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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4) Date Filed:
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<PAGE>
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 24, 2000
________________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of Vanguard Airlines, Inc., a Delaware corporation,
will be held on Wednesday, May 24, 2000, at 10:00 a.m., Central
Daylight Time, at the Embassy Suites Plaza Hotel, 220 West 43rd
Street, Kansas City, Missouri 64111, 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 2003 annual meeting of stockholders and
until his successor is duly elected and qualified or until
his earlier resignation or removal;
2. To consider and act upon approval of an amendment to our
Company's restated certificate of incorporation, as amended,
to decrease the number of authorized shares of our Company's
common stock, $0.001 par value, from 200,000,000 shares to
100,000,000 shares;
3. To consider and act upon approval of the Vanguard Airlines,
Inc. 2000 Stock Option Plan;
4. To consider and act upon ratification and approval of the
selection of Ernst & Young LLP as our Company's independent
auditors for the year ending December 31, 2000; and
5. To consider and act upon any other matters which may
properly come before the Annual Meeting or any adjournment
thereof.
The foregoing matters are more fully described in the
accompanying proxy statement.
Our board of directors has fixed the close of business on
April 4, 2000, as the record date for the determination of the
holders of shares of our Company's common stock, $0.001 par
value, and Series A preferred stock, $0.001 par value, entitled
to notice of, and to vote at, the Annual Meeting.
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
April 14, 2000
Kansas City, Missouri
<PAGE>
VANGUARD AIRLINES, INC.
533 MEXICO CITY AVENUE
KANSAS CITY INTERNATIONAL AIRPORT
KANSAS CITY, MISSOURI 64153
____________________________
PROXY STATEMENT
____________________________
ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 2000
____________________________
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, for use at the Annual
Meeting of Stockholders to be held on Wednesday, May 24, 2000,
commencing at 10:00 a.m., Central Daylight Time, at the Embassy
Suites Plaza Hotel, 220 West 43rd Street, Kansas City, Missouri
64111, and all adjournments and postponements thereof. This
proxy statement and the accompanying form of proxy were first
mailed to stockholders on or about April 14, 1999.
STOCKHOLDERS ENTITLED TO VOTE
Only the holders of record of shares of our Company's common
stock and preferred stock as of the close of business on the
April 4, 1999 record date are entitled to notice of, and to vote
at, the Annual Meeting. Holders of shares of our Company's
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 our
Company's preferred stock are entitled to one vote for each share
of common stock into which the 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 ______ shares of our
common stock and 302,362 shares of our preferred stock,
constituting all of the outstanding voting securities of our
Company. As of the record date, the preferred stock was
convertible into 1,209,448 shares of common stock and the holders
of the preferred stock will be entitled to vote on an as
converted basis on all matters.
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 our Company located at 533 Mexico City Avenue,
Kansas City, Missouri 64153. The list also will be available at
the Annual Meeting.
VOTING BY PROXY
You are requested to complete, date and sign the
accompanying form of proxy and return it promptly in the enclosed
postage prepaid envelope. The proxy may be revoked at any time
prior to its exercise at the Annual Meeting by written notice of
revocation delivered to the Secretary of our Company, by
executing and delivering to the Secretary of our Company a proxy
bearing a later date, or by appearing at the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not in
and of itself constitute a revocation of a proxy. The persons
designated as proxies were selected by the board of directors and
are officers or directors of our 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:
- - FOR the election of Lee M. Gammill, Jr. as a Class II
director to serve for a three-year term expiring at the 2003
annual meeting of stockholders;
<PAGE>
- - FOR approval of the proposed amendment to our Company's
restated certificate of incorporation to decrease the number
of authorized shares of our Company's common stock from
200,000,000 shares to 100,000,000 shares;
- - FOR approval of the Vanguard Airlines, Inc. 2000 Stock
Option Plan;
- - FOR ratification and approval of the selection of Ernst &
Young LLP as our Company's independent auditors for the
current year; and
- - With respect to any other matters which may properly come
before the Annual Meeting, in accordance with the discretion
and judgment of the appointed proxies.
SOLICITATION OF PROXIES
The solicitation of proxies for the Annual Meeting is being
made by our Company's board of directors. Our Company will bear
all costs of this 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 mail, telephone or telegraph by
directors, officers, employees or agents of our 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. Our Company will bear all of the costs of the
solicitation.
QUORUM REQUIREMENTS
The presence in person or by proxy of stockholders holding a
majority of the aggregate outstanding shares of our Company's
common stock, and shares of our Company's preferred stock
convertible into common stock, will constitute a quorum for the
transaction of business at the Annual Meeting. 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. Shares of stock as to
which there is a broker non-vote (i.e., when a broker holding
shares for clients in street name is not permitted to vote on
certain matters without instruction) also will be counted for
quorum purposes. If a quorum should not be present, the Annual
Meeting may be adjourned from time to time until a quorum is
obtained.
PROPOSAL ONE
ELECTION OF DIRECTORS
The restated certificate of incorporation of our Company
provides that the number of our directors shall be fixed by, or
in the manner provided in, the bylaws of our 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 has fixed the number of directors at five,
although there presently are only four persons serving on our
board. Each year the term of office of one class of directors
expires.
The present term of Lee M. Gammill, Jr., a director in Class
II, expires at this Annual Meeting. Our board of directors
intends to present for action at the Annual Meeting the
reelection of Mr. Gammill as a Class II director, to serve for a
three-year term expiring at the 2003 annual meeting of
stockholders. The directors in Class I (Robert J. Spane) 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 2002 and 2001, respectively. There is currently
one vacancy on the board of directors, which our Company does not
intend to fill at the Annual Meeting.
<PAGE>
Directors will be elected by a plurality (a number greater
than those cast for any other candidates) of the votes cast, in
person or by proxy, by the holders of shares of our common stock
and preferred stock entitled to vote at the Annual Meeting.
Stockholders do not have cumulative voting rights in the election
of directors. It is intended that shares represented by a proxy
given pursuant to this solicitation will be voted in favor of the
election of Lee M. Gammill, Jr. as a Class II director, unless
such authority is specifically withheld. In the event that Mr.
Gammill 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 designated by the board of
directors. Mr. Gammill 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 LEE M. GAMMILL, JR. AS A CLASS II DIRECTOR.
ADVANCE NOTIFICATION OF NOMINATIONS
Our Company's restated certificate or incorporation and
bylaws provide that advance notice of stockholder nominations for
the election of directors must be given. With respect to this
Annual Meeting, written notice of a stockholder's intent to make
a nomination at the meeting must be received by our Company's
Secretary at our principal executive offices not later than
April 18, 2000. At future meetings of stockholders, notice of
nominations must be delivered to our Company's Secretary 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. See "Deadline for Stockholder Proposals." The
nomination 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 our 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 our 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
our 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 our Company if so elected. No such notice
has been received for this Annual Meeting, 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.
NOMINEES AND DIRECTORS CONTINUING IN OFFICE
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 our 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 2003
Lee M. Gammill, Jr.<F1><F2> 65 1997
DIRECTORS CONTINUING IN OFFICE
CLASS I: TERM TO EXPIRE IN 2002
Robert J. Spane 59 1996
<PAGE>
CLASS III: TERM TO EXPIRE IN 2001
Denis T. Rice<F1> 67 1997
Leighton W. Smith, Jr.<F2> 60 1998
_____________________
[FN]
<F1> Member of our audit committee.
<F2> Member of our compensation committee
</FN>
The business experience during the last five years of the
person nominated for election as a Class II director at the
Annual Meeting and of each director whose term of office will
continue after the Annual Meeting is as follows:
LEE M. GAMMILL, JR. was elected a director of our 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 our 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 our Company in May
1996 and elected Chairman of the Board, Chief Executive Officer
and President of our 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 our 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 our Company. See "Spane Employment
Agreement."
COMPENSATION OF DIRECTORS
In 1999, our directors did 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. Commencing in 2000, our
Company will pay each director who is not an employee of our
Company $10,000 for serving as a member of our board. Directors
who are also employees of our Company receive no additional
compensation for serving as directors. Our Company's directors
are also eligible to receive stock options under our Company's
stock option plans. None of the directors was granted additional
stock options during the year ended December 31, 1999. See
"Stock Option Plans."
<PAGE>
MEETINGS OF THE BOARD AND COMMITTEES
During 1999, our board of directors held four meetings. Each
incumbent director attended at least 75% of the meetings of the
board of directors and committees on which they served during
1999. It should be noted that our 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 our Company.
Our 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 our Company and in
addressing the scope and expense of audit and related services
provided by our Company's independent auditors. During 1999 the
audit committee met two times. In September 1997, our board of
directors established a compensation committee, which makes
recommendations to the board regarding the compensation and
benefits of our executive officers. During 1999 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 our
Company's executive officers in 1999.
The board of directors reviews, evaluates and approves the
structure and implementation of our Company's compensation
program for its executive officers. The board of directors also
determines the form and amount of compensation for our Chief
Executive Officer. Except as noted below, the compensation of
our 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 our 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 our
Company's board of directors, the board of directors also
considers the recommendation of our Company's Chairman of the
Board and Chief Executive Officer.
The Vanguard Executive Compensation Program
Elements of Executive Compensation. The compensation
program of our Company has been structured, in part, to enable
our Company to attract, motivate and retain experienced and
qualified executives. Our Company seeks to provide a
compensation package to its executive officers that, in its
totality, is competitive. In addition, our Company intends to
grant stock options to executive officers upon their commencement
of employment with our Company, and at other times our Company
deems appropriate, in an effort to strengthen the mutuality of
interests between such executives and our 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. The board of directors believes stock options are an
integral part of the total compensation of such executive
officers.
Annual Compensation. Salaries for executive officers are
determined by evaluating the responsibilities of the position
held and the experience of the individual and by reference to the
competitive marketplace for executive talent, including a
comparison of salaries for comparable positions at other
airlines.
The salary levels of the executive officers of our Company
for the next year are generally established by the Compensation
Committee at year-end and are reviewed and approved by the entire
board of directors. Specific individual performance and overall
corporate or business segment performance are reviewed in
determining the compensation level of each individual officer.
<PAGE>
Bonuses and Incentives. Our Company currently does not have
a formal bonus plan or long-term incentive plan for its executive
officers.
Stock Options. The board of directors has determined to
grant stock options to executive officers upon their commencement
of employment with our Company, and at other times our Company
deems appropriate, to provide additional incentive to its
executive officers and to strengthen the mutuality of interests
between the executive officers and our Company's stockholders.
The board of directors believes that stock option grants advance
the long-term interests of our Company and its stockholders by
rewarding executive officers for increasing stockholder value
(i.e., appreciation in the price of our Company's common stock).
Payment of the total annual compensation for the Chief
Executive Officer and the other named executives appearing below
in the Summary Compensation Table and other tables included in
this proxy statement is based on the previously discussed
factors.
1999 Compensation of the Chief Executive Officer
The 1999 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 our Company as Chief Executive Officer and
President on June 15, 1997. 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 our
Company's common stock and made the determination to give
disproportionate weight to the grant of stock options.
Accordingly, our Company agreed to increase Mr. Spane's salary to
$250,000 for the 12-month period ending June 15, 2000 and to
$300,000 for the 12-month period ending June 15, 2001, as well as
to grant 440,557 stock options that vest over the two-year period
ending June 15, 2001. 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. Leighton W. Smith, Jr.
Denis T. Rice Robert J. Spane
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The board of directors along with the compensation committee
determines the structure of our Company's compensation system.
As a result, Robert J. Spane, Chairman of the Board, Chief
Executive Officer and President of our 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 our Company as to whom the
total salary and bonuses for the year ended December 31, 1999
exceeded $100,000 (collectively, the "Named Executive Officers"):
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
OTHER
ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL ANNUAL COMPENSATION COMPEN- UNDERLYING COMPEN-
POSITION YEAR SALARY BONUS SATION<F1> OPTIONS<F2> SATION
<S> <C> <C> <C> <C> <C> <C>
Robert J. Spane 1999 $226,923 - $28,682<F4> 440,557 -
Chairman, Chief Executive 1998 $195,995 $3,682 $24,000<F5> 2,708 -
Officer and President 1997<F3> $107,714 - - 677,396 -
James E. Eckart 1999 $113,641 $5,564 - 73,426 -
Vice President - 1998 $100,784 $1,841 - 1,015 -
Facilities
and Ground Operations 1997 $ 42,050 - - 112,899 -
William A. Garrett 1999 $113,641 $5,564 - 73,426 -
Vice President - Finance 1998 $ 99,193 $1,841 - 1,015 -
and
Chief Financial Officer 1997 $100,000 - - 112,899 -
Brian S. Gillman 1999 $113,641 $5,564 - 73,426 -
Vice President and 1998 $101,034 $1,841 - 1,015 -
General Counsel 1997 $ 95,983 - - 112,899 -
William F. McKinney 1999 $113,641 - 73,426 -
Vice President - 1998 $ 99,193 - 1,015 -
Operations
1997 $100,000 - - 112,899 -
______________________________________________________________________________________________________
<FN>
<F1> Excludes perquisites and other benefits, unless the aggregate amount
of such compensation exceeds the lesser of $50,000 or 10% of the total
salary and bonus for the Named Executive Officer.
<F2> The number in the Securities Underlying Options column reflects the
number of shares of common stock into which such options are
exercisable. On May 18, 1999, the Company's stockholders
approved a one-for-five reverse stock split and all historical
stock option grants have been adjusted to reflect the reverse split.
<F3> Mr. Spane joined our Company as Chairman, Chief Executive Officer and
President on June 15, 1997 and his salary represents compensation for
services performed from June 15, 1997 through December 31, 1997.
<F4> Represents expenses for housing and an automobile lease in Kansas City
incurred by Mr. Spane and paid by our Company.
<F5> Represents expenses for housing in Kansas City incurred by Mr. Spane
and paid by our Company.
</FN>
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with
respect to each Named Executive Officer concerning
grants during the year ended December 31, 1999 of stock
options and stock appreciation rights ("SARs").
<PAGE>
<TABLE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999<F1>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM<F2>
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARs
UNDERLYING GRANTED TO
OPTIONS/ EMPLOYEES EXERCISE OR
SARs IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED YEAR ($/SHARE) DATE<F3> 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Robert J. Spane 440,557 47% $4.81 6/15/09 $1,332,901 $3,375,283
James E. Eckart 36,713 4 % $4.25 10/19/09 $ 98,143 $248,712
36,713 4 % $3.94 11/4/09 $ 90,984 $230,571
William A. Garrett 36,713 4 % $4.25 10/19/09 $ 98,143 $248,712
36,713 4 % $3.94 11/4/09 $ 90,984 $230,571
Brian S. Gillman 36,713 4 % $4.25 10/19/09 $ 98,143 $248,712
36,713 4 % $3.94 11/4/09 $ 90,984 $230,571
William F. McKinney 36,713 4 % $4.25 10/19/09 $ 98,143 $248,712
36,713 4 % $3.94 11/4/09 $ 90,984 $230,571
___________________________
<FN>
<F1> No SARs were granted by our Company during the year ended December 31,
1999.
<F2> 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 our 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 our Company's common stock for financial
statement presentation purposes on the date of grant
($4.8125, $4.25 and $3.9375, respectively) appreciates at the
indicated rate for the entire term of the option and that the
option is exercised at the exercise price and sold on
the last day of its term at the appreciated price.
This table does not take into account any appreciation
in the price of the common stock to date.
</TABLE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information with respect to each
Named Executive Officer concerning the exercise of options and SARs during 1999
and unexercised options and SARs held as of December 31, 1999.
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1999 OPTION VALUES<F1>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISEd VALUE OF UNEXERCISED
OPTIONS (#)<F2> IN-THE-MONEY OPTIONS($)<F2>
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE<F3> EXERCISABLE UNEXERCISABLE<F3>
<S> <C> <C> <C> <C> <C> <C>
Robert J. Spane - - 795,244 330,417 $1,701,106.25 -
James E. Eckart - - 57,465 129,876 $143,979,69 $141,125.00
William A. Garrett 2,000 $7,500.00 58,340 127,001 $146,167.19 $133,937.50
Brian S. Gillman 2,500 $10,563.50 57,653 127,188 $144,449.69 $134,405.00
William F. McKinney 11,100 $36,381.25 49,459 137,882 $123,964.20 $133,390.00
<FN>
<F1> No SARs have ever been granted by our Company.
<F2> 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, 1999, the last reported sale price of our Company's
common stock, which was reported on the Nasdaq SmallCap Market,
was $3.28 per share. Value is calculated by determining
the difference between the option exercise price and $3.2812,
multiplied by the number of shares of common stock underlying
the options.
<F3> These options are unexercisable because they have not vested
under their terms.
</FN>
</TABLE>
STOCK OPTION PLANS
Our Company currently has two stock option plans: the 1994
Vanguard Airlines, Inc. Stock Option Plan and the 2000 Vanguard
Airlines, Inc. Stock Option Plan. The total number of shares of
common stock issuable pursuant to the exercise of options under
our stock option plan is 4,000,000 of which 2,000,000 options may
be granted under the 1994 Plan and 2,000,000 options may be
granted under the 2000 Plan. As of April 1, 2000, options
exercisable with respect to 1,661,996 shares of common stock had
been granted under the 1994 Plan, of which 747,725 are
exercisable. Our Company has also granted nonstatutory stock
options to Mr. Spane in connection with his employment agreement
and to certain executives of our Company. No options have been
granted under the 2000 Plan. The 2000 Plan is being submitted
for the approval of the stockholders at this Annual Meeting. See
"Proposal Two."
Each stock option plan is administered by the board of
directors (the "Plan Administrator"). Subject to the terms of
the respective 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 our Company
upon exercise of options, and the term of each option (not to
exceed ten years).
Under each stock option plan, our Company may grant options
intended to qualify as incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"),
and 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.
Each 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 our Company.
<PAGE>
In the event of a merger in which our 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, our Company entered into a two year employment
agreement with Mr. Spane. This employment agreement provided for
Mr. Spane's performance of consulting and management services in
the supervision, operation and management of our Company's
business in exchange for an annual salary of $200,000 per year,
the grant of options to purchase 677,396 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 under the 1997 employment agreement vested evenly over the
two-year period.
On June 15, 1999, our Company entered into a new employment
agreement with Mr. Spane. The 1999 employment agreement provides
for the same job responsibilities as the 1997 employment
agreement. It provides for payment of an annual salary of
$250,000 between June 15, 1999 and June 15, 2000 and $300,000
between June 15, 2000 and June 15, 2001, and for options to
purchase 440,557 shares of common stock that vest over the term
of the agreement. The stock options granted to Mr. Spane under
the 1999 employment agreement have a $4.81 per share exercise
price. In the event of the sale of all or substantially all the
assets or capital stock of our Company or a merger of our 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 1999 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, our Company must
offer to employ Mr. Spane as Chief Executive Officer and
President) and upon provision of 30 days notice. Our Company may
terminate the employment agreement upon Mr. Spane's death,
permanent disability or resignation as Chief Executive Officer
and President of our Company. In addition, our Company may
terminate the employment agreement at any time for cause (as
defined in the employment agreement).
STOCKHOLDER RETURN PERFORMANCE GRAPH
The performance graph below shows a comparison of the
cumulative total stockholder return on the common stock of our
Company to the cumulative total stockholder return of the Nasdaq
Stock Market Index and a composite peer index selected by our
Company (the "Peer Group") for the period from October 31, 1995
through December 31, 1999. Cumulative total returns are
calculated assuming that $100 was invested on October 31, 1995,
in each of the common stock of our 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
our 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.
<PAGE>
<TABLE>
COMPARISON OF CUMULATIVE TOTAL RETURNS
<CAPTION>
10/31/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C>
Vanguard Airlines, Inc. $100.00 $100.00 $ 25.00 $ 9.00 $ 17.53 $ 13.48
Peer Group<F1> $100.00 $105.00 $ 49.62 $ 29.06 $ 27.69 $ 38.65
Nasdaq Stock Market $100.00 $100.99 $122.70 $149.24 $207.78 $419.09
_________________
<FN>
<F1> 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 1999
and in future proxy statements.
</FN>
</TABLE>
The following graph compares the total return on the common
stock of our Company with the total return of the Nasdaq National
Market Index and the Peer Group for the period from October 31,
1995 through December 31, 1999.
[graph]
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The table below sets forth certain information, as of April
1, 2000, regarding the beneficial ownership of the issued and
outstanding shares of our Company's 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 of our Company, (iii) each Named
Executive Officer of our Company, and (iv) the executive officers
and directors of our 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 four votes per share.
Each share of preferred stock is convertible into four 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
OF BENEFICIAL OF SHARES
OWNERSHIP<F1> OUTSTANDING<F1>
NAME COMMON PREFERRED COMMON PREFERRED
<S> <C> <C> <C> <C>
Hambrecht & Quist Group
and affiliated entities<F2> 7,173,295 - 42.0 % -
William R. Hambrecht<F3> 9,405,334 151,160 52.7 % 50 %
J. F. Shea Company, Inc. and
affiliated entities<F4> 4,297,978 151,200 22.8 % 50 %
Robert J. Spane<F5> 1,125,661 - 6.6 % -
Lee M. Gammill, Jr.<F6> 45,000 - * -
Denis T. Rice<F7> 45,000 - * -
Leighton Smith<F8> 45,000 - * -
Brian S. Gillman<F9> 184,901 - * -
James E. Eckart - - - -
William A. Garrett - - - -
William F. McKinney<F10> 176,241 - * -
All current directors and
executive officers as a group 1,985,781 - 11.6% -
(11 persons)<F11>
_________________
<FN>
<F*> Represents beneficial ownership of less than 1% of the common
stock of our Company.
<F1> 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 17,106,746 shares of common stock outstanding
and 60,472 shares of preferred stock outstanding.
<F2> Includes 1,367,856 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. Hambrecht & Quist Group
is an indirect wholly owned subsidiary of The Chase
Manhattan Corporation.
<F3> Mr. Hambrecht is the trustee of The 1980 Hambrecht Revocable
Trust and may be deemed the beneficial owner of common stock
held by such trust. Includes 1,300,795 and 400,000 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) and The 1980 Hambrecht Revocable Trust, respectively.
Mr. Hambrecht disclaims beneficial ownership
of shares of<PAGE> 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's business address is 550 15th
Street, San Francisco, California 94103.
<F4> 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 3,864,978
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. Includes 400,000 shares of
common stock issuable upon the exercise of outstanding warrants.
In addition, Mr. Edmund Shea may be deemed the beneficial
owner of 18,000 shares of common stock owned by
E&M R. P. Trust (the "Trust"), of which Mr. Shea is
a trustee, 18,000 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.
<F5> Includes 1,125,661 shares of common stock issuable upon the
exercise of stock options.
<F6> Includes 45,000 shares of common stock issuable upon the
exercise of stock options.
<F7> Includes 45,000 shares of common stock issuable upon the
exercise of stock options.
<F8> Includes 45,000 shares of common stock issuable upon the
exercise of stock options.
<F9> Includes 184,841 shares of common stock issuable upon the
exercise of stock options.
<F10> Includes 187,341 shares of common stock issuable upon the
exercise of stock options.
<F11> Includes an aggregate of 1,985,697 shares of common stock
issuable upon the exercise of stock options.
</TABLE>
CERTAIN TRANSACTIONS
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 our Company in favor of our
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 establishment of this letter of credit, our Company agreed to
issue warrants to purchase up to 800,000 shares of our 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 $5.00 per share. Each
warrant expires five years from the date of issuance.
PROPOSAL TWO
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
GENERAL
On March 1, 2000, our board of directors unanimously adopted
a resolution setting forth a proposed amendment to our Company's
restated certificate of incorporation. The proposed amendment
would decrease the total number of authorized shares of our
Company's capital stock from 202,000,000 shares to 102,000,000
shares and decrease the number of authorized shares of common
stock, $0.001 par value, from 200,000,000 shares to 100,000,000
shares. The number of authorized shares of preferred stock,
$0.001 par value, would remain 2,000,000 shares.
<PAGE>
The text of the proposed amendment to the restated
certificate of incorporation is set forth in Exhibit A hereto.
If the proposed amendment is adopted by the stockholders, our
Company will cause a Certificate of Amendment consistent with the
text of the amendment set forth in Exhibit A to be filed with the
office of the Delaware Secretary of State as promptly as
practicable after the Annual Meeting. The description of the
proposed amendment contained herein is qualified in its entirety
by reference to Exhibit A.
DESCRIPTION OF THE AMENDMENT
Our Company's restated certificate of incorporation, as
currently in effect, provides that our Company is authorized to
issue 202,000,000 shares of capital stock, consisting of
200,000,000 shares of common stock, $0.001 par value, and
2,000,000 shares of preferred stock, $0.001 par value. On March
1, 2000 our board of directors authorized an amendment to the
restated certificate of incorporation to decrease the authorized
shares of our Company's capital stock from 202,000,000 shares to
102,000,000 shares. This would be accomplished by decreasing the
number of authorized shares of our Company's common stock from
200,000,000 shares to 100,000,000 shares. Our Company's
preferred stock would remain at 2,000,000 shares. Our
stockholders are being asked to approve such amendment to the
restated certificate of incorporation at the Annual Meeting.
Our Company currently has 202,000,000 authorized shares of
capital stock. As of April 1, 2000, ________ shares of common
stock and 302,362 shares of preferred stock were issued and
outstanding, which shares of preferred stock are convertible into
1,209,448 shares of common stock. In addition, as of April 1,
2000, 386,433 shares of common stock were reserved for future
grant or issuance upon the exercise of outstanding options under
our Company's employee benefit plans. In addition to the options
reserved under our Company's employee benefit plans, as of April
1, 2000 there were outstanding options for 1,709,800 shares of
common stock and warrants for 7,038,563 shares of common stock.
PURPOSES AND EFFECTS OF THE PROPOSED AMENDMENT
The principal purpose of the proposed amendment to the
restated certificate of incorporation is to decrease the number
of authorized shares of common stock in order to reduce the
annual franchise tax currently assessed on the corporation by the
State of Delaware, the jurisdiction of our Company's
incorporation. In Delaware, the franchise taxes paid by our
Company are determined by a formula, taking into account our
Company's authorized shares of common stock and preferred stock.
Our Company's decision, with stockholder approval at the last
annual meeting, to complete a one-for-five reverse stock split
has significantly reduced the number of shares outstanding. Due
to the significant number of shares presently authorized by our
Company's restated certificate of incorporation, our Company
believes that its present franchise tax obligations are
inordinately high relative to our Company's size and foreseeable
needs.
Our board of directors does not anticipate that the number
of shares by which our total authorized capital stock would be
decreased will be required in connection with any presently
foreseeable offerings of equity securities by our Company. If
any additional authorized shares are so required, a proposed
increase will be submitted to our Company's stockholders. The
Board believes that the proposed amendment will bring long-term
advantage to our Company and its stockholders by the reduction of
annual franchise tax expenses.
The proposed amendment will result in no change in
ownership. Each stockholder will hold the same percentage of the
outstanding shares of common stock or preferred stock.
REQUIRED VOTE
The adoption of the proposed amendment to the restated
certificate of incorporation of our Company requires approval by
a majority of the votes cast at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENT TO OUR COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO DECREASE THE NUMBER OF SHARES OF AUTHORIZED CAPITAL STOCK.
<PAGE>
PROPOSAL THREE
APPROVAL TO ADOPT THE VANGUARD AIRLINES, INC. 2000 STOCK OPTION PLAN
GENERAL
Our Company's board of directors has unanimously adopted the
Vanguard Airlines, Inc. 2000 Stock Option Plan and has
recommended that the stockholders of our Company approve the
Plan. The aggregate number of shares of common stock, $0.001 par
value, of our Company that may be issued pursuant to the exercise
of options granted under the Plan is limited to 2,000,000 shares,
subject to increase or decrease in the event of any change in our
Company's capital structure. See "Dilution or Enlargement." Our
Company currently intends to register the shares of common stock
underlying options on Form S-8 under the Securities Act of 1933
and any applicable state securities laws.
PURPOSE
The purpose of the Plan is to encourage selected employees
and directors of, and consultants to, our Company and its
affiliates to participate in the ownership of our Company, to
attract and retain the services of selected persons who serve our
Company and its affiliates as employees, directors and
consultants, and to provide additional incentive for those
persons to promote the success of the business of our Company and
its affiliates through sharing in the future growth of such
business.
ELIGIBLE PARTICIPANTS
Options granted under the Plan intended to qualify as
"incentive stock options" under section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), may be granted
under the Plan only to employees of our Company or of any of its
affiliates. Options granted under the Plan not intended to so
qualify under the Code may be granted under the Plan only to
employees of our Company or of any of its affiliates, members of
our Company's board of directors, and persons engaged by our
Company or any of its affiliates to render consulting services.
No option may be granted under the Plan to any person who,
immediately before the option is granted, owns (either directly
or by application of the rules contained in section 424(d) of the
Code) stock possessing more than ten percent of the total
combined voting power of all classes of stock of our Company or
of any of its affiliates. Such stock ownership limitation shall
not apply, however, if at the time the option is granted (i) the
option exercise price is at least 110 percent of the fair market
value (as defined in the Plan) of the shares of the common stock
subject to the option, and (ii) the option will expire by its
terms no later than five years from the date on which it is
granted.
The aggregate fair market value of shares of common stock
for which a person may be granted options under the Plan has no
limit. However, no person presently shall be eligible to be
granted options exercisable with respect to more than 200,000
shares of common stock in any calendar year.
ADMINISTRATION OF THE PLAN
The Plan currently is administered by our Company's board of
directors. Our Company's board of directors is permitted,
however, to delegate its discretionary authority over the Plan to
a committee (the "Committee") composed of not less than two
members of the board of directors who qualify as "disinterested
persons." The board of directors (or the Committee) is
authorized to construe, interpret and administer the Plan and the
options granted thereunder, and from time to time to adopt such
rules and regulations for carrying out the Plan as it may choose.
Subject to the terms, conditions and provisions of the Plan, the
Committee has exclusive authority to (i) select the key employees
to whom options will be granted, (ii) determine the number of
shares subject to each option, (iii) determine the time or times
when options will be granted, (iv) determine the option price of
shares subject to each option, (v) determine the time when each
option may be exercised, and (vi) fix such other provisions of
each incentive stock option agreement as the Committee may deem
necessary or desirable, consistent with the terms of the Plan.
<PAGE>
TERMS OF OPTIONS
The board of directors (or the Committee) is authorized to
establish the terms which will govern each option granted under
the Plan, provided that such terms are consistent with the terms,
provisions and conditions of the Plan. There is no obligation to
grant any two options on the same terms, and options granted at
the same time to different individuals or at different times to
the same individual may have different terms. The period during
which each option granted under the Plan may be exercised is
fixed by the board of directors (or the Committee) at the time
such option is granted. The maximum period during which an
option is exercisable is ten years from the date that it is
granted.
Except as provided below with respect to termination of
employment or relationship, disability or death of the optionee,
options granted under the Plan may be exercised only by persons
who are then employed or engaged as a director of or consultant
to our Company or any of its affiliates and who have been so
employed or engaged at all times since the date on which such
options were granted. See "Withdrawal From the Plan."
PRICE
No consideration is paid to our Company by any optionee in
exchange for the grant of an option. The exercise price at which
shares of our common stock may be purchased under an option
granted pursuant to the Plan shall be determined by the board of
directors (or the Committee), but in no event will the exercise
price be less than the greater of (i) the par value thereof, or
(ii) in the case of incentive stock options, 100 percent of the
fair market value of such shares on the date that the option is
granted, and in the case of nonstatutory options, 85 percent of
the fair market value of such shares on the date that the option
is granted. For purposes of the Plan, the fair market value of
shares of common stock on the date that the option is granted
will be the mean between the bid and asked prices for common
stock on the last market trading day prior to such date of grant.
PAYMENT FOR SHARES
The exercise of any option will be contingent upon receipt
by our Company of (i) written notice of the number of shares with
respect to which the optionee is exercising an option and (ii)
the full option exercise price for the shares of common stock.
Such payment for the shares may be made in cash at the time of
exercise, or, at the discretion of the board of directors (or the
Committee) and to the extent permitted by applicable law, in
other shares of common stock according to a deferred payment or
other arrangement, or other consideration acceptable to the board
of directors (or the Committee).
SHARES AVAILABLE FOR OPTIONS
The shares of common stock to be delivered upon exercise of
options under the Plan will be made available, at the discretion
of our Company's board of directors, from either our Company's
authorized but unissued shares of common stock or any shares of
common stock held by our Company as treasury shares. Shares of
common stock subject to options granted under the Plan which
expire or terminate without being exercised in full become
available, to the extent unexercised, for future grants under the
Plan. The per share market value of the common stock on April 1,
2000, computed by reference to the last sale price of the common
stock, was $________.
DILUTION OR ENLARGEMENT
In the event that there is any change in the capital
structure of our Company, including but not limited to a change
resulting from a stock dividend, stock split, reorganization,
merger, consolidation, liquidation or any combination or exchange
of shares of common stock, the number of shares of common stock
subject to an option under the Plan which remains unexercised,
and the number of shares of common stock subject to the Plan,
will be subject to increase or decrease in order to prevent
dilution or enlargement. The option exercise price also will be
adjusted upon the occurrence of any of such events so that there
will be no change in the aggregate option exercise price payable
upon the exercise of the option.
<PAGE>
RESTRICTIONS ON RESALE
Any person acquiring shares of common stock pursuant to the
exercise of an option under the Plan may resell such shares
without restriction, unless such person is an "affiliate" of our
Company. "Affiliates" of our Company (i.e., persons who are
deemed to directly or indirectly control our Company, including
executive officers and directors of our Company) who acquire
shares pursuant to the exercise of an option granted under the
Plan may resell such shares only if such shares are either (i)
registered under the Securities Act of 1933, as amended, and any
applicable state securities laws, or (ii) exemptions from
registration under the Securities Act and applicable state
securities laws are available.
Rule 144 under the Securities Act provides an exemption from
registration under that Act if all of its conditions are met.
Under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one
year would be entitled to sell within any three month period a
number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then
outstanding; and
- the average weekly trading volume of the common stock
during the four calendar weeks preceding the filing of
a notice on Form 144 with respect to such sale.
Sales under Rule 144 also are subject to certain manner of
sale provisions and notice requirements and to the availability
of current public information about us.
Our Company is subject to Section 16 of the Securities
Exchange Act of 1934, which permits the recovery by our Company
of any profit realized by any officer, director or beneficial
owner of more than ten percent of the outstanding shares of
common stock from each purchase and sale, or sale and purchase,
of common stock within any period of less than six months. Under
Rule 16b-3 of the Exchange Act, such persons are prohibited from
selling shares of common stock within six months of the option
grant unless the option grant was approved by the shareholders or
by the board of directors (or a committee of two or more "non-
employee directors"). It is anticipated that all grants of
options under the Plan will be approved in that manner and
therefore the six-month restriction period under Rule 16b-3 will
not be applicable. If the six-month period were to be
applicable, however, sales of shares of common stock by officers,
directors and ten percent shareholders within the six month
period would be subject to the short-swing profit recovery
provisions of Section 16(b).
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS Incentive stock options granted
under the Plan are intended to qualify as "incentive stock
options" under section 422(b) of the Code. Generally, an
optionee incurs no federal income tax liability at the time of a
grant of an incentive stock option under the Plan or upon
exercise of an incentive stock option granted under the Plan;
however, as explained below, an optionee may incur alternative
minimum tax consequences upon the exercise of an incentive stock
option.
Upon the sale of stock received pursuant to the exercise of
an incentive stock option granted under the Plan, other than a
sale of stock which is a "disqualifying disposition," as defined
below, an optionee will recognize either (1) a taxable gain equal
to the excess of the amount realized from the sale over the
optionee's basis in the shares, or (2) a taxable loss equal to
the excess of the optionee's basis in the shares over the amount
realized from the sale. The basis in shares received upon
exercise of an incentive stock option granted under the Plan will
be the amount paid for those shares, or, if the incentive stock
option was exercised by exchanging shares of common stock for the
new shares, the basis in the shares surrendered in the exchange.
Gain or loss from the sale of stock received upon exercise
of an incentive stock option granted under the Plan, other than a
sale of stock which is a "disqualifying disposition," as defined
below, will be considered gain or loss from the sale of a capital
asset. Losses from sales of capital assets are subject to
limitations based upon the amount and nature of the taxpayer's
other income, deductions, gains and losses.
<PAGE>
A "disqualifying disposition" of shares received pursuant to
the exercise of an incentive stock option occurs if the optionee
disposes of such shares within two years from the date of the
granting of the option or within one year after the transfer of
the shares to such optionee, unless such disposition is (i) a
transfer from a decedent to an estate or a transfer by bequest or
inheritance, (ii) an exchange to which section 354, section 355,
section 356 or section 1036 of the Code (or so much of section
1031 as relates to section 1036) applies, or (iii) a mere pledge
or hypothecation. In the event of a "disqualifying disposition,"
the optionee generally will realize ordinary income in the year
of the "disqualifying disposition" in an amount equal to the
difference between the fair market value of the shares on the
date of exercise and the exercise price. If the disposition is
one in which a loss, if sustained, would be recognized by the
optionee, the amount recognized as taxable income is the excess,
if any, of the amount realized on the sale over the basis of the
shares sold.
Upon expiration of any incentive stock option, no taxable
income will be recognized by the optionee whose option has
expired and was not exercised.
There are generally no Federal income tax consequences to a
Company upon the issuance or exercise of incentive stock options.
If the optionee makes a "disqualifying disposition," however, our
Company may deduct an amount equal to the amount that the
optionee recognizes as compensation income due to the
disqualifying disposition, provided our Company satisfies
applicable information reporting and income and payroll tax
withholding requirements.
If the stock received pursuant to the exercise of an
incentive stock option granted under the Plan is freely
transferable or not subject to a substantial risk of forfeiture,
then the excess, if any, of the fair market value of such stock
(determined without regard to any restriction other than a
restriction which by its term will never lapse) over the amount
paid for such stock is included in the determination of
alternative minimum taxable income in the year of exercise. If
the stock received pursuant to the exercise of an incentive stock
option granted under the Plan is not freely transferable and is
subject to a substantial risk of forfeiture, then the excess, if
any, of the fair market value of such stock (determined as above)
over the amount paid for such stock is included in the
determination of alternative minimum taxable income in the year
in which such stock becomes freely transferable or is no longer
subject to a substantial risk of forfeiture, whichever of those
two events first occurs. Special rules apply for purposes of
determining whether stock received pursuant to the exercise of an
incentive stock option granted under the Plan is freely
transferable or subject to a substantial risk of forfeiture.
These rules may impact the determination of alternative minimum
taxable income for optionees whose sale of such stock at a profit
could subject the optionee to suit under section 16(b) of the
Exchange Act and in certain other circumstances.
For purposes of computing the alternative minimum income tax
in the year of sale, the basis in the shares sold is increased by
the amount included in the determination of alternative minimum
taxable income in the year the incentive stock option was
exercised. If stock received pursuant to the exercise of an
incentive stock option granted under the Plan is sold in the same
taxable year in which the option was exercised then the amount
includible in the determination of alternative minimum taxable
income cannot exceed the excess (if any) of the amount realized
on the sale less the optionee's adjusted basis in such stock.
NONSTATUTORY OPTIONS An optionee will, generally, not
recognize any taxable income at the time of a grant of a
nonstatutory option under the Plan.
Generally, under section 83 of the Code an optionee will
recognize ordinary income on the exercise of a nonstatutory
option granted under the Plan provided the stock received by the
optionee is freely transferable or is not subject to a
substantial risk of forfeiture. If the shares received pursuant
to the exercise of a nonstatutory option granted under the Plan
are freely transferable or not subject to a substantial risk of
forfeiture, an optionee will recognize ordinary income on the
date of exercise of an option equal to the amount by which the
fair market value of the shares of common stock acquired pursuant
to the exercise of the option on the date of exercise exceeds the
exercise price. However, shares received upon exercise of a
nonstatutory option granted under the Plan held by a person who
could be subject to suit under section 16(b) of the Securities
Exchange Act of 1934 if the stock were sold at a profit would be
considered to be "subject to a substantial risk of forfeiture"
and "not transferable" under section 83 of the Code until such
time as the optionee is no longer subject to suit under section
16(b) of the Securities Exchange Act. Persons who could be
subject to suit under section 16(b) of the Securities Exchange
Act (hereinafter referred to as "Insiders") include officers and
directors of our Company and any stockholder who is a beneficial
owner of more than 10% of any class of our Company's equity
securities. Special rules apply<PAGE> for purposes of
determining the time at which income which must be recognized by
Insiders granted nonstatutory options under the Plan as described
below.
The grant of a nonstatutory option to an Insider under the
Plan will be treated as the immediate purchase of the underlying
shares for purposes of section 16(b) of the Securities Exchange
Act, and, in general, the exercise of a nonstatutory option is
not considered a purchase matchable with a sale under section
16(b). As a result, an Insider who exercises a nonstatutory
option under the Plan when the option has been outstanding for at
least six months will recognize taxable income on the date of
exercise equal to the difference between the fair market value of
the shares subject to the option and the amount paid for the
shares. If a nonstatutory option is exercised by an Insider
within six months of the date of grant, the optionee will
generally recognize ordinary income on the expiration of six
months from the date of grant in an amount equal to the
difference between the fair market value of the option shares on
the date the six-month period expires and the amount paid for
such shares on exercise. If, however, at the time a nonstatutory
option is exercised, the exercise price exceeds the fair market
value of the shares subject to the option, then, regardless of
the time of the exercise, the acquisition of shares pursuant to
the exercise of the option is treated as a matchable purchase
under section 16(b) of the Securities Exchange Act. Accordingly,
an Insider who exercises a nonstatutory option at a time when the
exercise price exceeds the fair market value of the shares
subject to the option will recognize ordinary income on the date
which is six months from the date of exercise equal to the amount
by which the fair market value of such shares on expiration of
the six-month period exceeds the exercise price.
An optionee who is an Insider and who exercises a
nonstatutory option prior to the expiration of the six-month
period beginning on the date the option is granted or an optionee
who exercises an option at any time when the exercise price of
such option exceeds the fair market value of the shares subject
to option may, however, elect to be taxed at the time of exercise
on the difference between the fair market value of the shares on
the date of exercise and the exercise price, even though such
optionee could be subject to suit under section 16(b), if the
optionee elects, in a timely manner, to be so treated under
section 83(b) of the Code and the regulations thereunder. Any
optionee considering a section 83(b) election should consult his
or her tax advisor as to the consequences of, and manner of
making, the election.
Upon expiration of any nonstatutory option, no taxable
income will be recognized by the optionee whose option has
expired and was not exercised.
Upon the sale of stock received pursuant to the exercise of
a nonstatutory option under the Plan, an optionee will recognize
either a taxable gain equal to the excess of the amount realized
from the sale over the basis in the shares, or a taxable loss
equal to the excess of the basis in the shares over the amount
realized from the sale. The basis in shares received upon
exercise of a nonstatutory option under the Plan generally will
be the fair market value of the shares at the time of exercise.
Gain or loss from the sale of such stock will be considered gain
or loss from the sale of a capital asset if the shares are held
for investment purposes. Losses from sales of capital assets are
subject to limitations based upon the amount and nature of the
taxpayer's other income, deductions, gains and losses.
There are no Federal Income tax consequences to a company
upon the granting of nonstatutory options under the Plan. When
an optionee exercises a nonstatutory option, however, our Company
is entitled to a deduction equal to the amount included in the
gross income of the optionee as a result of the optionee's
exercise of the nonstatutory option, provided our Company
satisfies applicable information reporting and income and payroll
tax withholding requirements.
The Plan is not one which can be qualified under section
401(a) of the Code.
THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE ARE FOR
GENERAL INFORMATION ONLY. NO INFORMATION IS PROVIDED AS TO
STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE ACQUISITION OR
EXERCISE OF OPTIONS GRANTED UNDER THE PLAN OR THE SALE OF SHARES
OF COMMON STOCK ACQUIRED UPON SUCH EXERCISE. EACH OPTIONEE
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC
FEDERAL INCOME TAX CONSEQUENCES AND AS TO THE SPECIFIC
CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN TAX LAWS.
<PAGE>
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Plan is not subject to any provision of the Employee
Retirement Income Security Act of 1974, as amended.
WITHDRAWAL FROM THE PLAN
TERMINATION OF EMPLOYMENT OR RELATIONSHIP. If a person to
whom options are granted under the Plan ceases to be employed or
engaged as a director of or consultant to our Company or any of
its affiliates for any reason other than death or disability, any
option or unexercised portion thereof granted to him under the
Plan that is otherwise exercisable will terminate unless it is
exercised within three months (or longer or shorter period (not
less than 30 days) specified in the applicable stock option
agreement) of the date on which such person ceased to be so
employed or engaged (but in no event later than the expiration
date of the option specified in the applicable stock option
agreement). The Plan does not, nor will any stock option
agreement issued pursuant to the Plan, confer upon any optionee
any right with respect to continuance of employment or other
relationship by our Company or any of its affiliates.
DISABILITY OF OPTIONEE. If a person to whom options are
granted under the Plan ceases to be employed or engaged as a
director of or consultant to our Company or any of its affiliates
as a result of such person's disability, any option or
unexercised portion thereof granted to him under the Plan that is
otherwise exercisable will terminate unless it is exercised
within twelve months (or such longer or shorter period (not less
than six months) specified in the applicable stock option
agreement) of the date on which such person ceased to be so
employed or engaged (but in no event later than the expiration
date of such option specified in the applicable stock option
agreement).
DEATH OF OPTIONEE
In the event a person to whom options are granted under the
Plan dies while he is an employee, director of or consultant to
our Company or any of its affiliates (or within a period
specified in the applicable stock option agreement after the date
on which such person ceases to be so employed or engaged) any
option or unexercised portion thereof granted to him under the
Plan that is otherwise exercisable may be exercised by the person
or persons to whom the optionee's rights under the option pass by
operation of the optionee's will or the laws of descent and
distribution, at any time within 18 months (or such longer or
shorter period (not less than six months) specified in the
applicable stock option agreement) following the date of death
(but in no event later than the expiration date of the option as
specified in the applicable stock option agreement).
TERMINATION OF THE PLAN
The Plan will terminate on February 24, 2010, except as to
options then outstanding under the Plan. Options which are
outstanding on the date of such termination shall remain in
effect until they have been exercised or have expired.
ASSIGNMENT
An incentive stock option granted pursuant to the Plan shall
not be transferable or assignable by the optionee other than by
will or the laws of descent and distribution, and during the
lifetime of the optionee the option shall be exercisable only by
the optionee. A nonstatutory option granted pursuant to the Plan
shall not be transferable or assignable by the optionee other
than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order satisfying applicable
Securities and Exchange Commission Rules, and during the lifetime
of the optionee the option shall be exercisable only by the
optionee (or by the transferee pursuant to such a qualified
domestic relations order).
PLAN BENEFITS
As of April 1, 2000, our Company had not granted options to
purchase any shares of common stock pursuant to the Plan. The
number and dollar amount of benefits that will be received by or
allocated to each officer named in the Summary Compensation Table
under "Executive Compensation and Other Information--Executive
Compensation" in Item 1, all executive officers as a group, all
directors who are not executive officers as a group, and all
employees, including officers who are not executive officers, as
a group under the Plan therefore are not currently determinable.
<PAGE>
REQUIRED VOTE
The approval of the Vanguard Airlines, Inc. 2000 Stock
Option Plan requires approval by a majority of the votes cast at
the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF OUR
2000 INCENTIVE STOCK OPTION PLAN.
PROPOSAL FOUR
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The board of directors has selected the independent
certified public accounting firm of Ernst & Young LLP as our
Company's independent auditors to audit the financial statements
of our Company for the year ending December 31, 2000. Ernst &
Young has served as auditors for our Company since 1994.
It is expected that a representative of Ernst & Young 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.
Submission of the selection of the independent auditors to
the shareholders for ratification will not limit the authority of
the board of directors to appoint another independent certified
public accounting firm to serve as independent auditors if the
present auditors resign or their engagement otherwise is
terminated. Stockholder ratification of the board of directors'
selection of Ernst & Young as our Company's independent auditors
is not required by any statute or regulation or by our Company's
bylaws. Nevertheless, if the stockholders do not ratify the
selection of Ernst & Young at the Annual Meeting, the selection
of independent auditors for the current year will be reconsidered
by the board of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
OF THE SELECTION OF ERNST & YOUNG.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our Company's directors and executive officers, and
persons who own more than 10% of a registered class of our
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 our Company. Executive officers, directors and holders of 10%
or more of our Company's equity securities are required by
Securities and Exchange Commission regulations to furnish our
Company with copies of all Section 16(a) reports they file.
Based solely on a review of the copies of such reports
furnished to our Company and written representations that no
other reports were required, our Company believes that during the
year ended December 31, 1999, all Section 16(a) filing
requirements applicable to its executive officers, directors and
holders of 10% or more of our Company's equity securities were
complied with.
OTHER BUSINESS OF THE MEETING
The board of directors is not aware of, and does not intend
to present, any matter for action at the Annual Meeting other
than those referred to in this proxy statement. If, however, any
other matter properly comes before the Annual Meeting or any
adjournment, it is intended that the holders of the proxies
solicited by the board of directors will vote on such matters in
their discretion in accordance with their best judgment.
FINANCIAL STATEMENTS
Our Company's Annual Report to Stockholders, containing
consolidated financial statements for the year ended December 31,
1999, is being mailed with this proxy statement to all
shareholders entitled to vote at the Annual Meeting. Such Annual
Report is not to be regarded as proxy solicitation material.
<PAGE>
A COPY OF OUR COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1999, EXCLUDING EXHIBITS, WILL BE
FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER OF RECORD AS OF APRIL
4, 1999, UPON WRITTEN REQUEST TO BRIAN GILLMAN, VANGUARD
AIRLINES, INC., 533 MEXICO CITY AVENUE, KANSAS CITY, MISSOURI
64153. Our Company will provide a copy of any exhibit to the
Form 10-K to any such person upon written request and the payment
of our Company's reasonable expenses in furnishing such exhibits.
GENERAL INFORMATION
ADVANCE NOTIFICATION OF STOCKHOLDER PROPOSALS
To permit our Company and its stockholders to deal with
stockholders' proposals in an informed and orderly manner, the
Bylaws of our Company require that for business to be properly
brought before an annual stockholders' meeting, the Secretary of
our 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 our 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 our 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 our 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
It is anticipated that the 2001 Annual Meeting of
Stockholders will be held on May 24, 2001. Any stockholder who
intends to present a proposal at the 2001 Annual Meeting must
deliver the proposal to our Company at 533 Mexico City Avenue,
Kansas City, Missouri 64153, Attention: Secretary by the
applicable deadline below:
- If the stockholder proposal is intended for inclusion
in our Company's proxy materials for that meeting
pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, our Company must receive the proposal no
event later than November 24, 2000. Such proposal must
also comply with the other requirements of the proxy
solicitation rules of the Securities and Exchange
Commission.
- If the stockholder proposal is to be presented without
inclusion in our Company's proxy materials for that
meeting, our Company must receive the proposal no event
later than March 25, 2001 in accordance with the
advance notice provisions of our Company's articles of
incorporation and bylaws. See "General Information -
Advance Notification of Stockholder Proposals."
<PAGE>
Proxies solicited in connection with the 2001 Annual Meeting
of Stockholders will confer on the appointed proxies
discretionary voting authority to vote on stockholder proposals
that are not presented for inclusion in the proxy materials
unless the proposing stockholder notifies our Company by
March 25, 2001 that such proposal will be made at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Brian S. Gillman
Vice President, General Counsel
and Secretary
April 14, 2000
Kansas City, Missouri
<PAGE>
EXHIBIT A
VANGUARD AIRLINES, INC.
PROPOSED AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
RESOLVED, that the Restated Certificate of
Incorporation of the Corporation be amended by deleting all of
the present Article IV, Section (a) in its entirety and inserting
in lieu thereof the following Article IV, Section (a):
(a) The total number of shares of all classes of
stock which the Corporation shall have the authority to
issue is one hundred two million (102,000,000) shares,
of which (i) one hundred million (100,000,000) shares,
of the par value of $0.001 per share, shall be
denominated "Common Stock" and (ii) two million
(2,000,000) shares, of the par value of $0.001 per
share, shall be denominated "Preferred Stock."
* * * *
<PAGE>
APPENDIX I -- 2000 STOCK OPTION PLAN
VANGUARD AIRLINES, INC.
2000 STOCK OPTION PLAN
ADOPTED FEBRUARY 24, 2000
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which
selected Employees and Directors of and Consultants to the
Company, and its Affiliates, may be given an opportunity to
purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees or Directors of or
Consultants to the Company or its Affiliates, to secure and
retain the services of new Employees, Directors and Consultants,
and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan
shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated
pursuant to subsection 3(c), be either Incentive Stock Options or
Nonstatutory Stock Options. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to
Section 6, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f) respectively, of the Code.
<PAGE>
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(e) "Company" means Vanguard Airlines, Inc., a Delaware
corporation.
(f) "Consultant" means any person, including an advisor, engaged
by the Company or an Affiliate to render consulting services and
who is compensated for such services, provided that the term
"Consultant" shall not include Directors who are paid only a
director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(g) "Continuous Status as an Employee, Director or Consultant"
means the employment or relationship as a Director or Consultant
is not interrupted or terminated. The Board, in its sole
discretion, may determine whether Continuous Status as an
Employee, Director or Consultant shall be considered interrupted
in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal
leave; or (ii) transfers between locations of the Company or
between the Company, Affiliates or their successors.
(h) "Covered Employee" means the Chief Executive Officer and the
four (4) other highest compensated officers of the Company.
(i) "Director" means a member of the Board.
(j) "Disinterested Person" means a Director who either (i) was
not during the one year prior to service as an administrator of
the Plan granted or awarded equity securities pursuant to the
Plan or any other plan of the Company or any of its Affiliates<PAGE>
entitling the participants therein to acquire equity securities
of the Company or any of its Affiliates except as permitted by
Rule 16b-3(c)(2)(i); or (ii) is otherwise considered to be a
"disinterested person" in accordance with Rule l6b-3(c)(2)(i), or
any other applicable rules, regulations or interpretations of the
Securities and Exchange Commission.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Affiliate of the
Company. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of the
common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without
limitation the National Market System of the National Association
of Securities Dealers, Inc. Automated Quotation ("NASDAQ")
System, the Fair Market Value of a share of common stock shall be
the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on
the last market trading day prior to the day of determination, as
reported in the Wall Street Journal or such other source as the
Board deems reliable;
(ii) If the common stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or is regularly quoted by
a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a share of common stock shall
be the mean between the bid and asked prices for the common stock
on the<PAGE> last market trading day prior to the day of determination,
as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(iii) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by
the Board.
(n) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of
the Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an
individual Option grant. Each Option Agreement shall be subject
to the terms and conditions of the Plan.
(s) "Optionee" means an Employee, Director or Consultant who
holds an outstanding Option.
(t) "Outside Director" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation"
(as defined in the Treasury regulations promulgated under Section
162(m) of the Code), is not a former employee of the Company or
an affiliated corporation receiving compensation for prior
services (other than benefits under a tax qualified pension
plan), was not an officer of the Company or an<PAGE> affiliated
corporation at any time, and is not currently receiving
compensation for personal services in any capacity other than as
a Director, or (ii) is otherwise considered an "outside director"
for purposes of Section 162(m) of the Code.
(u) "Plan" means this Vanguard Airlines, Inc. 2000 Stock Option
Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being
exercised with respect to the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option
shall be granted; whether an Option will be an Incentive Stock
Option or a Nonstatutory Stock Option; the provisions of each
Option granted (which need not be identical), including the time
or times such Option may be exercised in whole or in part; and
the number of shares for which an Option shall be granted to each
such person.
(ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or
in any Option Agreement, in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan as provided in Section 11.
<PAGE>
(c) The Board may delegate administration of the Plan to a
committee composed of not fewer than two (2) members (the
"Committee"), all of the members of which Committee shall be
Disinterested Persons and may also be, in the discretion of the
Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by
the Board (and references in this Plan to the Board shall
thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as
may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the
administration of the Plan. Additionally, prior to the date of
the first registration of an equity security of the Company under
Section 12 of the Exchange Act, and notwithstanding anything to
the contrary contained herein, the Board may delegate
administration of the Plan to any person or persons and the term
"Committee" shall apply to any person or persons to whom such
authority has been delegated. Notwithstanding anything in this
Section 3 to the contrary, the Board or the Committee may
delegate to a committee of one or more members of the Board the
authority to grant Options to eligible persons who (i) are not
then subject to Section 16 of the Exchange Act and/or (ii) are
either (A) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting
from such Option, or (B) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code.
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply (i) prior to the date of the
first registration of an equity security of the Company under
Section 12 of the Exchange Act, or (ii) if the Board or the
Committee<PAGE> expressly declares that such requirement shall not
apply. Any Disinterested Person shall otherwise comply with the
requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to
adjustments upon changes in stock, the stock that may be sold
pursuant to Options shall not exceed in the aggregate two million
(2,000,000) shares of the Company's common stock. If any Option
shall for any reason expire or otherwise terminate, in whole or
in part, without having been exercised in full, the stock not
purchased under such Option shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees,
Directors or Consultants.
(b) A Director shall in no event be eligible for the benefits of
the Plan unless at the time discretion is exercised in the
selection of the Director as a person to whom Options may be
granted, or in the determination of the number of shares which
may be covered by Options granted to the Director: (i) the Board
has delegated its discretionary authority over the Plan to a
Committee which consists solely of Disinterested Persons; or (ii)
the Plan otherwise complies with the requirements of Rule 16b-3.
The Board shall otherwise comply with the requirements of Rule
16b-3. This subsection 5(b) shall not apply if the Board or
Committee expressly declares that it shall not apply.
<PAGE>
(c) No person shall be eligible for the grant of an Option if,
at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the
date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(d) No person shall be eligible to be granted Options covering
more than two hundred thousand (200,000) shares of the Company's
common stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. The
provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof
by reference in the Option or otherwise) the substance of each of
the following provisions:
(a) TERM. No Option shall be exercisable after the expiration
of ten (10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the Fair
Market Value of the stock subject to the Option on the date the
Option is granted. The exercise price of each Nonstatutory Stock
Option shall be not less than eighty-five percent (85%) of the
Fair Market Value of the stock subject to the Option on the date
the Option is granted.
<PAGE>
(c) CONSIDERATION. The purchase price of stock acquired
pursuant to an Option shall be paid, to the extent permitted by
applicable statutes and regulations, either (i) in cash at the
time the Option is exercised, or (ii) at the discretion of the
Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other
common stock of the Company, (B) according to a deferred payment
or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom
the Option is transferred pursuant to subsection 6(d), or (C) in
any other form of legal consideration that may be acceptable to
the Board.
In the case of any deferred payment arrangement, interest
shall be payable at least annually and shall be charged at the
minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY.
(i) INCENTIVE STOCK OPTIONS. An Incentive Stock Option shall
not be transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the
person to whom the Incentive Stock Option is granted only by such
person.
(ii) NONSTATUTORY STOCK OPTIONS. A Nonstatutory Stock Option
shall not be transferable except by will, by the laws of descent
and distribution or, as provided immediately below, to the
Optionee's Immediate Family and shall be exercisable during the
lifetime of the person to whom the Nonstatutory Stock Option is
granted only by such person or any transferee. An Optionee may
transfer any portion of a Nonstatutory Stock<PAGE> Option that is then
exercisable, for no consideration, to or for the benefit of one
or more members of the Optionee's Immediate Family (as defined
below), including, without limitation, to a trust for the benefit
of one or more members of the Optionee's Immediate Family or to a
partnership of and among members of the Optionee's Immediate
Family, in which event the transferee or transferees of such
portion shall possess all rights of the Optionee under this Plan
with respect to such portion and shall remain subject to all the
terms and conditions applicable thereto, including those terms
and conditions pursuant to which the exercisability of the Option
is related to the continuing employment of the Optionee (not the
transferee or transferees) by the Company or its subsidiaries.
The Committee may specify from time to time the procedures
applicable to any such transfer and certain limitations relating
thereto as may be practical or are necessary to protect the
Company's interests. For purposes of this subparagraph (ii), an
Optionee's "Immediate Family" means an Optionee's parents,
spouse, children, stepchildren, adoptive relationships, sisters,
brothers and grandchildren. The Optionee may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death
of the Optionee, shall thereafter be entitled to exercise the
Option.
(e) VESTING. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments
(which may, but need not, be equal). The Option Agreement may
provide that from time to time during each of such installment
periods, the Option may become exercisable ("vest") with respect
to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to
such period and/or any prior period as to which the Option<PAGE> became
vested but was not fully exercised. The Option may be subject to
such other terms and conditions on the time or times when it may
be exercised (which may be based on performance or other
criteria) as the Board may deem appropriate. The vesting
provisions of individual Options may vary but in each case will
provide for vesting of at least twenty percent (20%) per year of
the total number of shares subject to the Option. The provisions
of this subsection 6(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may
be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any
Optionee, or any person to whom an Option is transferred under
subsection 6(d), as a condition of exercising any such Option,
(i) to give written assurances satisfactory to the Company as to
the Optionee's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced
in financial and business matters, and that he or she is capable
of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option;
and (ii) to give written assurances satisfactory to the Company
stating that such person is acquiring the stock subject to the
Option for such person's own account and not with any present
intention of selling or otherwise distributing the stock. The
foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (A) the issuance of the
shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), or (B)
as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in
the circumstances under the then applicable securities<PAGE> laws. The
Company may, upon advice of counsel to the Company, place legends
on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an
Employee, Director or Consultant terminates (other than upon the
Optionee's death or disability), the Optionee may exercise his or
her Option (to the extent that the Optionee was entitled to
exercise it at the date of termination) but only within such
period of time ending on the earlier of (i) the date three (3)
months after the termination of the Optionee's Continuous Status
as an Employee, Director or Consultant (or such longer or shorter
period, which in no event shall be less than thirty (30) days,
specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If,
after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the
Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the
Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee' s
Continuous Status as an Employee, Director or Consultant
terminates as a result of the Optionee's disability, the Optionee
may exercise his or her Option (to the extent that the Optionee
was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date
twelve (12) months following such termination (or such longer or
shorter period, which in no event shall be less than six (6)
months, specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the<PAGE> Option
Agreement. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered
by the unexercisable portion of the Option shall revert to and
again become available for issuance under the Plan. If, after
termination, the Optionee does not exercise his or her Option
within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option after the
termination of, the Optionee's Continuous Status as an Employee,
Director or Consultant, the Option may be exercised (to the
extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by
a person designated to exercise the option upon the Optionee's
death pursuant to subsection 6(d), but only within the period
ending on the earlier of (i) the date eighteen (18) months
following the date of death (or such longer or shorter period,
which in no event shall be less than six (6) months, specified in
the Option Agreement), or (ii) the expiration of the term of such
Option as set forth in the Option Agreement. If, at the time of
death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of
the Option shall revert to and again become available for
issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an
Employee, Director or Consultant<PAGE> to exercise the Option as to any
part or all of the shares subject to the Option prior to the full
vesting of the Option. Any unvested shares so purchased shall be
subject to a repurchase right in favor of the Company, with the
repurchase price to be equal to the original purchase price of
the stock, or to any other restriction the Board determines to be
appropriate; provided, however, that (i) the right to repurchase
at the original purchase price shall lapse at a minimum rate of
twenty percent (20%) per year over five (5) years from the date
the Option was granted, and (ii) such right shall be exercisable
only (A) within the ninety (90) day period following the
termination of employment or the relationship as a Director or
Consultant or (B) such longer period as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying
the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock")), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money
indebtedness for the shares. Should the right of repurchase be
assigned by the Company, the assignee shall pay the Company cash
equal to the difference between the original purchase price and
the stock's Fair Market Value if the original purchase price is
less than the stock's Fair Market Value.
(k) WITHHOLDING. To the extent provided by the terms of an
Option Agreement, the Optionee may satisfy any federal, state or
local tax withholding obligation relating to the exercise of such
Option by any of the following means or by a combination of such
means: (i) tendering a cash payment; (ii) authorizing the Company
to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the
Option; or (iii) delivering to the Company owned and unencumbered
shares of the common stock of the Company.
<PAGE>
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep
available at all times the number of shares of stock required to
satisfy such Options.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock
upon exercise of the Options; provided, however, that this
undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or
issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options
unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall
constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the
holder of, or to have any of the rights of a holder with respect
to, any shares subject to such Option unless and until such
person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(b) Nothing in the Plan or any instrument executed or Option
granted pursuant thereto shall confer upon any Employee,
Director, Consultant or Optionee any right to<PAGE> continue in the
employ of the Company or any Affiliate (or to continue acting as
a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment or
relationship as a Director or Consultant of any Employee,
Director, Consultant or Optionee with or without cause.
(c) To the extent that the aggregate Fair Market Value
(determined at the time of grant) of stock with respect to which
Incentive Stock Options granted after 1986 are exercisable for
the first time by any Optionee during any calendar year under all
plans of the Company and its Affiliates exceeds one hundred
thousand dollars ($l00,000), the Options or portions thereof
which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(d) (i) The Board or the Committee shall have the authority to
effect, at any time and from time to time (A) the repricing of
any outstanding Options under the Plan and/or (B) with the
consent of the affected holders of Options, the cancellation of
any outstanding Options and the grant in substitution therefor of
new Options under the Plan covering the same or different numbers
of shares of Common Stock, but having an exercise price per share
not less than eighty-five percent (85%) of the Fair Market Value
(one hundred percent (100%) of the Fair Market Value in the case
of an Incentive Stock Option or, in the case of a ten percent
(10%) stockholder (as defined in subsection 5(c)), not less than
one hundred and ten percent (110%) of the Fair Market Value) per
share of Common Stock on the new grant date.
(ii) Shares subject to an Option canceled under this subsection
9(d) shall continue to be counted against the maximum award of
Options permitted to be granted pursuant to subsection 5(d) of
the Plan. The repricing of an Option under this<PAGE> subsection 9(d),
resulting in a reduction of the exercise price, shall be deemed
to be a cancellation of the original Option and the grant of a
substitute Option; in the event of such repricing, both the
original and the substituted Options shall be counted against the
maximum awards of Options permitted to be granted pursuant to
subsection 5(d) of the Plan. The provisions of this subsection
9(d) shall be applicable only to the extent required by Section
162(m) of the Code.
(e) This Plan shall be governed by and construed in accordance
with the internal laws of the State of Missouri without regard to
any principles of Missouri conflicts or choice of law.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Option (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan and outstanding Options will be
appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares
and price per share of stock subject to outstanding Options.
(b) In the event of: (i) a merger or consolidation in which the
Company is not the surviving corporation or (ii) a reverse merger
in which the Company is the surviving corporation but the shares
of the Company's common stock outstanding immediately preceding
the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise
then to the extent permitted by applicable law: (A) any surviving
corporation shall assume any Options outstanding under the Plan
or<PAGE> shall substitute similar Options for those outstanding under
the Plan, or (B) such Options shall continue in full force and
effect. In the event any surviving corporation refuses to assume
or continue such Options, or to substitute similar options for
those outstanding under the Plan, then such Options shall be
terminated if not exercised prior to such event. In the event of
a dissolution or liquidation of the Company, any Options
outstanding under the Plan shall terminate if not exercised prior
to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 10 relating to
adjustments upon changes in stock, no amendment shall be
effective unless approved by the stockholders of the Company
within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Options under the
Plan;
(ii) Modify the requirements as to eligibility for participation
in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of
Section 422 of the Code); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy
the requirements of Section 422 of the Code or to comply with the
requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations
promulgated thereunder regarding the exclusion of performance-
based compensation<PAGE> from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the
Plan in any respect the Board deems necessary or advisable to
provide Optionees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or
to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
(d) Rights and obligations under any Option granted before
amendment of the Plan shall not be altered or impaired by any
amendment of the Plan unless (i) the Company requests the consent
of the person to whom the Option was granted and (ii) such person
consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on
February 24, 2010 which shall be within ten (10) years from the
date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier.
(b) Rights and obligations under any Option granted while the
Plan is in effect shall not be altered or impaired by suspension
or termination of the Plan, except with the consent of the person
to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board,
but no Options granted under the Plan shall be exercised unless
and until the Plan has been approved by<PAGE> the stockholders of the
Company, which approval shall be within twelve (12) months before
or after the date the Plan is adopted by the Board.
<PAGE>
APPENDIX II -- PROXY CARD
PROXY VANGUARD AIRLINES, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 24, 2000
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 2000 Annual Meeting of Stockholders of
Vanguard Airlines, Inc. to be held on Wednesday, May 24, 2000, at
10:00 a.m. Central Daylight Time, at the Embassy Suites Plaza
Hotel, 220 West 43rd Street, Kansas City, Missouri 64111, 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. To elect Lee M. Gammill, Jr. as a Class II Director.
2. To approve an amendment to the Company's Restated
Certificate of Incorporation, as amended (the "Restated
Certificate"), to decrease the number of authorized shares of the
Company's Common Stock from 200,000,000 to 100,000,000.
3. To approve the proposal to ratify the Vanguard Airlines,
Inc. 2000 Stock Option Plan;
4. 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, 2000; and
5. To consider and act upon any other matters which may
properly come before the Annual Meeting of Stockholders or any
adjournment thereof.
<PAGE>
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 1,2,3
AND 4.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting and Proxy Statement, dated April __, 2000.
Dated: ___________, 2000
________________________
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.
<PAGE>
