<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Mesaba Holdings, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
------------------------------------------------------------------------
<PAGE>
MESABA HOLDINGS, INC.
7501 26TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55440
July 22, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Mesaba Holdings, Inc., to be held at the Radisson Plaza
Hotel, 35 South Seventh Street, Minneapolis, Minnesota, on Wednesday, August
28, 1996, at 3:30 p.m.
At the meeting you will be asked to vote for the election of three
Class Two directors, to approve the Company's 1996 Director Stock Option
Plan, and to ratify the appointment by the Board of Directors of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year ending
March 31, 1997.
I encourage you to vote FOR each of the nominees for Class Two
director, FOR the approval of the 1996 Director Stock Option Plan, and FOR
ratification of the appointment of Arthur Andersen LLP. Whether or not you
are able to attend the meeting in person, I also urge you to sign and date
the enclosed proxy card and return it promptly in the enclosed envelope. If
you do attend the meeting in person, you may withdraw your proxy and vote
personally on any matters properly brought before the meeting.
Sincerely,
/s/ Bryan K. Bedford
Bryan K. Bedford
President and Chief Executive Officer
<PAGE>
MESABA HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS -- AUGUST 28, 1996
____________________
The Annual Meeting of Shareholders of Mesaba Holdings, Inc. (the "Company")
will be held at 3:30 p.m. on Wednesday, August 28, 1996 at the Radisson Plaza
Hotel, 35 South Seventh Street, Minneapolis, Minnesota, for the following
purposes:
1. To elect three Class Two directors, each for a term of three years.
2. To approve the Company's 1996 Director Stock Option Plan.
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending March 31, 1997.
4. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on July 12, 1996,
are entitled to notice of and to vote at the meeting.
Whether or not you expect to attend the meeting in person, please
complete, date, and sign the enclosed proxy exactly as your name appears
thereon and promptly return it in the envelope provided, which requires no
postage if mailed in the United States. Proxies may be revoked at any time
and if you attend the meeting in person, your executed proxy will be returned
to you upon request.
BY ORDER OF THE BOARD OF DIRECTORS
John S. Fredericksen, Assistant Secretary
Dated: July 22, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE PROXY
CARD EXACTLY AS YOUR NAME(S) APPEAR(S) THEREON AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
<PAGE>
MESABA HOLDINGS, INC.
7501 26th Avenue South
Minneapolis, Minnesota 55450
_____________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
AUGUST 28, 1996
____________________________
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mesaba Holdings, Inc. (the "Company")
for use at the Annual Meeting of Shareholders to be held at the Radisson
Plaza Hotel, 35 South Seventh Street, Minneapolis, Minnesota on Wednesday,
August 28, 1996 at 3:30 p.m., and at any adjournment thereof.
All shares represented by properly executed proxies received in time
will be voted at the meeting and, where the manner of voting is specified on
the proxy, will be voted in accordance with such specifications. Shares
represented by properly executed proxies on which no specification has been
made will be voted FOR the election of the nominees for director named
herein, FOR the approval of the Company's 1996 Director Stock Option Plan,
and FOR ratification of the appointment by the Board of Directors of Arthur
Andersen LLP as the Company's independent public accountants for the year
ending March 31, 1997, and will be deemed to grant discretionary authority to
vote upon any other matters properly coming before the meeting. If a
properly executed proxy is returned and the shareholder has abstained from
voting on any matter, the shares represented by the proxy will be considered
present at the meeting for purposes of determining a quorum and for purposes
of calculating the vote, but will not be considered to have been voted in
favor of such matter. If an executed proxy is returned by a broker holding
shares in street name which indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more matters,
such shares will be considered present at the meeting for purposes of
determining a quorum, but not for purposes of calculating the vote with
respect to such matter.
Any shareholder who executes and returns a proxy may revoke it at any
time prior to the voting of the proxies by giving written notice to the
Assistant Secretary of the Company; by executing a later-dated proxy; or by
attending the meeting and giving oral notice to the Assistant Secretary of
the Company.
The Board of Directors of the Company has fixed the close of business on
July 12, 1996 as the record date for determining the holders of common stock
entitled to vote at the meeting. On that date, there were 12,760,046 shares
of common stock issued and outstanding. Each share of common stock entitles
the holder to one vote at the meeting. The Notice of Annual Meeting, this
proxy statement and the form of proxy are first being mailed to shareholders
of the Company on or about July 22, 1996.
ELECTION OF DIRECTORS
NOMINATION AND CLASSIFICATION
The Company's Board of Directors is divided into three separate classes.
The terms of the Class Two directors expire at the meeting and the Board of
Directors has nominated three persons to serve as Class Two directors. Each
Class Two director will be elected to serve until the annual meeting of
shareholders to be held in 1999 and until a successor is elected and
qualified. The terms of the Class Three and Class One directors expire in
1997 and 1998, respectively. Each of the Company's directors also serves as
a director of the
<PAGE>
Company's wholly owned subsidiary, Mesaba Aviation, Inc. ("Mesaba Aviation").
All nominees have agreed to stand for election at the meeting.
One of the nominees, Richard B. Hirst, is currently a member of the
Board of Directors and was elected to fill a vacancy created by the
resignation of a former director. Mr. Hirst was nominated by Northwest
Airlines, Inc. pursuant to an agreement dated May 18, 1995 between the
Company, Mesaba Aviation and Northwest Airlines, Inc. Such agreement
provided for the one-time designation by Northwest Airlines, Inc. of three
members of the Board of Directors of the Company to fill vacancies in Class
One, Class Two and Class Three. There is no continuing obligation to further
designate or elect Northwest Airlines, Inc. nominees. See "Certain
Transactions."
All proxies will be voted in favor of the three nominees, unless a
contrary choice is specified on the proxy. If, prior to the annual meeting,
the Board of Directors learns that any nominee will be unable to serve by
reason of death, incapacity, or other unexpected occurrence, the proxies
which would have otherwise been voted for such nominee will be voted for a
substitute nominee, if any, selected by the Board. The election of each
nominee for director requires the affirmative vote of the holders of a
majority of the shares of common stock represented at the meeting.
INFORMATION ABOUT NOMINEES
The names of the nominees, their principal occupations, and certain
other information regarding the nominees set forth below is based upon
information furnished to the Company by the respective nominees. Except for
Mr. Pohlad, each of the nominees became a director of the Company during the
fiscal year ended March 31, 1996.
DONALD E. BENSON, age 66, a Class Two director, was elected a director
of the Company in June 1995 to fill an existing vacancy in Class Two. Mr.
Benson has served as Executive Vice President of Marquette Bancshares, Inc.
since January 1993 and with predecessor organizations since 1968. He also
served as President of MEI Corporation from 1977 to 1986 and President of MEI
Diversified Inc. from 1986 to 1994. MEI Diversified Inc. filed for Chapter
11 bankruptcy protection in February 1993 and a Plan of Reorganization was
confirmed in October 1994, pursuant to which its assets and liabilities were
liquidated. Mr. Benson is also a director of Mass Mutual Corporate Investors
and Mass Mutual Participation Investors, and a director and Vice President of
CRP Sports, Inc., the managing general partner of the Minnesota Twins
baseball club. He also currently serves as Chairman of Health Systems
Minnesota.
RICHARD B. HIRST, age 52, a Class Two director, was elected a director
of the Company in August 1995. Mr. Hirst has been Senior Vice President of
Corporate Affairs at Northwest Airlines, Inc. since 1994. From 1990 to 1994,
Mr. Hirst was Senior Vice President and General Counsel of Northwest
Airlines, Inc. From 1986 to 1990, Mr. Hirst was Vice President and General
Counsel/Secretary at Continental Airlines, and from 1983 to 1986 held various
other positions at Continental Airlines.
CARL R. POHLAD, age 80, a Class Two director, was elected a director of
the Company in February 1995. Mr. Pohlad has been President and a director
of Marquette Bancshares, Inc. since 1993. Prior to 1993, Mr. Pohlad served
as President and Chief Executive Officer of Marquette Bank Minneapolis and
Bank Shares Incorporated. Mr. Pohlad was Chairman of the Board of MEI
Corporation from 1972 to 1986, and Chairman of the Board of MEI Diversified
Inc. from 1986 to 1994. MEI Diversified Inc. filed for Chapter 11 bankruptcy
protection in February 1993 and a Plan of Reorganization was confirmed in
October, 1994, pursuant to which its assets and liabilities were liquidated.
Mr. Pohlad is also an owner, director and the President of CRP Sports, Inc.,
the managing general partner of the Minnesota Twins baseball club, and is a
director of Genmar Holdings, Inc.
2
<PAGE>
INFORMATION ABOUT CONTINUING DIRECTORS
The following information regarding the directors of the Company whose
terms do not expire at the meeting is based upon information furnished to the
Company by the respective directors. Each of the persons named below became
a director of the Company during the fiscal year ended March 31, 1996.
BRYAN K. BEDFORD, age 34, a Class One director, was elected a director
of the Company in September 1995. Mr. Bedford has been President and Chief
Executive Officer of the Company since August 1995. Mr. Bedford was
President and Chief Executive Officer of Business Express, Inc. from February
1994 to August 1995. He served as Executive Vice President and Chief
Financial Officer of Phoenix Airline Services, Inc. from July 1992 to January
1994, and as Vice President and Chief Financial Officer of WestAir Holding,
Inc. from January 1990 to July 1992. From June 1988 to January 1990, Mr.
Bedford was Vice President of Finance of Aspen Airways, Inc.
CHRISTOPHER E. CLOUSER, age 44, a Class Three director, was elected a
director of the Company in August 1995. Mr. Clouser is Senior Vice President,
Communications, Advertising and Human Resources at Northwest Airlines, Inc.
He joined Northwest in April 1991. Previously, he held corporate officer
positions at Bell Atlantic Corporation, United Telecom, US Sprint Corp. and
Hallmark Cards, Inc. Mr. Clouser currently serves as a director of the
following organizations and companies: Delta Beverage Group, Inc.,
Mintertainment, Inc., Epilepsy Foundation of America, Children's HeartLink
and the Greater Minneapolis Chamber of Commerce.
ROBERT C. POHLAD, age 42, a Class Three director, was elected a director
of the Company in September 1995. Mr. Pohlad has served as President of
Pohlad Companies since 1987. Currently he is also Chief Executive Officer
and director of Delta Beverage Group, Inc., and a director of Dougherty
Financial Group, Inc., Grow Biz International, Inc., North Central Life
Insurance Company and Champion Glove Manufacturing Company.
DONALD A. WASHBURN, age 51, a Class One director, was elected a director
of the Company in August 1995. Mr. Washburn has been Executive Vice
President of Customer Service and Operations of Northwest Airlines, Inc.
since July 1994. From July 1993 to July 1994, Mr. Washburn was Senior Vice
President of Customer Service at Northwest Airlines, Inc. From March 1992 to
July 1993, he served as Sr. Vice President and from August 1990 to March
1992, as Senior Vice President of Product Development at Northwest Airlines,
Inc. Prior to August, 1990, Mr. Washburn was employed by Marriott
Corporation, most recently as Executive Vice President of Marriott
Corporation's Courtyard Division.
RAYMOND W. ZEHR, JR., age 49, a Class One director, was elected a
director of the Company in June 1995. Mr. Zehr has served as Vice President
of Pohlad Companies since 1987, and in various other capacities in Pohlad
Companies since 1971. He is also a director of Dougherty Financial Group,
Inc., Chief Investment Manager of CRP Holdings, LLC, and Vice President of
CRP Sports, Inc., the managing general partner of the Minnesota Twins
baseball club. Prior to December 31, 1993, Mr. Zehr also served as a
director and/or officer of various bank holding companies affiliated with the
Pohlad family.
COMMITTEES
The Board of Directors has established Executive, Audit, Compensation,
Nominating and Affiliated Transactions Committees. The current members of
the Executive Committee were appointed on October 25, 1995 and the current
members of each of the other committees were appointed on September 7, 1995.
The members of the Executive Committee are Bryan K. Bedford, Richard B. Hirst
and Carl R. Pohlad. The Executive Committee is delegated the full and
complete powers of the Board of Directors to act in place of the full Board
during all periods between regularly scheduled meetings of the Board and at
any other time at which a meeting of the full Board is not practicable for
any reason.
3
<PAGE>
The members of the Audit Committee are Robert C. Pohlad, Donald A.
Washburn and Raymond W. Zehr, Jr. The Audit Committee is empowered by the
Board of Directors to review the financial books and records of the Company
in consultation with the Company's accounting staff and its independent
auditors and to review with the accounting staff and independent auditors any
questions raised with respect to accounting and auditing policy and
procedures.
The members of the Compensation Committee are Donald E. Benson,
Christopher E. Clouser and Raymond W. Zehr, Jr. The Compensation Committee
is authorized by the Board of Directors to establish general levels of
compensation for all employees of the Company, to set the annual salary of
each of the executive officers of the Company, to grant options and to
otherwise administer the Company's stock option plans, and to review and
approve compensation and benefit plans of the Company. The Compensation
Committee consists exclusively of non-employee directors.
The members of the Nominating Committee are Bryan K. Bedford, Richard B.
Hirst and Carl R. Pohlad. The Nominating Committee is authorized by the
Board of Directors to recommend the structure and makeup of the Board of
Directors and recommends the nomination of members to the Board of Directors
to fill vacancies or for election by the shareholders of the Company.
Pursuant to the Company's Bylaws, the Nominating Committee will consider
nominees proposed by shareholders in accordance with the procedures outlined
in the Bylaws.
The members of the Affiliated Transactions Committee are Donald E.
Benson, Robert C. Pohlad and Raymond W. Zehr, Jr. The Affiliated
Transactions Committee is authorized by the Board of Directors to make
recommendations to the Board of Directors on any actions relating to
Northwest Airlines, Inc. or its affiliates.
During the fiscal year ended March 31, 1996, the Board of Directors held
14 meetings, the Executive Committee held four meetings, the Compensation
Committee held eight meetings and the Audit Committee held one meeting. Each
of the directors attended at least 75% of the meetings of the Board and each
committee of which he was a member held during the period of his Board
membership in the fiscal year ended March 31, 1996.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a fee of $1,500
per quarter and are reimbursed for out-of-pocket expenses incurred in
performing their duties as directors, except for the Northwest Airlines, Inc.
designees, Messrs. Clouser, Hirst and Washburn, who do not receive director's
fees. Mr. Carl R. Pohlad received $45,000 as compensation for serving as
Chairman of the Board during the fiscal year ended March 31, 1996.
Non-employee directors have received automatic grants of options to purchase
the Company's common stock pursuant to the 1991 Director Stock Option Plan,
which plan will be terminated by the Board of Directors effective November 5,
1996, and will receive options under the 1996 Director Stock Option Plan,
beginning on November 6, 1996, if such plan is approved by shareholders at
the annual meeting. Messrs. Clouser, Hirst and Washburn have waived their
rights to receive options under the 1991 Director Stock Option Plan and are
expected to waive their rights to receive options under the 1996 Director
Stock Option Plan. Messrs. Benson, Robert C. Pohlad, and Zehr were each
granted options to purchase 4,000 shares of the Company's common stock under
the 1991 Director Stock Option Plan during the fiscal year ended March 31,
1996. The options have a term of six years and become fully exercisable on
the first anniversary of the date of grant at price per share equal to the
fair market value of the stock on the date of grant. See "Approval of 1996
Director Stock Option Plan."
APPROVAL OF 1996 DIRECTOR STOCK OPTION PLAN
The 1996 Director Stock Option Plan (the "Plan") was adopted by the
Board of Directors on May 22, 1996, subject to shareholder approval. A
proposal to approve the Plan will be presented to shareholders at the Annual
Meeting. Approval of the Plan requires the affirmative vote of the holders of
a majority of the shares of common stock represented at the Annual Meeting.
The purpose of the Plan is to attract the best available individuals to serve
as non-employee directors of the Company ("Outside Directors") and to
encourage their continued service on the Board of Directors. The maximum
aggregate number of shares of
4
<PAGE>
common stock which may be issued pursuant to the Plan is 200,000. The
Outside Directors will benefit from approval of the Plan to the extent that
they exercise the options they receive pursuant to the Plan. The Plan is
intended to comply with Rule 16b-3 under the Securities Exchange Act of 1934.
Copies of the Plan are available for examination at the corporate
headquarters of the Company in Minneapolis, Minnesota, and will be mailed at
no charge to any shareholder who requests a copy. A copy of the Plan will
also be available for examination at the Annual Meeting.
The Company's 1991 Director Stock Option Plan was to expire by its terms
on November 6, 1996. Pursuant to its authority under the 1991 Director Stock
Option Plan, the Board of Directors provided for termination of the plan
effective November 5, 1996, prior to the final automatic award of 4,000
shares to each participant on November 6. The Plan is intended to replace
the 1991 Director Stock Option Plan.
The Plan provides for the automatic grant of options to purchase common
stock to Outside Directors according to fixed terms. On November 6, 1996,
each Outside Director then serving on the Board of Directors will be
automatically granted an option to purchase 6,000 shares of common stock and
will automatically receive an option to purchase 6,000 shares on each
subsequent November 6, subject to shareholder approval of the Plan. A new
Outside Director automatically receives options to purchase 6,000 shares upon
first becoming an Outside Director and on each November 6 after the year of
the original grant. Each Outside Director will continue to receive automatic
annual grants until the Outside Director ceases to serve as such; until the
final grant on November 6, 2001, when the Plan terminates; or until the
shares authorized for issuance under the Plan are exhausted. Each option has
a term of six years and will be exercisable not earlier than the first
anniversary of the date of the grant of the option. The exercise price for
each share of common stock purchased pursuant to an option will be 100% of
the fair market value of such share on the date of the grant of the option.
On July 12, 1996, the closing price per share of the common stock as quoted
on the Nasdaq National Market was $10-7/8.
No option granted under the Plan may be transferred other than by will
or by the laws of descent and distribution, and all options are exercisable,
during the lifetime of the Outside Director, only by the Outside Director.
If an Outside Director ceases to serve as a director for any reason other
than death or total disability (as defined in the Plan), all rights to
exercise his or her options granted under the Plan will terminate, unless
such termination is waived by the Board of Directors. In the event an
Outside Director dies while serving as a director or within three months
after termination of his or her service as a director because of his or her
total disability, his or her options may be exercised prior to the earlier to
occur of the expiration of the option or two years from the date of death.
In the event an Outside Director's service as a director terminates because
of a total disability and the Outside Director has not died within three
months of such termination, his or her options may be exercised prior to the
earlier to occur of the expiration of the option or one year from the date of
such termination.
The options granted under the Plan will not constitute incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of
1986. There is no taxable income to an Outside Director as a result of the
grant of an option under the Plan. Upon the exercise of an option under the
Plan, the amount by which the fair market value of the shares of common stock
exceeds the option price will be treated as compensation (ordinary income)
received by the Outside Director. The Company will ordinarily be entitled to
a corresponding tax deduction at the time that the Outside Director realizes
compensation income. Upon a subsequent sale of the shares so acquired, the
Outside Director will recognize a capital gain or loss equal to the
difference between the amount realized in the sale and fair market value of
the shares on the date of exercise.
As of the date of this Proxy Statement, no options have been granted
under the Plan.
5
<PAGE>
COMPANY STOCK PERFORMANCE
The following graph provides a five-year comparison of the total
cumulative returns for the Company's common stock, the CRSP Index for the
Nasdaq Stock Market (U.S. companies), and the CRSP Index for air carriers
traded on the Nasdaq Stock Market. The CRSP Indexes are prepared by the
Center for Research in Security Prices of the University of Chicago. The
total cumulative return for each period is based on the investment of $100 on
March 31, 1991, assuming compounded daily returns and the reinvestment of all
dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
LEGEND
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 03/28/91 03/31/92 03/31/93 03/31/94 03/31/95 03/29/96
- ----------------------------- -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C>
Mesaba Holdings, Inc. 100.0 190.4 190.4 192.6 176.7 566.3
Nasdaq Stock Index 100.0 127.5 146.5 158.1 175.9 238.8
Air Carrier Index 100.0 132.3 219.5 205.9 220.1 402.4
</TABLE>
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership
of the Company's common stock as of June 30, 1996, by (i) each person known
to the Company to own beneficially more than 5% of its common stock, (ii)
each director and nominee for director of the Company, (iii) each executive
officer named in the Summary Compensation Table, and (iv) all directors and
executive officers as a group. Unless otherwise indicated, each person in
the table has sole voting and investment power as to the shares shown. For
the purposes of this proxy statement, beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission, and
includes any shares as to which the person has sole or shared investment
power and any shares which the person has the right to acquire within 60 days
of June 30, 1996, through the exercise of any stock option or other right.
Name and address Number Percentage
of beneficial owner of shares owned
- ------------------- --------- ----------
Northwest Aircraft Inc. (1) 3,771,409 29.6%
Minneapolis-Saint Paul
International Airport
Saint Paul, Minnesota 55411
Carl R. Pohlad 1,383,310 (2) 10.8%
Pohlad Companies
60 South Sixth Street, Suite 3800
Minneapolis, Minnesota 55402
Bryan K. Bedford 91,250 (3) *
Raymond W. Zehr, Jr. 74,000 (4) *
John S. Fredericksen 47,500 (5) *
Donald E. Benson 27,500 (6) *
Robert D. Swenson 26,500 (7) *
Richard B. Hirst 20,000 *
Christopher E. Clouser 12,386 (8) *
Robert C. Pohlad 0 --
Donald A. Washburn 0 --
All directors and executive 1,585,946 (9) 12.3%
officers as a group (10 persons)
__________________________________
* Less than 1%.
(1) An indirect subsidiary of Northwest Airlines Corporation.
(2) Includes 4,000 shares which may be purchased pursuant to a director stock
option exercisable within 60 days.
(3) Includes 81,250 shares which may be purchased pursuant to stock options
exercisable within 60 days.
(4) Consists of 70,000 shares which may be purchased pursuant to an option
issued by Carl R. Pohlad to Mr. Zehr and 4,000 shares which may be
purchased pursuant to a director stock option exercisable within 60 days.
(5) Includes 42,500 shares which may be purchased pursuant to stock options
exercisable within 60 days.
(6) Includes 3,500 shares held in trust and 4,000 shares which may be purchased
pursuant to a director stock option exercisable within 60 days.
(7) Includes 10,000 shares owned by Mr. Swenson's wife. Mr. Swenson resigned
as a director and officer effective September 7, 1995.
(8) Includes 9,636 shares held in trust in Mrs. Clouser's name.
(9) Includes shares which are owned indirectly and shares which may be issued
pursuant to stock options exercisable within 60 days. See notes 2, 3,
4, 5 and 6 above.
7
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires directors
and executive officers of the Company and persons who own more than 10% of
the Company's common stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership
of the Company's common stock. Initial reports are required to be filed
within 10 days of an individual becoming a director, executive officer or
owner of 10% or more of the Company's Common Stock. Reports of changes in
ownership are required to be filed within the first 10 days of the month
succeeding the month in which a change occurs. To the Company's knowledge,
all Section 16(a) filing requirements applicable to its officers, directors
and greater than 10% beneficial owners required through the end of the
Company's fiscal year ended March 31, 1995 were completed, with the exception
of two untimely filings by Roger T. Munt, a former director who resigned
effective September 7, 1995, with respect to transactions occurring after his
resignation. Subsequently, Mr. Munt completed the required filings.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses the annual and long-term compensation
received in each of the last three fiscal years by (i) all persons serving in
the capacity of Chief Executive Officer during the last fiscal year, (ii) by
its executive officers serving at the end of the last fiscal year whose
salary and incentive compensation exceeded $100,000 in the last fiscal year,
and (iii) by any executive officer who resigned during the last fiscal year
whose salary and incentive compensation exceeded $100,000 in the last fiscal
year.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------- -------------
Securities
Fiscal Incentive Underlying All Other
Name and Principal Position Year Salary Compensation Options/# Compensation
- --------------------------- ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Bryan K. Bedford (2) 1996 $153,900 $200,000 325,000 $ 0
President and Chief Executive Officer 1995 -- -- -- --
of the Company and Mesaba Aviation 1994 -- -- -- --
F. Darrell Richardson (3) 1996 $ 65,078 $ 35,000 75,000 $ 0
Vice President, Operations 1995 -- -- -- --
of Mesaba Aviation 1994 -- -- -- --
John S. Fredericksen 1996 $104,866 $ 25,000 0 $1,030 (4)
Vice President, Administration, 1995 92,146 50,000 0 906 (4)
General Counsel and Assistant
Secretary of the Company and 1994 89,362 42,000 17,500 453
Mesaba Aviation
Robert D. Swenson (5) 1996 $100,026 $ 0 0 $ 0
1995 170,245 325,000 0 2,052 (4)
1994 170,000 120,000 300,000 1,707
</TABLE>
____________________
(1) Incentive compensation for services rendered has been included as
compensation for the year earned even though a portion of
such compensation was actually paid in the following year. Incentive
compensation is based upon the achievement by the Company of certain
profitability and operational goals as described under "Compensation
Committee Report on Executive Compensation."
(2) Mr. Bedford joined Mesaba Aviation as an executive officer in August 1995
and became an executive officer of the Company in September 1995.
8
<PAGE>
(3) Mr. Richardson joined Mesaba Aviation in September 1995.
(4) Represents matching contributions made by the Company on behalf of such
executive officers pursuant to the Company's 401(k) Retirement Savings
Plan.
(5) Mr. Swenson, formerly President and Chief Executive Officer of the Company
and Mesaba Aviation, resigned in September 1995.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, as to each executive officer named in the
Summary Compensation Table, certain information with respect to stock options
granted during the fiscal year ended March 31, 1996.
<TABLE><CAPTION>
Individual Grants
--------------------------------------------------------- Potential Realizable Value
Number of at Assumed Annual Rates
Securities Percent of Total of Stock Price Appreciation
Underlying Options Granted for Option Term(2)
Options to Employees Exercise Expiration ---------------------------
Name Granted(1) in Fiscal Year Price ($/sh) Date 5% 10%
- --------------------- ---------- ---------------- ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Bryan K. Bedford 325,000 73.0% $7.75 6/19/01 $856,616 $1,943,369
F. Darrell Richardson 75,000 17.0% 7.125 10/25/01 181,739 412,303
John S. Fredericksen 0 -- -- -- -- --
Robert D. Swenson 0 -- -- -- -- --
</TABLE>
____________________
(1) Represents options granted under the Company's 1986 or 1994 Stock Option
Plan.
(2) These amounts are based on the assumed rates of appreciation as suggested
by the rules of the Securities and Exchange Commission and do not represent
a prediction by the Company of future stock prices. Actual gains, if any,
on stock option exercises are dependent upon the future performance of the
Company's common stock. The closing price per share of the Company's
common stock on July 12, 1996, as quoted on the Nasdaq National Market, was
$10-7/8.
9
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table set forth, as to each executive officer named in the
Summary Compensation Table, certain information with respect to the exercise
of stock options during the fiscal year ended March 31, 1996 and the value of
unexercised stock options held at the end of such fiscal year.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired Value March 31, 1996 March 31, 1996(2)
Name on Exercise Realized(1)(2) Exercisable Unexercisable Exercisable Unexercisable
--------------------- ------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bryan K. Bedford -- -- -- 325,000 -- $1,137,500
F. Darrell Richardson -- -- -- 75,000 -- 309,375
John S. Fredericksen 15,000 $ 79,625 52,500 -- $249,375 --
Robert D. Swenson 150,000 703,688 -- -- -- --
</TABLE>
____________________
(1) The exercise price of options granted under the Company's option plans may
be paid in cash or in shares of the Company's common stock valued at fair
market value on the date of exercise. In addition, the exercise price of
options granted under the plans may be paid pursuant to a cashless exercise
procedure under which the optionee provides irrevocable instructions to a
brokerage firm to sell the purchased shares and to remit to the Company,
out of the sale proceeds, an amount equal to the exercise price plus all
applicable withholding taxes.
(2) Value is calculated as the excess of the market value of the common stock
at the date of exercise or March 31, 1996, as the case may be, over the
exercise price. The closing price per share of the Company's common stock
on March 31, 1996, as quoted on the Nasdaq National Market, was $11-1/4.
OPTION REPRICING
The following table sets forth information with respect to the repricing
of any options held by any executive officer during the last 10 completed
fiscal years. In August 1995, the exercise price of all outstanding options
was reduced by $2.00 per share, to compensate for a reduction of
approximately $2.00 per share in the book value of the Company's common stock
resulting from the spinoff of Airways Corporation. No other changes were
made to the options. See "Compensation Committee Report on Executive
Compensation and Repricing of Options" below.
<TABLE>
<CAPTION>
Length of
Number of original
securities Market price Exercise option term
underlying of stock at price at remaining at
options time of time of New date of
repriced or repricing or repricing or exercise repricing or
Name Date amended amendment amendment price amendment
------------------- ------- ----------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bryan K. Bedford 8/29/95 325,000 $12.50* $9.75 $7.75 6/19/01
John S. Fredericksen 8/29/95 35,000 12.50* 8.00 6.00 7/27/98
8/29/95 12,000 12.50* 9.50 7.50 6/23/99
8/29/95 5,500 12.50* 9.50 7.50 8/05/99
</TABLE>
- -------------
* On September 8, 1995, the first trading day after the spinoff of Airways
Corporation, the closing price of the Company's common stock was $6.25.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors was an
officer, former officer or employee of the Company or its subsidiary during
the fiscal year ended March 31, 1996. No executive officer of the Company
served as a member of the compensation committee or board of directors of
another
10
<PAGE>
entity, one of whose executive officers served on the Company's Compensation
Committee or Board of Directors during the fiscal year ended March 31, 1996.
CERTAIN TRANSACTIONS
Northwest Aircraft Inc. ("Northwest Aircraft"), an indirect subsidiary
of Northwest Airlines Corporation, is the beneficial owner of more than 5% of
the Company's outstanding common stock. See "Security Ownership of Certain
Beneficial Owners and Management." Mesaba Aviation, the Company's wholly
owned subsidiary, and Northwest Airlines, Inc. ("Northwest"), an indirect
subsidiary of Northwest Airlines Corporation, are parties to an Airline
Services Agreement, dated as of September 15, 1988, which has been amended as
of April 1, 1992 and January 1, 1996 (the "Airlink Agreement"). As amended,
the Airlink Agreement provides exclusive rights to designated service areas
and support in acquiring new aircraft and equipment. Under the Airlink
Agreement, substantially all of Mesaba Aviation's revenues are collected by
Northwest and remitted to Mesaba Aviation semi-monthly, based on traffic
reports. Mesaba Aviation's flights appear in Northwest's timetables and
Mesaba Aviation receives ticketing and certain check-in, baggage and
freight-handling services from Northwest at certain airports. Mesaba
Aviation also benefits from its relationship with Northwest through
advertising and marketing programs. In addition, Mesaba Aviation receives
its computerized reservations services from Northwest. The Airlink Agreement
extends through March 31, 1997, and continues indefinitely thereafter,
subject to termination by either party on eight months' notice given at any
time after July 31, 1996.
Following extensive negotiations, the Company, Mesaba Aviation and
Northwest entered into a preliminary agreement dated March 8, 1995 to
accomplish the separation from the Company of the business operations
unrelated and unnecessary to Mesaba Aviation's services under the Airlink
Agreement. On May 18, 1995, the Company, Mesaba Aviation and Northwest
entered into a definitive agreement (the "Agreement") superseding the
preliminary agreement.
At a special meeting on August 29, 1995, the Company's shareholders
ratified the distribution of all of the outstanding shares of Airways
Corporation to the Company's shareholders, other than Northwest (the
"Distribution"). Airways Corporation, then a wholly owned subsidiary of the
Company, owned and operated a low-fare, non-stop airline service from its
base in Orlando, Florida and also operated a fixed base operation and
aircraft parts business in Grand Rapids, Minnesota. The Distribution was
made on September 7, 1995. As a result of the Distribution, the Company no
longer has any equity interest in Airways Corporation.
The Agreement requires Northwest and Mesaba Aviation to enter into good
faith negotiations to amend the Airlink Agreement to provide for a term of
not less than 10 years. Prior to the Distribution, the Company and Mesaba
Aviation made capital contributions to Airways consisting of cash, tax
sharing payments, and other assets having a total book value of approximately
$20.25 million. In addition, the Company made capital contributions to
Airways' wholly owned subsidiary, AirTran Airways, totaling $8.75 million
during fiscal 1995. The Agreement also provided for the designation by
Northwest of three members of the Boards of Directors of the Company and
Mesaba Aviation and for the resignation from the Company and Mesaba Aviation
of Robert D. Swenson, the Company's Chairman, President and Chief Executive
Officer, and John S. Olbrych, the Company's Senior Vice President, Finance,
prior to the Distribution. So long as the income guarantee described below
remains in effect, the person elected to replace Robert D. Swenson as Chief
Executive Officer of Mesaba Aviation must be reasonably acceptable to
Northwest. See "Election of Directors."
The Agreement required Northwest, prior to the Distribution, to exercise
stock purchase warrants to purchase 1,499,078 shares of Company Common Stock
for an aggregate cash price of $4,477,563.43. After the exercise of the
warrants and prior to the Distribution record date, Northwest owned 1,719,134
shares of the Company's common stock. In lieu of receiving its pro rata
distribution of shares of Airways Corporation stock in the Distribution,
Northwest was issued 2,052,275 additional shares of the Company's common
stock in a private placement transaction.
11
<PAGE>
The Agreement gives Northwest the right to determine, in its discretion,
all schedules and aircraft routing for Mesaba Aviation flights departing on
and after the Distribution. In consideration for allowing Northwest control
over scheduling and routing, Northwest agreed to make quarterly payments to
Mesaba Aviation which, together with payments under the Airlink Agreement,
would guarantee that Mesaba Aviation's pre-tax income would not be less than
$7.6 million for the last three quarters of the fiscal year ending March 31,
1996 and not less than $10 million for the fiscal year ending March 31, 1997.
The guarantee provides that the Company's quarterly pre-tax income should be
no less than the following amounts:
Minimum
Quarter Ending Pre-Tax Income
-------------- --------------
September 30, 1995 $4,221,000
December 31, 1995 2,219,000
March 31, 1996 1,176,000
June 30, 1996 2,384,000
September 30, 1996 4,221,000
December 31, 1996 2,219,000
March 31, 1997 1,176,000
Quarterly pre-tax income amounts noted above are subject to adjustment,
provided the minimum pre-tax income guarantee of $7.6 million for fiscal year
end 1996 and $10.0 million for fiscal year end 1997 are met. To the date of
this proxy statement, Northwest has not been required to make any payments
under the guarantee.
The Agreement also resolved certain cost disputes between Northwest and
Mesaba Aviation relating to the sharing of Mesaba Aviation cost increases and
payment of holding company costs, resulting in net cash payments by Northwest
to Mesaba Aviation of $443,595.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
AND REPRICING OF OPTIONS
The Compensation Committee consists of three independent, non-employee
directors appointed by the Board of Directors. The current members of the
Compensation Committee were elected by the Board of Directors in September
1995, and consequently did not participate in decisions pertaining to
compensation made prior to their joining the Board. The Committee has been
authorized by the Board of Directors to set the annual salary and incentive
compensation of each of the executive officers of the Company, to grant stock
options to officers and key employees under the Company's option plans and to
review and approve overall compensation levels and benefit plans of the
Company. The full Board of Directors generally does not review the
Compensation Committee's decisions relating to executive compensation except
in the event that such decisions require the adoption of certain documents or
specific plans.
COMPENSATION PHILOSOPHY
The Company's executive compensation policies, as endorsed by the
Compensation Committee, are designed to:
- Attract, motivate and retain executives whom the Committee believes
are critical to the long-term success of the Company;
- Reward individual contributions to the Company's accomplishment of
certain profit and operational goals;
12
<PAGE>
- Promote a pay-for-performance philosophy by placing a significant
portion of total compensation "at risk" while providing a level of
compensation opportunity that is competitive with companies of similar
profitability, complexity and size; and
- Provide an opportunity to own the Company's common stock so that
executives will have common interests with the Company's shareholders.
The Compensation Committee believes that each of these factors is
important to the financial performance of the Company. In implementing its
executive compensation program, the Company and the Committee seek to link
executive compensation directly to earnings performance and, consequently, to
increases in shareholder value.
The components of the Company's current executive compensation program
are comprised of base salary, cash incentive compensation and long-term
incentive awards in the form of stock option grants.
BASE SALARY AND CASH INCENTIVE COMPENSATION
The Compensation Committee establishes the base salary and incentive
compensation of the Chief Executive Officer and approves the salaries and
incentive compensation of the other executive officers as recommended by the
Chief Executive Officer. Base salary levels, including that of the Chief
Executive Officer, are reviewed annually by the Committee and adjusted based
upon competitive market factors, the level of technical skill required, and
the officer's ability to contribute to the overall success of the Company's
mission. Incentive compensation is based on the individual's contribution to
the Company's annual performance, as measured agaisnt goals to be determined
at the beginning of each fiscal year and approved by the Board. Incentive
compensation generally will not exceed 50% of an individual's base salary,
although senior executive officers may on occasion receive a larger portion
of their total compensation through incentive compensation than from salary,
thereby placing a greater percentage of their compensation at risk while more
closely aligning their interests with the interests of the Company's
shareholders. The Chairman, with the approval of the Compensation Committee,
may authorize special incentive payments.
In making its compensation decisions for fiscal 1996, the Compensation
Committee has been advised, and believes, that the predecessor committee
considered individual job performance and the financial performance of the
Company; did not use any predetermined formula or assign any particular
weight to any specific factors in setting compensation; and in conjunction
with the Board of Directors developed severance arrangements for those
executives who resigned as a result of the agreement with Northwest Airlines,
Inc. and the consequent spinoff of the Company's former subsidiary, Airways
Corporation. See "Certain Transactions."
The fiscal 1996 base salary of Bryan K. Bedford, who became the Company's
Chief Executive Officer in September 1995, was determined by the predecessor
committee principally on the basis of market factors. Mr. Bedford's fiscal
1996 cash incentive compensation was $125,000, plus a special incentive
payment of $75,000 to reflect the extraordinary results attained since August
1995. The $75,000 special incentive payment must be returned to the Company
if Mr. Bedford resigns during fiscal 1997.
LONG-TERM INCENTIVE COMPENSATION
The Company's stock option program is intended to strengthen the
Company's ability to attract and retain key employees and to furnish
additional incentives to such persons by encouraging them to become owners of
common stock. The Committee believes that stock option grants allow
executives and key employees to participate in the success of the Company and
link their interests directly with those of the shareholders. If there is no
price appreciation in the Company's common stock, option holders receive no
benefit, because stock options are granted with an exercise price equal to
the fair market value of the common stock on the day of grant. The number of
stock options granted to executives, including the Chief Executive Officer,
is based primarily on base salary level, the number of options previously
granted, individual performance and the Company's financial performance
during the year. The two executive officers named in the Summary
Compensation Table who received options in fiscal 1996, were granted options
principally as a means of inducing them to join the Company and to secure
their commitment to the future success of the Company. The named officer who
resigned during the year was not granted options in fiscal 1996.
13
<PAGE>
REPORT ON REPRICING OF OPTIONS
In August 1995, in connection with the spinoff of Airways Corporation,
the Board of Directors reduced the exercise price of each outstanding option
to purchase the Company's common stock by $2.00 per share. No other changes
were made to the options. The purpose of the adjustment was to compensate
for a reduction of approximately $2.00 per share in the book value of the
common stock resulting from the spinoff of Airways Corporation. The
repricing applied equally to all outstanding stock options, whether held by
executive officers or others. Of the executive officers named in the Summary
Compensation Table, only Messrs. Bedford and Fredericksen held options on the
effective date and benefitted from the repricing.
Respectfully submitted,
THE COMPENSATION COMMITTEE
Donald E. Benson
Christopher E. Clouser
Raymond W. Zehr, Jr.
RATIFICATION OF
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as independent
auditors for the Company for the year ending March 31, 1997. A proposal to
ratify that appointment will be presented to shareholders at the Annual
Meeting of Shareholders. Ratification of the appointment requires the
affirmative vote of the holders of a majority of the shares of common stock
represented at the meeting. If the shareholders do not ratify the selection
of Arthur Andersen LLP, another firm of independent public accountants will
be selected by the Board of Directors. Representatives of Arthur Andersen
LLP will be present at the meeting, will have an opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions from shareholders in attendance.
VOTING OF PROXIES AND EXPENSES
The Board of Directors recommends that an affirmative vote be cast in
favor of each of the proposals listed on the proxy card.
The Board of Directors knows of no other matters that may be brought
before the meeting which require submission to a vote of the shareholders.
If any other matters are properly brought before the meeting, however, the
persons named in the enclosed proxy or their substitutes will vote in
accordance with their best judgment on such matters.
Expenses incurred in connection with the solicitation of proxies will be
paid by the Company. The proxies are being solicited principally by mail.
In addition, directors, officers and regular employees of the Company may
solicit proxies personally or by telephone, for which they will receive no
consideration other than their regular compensation. The Company will also
request brokerage houses, nominees, custodians and fiduciaries to forward
soliciting material to the beneficial owners of common stock of the Company
and will reimburse such persons for their expenses so incurred.
14
<PAGE>
SHAREHOLDER PROPOSALS
Shareholders wishing to present proposals for action by the shareholders
at the next annual meeting must present such proposals at the principal
offices of the Company not later than March 31, 1997. Due to the complexity
of the respective rights of the shareholders and the Company in connection
with inclusion of shareholder proposals in issuers' proxy materials, any
shareholder desiring to propose such an action is advised to consult with his
or her legal counsel with respect to such rights. It is suggested that any
such proposals be submitted by certified mail, return receipt requested.
Dated: July 22, 1996
15
<PAGE>
MESABA HOLDINGS, INC.
7501 26TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55450
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting and the
Proxy Statement dated July 22, 1996, hereby appoints Bryan K. Bedford and John
S. Fredericksen as proxies (each with the power to act alone and with the power
of substitution and revocation), to represent the undersigned and to vote, as
designated below, all common shares of Mesaba Holdings, Inc. held of record by
the undersigned on July 12, 1996, at the annual meeting of shareholders to be
held on Wednesday, August 28, 1996, at the Radisson Plaza Hotel, 35 South 7th
Street, Minneapolis, Minnesota, at 3:30 p.m., and at any adjournments thereof.
1. PROPOSAL TO ELECT THREE CLASS TWO DIRECTORS, EACH FOR A THREE-YEAR TERM.
<TABLE>
<S> <C> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below) below
</TABLE>
Donald E. Benson Richard B. Hirst Carl R. Pohlad
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- --------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE COMPANY'S 1996 DIRECTOR STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT AUDITORS FOR FISCAL YEAR
ENDING MARCH 31, 1997.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON
THE PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ELECTION OF EACH OF THE NOMINEES FOR CLASS TWO DIRECTOR LISTED
IN PROPOSAL 1, FOR PROPOSAL 2, AND FOR PROPOSAL 3.
Please sign exactly as name appears on this card. When shares are held by
joint tenants, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
Dated: ____________________________
___________________________________
___________________________________
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
MESABA HOLDINGS, INC.
1996 DIRECTOR STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of this 1996 Director Stock
Option Plan, adopted by the Board on May 22, 1996, subject to the approval of
the Company's shareholders at the next annual meeting, is to attract the best
available individuals to serve as Outside Directors of the Company and to
encourage their continued service on the Board.
The Company intends that the options granted hereunder shall not
constitute incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986. The Plan is intended to comply with the
requirements of Rule 16b-3 under the Exchange Act.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "COMMON STOCK" shall mean the Common Stock, $.01 par value per
share, of the Company.
(c) "COMPANY" shall mean Mesaba Holdings, Inc., a Minnesota
corporation.
(d) "COMMITTEE" shall mean a committee of the Board appointed by the
Board to administer the Plan.
(e) "DIRECTOR" shall mean a member of the Board.
(f) "EMPLOYEE" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of fees to a Director shall not be sufficient in and
of itself to constitute "employment" by the Company.
(g) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "OPTION" shall mean a stock option granted pursuant to the Plan.
(i) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(j) "OPTIONEE" shall mean an Outside Director who receives an option.
(k) "OUTSIDE DIRECTOR" shall mean a Director who is not an Employee.
<PAGE>
(l) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Internal Revenue
Code of 1986, as amended.
(m) "PLAN" shall mean this 1996 Director Stock Option Plan.
(n) "SHARE" shall mean a share of Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(o) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986, as amended.
(p) "TOTAL DISABILITY" shall mean the permanent inability of a
person, as a result of accident or sickness, to perform his or her duties
as a Director.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 200,000 shares of Common Stock. The shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable for any reason without
having been exercised in full, the unexercised Shares which were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. If Shares which were acquired upon exercise of an Option are
subsequently repurchased by the Company, such Shares shall not become available
for future grant under the Plan.
4. AUTOMATIC GRANT OF OPTIONS. All grants of Options hereunder shall be
automatic and non-discretionary and shall be made strictly in accordance with
the following provisions:
(a) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to
be covered by Options granted to Outside Directors.
(b) Each Outside Director, including persons who are Outside
Directors on the date of adoption of the Plan, shall be automatically
granted an option to purchase 6,000 Shares (the "First Option") upon the
later of (i) November 6, 1996 or (ii) the date on which such person first
becomes an Outside Director, whether through election by the shareholders
of the Company or appointment by the Board to fill a vacancy.
(c) After the First Option has been granted to an Outside Director,
such Outside Director shall thereafter be automatically granted an Option
to purchase 6,000 shares on November 6 of the calendar year after the year
in which the First Option was granted and on each successive November 6
thereafter to and including
2
<PAGE>
November 6, 2001 or until the earlier termination of the Plan. If
November 6 falls on a weekend or holiday, the grant date shall be the
next business day.
(d) Notwithstanding the provisions of Sections 4(b) and (c) hereof,
in the event that a grant would cause the number of Shares subject to
outstanding Options to Outside Directors plus Shares previously purchased
upon exercise of Options by Outside Directors to exceed 200,000 Shares,
then each such automatic grant shall be for that number of Shares
determined by dividing the total number of Shares remaining available for
grant by the number of Outside Directors on the automatic grant date. Any
further grants shall then be deferred until such time, if any, as
additional Shares become available for grant under the Plan through action
of the shareholders to increase the number of Shares which may be issued
under the Plan or through cancellation or expiration of Options previously
granted hereunder.
5. OPTION TERMS AND CONDITIONS. The terms and conditions of an Option
granted hereunder shall be as follows:
(a) the term of each Option shall be six (6) years, subject to
Sections 12 and 13 hereof.
(b) the Option shall become exercisable in full beginning on the
first anniversary of the grant of the Option.
(c) the Option shall be exercisable only while the Outside Director
serves as a Director of the Company or, in the event of death or Total
Disability, pursuant to Section 10(c) hereof.
(d) the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the Option, as determined in
accordance with Section 9(a) hereof.
(e) the effectiveness of any options granted hereunder is conditioned
upon shareholder approval of the Plan in accordance with Rule 16b-3 under
the Exchange Act.
6. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATION. Except as otherwise required herein, the Plan
shall be administered by the Board or a Committee.
(b) POWERS OF THE BOARD OR COMMITTEE. Subject to the provisions and
restrictions of the Plan, the Board or Committee shall have the authority,
in its discretion: (i) to determine, upon review of relevant information
and in accordance with Section 9(a) hereof, the fair market value of the
Common Stock; (ii) to interpret the Plan; (iii) to prescribe, amend and
rescind rules and regulations relating to the Plan; (iv) to authorize any
person to execute on behalf of the Company any
3
<PAGE>
instrument required to effectuate the grant of an Option hereunder; and
(v) to make all other determinations deemed necessary or advisable for
the administration of the Plan.
(c) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board or Committee shall be final and binding on all
Optionees and any other holders of any Options granted under the Plan.
(d) SUSPENSION OR TERMINATION OF OPTION. If the Board or Committee
reasonably believes that an Optionee has committed an act of misconduct, it
may suspend the Optionee's right to exercise any Option pending a
determination by the Board or Committee (excluding the Outside Director
accused of such misconduct). If the Board or Committee (excluding the
Outside Director accused of such misconduct) determines that an Optionee
has committed an act of embezzlement, fraud, dishonesty, nonpayment of an
obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of the Company's rules resulting in loss, damage or injury to the
Company, or if an Optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct
constituting unfair competition with respect to the Company, or induces any
party to breach a contract with the Company, neither the Optionee nor the
Optionee's estate shall be entitled to exercise any Option whatsoever. In
making such determination, the Board or Committee (excluding the Outside
Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on the Optionee's
behalf at a hearing before the Board or Committee.
(e) DATE OF GRANT OF OPTIONS. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4
hereof, notwithstanding the fact that an Optionee may not have entered into
an option agreement with the Company on such date. Notice of the grant of
an Option shall be given to the Optionee within a reasonable time after the
date of such grant.
7. ELIGIBILITY. Options may be granted only to Outside Directors. All
options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof. The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which a Director or
the Company may have to terminate such Director's directorship at any time.
8. TERM OF PLAN. The effective date of this Plan is May 22, 1996, the
date upon which it was adopted by the Board. The Plan shall continue in effect
to and including November 6, 2001 unless terminated sooner under Section 13
hereof.
9. FAIR MARKET VALUE AND FORM OF CONSIDERATION.
(a) FAIR MARKET VALUE. The fair market value per share shall be
determined as follows:
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(i) if the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange,
the fair market value on any given day shall be the closing sale price
for the Common Stock on such day, as reported in the Wall Street
Journal or other newspaper of general circulation;
(ii) if the Common Stock is not listed on a national securities
exchange, the fair market value on any given day shall be the closing
sale price for the Common Stock on the Nasdaq National Market on such
day, as reported in the Wall Street Journal or other newspaper of
general circulation;
(iii) if the Common Stock is not listed on a national securities
exchange, is not admitted to unlisted trading privileges on any such
exchange, and is not included in the Nasdaq National Market, the fair
market value on any given day shall be the average of the closing
representative bid and asked prices on such day, as reported on the
Nasdaq System, and if not reported on such system, then as reported by
the National Quotation Bureau, Inc. or such other publicly available
compilation of the bid and asked prices of the Common Stock in any
over-the-counter market on which the Common Stock is traded; or
(iv) if there exists no public trading market for the Common
Stock, the fair market value on any given day shall be an amount
determined by the Board or Committee in such manner as it may
reasonably determine in its discretion, provided that such amount
shall not be less than the book value per share as reasonably
determined by the Board or Committee as of the date of determination
nor less than the par value of the Stock.
(b) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of
cash or such other form of consideration as the Board or Committee may
determine, in its sole discretion, to be appropriate for payment, including
but not limited to other shares of Common Stock having a fair market value
on the date of surrender equal to the aggregate exercise price of the
Shares as to which the Option is exercised, or any combination of such
methods of payment.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 5 hereof. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment may consist of any consideration and method
of payment allowable under
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Section 9(b) hereof. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for
a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 12 hereof.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option was exercised.
(b) TERMINATION OF STATUS AS A DIRECTOR. If an Optionee ceases to
serve as a Director for any reason other than death or Total Disability,
all rights to exercise his or her Option shall terminate at the date of
such termination of service as a Director, unless such termination is
waived by the Board or Committee in its sole discretion.
(c) DEATH OR TOTAL DISABILITY OF OPTIONEE.
(i) If an Optionee dies while serving as a Director or within
three months after termination of his or her service as a Director
because of his or her Total Disability, his or her Option may be
exercised, to the extent that the Optionee shall have been entitled to
do so on the date of his or her death or such termination, by the
person or persons to whom the Optionee's right under the Option pass
by will or applicable law, or if no such person has such right, by his
or her executors or administrators, at any time or from time to time,
but not later than the expiration of the Option or two years after the
Optionee's death, whichever date is earlier.
(ii) If an Optionee's service as a Director terminates because of
his or her Total Disability and the Optionee has not died within three
months following the date of such termination, the Optionee may
exercise his or her Option to the extent that he or she shall have
been entitled to do so at the date of such termination, at any time or
from time to time, but not later than the expiration of the Option or
one year after termination of service as a Director whichever date is
earlier.
11. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
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12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number
of shares of Common Stock covered by each outstanding Option, the number of
shares to be granted pursuant to automatic grants, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but as
to which Options have not yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, or
options or rights to purchase shares of stock of any class shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, each Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may,
in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Board and give each Optionee
the right to exercise his or her Option as to all or any part of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, that the
Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise
be exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Board shall notify the Optionee that the Option shall be fully exercisable
for a period of ten (10) days from the date of such notice, and the Option
will terminate upon the expiration of such period.
13. AMENDMENT, TERMINATION AND APPROVAL OF THE PLAN. The Board may at
any time amend or terminate the Plan, except that the Board shall not amend
the Plan more than once every six (6) months with respect to the provisions
of the Plan relating to the amount, price, and timing of Option grants, other
than to comply with changes in the Internal Revenue Code of 1986, the
Employee Retirement Income Security Act of 1974, as amended, or the
regulations thereunder. No Option may be granted after the Plan is
terminated. The foregoing provisions of this Section notwithstanding, no
amendment or termination shall, without the consent of the holder of an
Option, alter or impair any rights or obligations under any Option
theretofore granted under the Plan except as is permitted pursuant to Section
12 of the Plan.
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If any amendment to the Plan requires approval by the shareholders of
the Company for continued applicability of Rule 16b-3 under the Exchange Act, or
for initial or continued listing of the Common Stock or other securities of the
Company upon Nasdaq or any stock exchange, then such amendment shall be approved
by the holders of a majority of the Company's outstanding capital stock entitled
to vote.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of the NASD or any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any
relevant provisions of law. Such Shares may also be issued with appropriate
legends on stock certificates representing such Shares, and the Company may
place stop transfer orders with respect to such Shares.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in substantially the form attached hereto or in such other form as
the Board or Committee shall approve.
17. INFORMATION TO OPTIONEES. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company.
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