Group. Mr. Tague
is not compensated directly by the Company, but rather
performs his services for the Company and other clients of
Pointe Group in exchange for such compensation as Pointe
Group provides. Mr. Tague is Co-Chairman and Chief
Executive Officer of Pointe Group, which is a firm that has
been retained by the Company to provide consulting and
management services. See "Pointe Group Consulting
Agreement" and "Certain Transactions."
/4/ Mr. McAdoo resigned as Chairman, Chief Executive Officer and
President of the Company effective November 1, 1996.
/5/ Represents compensation for services performed from the
corporate formation stage through December 31, 1994.
/6/ As of the date of Mr. McAdoo's resignation, 67,500 options
had vested and became immediately exercisable. The
remaining 52,500 options were canceled.
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to each Named Executive Officer concerning grants
during the year ended December 31, 1996 of stock options and stock appreciation rights ("SARs").
<CAPTION>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996/1/
<C> <C> <C> <C> <C> <C>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term/2/
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Per Share) Date/3/ 5% ($) 10%($)
<S>
John P. Tague /3/ 1,700,000 96% 1.81 November 1, 2001 850,118 1,878,539
</TABLE>
/1/ No SARs were granted by the Company during the year ended
December 31, 1996. No stock options were granted during
such year to any Named Executive Officer (other than those
granted indirectly to Mr. Tague). See "Pointe Group
Consulting Agreement" and "Certain Transactions."
/2/ The potential realizable value portion of the foregoing
table illustrates value that might be realized upon
exercise of the options immediately prior to the expiration
of their term, assuming the specified compounded rates
of appreciation on the Company's Common Stock over the term
of the options. Assumed stock price appreciation of
five percent and ten percent is used pursuant to rules
promulgated by the Securities and Exchange Commission. The
potential realizable value is calculated by assuming that
the deemed fair market value of the Company's Common
Stock for financial statement presentation purposes on the
date of grant ($1.81) appreciates at the indicated rate
for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day
of its term at the appreciated price. This table does not
take into account any appreciation in the price of the
Common Stock to date.
/3/ The options reported for Mr. Tague were granted by the
Company to Pointe Group. Mr. Tague is not compensated
directly by the Company, but rather performs his services
for the Company and other clients of Pointe Group in
exchange for such compensation as Pointe Group provides.
Mr. Tague is Co-Chairman and Chief Executive Officer of
Pointe Group, which is a firm that has been retained by the
Company to provide consulting and management services.
See "Pointe Group Consulting Agreement" and "Certain
Transactions." The options vest at the rate of 212,500 shares
(one-eighth of the shares subject to the option) on November
1, 1996 and at the end of each three-month period
thereafter. Full vesting occurs on October 31, 1998. In
the event of the sale of all or substantially all the
assets or capital stock of the Company or a merger of the
Company in which it is not the surviving corporation, the
options become fully vested. In addition, one-half of any
unvested options become fully vested upon the death or
permanent disability of Mr. Tague.
<PAGE>
<TABLE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information with respect to each Named Executive Officer concerning the
exercise of options and SARs during 1996 and unexercised options and SARs held as of December 31, 1996.
<CAPTION>
Aggregated Option Exercises in Year ended December 31, 1996
And December 31, 1995 Option Values/1/
Number of Securities Underlying
Unexercised Options (#)/2/ Value of Unexercised
In-the-Money Options ($)/2/
<C> <C> <C> <C> <C> <C> <C>
Shares Acquired Value
Name on Exercise(#) Realized($) Exercisable Unexercisable/3/ Exercisable Unexercisable/3/
<S>
John P. Tague/4/ --- --- --- 1,700,000 --- ---
Robert J. McAdoo --- --- 67,500 --- 93,825 ---
Ronald L. McClellan 22,500 31,275 --- 17,500 --- 24,325
</TABLE>
/1/ No SARs have ever been granted by the Company.
/2/ The numbers in the column headed Number of Securities
Underlying Unexercised Options and the dollar amounts in the
column headed Value of Unexercised In-the-Money Options
reflect (i) the number of shares of Common Stock into which
options are exercisable and (ii) the difference between the
fair market value of such shares of Common Stock and
the exercise price of the options, respectively. As of
December 31, 1996, the last reported sale price of the
Company's Common Stock, which was reported by over the
Counter Bulletin Board on December 30, 1996, was $1.50 per
share. Value is calculated by determining the difference
between the option exercise price and $1.50, multiplied
by the number of shares of Common Stock underlying the
options.
/3/ These options are unexercisable because they have not vested
under their terms.
/4/ The options reported for Mr. Tague were granted by the
Company to Pointe Group. Mr. Tague is not compensated
directly by the Company, but rather performs his services
for the Company and other clients of Pointe Group in
exchange for such compensation as Pointe Group provides.
Mr. Tague is Co-Chairman and Chief Executive Officer of
Pointe Group, which is a firm that has been reatined by the
Company to provide consulting and management services.
See "Pointe Group Consulting Agreement" and "Certain
Transactions."
STOCK OPTION PLAN
The Company has one stock option plan pursuant to which
options are outstanding: the 1994 Vanguard Airlines, Inc. Stock
Option Plan ("Stock Option Plan"). The total number of shares
of Common Stock issuable pursuant to the exercise of options
under the Stock Option Plan is 1,700,000. As of April 1, 1997,
options exercisable with respect to 420,102 shares of Common
Stock had been granted under the Plan of which 217,540 are
exercisable, but no options were granted under the Stock Option
Plan to any Named Executive Officer during 1996.
The Stock Option Plan is administered by the Board of
Directors (the "Plan Administrator"). Subject to the terms of
the Stock Option Plan, the Plan Administrator determines the
persons to whom awards are granted, the type of award granted,
the number of shares granted, the vesting schedule, the type of
consideration to be paid to the Company upon exercise of options,
and the term of each option (not to exceed ten years).
<PAGE>
Under the Stock Option Plan, the Company may grant
stock options, ("incentive stock options") intended to qualify
under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and stock options which are not qualified
as incentive stock options ("non-qualified stock options").
Incentive stock options must be granted at an exercise price
equal to or greater than the fair market value of the Common
Stock on the date of grant. The exercise price of non-qualified
stock options granted under the Stock Option Plan will be
determined by the Plan Administrator on the date of grant but may
not be less than 85% of the fair market value of the Common Stock
on the date of grant. The exercise price of incentive stock
options granted to holders for more than 10% of the Common Stock
must be at least 110% of the fair market value of the Common
Stock on the date of grant, and the term of these options may not
exceed five years.
The Stock Option Plan provides the total number of
shares covered by such plan, the number of shares covered by each
option and the exercise price per share will be proportionately
adjusted in the event of a stock split, reverse stock split,
stock dividend or similar capital adjustment effected without
receipt of consideration by the Company.
In the event of a merger in which the Company is not
the surviving corporation options may be assumed or continued by
the surviving corporation. If the outstanding options are not
assumed or continued, they will be terminated if not exercised
prior to the merger.
POINTE GROUP CONSULTING AGREEMENT
In November 1996, the Company entered into a consulting
agreement (the "Consulting Agreement") with Pointe Group, an
aviation and transportation consulting firm of which John P.
Tague is Co-Chairman and Chief Executive Officer. The Consulting
Agreement provides for Pointe Group's performance of consulting
and management services in the supervision, operation and
management of the Company's business. In connection with Pointe
Group's provision of these services, Mr. Tague was appointed
President and Chief Executive Officer of the Company and a member
of the Board of Directors.
The Consulting Agreement provides for the Company's
payment to Pointe Group of a $225,000 per year fee (payable in
advance in monthly installments of $18,750), the grant of options
to purchase 1,700,000 shares of Common Stock, and the payment of
Pointe Group's reasonable expenses, including Mr. Tague's
transportation, lodging and related expenses. The stock options
granted to Pointe Group vest at the rate of 212,500 shares
(one-eighth of the shares subject to the options) on November 6,
1996 and at the end of each three-month period thereafter, and have a
$1.81 per share exercise price.
The term of the Consulting Agreement is two years,
subject to renewal upon written agreement of the parties and to
earlier termination under certain circumstances. The Consulting
Agreement is terminable by either party upon the expiration of
the term (in which event, among other things, the Company must
offer to employ Mr. Tague as Chief Executive Officer and
President) and upon provision of 30 days' notice. The Company
may terminate the Consulting Agreement upon Mr. Tague's death,
permanent disability or resignation as Chief Executive Officer
and President of the Company. In addition, the Company may
terminate the Consulting Agreement at any time for cause (as
defined).
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph presents a comparison of the
performance of the Common Stock of the Company with the Nasdaq
Stock Market Index and the Standard & Poors Airlines Index. The
Standard & Poors Airlines Index includes AMR Corporation, Delta
Air Lines, US Airways and Southwest Airlines. Stock price
performance, presented for the period from October 31, 1995 (the
date upon which the Common Stock of the Company was first traded
publicly) through December 31, 1996, is not necessarily
indicative of future results. The October 31, 1995 stock price
used for the Common Stock of the Company is the $6.00 per share
initial public offering price.
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURNS
(Vanguard, S&P Airlines, NASDAQ)
The comparison of cumulative total returns presented in
the above graph was plotted using the following index values and
Common Stock price values:
10/31/95 12/31/95 12/31/96
Vanguard Airlines, Inc. $100.00 $100.00 $25.00
Standard & Poors Airlines
Index $100.00 $112.37 $123.19
Nasdaq Stock Market Index $100.00 $100.99 $122.70
The above comparison assumes $100 was invested on
October 31, 1995 in Common Stock of the Company and in each of
the foregoing indices and assumes reinvestment of dividends.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The table below sets forth certain information, as of April
1, 1997 (unless otherwise indicated below), with respect to the
beneficial ownership of the issued and outstanding shares of
Common Stock by (i) each person known to the Board of Directors
to own beneficially 5% or more of the aggregate shares of Common
Stock outstanding, (ii) each director, (iii) each Named Executive
Officer of the Company, and (iv) the executive officers and
directors of the Company as a group. All information with
respect to beneficial ownership has been furnished by the
respective directors, officers or 5% or more stockholders, as the
case may be.
Amount and Nature Percentage
of Beneficial of Shares
Name Ownership/1/ Outstanding/2/
Entities affiliated with
Hambrecht & Quist
Group /3/ /4/ 18,037,103 72.2%
William R.
Hambrecht /3//5/ 20,685,853 77.5%
John P. Tague /6/ 425,000 2.8%
Kenneth J. Wagnon /7/ 2,366,604 14.2%
Daniel M. Carney /8/ 1,384,688 8.7%
Robert J. McAdoo /9/ 409,459 2.7%
Ronald L. McClellan /10/ 57,500 *
Richard D. Pearson 25,000 *
Denis T. Rice/11/ 25,000 *
Edmund H. Shea, Jr. /12/ 2,643,750 15.8%
Robert J. Spane /13/ 25,000 *
All current directors and
executive officers as a
group (11 persons) /14/ 3,617,271 21.0%
______________
* Represents beneficial ownership of less than 1% of the
Common Stock of the Company.
/1/ Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, which
generally attribute beneficial ownership of securities to
persons who possess sole or shared voting power and/or
investment power with respect to those securities. The
persons or entities named in this table have sole voting and
investment power with respect to all shares shown as
beneficially owned by them, except as noted below. The
amount of shares reflected in the table includes options and
warrants that are exercisable into shares of Common Stock
within 60 days of April 1, 1997.
/2/ Percentage ownership calculations are based on 14,984,108
shares of Common Stock outstanding.
<PAGE>
/3/ The business address for each of the entities affiliated
with Hambrecht & Quist Group (the "H&Q Entities") and
William R. Hambrecht is the office of Hambrecht & Quist LLC,
One Bush Street, San Francisco, California, 94104.
/4/ Includes 10,003,354 shares of Common Stock issuable upon the
exercise of outstanding warrants.
/5/ Includes 1,702,500 shares of Common Stock issuable upon the
exercise of outstanding warrants, and 18,037,103 shares of
Common Stock beneficially owned by the H&Q Entities
(including 10,003,354 shares of Common Stock issuable upon
the exercise of outstanding warrants). Mr. Hambrecht is
Chairman of the Board of Hambrecht & Quist Group and may be
deemed to beneficially own the shares beneficially owned by
the H&Q Entities. Mr. Hambrecht disclaims beneficial
ownership of shares of Common Stock held by the H&Q
Entities, except as to the extent of his pecuniary interest
therein.
/6/ Includes 425,000 shares issuable pursuant to the exercise of
vested stock options issued to Pointe Group, an aviation and
transportation consulting firm. Mr. Tague is Co-Chairman
and Chief Executive Officer of Pointe Group. See "Pointe
Group Consulting Agreement" and "Certain Transactions."
/7/ Includes 1,646,261 shares of Common Stock issuable upon the
exercise of outstanding warrants. Mr. Wagnon's business
address is 300 North Main, Suite 200, Wichita, Kansas 67202.
/8/ Includes 33,332 shares held by Danberry Associates, Ltd.
Mr. Carney owns forty percent of the outstanding capital
stock of Danberry Associates, Ltd. and may be deemed to
beneficially own such 33,332 shares. Mr. Carney disclaims
beneficial ownership of such shares except to the extent of
his pecuniary interest in Danberry Associates, Ltd. Also
includes 919,655 shares of Common Stock issuable pursuant to
the exercise of outstanding warrants. The business address
for Mr. Carney is 8100 East 22nd Street, North, Building
1900, Wichita, Kansas 67226.
/9/ Includes 67,500 shares issuable pursuant to the exercise of
stock options.
/10/ Includes 2,500 shares issuable pursuant to the exercise of
stock options.
/11/ Includes 25,000 shares of Common Stock issuable pursuant to
the exercise of stock options.
/12/ Includes 1,702,500 shares of Common Stock issuable upon the
exercise of outstanding warrants, 35,000 shares owned by E&M
R.P. Trust, of which Mr. Shea is a trustee, and 30,000
shares owned by Siam Partners II, a California limited
partnership ("Siam"), of which Mr. Shea is the general
partner. Mr. Shea disclaims beneficial ownership of the
shares held by Siam, except to the extent of his pecuniary
interest in Siam. Mr. Shea's business address is 655 Brea
Canyon Road, Walnut, California 91789.
/13/ Includes 25,000 shares of Common Stock issuable pursuant to
the exercise of stock options.
/14/ Includes an aggregate of 551,563 shares of Common Stock
issuable pursuant to the exercise of stock options and
1,702,500 shares of Common Stock issuable upon the exercise
of outstanding warrants.
CERTAIN TRANSACTIONS
In November 1996, the Company entered into the
Consulting Agreement with Pointe Group, an aviation and
transportation consulting firm in which John P. Tague is
Co-Chairman and Chief Executive Officer. The Consulting
Agreement provides for Pointe Group's performance of consulting and
management services in the supervision, operation and management
of the Company's business. In connection with Pointe Group's
provision of these services, Mr. Tague was appointed Chief
Executive Officer and President of the Company and a member of
the Board of Directors. Mr. Tague is not compensated directly by
the Company, but rather performs his services for the Company and
other clients of Pointe Group in exchange for such compensation
as Pointe Group provides. The Consulting Agreement provides for
the Company <PAGE> payment to Pointe Group of a $225,000 per year fee
(payable in advance in monthly installments of $18,750), the
grant of options to purchase 1,700,000 shares of Common Stock,
and the payment of Pointe Group's reasonable expenses. See
"Pointe Group Consulting Agreement."
RATIFICATION OF THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of Ernst &
Young LLP as the Company's independent certified public
accountants to audit the financial statements of the Company for
the year ending December 31, 1997. Ernst & Young LLP has served
as auditors for the Company since 1994.
It is expected that a representative of Ernst & Young
LLP will be present at the Annual Meeting. Such representative
will have the opportunity to make a statement, if he or she
desires to do so, and also will be available to respond to
appropriate questions.
The affirmative vote of a majority of the shares of
Common Stock present or represented at the Annual Meeting is
required for the ratification of the selection of Ernst & Young
LLP as independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL AND RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of
the Company's equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities
of the Company. Executive officers, directors and holders of ten
percent or more of the Company's equity securities are required
by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely on a review of the copies of such reports
furnished to the Company and written representations that no
other reports were required, the Company believes that during the
year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its executive officers, directors and
holders of ten percent or more of the Company's equity securities
were complied with, except that an initial statement of
beneficial ownership of securities on Form 3 was filed late by
William A. Garret and Robert J. Spane.
FINANCIAL STATEMENTS
The Annual Report to Shareholders of the Company for
the fiscal year ended December 31, 1996, is enclosed with this
Proxy Statement. Such Annual Report is not to be regarded as
proxy solicitation material.
GENERAL INFORMATION
OTHER MATTERS
To permit the Company and its stockholders to deal with
stockholders' proposals in an informed and orderly manner, the
Bylaws of the Company require that for business to be properly
brought before an annual stockholders' <PAGE> meeting, the Secretary of
the Company must have received prior written notice of such
business not later than 60 days prior to the first anniversary of
the preceding year's annual meeting. The notice to the Secretary
must set forth as to each matter: (i) a brief description of
proposed business to be brought before the annual meeting; (ii) a
representation that such stockholder is a holder of record of
stock entitled to vote on the business proposed by such
stockholder and intends to appear in person or by proxy at the
meeting to present the proposed business to be brought before the
meeting; (iii) the name and address of the stockholder and of the
beneficial owner (as such term is defined under Rule 13d-3 under
the Securities Exchange Act of 1934); (iv) a description of the
class and number of shares of stock of the Company which are
owned beneficially and of record by the stockholder; (v) the
reason for conducting such business at the meeting and any
material interest of the stockholder or such beneficial owner in
such business; and (vi) all other information regarding the
proposal which the Company would be required to provide in a
proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission if proxies for the proposal
were being solicited by the Company. Because no such notice has
been received in a timely manner, the only business that may be
properly brought before the Annual Meeting are the matters set
forth herein or those brought before the meeting by or at the
direction of the Board of Directors.
The Board of Directors does not intend to present any
matter for action at the Annual Meeting other than the matters
referred to in this Proxy Statement. If any other matters
properly come before the Annual Meeting, it is intended that the
holders of the proxies hereby solicited will act in respect of
such matters in accordance with their best judgment.
DEADLINE FOR STOCKHOLDER PROPOSALS
Proposals by holders of the shares of Common Stock that
are intended to be presented at the 1998 Annual Meeting of
Stockholders must be received by the Company no later than March
28, 1998 to be eligible for inclusion in the Company's Proxy
Statement and form of proxy relating to that meeting. Such
proposals must also comply in full with the requirements of Rule
14a-8 under the Securities Exchange Act of 1934 and must comply
with the advance notice and information requirement described
under the heading "General Information -- Other Matters" above to
be presented at that meeting. Stockholders' proposals should be
addressed to the attention of the Secretary of the Company.
VOTING MATTERS
In accordance with Delaware law, a stockholder entitled
to vote in the election of directors can withhold authority to
vote for all nominees for directors or can withhold authority to
vote for certain nominees for directors. Abstentions from the
proposal to approve and ratify the selection of the Company's
independent public accountants are treated as votes against the
particular proposal. Broker non-votes on the election of
directors or the proposal to ratify the selection of the
Company's independent public accountants are treated as shares of
Common Stock as to which voting power has been withheld by the
respective beneficial holders and, therefore, as shares not
entitled to vote on the proposal as to which there is the broker
non-vote.
BY ORDER OF THE BOARD OF DIRECTORS,
Brian S. Gillman
Vice President, General Counsel
and Secretary
Kansas City, Missouri
May 5, 1997
PROXY
VANGUARD AIRLINES, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 29, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF VANGUARD
AIRLINES, INC.
The undersigned stockholder of VANGUARD AIRLINES, INC.
hereby appoints John F. Tague and Brian S. Gillman, and each or
either of them, with full power of substitution, as attorneys-
in-fact, agents and proxies of the undersigned, to vote all the
shares of Common Stock of the Company which the undersigned is
entitled to vote at the 1997 Annual Meeting of Stockholders of
Vanguard Airlines, Inc. to be held on Thursday, May 29, 1997, at
10:00 a.m. Central Daylight Time, at the Kansas City Airport
Embassy Suites Hotel, 7640 N.W. Tiffany Springs Parkway, Kansas
City, Missouri, 64153, and at any adjournment thereof, on the
transaction of any and all business which may come before said
meeting, as fully and with the same effect as the undersigned
might or could do if personally present for the following
purposes:
1. The election of John P. Tague as director.
[ ] FOR [ ] WITHHELD
2. Ratification and approval of the selection of Ernst & Young
LLP as the independent public accountants of Vanguard
Airlines, Inc., for the fiscal year ending December 31,
1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are to vote upon such other
business as may properly come before the meeting of which
the board of directors does not have knowledge a reasonable
period of time before the solicitation of this proxy.
(Please date and sign on the reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS SPECIFICALLY SET FORTH
ABOVE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement, dated May 5, 1997.
Dated: ____________________, 1997
__________________________________
Signature of Stockholders
Please date and sign exactly as name
or names appear hereon. If shares are
held jointly or by two or more persons,
each stockholder named should sign.
Executors, administrators, trustees,
etc. should so indicate when signing.
If the signer is a corporation, please
sign full corporate name by duly
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THIS
PROXY IN THE ENVELOPE PROVIDED.
