SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] 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 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):
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5) Total fees paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE>
Preliminary Copy
VANGUARD AIRLINES, INC.
533 MEXICO CITY AVENUE
KANSAS CITY INTERNATIONAL AIRPORT
KANSAS CITY, MISSOURI 64153
________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 18, 1999
________________________________
NOTICE IS HEREBY GIVEN that an Annual Meeting of
Stockholders of Vanguard Airlines, Inc., a Delaware corporation
(the "Company"), will be held on Tuesday, May 18, 1999, 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 I Director to serve for a
three-year term expiring at the 2002 Annual Meeting of
Stockholders and until his successor is duly elected
and qualified;
2. To approve an amendment to the Company's Restated
Certificate of Incorporation, as amended (the "Restated
Certificate"), to effect a one-for-five reverse stock
split (the "Reverse Split") of all outstanding shares
of Common Stock, $0.001 par value per share, of the
Company;
3. 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, 1999; and
4. 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 April 9, 1999, as the record date for the determination of the
holders of shares of Common Stock, par value $0.001 per share, of
the Company (the "Common Stock") and Series A Preferred Stock,
par value $0.001 per share (the "Preferred 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
April __, 1999
<PAGE>
VANGUARD AIRLINES, INC.
533 Mexico City Avenue
Kansas City International Airport
Kansas City, Missouri 64153
____________________________
PROXY STATEMENT
____________________________
ANNUAL MEETING
OF STOCKHOLDERS
MAY 18, 1999
____________________________
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 Tuesday, May
18, 1999, 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") and Series A Preferred Stock,
par value $0.001 per share (the "Preferred Stock") as of April 9,
1999, on or about April __, 1999.
Only the holders of record of shares of Common Stock
and Preferred Stock as of the close of business on April 9, 1999
(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. Holders of shares of Preferred Stock are entitled to
one vote for each share of Common Stock into which the Series A
Preferred Stock could have been converted with respect to 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 85,392,746 shares of Common Stock and 302,362
shares of Preferred Stock, constituting all of the outstanding
voting securities of the Company. As of the Record Date, the
Preferred Stock is convertible into 6,047,240 shares of Common
Stock and the holders of the Preferred Stock will be entitled to
vote on an as converted basis on all matters.
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 Robert J. Spane as a Class I Director to
serve for a three-year term expiring at the 2002 Annual
Meeting of Stockholders and until his successor is duly
elected and qualified;
<PAGE>
2. To approve an amendment to the Company's Restated
Certificate of Incorporation, as amended, (the
"Restated Certificate") to effect a one-for-five
reverse stock split (the "Reverse Split") of all
outstanding shares of Common Stock, $0.001 par value
per share, of the Company;
3. To ratify and approve the selection of Ernst &
Young LLP as the Company's independent public
accountants for the year ending December 31, 1999; and
4. 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 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 7000 Squibb Road, Third
Floor, Mission, KS 66202. 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 aggregate outstanding shares of Common
Stock and shares of Preferred Stock convertible into 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 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.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Restated Certificate 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 five. 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 Robert J. Spane, a present
Class I director, whose term expires at the Annual Meeting, to
serve for a three-year term expiring at the 2002 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 II (Lee M. Gammill, Jr.) and
Class III (Denis T. Rice and Leighton W. Smith, Jr.) have been
elected to terms expiring at the time of the Annual Meetings of
Stockholders in 2000 and 2001, 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 and Preferred Stock entitled to vote at
the Annual Meeting and present in person or by proxy.
<PAGE>
One director is to be elected as the only member of
Class I 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 Robert J. Spane as the
Class I Director, unless such authority is specifically withheld.
In the event that Mr. Spane should become unavailable for
election, it is intended that the shares of 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 BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE ELECTION OF ROBERT J. SPANE AS A CLASS I DIRECTOR.
The Restated Certificate 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 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 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, o 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
that 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 I Director of the Company and each director whose term of
office will continue after the Annual Meeting:
NAME AGE DIRECTOR SINCE
NOMINEES
CLASS I: TERM TO EXPIRE IN 2002
Robert J. Spane 58 1996
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS II: TERM TO EXPIRE IN 2000
Lee M. Gammill, Jr. /1//2/ 64 1997
CLASS III: TERM TO EXPIRE IN 2001
Denis T. Rice (1) 66 1997
Leighton W. Smith, Jr. /2/ 59 1998
/1/ Member of Audit Committee.
/2/ Member of the Compensation Committee
The business experience of each of the directors of the
Company during the last five years is as follows:
LEE M. GAMMILL, JR. was elected a director of the
Company in September 1997. Mr. Gammill is the retired Vice
Chairman of the Board of New York Life Insurance Company. From
1989 until he retired in May 1997, Mr. Gammill served as the
Executive Vice President - Individual Insurance Operations at New
York Life. Mr. Gammill joined New York Life in 1957 as a sales
agent and held various management and executive positions
throughout his 40-year career at New York Life.
DENIS T. RICE was elected a director of the Company in
April 1997. Mr. Rice is a director in the law firm of Howard,
Rice, Nemerovski, Canady, Falk & Rabkin, P.C., San Francisco,
California, a firm he has been associated with since 1961.
ROBERT J. SPANE was elected a director of the Company
in May 1996 and elected Chairman of the Board, Chief Executive
Officer and President of the Company in June 1997. Mr. 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. Mr. 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. Mr. Spane retired from the
U.S. Navy in February 1996. Mr. Spane is a 1962 graduate of the
U.S. Naval Academy.
LEIGHTON W. SMITH, JR. was elected a director of the
Company in August 1998. Admiral Smith was appointed to the four
star rank in April 1994, became Commander in Chief Allied Forces
Southern Europe and concurrently assumed the command of the NATO-
led Implementation Force (IFOR) in Bosnia in December 1995.
Admiral Smith retired from the U.S. Navy after 34 years of
service in October 1996. Currently, he serves as a Senior Fellow
at the Center for Naval Analysis, and is Chairman of the Board of
Trustees of the U. S. Naval Academy Alumni Association. Admiral
Smith also serves on the Executive Boards of the Naval Aviation
Museum and the Association of Naval Aviation and is on the
National Advisory Council to the Navy League.
Except as may be contemplated by Mr. Spane's Employment
Agreement, 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 "Spane Employment
Agreement."
COMPENSATION OF DIRECTORS
Currently, 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 granted Mr. Spane 25,000 options to purchase shares of
Common Stock in May 1996 on the date of his election to the
Board. The Company granted to each of Messrs. Rice and Gammill
in 1997 on the date of their election to the Board, options to
purchase 25,000 shares of Common Stock. In October 1997, the
Company granted to each of its outside directors options to
purchase an additional 200,000 shares of Common Stock. In August
1998, the Company granted Admiral Smith an option to purchase
225,000 shares of Common Stock upon his election to the Board of
Directors. 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. None of the current
directors have exercised their stock options. 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 "Spane Employment
Agreement," Mr. Spane became Chief Executive Officer and
President of the Company and Chairman of the Board of Directors
in June 1997. See "Spane Employment Agreement".
MEETINGS OF THE BOARD AND COMMITTEES
During 1998, the Board of Directors held three
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 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 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 1998
the Audit Committee met two times. The Board of Directors
established a Compensation Committee in September 1997. During
1998 the Compensation Committee met once. Currently, there is
not a Nominating Committee or a committee performing a similar
function 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 1998.
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 <PAGE> 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. The Board of Directors believes stock options are an
integral part of the total compensation of such executive
officers.
Annual Compensation. For the 1998 fiscal year and
since commencement of operations in 1994, the Company's
compensation program was 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. The Board of
Directors and the Compensation Committee are reviewing a plan to
introduce a performance-based component to the Company's
executive compensation program. The Company has maintained its
salary levels for the Company's Chief Executive Officer and Vice
Presidents since its startup in 1994.
Bonuses and Incentives. The Company currently does not
have a formal bonus plan or long-term incentive plan for its
executive officers. In December 1998, the Company paid a bonus
to all employees who had been with the Company as of January 1,
1998. The bonus was based upon a proportion of each employee's
annual salary.
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
stockholder 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.
1998 Compensation of the Chief Executive Officer
The 1998 salary of Mr. Robert J. Spane, Chairman, Chief
Executive Officer and President, was based primarily on the
factors discussed above. Mr. Robert J. Spane commenced
employment with the Company as Chief Executive Officer and
President on June 15, 1997. The 1997 salary of Mr. Robert J.
Spane was also based on the factors discussed above. In arriving
at Mr. Spane's 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 Mr. Spane an annual salary
of $200,000 along with the grant of 3,386,980 stock options that
vest over a two-year period. In authorizing this package, the
Board of Directors made the subjective determination that Mr.
Spane would be appropriately motivated to achieve stockholder
returns over the long term while receiving sufficient short-term
compensation in the meantime.
Submitted by:
THE BOARD OF DIRECTORS
Lee M. Gammill, Jr.
Denis T. Rice
Leighton W. Smith, Jr.
Robert J. Spane
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors along with the Compensation
Committee determines the structure of the Company's compensation
system. As a result, Robert J. Spane, Chairman of the Board,
Chief Executive Officer and President of the Company participated
in decisions regarding his direct or indirect compensation.
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, 1998
exceeded $100,000 (collectively, the "Named Executive Officers"):
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
OTHER ALL
ANNUAL SECURITIES OTHER
NAME AND PRINCIPAL COMPEN- UNDERLYING COMPEN-
POSITION YEAR SALARY BONUS SATION/1/ OPTIONS/2/ SATION
Robert J. Spane -- 1998 195995 3682 24,000/4/ 13538
Chairman,
Chief Executive 1997/3/ 107714 -- -- 3386980 --
Officer and
President
William A.
Garrett -- 1998 99193 1841 5077
Vice President --
Finance and 1997 100000 -- -- 549497 --
Chief Financial
Officer 1996/5/ 45577 -- -- 15000 --
William F.
McKinney -- 1998 99193 1841 5077
Vice President --
Operations 1997 100000 -- -- 544497 --
1996/6/ 79253 -- -- 20000 --
/1/ Excludes perquisites and other benefits, unless the aggregate amount of
such compensation exceeds the lesser of $50,000 or 10% of the total
salary and bonus for the Named Executive Officer.
/2/ The number in the Securities Underlying Options column reflects the
number of shares of Common Stock into which such options are
exercisable.
/3/ Mr. Spane joined the Company as Chairman, Chief Executive Officer and
President on June 15, 1997 and his salary represents compensation for
services performed from June 15, 1997 through December 31, 1997.
/4/ Represents expenses for housing in Kansas City incurred by Mr. Spane and
paid by the Company.
/5/ Represents compensation for services performed from June 17, 1996
through December 31, 1996.
/6/ Represents compensation for services performed from March 8, 1996 to
December 31, 1996.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with
respect to each Named Executive Officer concerning grants during
the year ended December 31, 1998 of stock options and stock
appreciation rights ("SARs").
<TABLE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998/1/
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates Of
Stock Price Appreciation
Individual Grants for Option Term/2/
% of Total
Number of Options/
Securities SARs
Underlying Granted to
Options/ Employees Exercise or
SARs in Fiscal Base Price Expiration
Name Granted Year ($/Share) Date/(3/ 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Robert J. Spane 13538 0.3% $0.5625 2/27/08 $ 4,790 $12,137
William A Garrett 5077 0.1% $0.5625 2/27/08 $ 1,796 $ 4,551
William F. McKinney 5077 0.1% $0.5625 2/27/08 $ 1,796 $ 4,551
/1/ No SARs were granted by the Company during the year ended December 31, 1998.
/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 ($0.5625) appreciates at the indicated rate for the entire term of the option and
that the option is exercised at the exercise price and sold on the last day of its term at the
appreciated price. This table does not take into account any appreciation in the price of the Common
Stock to date.
</TABLE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information with
respect to each Named Executive Officer concerning the exercise
of options and SARs during 1998 and unexercised options and SARs
held as of December 31, 1998.
<TABLE>
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1998
AND DECEMBER 31, 1998 OPTION VALUES /1/
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options($)/2/
Options (#)(2)
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable/3/ Exercisable Unexercisable/3/
<S> <C> <C> <C> <C> <C> <C>
Robert J. Spane -- -- 2,578,773 846,745 $1,435,651 $476,294
William A Garrett -- -- 160,576 408,998 $ 90,007 $230,061
William F. McKinney -- -- 161,669 407,905 $ 90,622 $229,447
/1/ No SARs have ever been granted by the Company.
<PAGE>
/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, 1998, the last reported sale price of the Company's Common Stock, which
was reported by Over-the-Counter Bulletin Board, was $1.0625 per share. Value is calculated by determining the difference
between the option exercise price and $1.0625, 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.
</TABLE>
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 10,000,000. As of April 1, 1999,
options exercisable with respect to 3,425,518 shares of Common
Stock had been granted under the Plan, of which 3,002,145 are
exercisable. The Company has also granted stock options to Mr.
Spane in connection with his employment agreement. See "Spane
Employment Agreement."
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).
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 intended to
qualify 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 of 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.
SPANE EMPLOYMENT AGREEMENT
In June 1997, the Company entered into an employment
agreement (the "Employment Agreement") with Mr. Spane. The
Employment Agreement provides for Mr. Spane's performance of
consulting and management services in the supervision, operation
and management of the Company's business.
The Employment Agreement provides for the Company's
payment to Mr. Spane of an annual salary of $200,000 per year,
the grant of options to purchase 3,386,980 shares of Common
Stock, and the payment of Mr. Spane's reasonable expenses
incurred in connection with Company business, including Mr.
Spane's transportation and lodging. The stock options granted to
Mr. Spane vest as follows: 423,372 shares (one-eighth of the
shares subject to the options) on <PAGE> June 15, 1997 and an additional
423,372 shares at the end of each three-month period thereafter.
The stock options granted to Mr. Spane under the Employment
Agreement have a $0.50 per share exercise price. In the event of
the sale of all or substantially all the assets or capital stock
sof 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. Spane.
The term of the Employment Agreement is two years,
subject to renewal upon written agreement of the parties and to
earlier termination under certain circumstances. The Employment
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. Spane as Chief Executive Officer and
President) and upon provision of 30 days notice. The Company may
terminate the Employment Agreement upon Mr. Spane's death,
permanent disability or resignation as Chief Executive Officer
and President of the Company. In addition, the Company may
terminate the Employment Agreement at any time for cause (as
defined in the Employment Agreement).
STOCKHOLDER RETURN PERFORMANCE GRAPH
Included below is a comparison of the cumulative total
stockholder return on the Common Stock of the Company to the
cumulative total stockholder return of the Nasdaq Stock Market
Index and a composite peer index selected by the Company (the
"Peer Group") for the period from October 31, 1995 through
December 31, 1998. Cumulative total returns are calculated
assuming that $100 was invested on October 31, 1995, in each of
the Common Stock of the Company, the Nasdaq National Market and
the Peer Group, and the reinvestment of all dividends, if any.
The Peer Group was selected from among companies in the
airline industry having similarities in the following criteria:
size (total employment and sales); capital structure (similar
debt/equity ratios); and market orientation (primarily domestic
flights). Companies included in the Peer Group in addition to
the Company are: AirTran Holdings, Inc. (which resulted from a
merger on November 17, 1997, of Airways Corporation, the parent
company of AirTran Airways, Inc., into ValuJet, Inc., the parent
company of ValuJet Airlines, Inc., which changed its name to
AirTran Holdings, Inc.); Frontier Airlines, Inc.; and Reno Air,
Inc. (Reno Air agreed to be acquired by AMR, Inc., the parent
company of American Airlines, Inc. and, consequently will not be
included in the Peer Group in future years). Western Pacific
Airlines, Inc. was included in the Peer Group up and until
Western Pacific's filing for bankruptcy and ceasing all scheduled
operations on February 4, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURN
10/31/95 12/31/95 12/31/96 12/31/97 12/31/98
Vanguard Airlines,
Inc. $100.00 $100.00 $ 25.00 $ 9.00 $ 17.53
Peer Group/1/ $100.00 $105.00 $ 49.62 $ 29.06 $ 27.69
Nasdaq Stock
Market $100.00 $100.99 $122.70 $149.24 $207.78
_________________
/1/ The cumulative total returns for AirTran Holdings, Inc. prior to the
merger have been averaged with the pre-merger cumulative total returns
for ValuJet, Inc. and Airways Corp. to create one cumulative total
return for the purposes of creating the Peer group as an index for
comparison in 1998 and in future proxy statements.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The table below sets forth certain information, as of
April 1, 1999, regarding the beneficial ownership of the issued
and outstanding shares of Common Stock and Preferred 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. With respect to all matters submitted to a
vote of the stockholders, the holders of Common Stock are
entitled to one vote per share and the holders of the Preferred
Stock are entitled to 20 votes per share. Each share of
Preferred Stock is convertible into 20 shares of Common Stock at
the option of the holder. 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/1/
Common Preferred Common Preferred
Hambrecht & Quist Group and
affiliated entities/2/ 35,866,473 -- 42.0% --
William R. Hambrecht /3/ 45,026,671 151,162 52.7% 50%
J. F. Shea Company, Inc.
and affiliated
entities /4/ 19,489,888 151,200 22.8% 50%
Robert J. Spane/5/ 3,425,518 -- 4.0% --
Lee M. Gammill, Jr. /6/ 225,000 -- * --
Denis T. Rice/7/ 225,000 -- * --
Leighton Smith/8/ 225,000 -- * --
William A. Garrett /9/ 195,856 -- * --
William F. McKinney /10/ 196,950 -- * --
All current directors and
executive officers as a group
(11 persons) /11/ 5,367,381 -- 6.1% --
<PAGE>
* 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 the date as of which information is provided in
this table. Percentage ownership calculations are based on 85,368,090
shares of Common Stock outstanding and 302,362 shares of Preferred Stock
outstanding.
/2/ Includes 6,839,281 shares of Common Stock issuable upon the exercise of
outstanding warrants. The business address for each of the entities
affiliated with Hambrecht & Quist Group, which include H & Q California,
H & Q TSP Investors, L. P., H & Q TSP Investors II, L. P. and H & Q
London Ventures, L. P. is the office of Hambrecht & Quist, One Bush
Street, San Francisco, CA 94104.
/3/ Mr. Hambrecht is the trustee of The 1980 Hambrecht Revocable Trust (the
"Hambrecht Trust") and may be deemed the beneficial owner of Common
Stock held by such trust. Includes 6,503,975 shares of Common Stock
issuable upon the exercise of outstanding warrants which are
beneficially owned by H & Q TSP Investors, LP and H & Q TSP Investors
II, LP (Mr. Hambrecht is a managing member of the limited liability
companies that are the investment general partners of these two
partnerships) and H & Q London Ventures, LP (Mr. Hambrecht is one of the
two general partners of the investment general partners of this
partnership). Mr. Hambrecht disclaims beneficial ownership of shares of
Common Stock held by H & Q TSP Investors, LP, H & Q TSP Investors II, LP
and H & Q London Ventures, LP, except as to the extent of his pecuniary
interest therein. Mr. Hambrecht retired from his position as Chairman
of Hambrecht & Quist Group and its principal subsidiary Hambrecht &
Quist LLC, effective January 1, 1998, and, consequently his beneficial
ownership no longer includes shares held by H & Q California.
Mr. Hambrecht's business address is 550 15th Street, San Francisco, CA
94103.
/4/ Mr. Edmund Shea, Mr. Peter Shea, Mr. John Shea and Mr. James Shontere
(collectively, the "Shea Company Stockholders") also may be deemed the
beneficial owner of the 19,324,888 shares of Common Stock owned by J. F.
Shea Company, Inc. ("Shea Company") by virtue of their stock ownership
in Shea Company and their positions as directors and executive officers
of the Shea Company. In addition, Mr. Edmund Shea may be deemed the
beneficial owner of 90,000 shares of Common Stock owned by E&M R. P.
Trust (the 'Trust"), of which Mr. Shea is a trustee, 90,000 shares of
Common Stock owned by Siam Partners II, a California limited partnership
("Siam"), of which the Trust is the general partner. Mr. Shea disclaims
beneficial ownership of the shares of Common Stock held by Siam, except
to the extent of the Trust's 4.97% interest in Siam. The business
address for Shea Company and each of the Shea Company Stockholders is
655 Brea Canyon Road, Walnut, CA 91789.
/5/ Includes 3,002,145 shares of Common Stock issuable upon the exercise of
stock options.
/6/ Includes 225,000 shares of Common Stock issuable upon the exercise of
stock options.
/7/ Includes 225,000 shares of Common Stock issuable upon the exercise of
stock options.
/8/ Includes 225,000 shares of Common Stock issuable upon the exercise of
stock options.
/9/ Includes 195,856 shares of Common Stock issuable upon the exercise of
stock options.
/10/ Includes 196,950 shares of Common Stock issuable upon the exercise of
stock options.
<PAGE>
/11/ Includes an aggregate of 5,359,481 shares of Common Stock issuable upon
the exercise of stock options.
CERTAIN TRANSACTIONS
On March 20, 1998, the Company completed a private sale
of equity securities, each unit costing $10 and consisting of one
share of Preferred Stock and one common stock purchase warrant
(each a "Preferred Unit"). The purchasers of Preferred Units
were (i) J. F. Shea Company, Inc., who purchased 151,200
Preferred Units, and (ii) 1980 Hambrecht Revocable Trust, who
purchased 151,162 Preferred Units. In connection with the sale,
the Company converted approximately $3.0 million of bridge
financing notes and interest into Preferred Units. Each warrant
entitled the holder to purchase 40 shares of Common Stock at an
exercise price of $0.55 per share of Common Stock. On August 6,
1998 and August 12, 1998, (i) J. F. Shea Company, Inc. exchanged
these warrants to purchase 6,048,000 shares of Common Stock for
an aggregate of 4,055,977 shares of Common Stock pursuant to the
cashless exercise provisions of the warrant and (ii) The
Hambrecht 1980 Revocable Trust exchanged warrants to purchase
5,046,480 shares of Common Stock for an aggregate of 3,386,286
shares of Common Stock pursuant to the cashless exercise
provisions of the warrant.
On March 20, 1998, the Company and certain principal
stockholders agreed to exchange their remaining unsecured demand
notes payable totaling approximately $9.5 million, and all
accrued unpaid interest, for new unsecured convertible demand
notes payable (the "Convertible Notes"). The Convertible Notes
were automatically convertible at $0.50 per share at such time as
the Company had an adequate number of authorized shares available
for issuance. On May 20, 1998, pursuant to the convertible
promissory notes, (i) 9,330,093 shares were issued to Hambrecht &
Quist California, (ii) 6,745,816 to the Hambrecht 1980 Revocable
Trust, (iii) 4,614,076 shares were issued to J. F. Shea Co.,
Inc., (iv) 307,545 shares were issued to H & Q TSP II Investors,
LP and (v) 132,240 shares were issued to H & Q TSP Investors, L.
P.
On August 14, 1998, (i) J. F. Shea purchased 1,702,500
shares of Common Stock pursuant to the exercise of redeemable
warrants for an aggregate amount of $851,250, (ii) H & Q TSP
Investors, L.P. purchased 3,375,000 shares of Common Stock
pursuant to an exercise of redeemable warrants for an aggregate
amount of $1,687,500, (iii) H & Q TSP Investors II, L.P.
purchased 950,000 shares of Common Stock pursuant to the exercise
of redeemable warrants for an aggregate amount of $475,000, (iv)
The Hambrecht 1980 Revocable Trust purchased 1,702,500 shares of
Common Stock pursuant to an exercise of redeemable warrants for
an aggregate amount of $851,250, (v) Hambrecht & Quist California
purchased 2,270,000 shares of Common Stock pursuant to an
exercise of redeemable warrants for an aggregate amount of
$1,135,000.
On January 17, 1999, J. F. Shea Co., Inc. and The
Hambrecht 1980 Revocable Trust agreed to establish a two-year
$4.0 million letter of credit on behalf of the Company in favor
of the Company's credit card processor in order to reduce
required restricted cash balances with such processor. This
letter of credit replaces the previously established two year
letter of credit that expired on January 18, 1999. In
consideration for the letter of credit, the Company agreed to
issue warrants to purchase up to 4,000,000 shares of the
Company's Common Stock. The warrants vest over a two year period
based upon the amount of the exposure backed by the letter of
credit. The exercise price for the warrants is $1.00 per share.
Each warrant expires five years from the date of issuance.
PROPOSAL TWO
AMENDMENT TO RESTATED
CERTIFICATE OF INCORPORATION TO
EFFECT A REVERSE STOCK SPLIT
The Board of Directors has unanimously adopted a
resolution setting forth a proposed amendment to the Company's
Restated Certificate. The proposed amendment would effect a
reverse split of the Company's Common Stock on the basis of one
new share of Common Stock for each five shares of Common Stock.
As of March 30, 1999, <PAGE> 85,392,746 shares of Common Stock were
issued and outstanding and 4,219 shares were held in treasury.
As of March 30, 1999, there were 4,995,748 shares of Common Stock
reserved for issuance upon the conversion of various convertible
securities or upon the exercise of options under the 1994 Stock
Option Plan or the Spane Employment Agreement.
Reasons for the Proposed Reverse Stock Split
The principal purpose of the proposed amendment is to
reduce the number of shares of Common Stock outstanding. The
Company believes that the total number of shares outstanding is
disproportionately large to the Company's current market
capitalization. When a large number of shares is outstanding,
earnings per share is only affected by a significant change in
net earnings. If a smaller number of shares were outstanding,
management and stockholders would be more likely to see changes
in the Company's financial results reflected in its earnings per
share.
The Company has also concluded that the present level
of per share market price of the Common Stock impairs its
acceptability by portions of the financial community and the
investing public. Theoretically, the number of shares
outstanding should not, by itself, affect the marketability of
the stock, the type of investor who acquires it or a company's
reputation in the financial community; in practice this is not
necessarily the case, as many investors look upon low priced
stock as unduly speculative in nature and, as a matter of policy,
avoid investments in such stocks. The Company believes that the
current per share price of the Common Stock has reduced the
effective marketability of the shares because of the reluctance
of many leading brokerage firms to recommend low-priced stock to
their clients. Various brokerage house policies and practices
pertaining to the payment of brokers' commission and to
time-consuming procedures can function to make the handling of
low-priced stock unattractive to brokers from an economic
standpoint. The structure of trading commissions tends to have
an adverse impact upon holders of low priced stock because the
brokerage commission on a sale of low priced stock generally
represents a higher percentage of the sales price than the
commission on higher priced issues. Market interest in
low-priced stocks may be reduced because they do not qualify as
collateral for margin loans.
The Board of Directors believes that the implementation
of the reverse split will enhance the marketability and liquidity
of the Company's Common Stock. In connection with the proposed
reverse split, the Company has filed an application with the
Nasdaq SmallCap stock market to list its shares on the Nasdaq
SmallCap Stock Market. There can be no assurance that the
Company will be successful with its application.
Although there can be no assurance that the price of
the Common Stock after the reverse split will actually increase
in an amount proportionate to the decrease in the number of
outstanding shares, the proposed reverse split is intended to
result in a price level for the Common Stock that will permit
Nasdaq SmallCap listing and an increased investor interest in the
Company's Common Stock.
Principal Effects
Based upon 85,392,746 shares of Common Stock
outstanding on March 30, 1999, the proposed one-for-five reverse
stock split would decrease the outstanding shares of Common Stock
by 80%. The proposed reverse split would not affect the
proportionate equity interest in the Company of any holder of
Common Stock, except as may result from the provisions for the
elimination of fractional interests as described below.
As of March 30, 1999, there were outstanding options
granted under the 1994 Stock Option Plan and the Spane Employment
Agreement to purchase 11,190,437 shares of Common Stock and
13,788,305 warrants to purchase shares of Common Stock. All of
the outstanding options and warrants include provisions for
adjustments in the number of shares covered thereby, and the
exercise price thereof, in the event of a reverse split. If the
proposed one-for-five reverse split is approved and effected,
there would be reserved for issuance upon the exercise of all
outstanding options and warrants a total of 4,995,748 shares of
Common Stock. Each outstanding option and warrant would
<PAGE>
thereafter evidence the right to purchase 20% of the shares of
Common Stock previously covered thereby and the exercise price
per share would be five times the previous exercise price.
Assuming the proposed amendment to Article IV, Section
(a) of the Restated Certificate effecting the reverse split is
approved, a Certificate of Amendment amending the Restated
Certificate as set forth in Exhibit A to this Proxy Statement
will be filed with the Secretary of State of the State of
Delaware (the "Delaware Secretary of State") as promptly as
practicable thereafter. The amendment and the proposed reverse
stock split would become effective upon the date of filing (the
"Effective Date").
EXCHANGE OF STOCK CERTIFICATES AND ELIMINATION OF FRACTIONAL
SHARES
As soon as possible after the Effective Date, holders
of Common Stock will be notified and requested to surrender their
present Common Stock certificates for new certificates
representing the number of whole shares of Common Stock after the
reverse split. Until so surrendered, each current certificate
representing shares of Common Stock will be deemed for all
corporate purposes after the Effective Date to evidence ownership
of Common Stock in the appropriately reduced whole number of
shares. UMB Bank, N.A. of Kansas City, Missouri will be
appointed exchange agent (the "Exchange Agent") to act for
stockholders in effecting the exchange of their certificates.
No scrip or fractional share certificates for Common
Stock will be issued in connection with the reverse split, but in
lieu thereof, a certificate or certificates evidencing the
aggregate of all fractional shares otherwise issuable (rounded,
if necessary, to the next higher whole share) shall be issued to
the Exchange Agent or its nominee, as agent for the accounts of
all holders of Common Stock otherwise entitled to have a fraction
of a share issued to them in connection with the reverse split.
Sales of fractional interests will be effected by the Exchange
Agent as soon as practicable on the basis of prevailing market
prices of the Common Stock at the time of sale. After the
Effective Date, the Exchange Agent will pay to such stockholders
their pro rata share of the net proceeds derived from the sale of
their fractional interests upon surrender of their stock
certificates. No service charges or brokerage commissions will
be payable by stockholders in connection with the sale of
fractional interests, all of which costs will be borne by the
Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain
federal income tax consequences of the proposed reverse split of
the Company's Common Stock. This discussion does not purport to
deal with all aspects of federal income taxation that may be
relevant to holders of Common Stock and is not intended to be
applicable to all categories of investors, some of which, such as
dealers in securities, banks, insurance companies, tax-exempt
organizations and foreign persons, may be subject to special
rules. Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and administrative and judicial interpretations as of
the date hereof, all of which are subject to change. Holders of
Common Stock are advised to consult their own tax advisors
regarding federal, state, local and foreign tax consequences of
the proposed reverse stock split.
The proposed reverse stock split will be a tax-free
recapitalization for the Company and its stockholders.
The new shares of Common Stock in the hands of a
stockholder will have an aggregate basis for computing gain or
loss equal to the aggregate basis of shares of Common Stock held
by that stockholder immediately prior to the proposed reverse
stock split reduced by the amount of proceeds, if any, received
from the sale of fractional interests and increased by any gain
recognized on that sale.
A stockholder's holding period for the new shares of
Common Stock will be the same as the holding period for the
shares of Common Stock exchanged therefor.
<PAGE>
Stockholders who receive cash for all of their holdings
(as a result of owning fewer that five shares) will recognize a
gain or loss for federal income tax purposes as a result of the
disposition of their shares of Common Stock. Although the tax
consequences to stockholders who receive cash for some of their
holdings are not entirely certain, those stockholders in all
likelihood will recognize a gain or loss for federal income tax
purposes as a result of the disposition of a portion of their
shares of Common Stock. Stockholders who do not receive any cash
for their holdings will not recognize any gain or loss for
federal income tax purposes as a result of the proposed reverse
stock split.
VOTE REQUIRED
The proposed amendment would effect a reverse stock
split. The affirmative vote of a majority of the shares of stock
present or represented at the Annual Meeting is required for the
approval of the amendment to the Company's Restated Certificate
effecting the Reverse Split.
The foregoing summary of the amendment is qualified in
its entirety by reference to the complete text of the proposed
amendment to the Restated Certificate as set forth in Exhibit A
hereto.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE EFFECTING A ONE-FOR-FIVE REVERSE STOCK SPLIT OF ALL
OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY.
The Board of Directors reserves the right to abandon
the proposed amendment without further action by the stockholders
at any time prior to the filing of the amendment with the
Delaware Secretary of State notwithstanding authorization of the
proposed amendment by the stockholders.
PROPOSAL THREE
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, 1999. 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
stock present or represented at the Annual Meeting is required
for the ratification of the selection of Ernst & Young LLP as
independent public accountants.
<PAGE>
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, 1998, 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.
FINANCIAL STATEMENTS
The Annual Report to Shareholders of the Company for
the fiscal year ended December 31, 1998, is enclosed with this
Proxy Statement. Such Annual Report is not to be regarded as
proxy solicitation material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1998 (THE "FORM 10-K"), EXCLUDING
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER OF
RECORD AS OF APRIL 9, 1999, UPON WRITTEN REQUEST TO BRIAN
GILLMAN, VANGUARD AIRLINES, INC., 533 MEXICO CITY AVENUE, KANSAS
CITY, MISSOURI 64153. The Company will provide a copy of any
exhibit to the Form 10-K to any such person upon written request
and the payment of the Company's reasonable expenses in
furnishing such exhibits.
<PAGE>
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' 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 2000 Annual Meeting of
Stockholders must be received by the Company no later than
December 15, 1999 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.
In accordance with the advance notice provisions of the
Company's Bylaws, written notice of the shareholder's intent to
bring any business before an annual meeting must be delivered to
the Company's Secretary at the Company's principal executive
offices not less than 60 days prior to the first anniversary of
the previous year's annual meeting. The deadline for such
proposals in connection with the Company's 2000 Annual Meeting is
March 20, 2000. Proxies solicited in connection with the 2000
Annual Meeting of Shareholders shall confer on the appointed
proxies discretionary voting authority to vote on certain
shareholder proposals that are not presented for inclusion in the
proxy materials unless the proposing shareholder notifies the
Company by March 20, 2000 that such proposal will be made at the
meeting.
<PAGE>
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
April __, 1999
<PAGE>
EXHIBIT A
VANGUARD AIRLINES, INC.
PROPOSED AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
(Increase in Authorized Capital)
RESOLVED, that the Restated Certificate of Incorporation of
Vanguard Airlines, Inc., a Delaware corporation (the
"Corporation"), Article IV Section (a) be amended to add to the
end thereof the following:
As of the effective time of this amendment, each
five (5) issued and outstanding shares of the
Corporation's Common Stock, par value $0.001 per
share, shall be converted into, and shall
thereafter represent for all purposes, one (1)
issued and outstanding share of the same class of
the Corporation's Common Stock, par value $0.001
per share, without any action on the part of the
holder thereof. No fractional shares shall be
issued by reason of this amendment and
stockholders shall receive cash in lieu of such
fractional shares.
<PAGE>
APPENDIX A -- PROXY CARD
Preliminary Copy
PROXY
VANGUARD AIRLINES, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 18, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF VANGUARD AIRLINES, INC.
The undersigned stockholder of VANGUARD AIRLINES, INC.
hereby appoints Robert J. Spane 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 capital stock of the Company which the undersigned is
entitled to vote at the 1999 Annual Meeting of Stockholders of
Vanguard Airlines, Inc. to be held on Tuesday, May 18, 1999, at
10:00 a.m. Central Daylight Time, at the Embassy Suites Hotel,
7640 N.W. Tiffany Springs Parkway, Kansas City, Missouri, 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. Election of Robert J. Spane as a Class I director.
[ ] FOR [ ] WITHHELD
2. Approval of an amendment to the Company's Restated
Certificate of Incorporation to effect a one-for five
reverse stock split of all outstanding shares of Common
Stock, par value $0.001 par value per share, of the
Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification and approval of the selection of Ernst & Young
LLP as the independent public accountants of Vanguard
Airlines, Inc., for the year ending December 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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 before the solicitation of this proxy.
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" PROPOSALS 1, 2,
AND 3.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting and Proxy Statement, dated April ____, 1999.
Dated: ____________________, 1999
_________________________________________
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.
