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
MIDWEST EXPRESS 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
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:
4) Date Filed:
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[Logo]
MIDWEST EXPRESS HOLDINGS, INC.
6744 South Howell Avenue
Oak Creek, Wisconsin 53154
(414) 570-4000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 1997
To the Shareholders of
MIDWEST EXPRESS HOLDINGS, INC.:
Notice is hereby given that the Annual Meeting of the Shareholders
(the "Meeting") of Midwest Express Holdings, Inc. (the "Company") will be
held at The Grand Milwaukee Hotel, 4747 South Howell Avenue, Milwaukee,
Wisconsin, on Wednesday, April 23, 1997, at 10:00 a.m. local time, for the
following purposes:
1. To elect three directors to serve for a three-year term to
expire at the 2000 Annual Meeting;
2. To approve amendments to the Midwest Express Holdings, Inc.
1995 Stock Option Plan; and
3. To transact such other business as may properly come before
the Meeting or any adjournments or postponements thereof.
Holders of record of Common Stock of the Company at the close of
business on March 3, 1997, will be entitled to notice of and to vote at
the Meeting and any adjournments or postponements thereof.
A proxy form is enclosed. Please complete it and return it as soon
as possible in the postage paid return envelope provided, even if you plan
to attend the Meeting. You retain the right to revoke the proxy at any
time before it is actually voted by notice in writing to the Secretary of
the Company.
By Order of the Board of Directors,
Timothy E. Hoeksema
Chairman of the Board, President
and Chief Executive Officer
Milwaukee, Wisconsin
March 18, 1997
<PAGE>
MIDWEST EXPRESS HOLDINGS, INC.
6744 South Howell Avenue
Oak Creek, Wisconsin 53154
Proxy Statement for Annual Meeting of Shareholders
To Be Held on April 23, 1997
This Proxy Statement is furnished beginning on or about March 18,
1997, in connection with the solicitation of proxies by the Board of
Directors of Midwest Express Holdings, Inc. (the "Company") to be used at
the Annual Meeting of Shareholders of the Company (the "Meeting"), which
will be held at 10:00 a.m., Wednesday, April 23, 1997, at The Grand
Milwaukee Hotel, 4747 South Howell Avenue, Milwaukee, Wisconsin, and at
any adjournments or postponements thereof.
The proxy may be revoked at any time before it is exercised, and any
shareholder attending the Meeting may vote in person whether or not the
shareholder has previously filed a proxy. Presence at the Meeting by a
shareholder who has signed a proxy does not itself revoke the proxy. Any
shareholder giving a proxy may revoke it at any time before it is
exercised by delivering notice thereof to the Secretary of the Company in
writing. Unless so revoked, the shares represented by such proxies will
be voted as directed by the shareholders at the Meeting and any
adjournments or postponements thereof.
The record date for shareholders entitled to notice of and to vote at
the Meeting is the close of business on March 3, 1997. As of the record
date, there were 6,330,863 shares of Common Stock of the Company ("Common
Stock") outstanding. Each share of Common Stock is entitled to one vote
on each matter to come before the Meeting.
ELECTION OF DIRECTORS
The Board of Directors currently consists of 10 members divided into
three classes. One class is elected each year to serve for a term of
three years. At the Meeting, holders of Common Stock will be entitled to
elect three directors. Each of the directors in the other classes will
continue to serve in accordance with their previous elections. Directors
will be elected by a plurality of votes cast at the Meeting (assuming a
quorum is present). For this purpose, "plurality" means that the
individuals receiving the largest number of votes are elected as
directors, up to the maximum number of directors to be chosen at the
election. Consequently, any shares not voted at the Meeting, whether due
to abstentions, broker nonvotes or otherwise, will have no impact on the
election of directors.
Proxies received representing Common Stock will, unless otherwise
directed, be voted in favor of the election of each of the three persons
named below to serve as directors until the 2000 Annual Meeting of
Shareholders or until their respective successors have qualified and been
elected. Pursuant to the Company's By-laws, written notice of other
qualifying nominations by shareholders for election to the Board of
Directors must have been received by the Secretary by February 3, 1997.
As no notice of any such other nominations was received, no other
nominations for election to the Board of Directors may be made by
shareholders at the Meeting.
Listed below are the names of the nominees for election to the Board
of Directors at the Meeting for a three-year term and of each director of
the Company whose term will continue after the Meeting, together with
certain additional information concerning each such nominee and director
as of March 3, 1997. As used below, the "Company" refers to Midwest
Express Holdings, Inc. and, for the period prior to the formation of
Midwest Express Holdings, Inc. in July 1995, to Midwest Express Airlines,
Inc. ("Midwest Express"), which is currently a wholly owned subsidiary of
Midwest Express Holdings, Inc. The three nominees are currently directors
of the Company. If any of the nominees should be unable or unwilling to
serve, the proxies, pursuant to the authority granted to them by the Board
of Directors, will have discretionary authority to select and vote for
substitute nominees. The Board of Directors has no reason to believe that
any of the nominees will be unable or unwilling to serve.
NOMINEES FOR ELECTION AS DIRECTORS
Terms Expiring at 2000 Annual Meeting
Business Experience During Last Director
Name Age Five Years Since
Oscar C. Boldt 72 Chairman of the Board of The 1983
Boldt Group, Inc. (a holding
company with subsidiaries in
general contracting, development
and related businesses) since
1984; Chief Executive Officer of
The Boldt Group, Inc. from 1984
to 1996. Director of Marshall &
Ilsley Corporation.
Brenda F. Skelton 41 Senior Vice President - Marketing 1995
and Customer Service of the
Company since March 1995; Vice
President of Marketing from
February 1993 to March 1995; and
Director of Marketing Programs
from April 1987 to February 1993.
Richard H. Sonnentag 56 Managing partner of Cobham Group 1997
LP (an investment partnership)
since December 1994. Private
investor since May 1990. Served
as a director of Midwest Express
from 1983 to 1990.
THE BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS
AND URGES EACH SHAREHOLDER TO VOTE "FOR" ALL NOMINEES.
DIRECTORS CONTINUING IN OFFICE
Terms Expiring at 1998 Annual Meeting
Business Experience During Director
Name Age Last Five Years Since
John F. Bergstrom 50 President and Chief 1993
Executive Officer of
Bergstrom Corporation (owner
and operator of hotels and
automobile sales and leasing
business) since 1974.
Director of Wisconsin Energy
Corporation, Universal Foods
Corporation, The First
National Bank-Fox Valley and
Kimberly-Clark Corporation.
Frederick P. Stratton, Jr. 57 Chairman and Chief Executive 1987
Officer of Briggs & Stratton
Corporation (manufacturer of
air-cooled engines) since
1986. Director of Briggs &
Stratton Corporation, Banc
One Corporation, Weyco
Group, Inc. and Wisconsin
Energy Corporation.
John W. Weekly 65 Chief Executive Officer of 1995
Mutual of Omaha Insurance
Company (insurance company)
since February 1996; Vice
Chairman since February
1995; and President since
February 1990. Vice
Chairman of United of Omaha
Life Insurance Company
(insurance company) since
February 1995; and President
since February 1990.
Terms Expiring at 1999 Annual Meeting
Business Experience During Director
Name Age Last Five Years Since
Timothy E. Hoeksema 50 Chairman of the Board, 1983
President and Chief Executive
Officer of the Company since
1983. Director of The Marcus
Corporation and M&I Marshall &
Ilsley Bank.
Albert J. DiUlio, S.J. 54 Visiting Professor at the 1993
Stanford Graduate School of
Business since September 1996;
President of Marquette
University from 1990 to 1996;
former President of Xavier
University. Director of Baird
Capital Development Fund, Inc.
and Baird Blue Chip Fund, Inc.
James G. Grosklaus 61 Retired; Executive Vice 1988
President of Kimberly-Clark
Corporation (manufacturer of
paper and consumer products)
from 1986 to 1996.
David H. Treitel 42 Chairman and Chief Executive 1984
Officer of SH&E, Inc.
(aviation consulting) since
January 1996; President of
SH&E, Inc. since September
1993; and Executive Vice
President from 1989 to 1993.
Committees, Meetings and Attendance
The Board of Directors of the Company has four standing committees: an
Audit Committee, a Compensation Committee, a Board Affairs and Nominating
Committee and an Executive Committee.
The Audit Committee, which met three times in 1996, consists of Messrs.
Boldt (Chairman) and Sonnentag and Father DiUlio. The Audit Committee
recommends to the Board of Directors independent auditors for selection by
the Company, discusses with the independent auditors and internal auditors
the scope and results of audits, and approves and reviews any nonaudit
services performed by the Company's independent auditing firm.
The Compensation Committee, which met twice in 1996, consists of Messrs.
Bergstrom (Chairman), Stratton and Weekly. The Compensation Committee
establishes all forms of compensation for the officers of the Company,
administers the Company's benefit plans, reviews and recommends officer
selection, responds to Securities and Exchange Commission requirements on
compensation committee reports and performs other functions relating to
officer compensation.
The Board Affairs and Nominating Committee, which met twice in 1996,
consists of Messrs. Treitel (Chairman), Grosklaus and Stratton. The Board
Affairs and Nominating Committee recommends nominees for the Company's
Board of Directors and reviews qualifications, compensation and benefits
for the Board of Directors and other matters relating to the Board. This
committee will consider nominees for director recommended by the
shareholders, but has no established procedures that must be followed.
The Company's By-laws require that shareholders give advance notice and
furnish certain information to the Company in order to nominate a person
for election as a director.
The Executive Committee, which met once in 1996, consists of Messrs.
Hoeksema (Chairman), Bergstrom and Stratton. The Executive Committee
exercises the full authority of the Board of Directors in the management
of the business affairs of the Company to the extent permitted by law or
not otherwise limited by the Board of Directors.
The Board of Directors of the Company held five meetings in 1996. Each
director who was a director in 1996 attended at least 75% of the meetings
of the Board of Directors and committees on which he or she serves.
Director Compensation
All directors who are not employees of the Company, any of the Company's
subsidiaries or any 10% or greater shareholder of the Company ("Non-
employee Directors") are paid an annual retainer and receive a fee of
$1,500 and $500 for each Board meeting and committee meeting,
respectively, that they attend. Pursuant to the Midwest Express Holdings,
Inc. 1995 Stock Plan for Outside Directors (the "Director Plan"), the
annual retainer is payable in 300 shares of Common Stock, and at the
election of a director, a portion or all of the meeting and committee fees
is also payable in shares of Common Stock. The Director Plan also allows
each Non-employee Director to defer the receipt of fees for purposes of
deferring recognition for income tax purposes. Such deferral may be made
to a share account for Common Stock granted under the Director Plan or to
a cash account for those fees payable, at the Director's election, in
cash. Such deferred fees (i) will be treated as invested in Common Stock,
and ultimately will be paid in Common Stock, to the extent such fees would
have been paid in Common Stock, or (ii) will otherwise earn a return at
market rates. The Directors are reimbursed for expenses incurred in
connection with attendance at Board and committee meetings.
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of March 3, 1997, the number of
shares of Common Stock beneficially owned by (i) each director of the
Company (including the nominees), (ii) each of the executive officers
named in the Summary Compensation Table set forth below, (iii) all
directors and executive officers of the Company as a group, and (iv) each
person known to the Company to be the beneficial owner of more than 5% of
the Common Stock. Except as otherwise indicated, persons listed have sole
voting and investment power over shares beneficially owned.
Name of Beneficial Owner Shares Percent of Class
Timothy E. Hoeksema 20,468(1)(2)(3) *
Brenda F. Skelton 5,167(1)(2) *
Dennis J. Crabtree 4,679(1)(2) *
Rex J. Kessler 767(1)(4) *
Carol J. Reimer 1,902(1)(2) *
John F. Bergstrom 11,200(5)(6) *
Oscar C. Boldt 5,482(6) *
Albert J. DiUlio, S.J. 482(6) *
James G. Grosklaus 1,421 *
Richard H. Sonnentag 2,252(6)(7) *
Frederick P. Stratton, Jr. 17,229(6) *
David H. Treitel 950(6) *
John W. Weekly 815 *
All directors and executive
officers as a group
(16 persons) 73,241(1)(2)(6) 1.2%
FMR Corp. and related 822,200(8) 13.0%
persons
82 Devonshire Street
Boston, MA 02109
Granahan Investment 339,000(8) 5.4%
Management, Inc.
303 Wyman Street
Waltham, MA 02154
State of Wisconsin 598,700(8) 9.5%
Investment Board
P.O. Box 7842
Madison, WI 53707
_______________
* Less than one percent.
(1) Includes shares of Common Stock in which the person or persons
noted had an interest under the Midwest Express Airlines Savings
and Investment Plan as of December 31, 1996. Such plan's Common
Stock fund is a unitized account that is invested in Common Stock
and in liquid funds. As of a given date, each participant with an
investment in the stock fund has a number of share units, and the
participant's interest in Common Stock depends upon the aggregate
number of shares of Common Stock held in the stock fund as of that
date. Thus, each participant has voting rights with respect to
share units based upon the aggregate number of shares held in the
stock fund as of the record date for a shareholders' meeting. Each
participant has the ability to divest of share units through
intraplan transfers.
(2) Includes shares of Common Stock that may be purchased under
currently exercisable stock options, as follows: Mr. Hoeksema,
15,000 shares; Ms. Skelton, 4,500 shares; Mr. Crabtree, 4,500
shares; Ms. Reimer, 1,500 shares; and all directors and executive
officers as a group, 25,500 shares.
(3) Mr. Hoeksema holds 100 shares jointly with his wife.
(4) Mr. Kessler holds 300 shares jointly with his wife.
(5) Mr. Bergstrom shares voting and investment control over 900 shares
that are held in trust for the benefit of Mr. Bergstrom's children.
(6) Includes shares of Common Stock the receipt of which has been
deferred by certain Non-employee Directors pursuant to the Director
Plan, as follows: Mr. Bergstrom, 300 shares; Mr. Boldt, 482
shares; Father DiUlio, 482 shares; Mr. Sonnentag, 152 shares; Mr.
Stratton, 479 shares; and Mr. Treitel, 450 shares.
(7) Includes 1,000 shares of Common Stock held by the Cobham Group LP,
a limited partnership for which Mr. Sonnentag serves as the general
partner and a limited partner.
(8) As reported to the Securities and Exchange Commission.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid by the Company during each of the Company's last three
years to the Company's Chief Executive Officer and each of the Company's
four other most highly compensated executive officers (collectively, the
"named executive officers") for services rendered in all capacities to the
Company at any time during such periods.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
Awards All Other
Name and Principal Fiscal Other Annual LTIP Securities Underlying Compensa-
Position Year Salary ($) Bonus ($) Compensation ($) Payouts($) Options (#) tion ($)(3)
MEH (1) K-C(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Timothy E. Hoeksema, 1996 $300,000 $265,566 $0 $0 0 0 $4,750
Chairman of the Board, 1995 299,700 280,000 0 0 50,000 20,000 4,725
President and Chief 1994 285,000 82,000 0 293,193 0 0 4,500
Executive Officer
Brenda F. Skelton, 1996 156,623 75,476 0 0 0 0 4,700
Senior Vice President- 1995 116,666 62,753 0 0 15,000 0 3,457
Marketing and Customer 1994 96,687 18,810 0 0 0 0 2,868
Service
Dennis J. Crabtree(4), 1996 145,835 75,476 24,136(5) 0 0 0 4,375
Senior Vice President- 1995 90,800 44,280 28,667(5) 0 15,000 0 1,050
Operations
Rex J. Kessler, 1996 115,750 31,985 0 0 0 0 3,470
Vice President- 1995 106,111 28,120 0 0 5,000 0 3,181
Technical Services 1994 98,830 11,787 0 0 0 0 2,885
Carol J Reimer, 1996 112,365 30,873 0 0 0 0 3,371
Vice President-Human 1995 106,565 0 0 0 5,000 0 3,194
Resources 1994 100,860 0 0 0 0 0 2,972
_______________
(1) Represents options granted under the Midwest Express Holdings, Inc.
1995 Stock Option Plan.
(2) Represents options to purchase shares of common stock of Kimberly-
Clark Corporation ("Kimberly-Clark"), granted by Kimberly-Clark in
1995 prior to consummation of the initial public offering of the
Common Stock (the "Offering").
(3) All amounts shown for 1996 consist of Midwest Express'
contributions under the Midwest Express Airlines Savings &
Investment Plan.
(4) Mr. Crabtree's employment with Midwest Express began on May 18,
1995.
(5) Amount consists solely of relocation expense and related tax gross-
up.
</TABLE>
Option Grants in 1996
The Company did not grant options to purchase Common Stock pursuant to
the Midwest Express Holdings, Inc. 1995 Stock Option Plan (the "Option
Plan") to any of the named executive officers in 1996.
Aggregated Option Exercises in 1996 and Year-End Option Values
None of the named executive officers exercised options to acquire Common
Stock during 1996. The following table sets forth information regarding
the year-end value of unexercised options held by each of the named
executive officers under the Option Plan.
Aggregated Option
Values as of December 31, 1996
Number of
Securities Value of
Underlying Unexercised in-
Unexercised the-Money
Options at Options at
December 31, December 31,
1996(#) 1996($)(1)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
Timothy E. Hoeksema . . . . . . . . 15,000/35,000 $270,000/$630,000
Brenda F. Skelton . . . . . . . . . 4,500/10,500 81,000/189,000
Dennis J. Crabtree . . . . . . . . 4,500/10,500 81,000/189,000
Rex J. Kessler . . . . . . . . . . 1,500/3,500 27,000/63,000
Carol J. Reimer . . . . . . . . . . 1,500/3,500 27,000/63,000
_______________
(1) The dollar values are calculated by determining the difference
between the fair market value of the underlying stock as of
December 31, 1996 and the exercise price of the options.
Pension Plan Table
Midwest Express will provide retirement benefits to certain of its U.S.
employees, including the named executive officers, through the Midwest
Express Airlines, Inc. Salaried Employees' Retirement Plan (the "Midwest
Express Pension Plan"). The following table illustrates the estimated
annual benefits payable upon retirement at age 65 under the Midwest
Express Pension Plan for the specified highest five-year average
remuneration and years of service classifications.
<TABLE>
<CAPTION>
Years of Benefit Service
Five-Year Average
Remuneration 15 20 25 30 35 40
<C> <C> <C> <C> <C> <C> <C>
$100,000 . . . $ 22,500 $ 30,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000
200,000 . . . 45,000 60,000 75,000 90,000 105,000 120,000
300,000 . . . 67,500 90,000 112,500 135,000 157,500 180,000
400,000 . . . 90,000 120,000 150,000 180,000 210,000 240,000
500,000 . . . 112,500 150,000 187,500 225,000 262,500 300,000
600,000 . . . 135,000 180,000 225,000 270,000 315,000 360,000
700,000 . . . 157,500 210,000 262,500 315,000 367,500 420,000
</TABLE>
The estimated benefits in the table above are computed on a single-life
annuity basis. Benefits will be adjusted if the employee receives one of
the optional forms of payment. Benefits in the table above do not reflect
the offset under the Midwest Express Pension Plan of 1.25% per year of
service (up to a maximum of 50%) of the Social Security Benefit. Benefits
under the Midwest Express Pension Plan are limited to the extent required
by tax provisions. To the extent benefits under the Midwest Express
Pension Plan are limited under tax law, any excess will be paid pursuant
to supplemental retirement arrangements. The compensation covered by the
Midwest Express Pension Plan, as supplemented for the named executive
officers, includes all compensation reported for each individual as salary
and bonus set forth in the Summary Compensation Table.
Service recognized under Kimberly-Clark's pension plan is counted under
the Midwest Express Pension Plan for eligibility and vesting purposes and,
for certain transferring employees, benefit accrual purposes.
At December 31, 1996, the years of benefit service for those named
executive officers currently eligible to participate in the Midwest
Express Pension Plan are as follows: Mr. Hoeksema, 26 years; Ms. Skelton,
9 years; Mr. Crabtree, 1 year; Mr. Kessler, 25 years; and Ms. Reimer, 27
years.
Agreements with Named Executive Officers
The Company has agreements with each of the named executive officers
that provide that each officer is entitled to benefits if, after a change
in control (as defined in the agreements) of the Company, such officer's
employment is ended through (i) termination by the Company, other than by
reason of death or disability or for cause (as defined in the agreements),
or (ii) termination by the officer following the first anniversary of the
change in control or due to a breach of the agreement by the Company or a
significant adverse change in the officer's responsibilities. In general,
the benefits provided are: (a) a cash termination payment one to three
times the sum of the executive officer's annual salary and highest annual
bonus during the three years before the termination, (b) continuation of
equivalent hospital, medical, dental, accident, disability and life
insurance coverage as in effect at the time of termination, (c)
supplemental pension benefits and (d) outplacement services. Each
agreement provides that, if any portion of the benefits under the
agreement or under any other agreement would constitute an "excess
parachute payment" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), then benefits are reduced so that the executive
officer is entitled to receive $1 less than the maximum amount that such
officer can receive without becoming subject to the 20% excise tax imposed
by the Code, or which the Company may pay without loss of deduction under
the Code.
Board Compensation Committee Report on Executive Compensation
Background
The Compensation Committee of the Board of Directors (the "Committee")
has responsibility to establish the compensation and benefits for officers
of the Company, among others.
A key objective of employee compensation is to ensure that a company
delivers compensation that is sufficient to attract and retain qualified
employees. Thus, as part of its compensation strategy, every company
needs to identify its competitors for executive and other employee talent
and where it should position itself relative to the compensation those
competitors provide. Generally, the Company's competitors for personnel
are others in the airline industry. However, in determining where the
Company should position itself with respect to compensation relative to
competitors in the industry, the Company is unusual in that there are no
airlines of similar size, sales volume and strategy.
Given this background, the Committee believes it is not necessary,
appropriate or, based upon available information, practical to state
precisely how the Company's compensation should compare to that of other
airlines. While the Committee believes it is appropriate to continue to
survey the industry, it believes the Company should base Company-wide
compensation decisions on Company performance and economic conditions
using the following framework:
1. As the Company has in the past, the Company should continue to work
at improving the total compensation of its employees while
maintaining a cost structure that will allow the Company to
compete, survive and be successful over the long term.
2. The Company must maintain compensation structures that continue to
allow the Company to attract and retain a high quality work force.
3. The Company's total compensation package must recognize and reward
the Company's employees for their contributions to the Company's
success.
4. As a publicly traded company, compensation must align the interests
of employees with those of the Company's shareholders.
The Company is a regular participant in two airline industry surveys.
An Air Conference survey reflects information concerning salary, benefits
and work rules relating to 17 member carriers. This survey is primarily
directed at line employee groups (pilots, flight attendants, customer
service and reservations representatives, mechanics, inspectors,
dispatchers, aircraft cleaners, etc.). The Company also participates in
the Salary Information Retrieval System survey conducted by Organization
Resources Counselors, Inc. ("ORC"). This survey, which is updated semi-
annually, includes major and national airlines. It focuses on management,
office and some line positions. However, neither survey reports on
executive officer and other senior management compensation. The Company
also relies on available market information regarding competitive
compensation practices for positions that are not specific to the airline
industry.
Historically, Kimberly-Clark determined the compensation for the
Company's executive officers and senior management. In doing so,
Kimberly-Clark based its decisions upon information concerning consumer
businesses and industrial companies, and not airlines, which typically
have lower compensation. In July 1995, in anticipation of the Offering
and in conjunction with Kimberly-Clark's compensation department, the
Company participated in an Airline Industry Executive Compensation Survey
conducted by ORC. The results of the survey indicated that, although the
Company's compensation for its officers was not calculated based upon
airline industry comparisons, officer compensation in 1995 was nonetheless
in line with the airline industry. Further, the Company's 1995 search for
and hiring of a senior operations executive provided additional
information confirming that the Company's compensation was consistent with
industry practice.
1996 Compensation
Base Salary. The Committee established base salaries in general for
1996 by following an approach that Kimberly-Clark used in the past to
establish executive officer and senior management compensation for the
Company and that the Company had used in establishing compensation for
other personnel.
The approach the Committee used to establish 1996 compensation for the
Company's executive officers generally involved evaluating each position
on a subjective basis and establishing a base salary range for each
position based upon that evaluation. The evaluation was intended to
reflect the relative worth to the Company of each position as it compared
to all other senior management positions. The three basic criteria used
for the evaluation were know-how, problem solving and accountability. The
Company determined market value for positions by attempting to take into
account the amount that other employers pay for experienced employees in
comparable positions, using benchmark positions for which information was
available regarding other employers' practices and determining market
values for other positions based upon the internal evaluations for each
position. In considering information concerning other employers' pay
practices, the Company did not factor in the performance of individual
employers. The resulting market value (or "midpoint") for each position
represented the dollar value of base compensation that the Company was
willing to pay an experienced employee for performing competently in the
job. Using the market value for each position, the Committee approved a
salary range for each executive officer position, where the minimum salary
was 20% below the market value, and the maximum salary was 20% above the
market value. For each individual executive officer, the Committee
established a base salary within the established range based upon an
individual's experience, length of service in the position and, most
importantly, performance.
For 1996, the Committee generally continued to utilize the 1995 base
salary market value for each executive officer position, subject only to
adjustments for 1996 in the Company's general base salary structure.
Based upon limited market information available to the Company, and the
Company's size, financial results and financial condition, the Committee
increased the base salary structure for the Company's executive officers
and senior management in 1996 by 3% over 1995 levels, which resulted in a
3% increase in the market value and salary range for each position. The
Committee then established the base salary for each executive officer
based upon the criteria described above.
Incentive Payments. Incentive payments are an integral part of the
Company's compensation approach for several reasons. First, such payments
are intended to provide employees with appropriate incentives to reach
higher levels of performance. Second, these payments are necessary in
light of competitive practice to attract and retain high quality
employees. Third, the payments provide the Company with a means to
deliver additional compensation to employees as performance justifies such
compensation without resulting in increases in the Company's salary
structure that become "fixed" costs.
The Company delivers incentive compensation to executive officers and
senior management through the Company's Annual Incentive Plan, which the
Committee administers. In particular, utilizing the plan enables the
Committee to better tailor individual and corporate objectives and amounts
of compensation to individual employees.
Under the Annual Incentive Plan, for 1996 the Committee approved for
each eligible employee an annual incentive Target Award that represented a
percentage of the base salary market value (midpoint) for the employee's
position. The Target Awards for executive officers ranged from 25% of an
officer's midpoint to 75% of an officer's midpoint. Depending upon actual
performance, an employee could receive a final Incentive Award of up to
133% of the Target Award.
The Target Award for each individual was generally the same as the
target award used in the past under Kimberly-Clark's incentive payment
approach, which was not expressly intended to follow airline industry
practice. However, ORC's Airline Industry Executive Compensation Survey
referred to above indicated that these Target Award percentages were
competitive in light of airline industry practice.
For the Company's executive officers for 1996, with one exception for
the president of Astral Aviation, Inc., a wholly owned subsidiary of
Midwest Express ("Astral"), the Committee chose earnings per share, a
corporate objective, as the sole performance criterion used for
determining the amount that could be paid to each officer in respect of
the officer's Target Award. In addition, awards were subject to control
measures based upon return on average shareholders' equity and cost per
available seat mile.
Long-Term Compensation. As is fairly common, the Committee intends to
rely on awards under its Option Plan to provide long-term incentives to
executive officers and senior management and to align their interests with
those of shareholders. Although this is a common form of compensation, it
is difficult to compare stock option compensation from one employer to
another due to the difficulty in valuing options at the time they are
awarded and thereafter. At the time of the Offering, the Committee
approved awards of options to executive officers and certain members of
senior management. With one exception arising from the hiring of a new
executive officer, the Committee did not approve additional awards in
1996.
Other Compensation. The Company has established other elements of a
compensation package for executive officers that include a "401(k)"
savings plan that has a 50% Company match feature; a defined benefit
retirement plan; and a supplemental benefit plan. The Committee believes
these elements and their terms are consistent with competitive practice.
Chief Executive Officer Compensation
Mr. Hoeksema's 1996 base salary approximated the market value that the
Committee established for his position. Mr. Hoeksema's annual incentive
Target Award under the Annual Incentive Plan for 1996 represented 75% of
that market value. As noted above, the actual award was dependent upon
Company earnings per share, return on average shareholders' equity and
cost per available seat-mile performance. The actual incentive payment
made to Mr. Hoeksema in 1996 was $265,566 (representing 118% of his Target
Award, but 89% of his maximum potential payout), based upon the Company
significantly exceeding the Company's earnings per share target in 1996
and meeting its minimum return on equity, but failing to meet a control
measure relating to an increase in cost per available seat mile.
Section 162(m) Limitations
Under Section 162(m) of the Code, the tax deduction by corporate
taxpayers, such as the Company, is limited with respect to the
compensation of certain executive officers unless such compensation is
based upon performance objectives meeting certain acceptable criteria or
is otherwise excluded from the limitation. The Committee currently
intends to qualify a sufficient amount of compensation to its executive
officers so that Section 162(m) of the Code will not adversely impact the
Company.
The foregoing report has been approved by all members of the
Committee.
The Compensation Committee
John F. Bergstrom, Chairman
Frederick P. Stratton, Jr.
John W. Weekly
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Common Stock for the period beginning September 22, 1995, when the
Company became a reporting company pursuant to Section 12(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
ending December 31, 1996, with the cumulative total return of the Standard
& Poor's 500 Stock Index ("S&P 500") and the Standard & Poor's Airline
Index ("S&P Airline Index") beginning with the closing value of each index
as of September 21, 1995, and ending December 31, 1996. The graph assumes
investments of $100 on September 22, 1995, in Common Stock at its initial
public offering price of $18.00 per share, and in the S&P 500 and the S&P
Airline Indices at their September 21, 1995, closing prices. Any
dividends are assumed to be reinvested.
MIDWEST EXPRESS HOLDINGS, INC.
Relative Market Performance
September 22, 1995, to December 31, 1996
[performance graph]
9/22/95 12/29/95 12/31/96
Midwest Express Holdings 100.00 155.56 200.00
S&P Airlines Index(1) 100.00 101.44 111.50
S&P 500 Index 100.00 106.34 130.76
(1) The S&P Airlines Index consists of AMR Corp., Delta Air Lines,
Southwest Air and USAir Group.
CERTAIN TRANSACTIONS
In July 1995, Chocolate Chip Limited Partnership, a Wisconsin limited
partnership ("Chocolate Chip"), purchased a parcel of land located at 6744
South Howell Avenue, Oak Creek, Wisconsin, from Midwest Express at a
purchase price of $258,500. The Boldt Group, Inc. controls Boldt
Development Corporation, a member of the limited liability company that is
the general partner to Chocolate Chip. Oscar C. Boldt, a member of the
Company's Board of Directors, is the Chairman of the Board of The Boldt
Group, Inc. The sale price for the parcel was determined on the basis of
two independent appraisals, and the Company believes such price represents
a price no less favorable to Midwest Express than could be obtained from
an unaffiliated party.
On June 30, 1995, Midwest Express entered into a lease with Chocolate
Chip for the corporate headquarters built at 6744 South Howell Avenue, Oak
Creek, Wisconsin. The lease began on March 1, 1996. The lease is for an
initial term of 15 years and provides for rental payments of $557,200 per
year for the first five years, $625,457 per year for years six through 10,
and $703,639 per year for years 11 through 15. The lease terms were
obtained through a competitive bidding process, and the Company believes
the terms are no less favorable to Midwest Express than could be obtained
from an unaffiliated party.
In connection with and as a result of the Offering, the Company entered
into various agreements with Kimberly-Clark, who ceased to be a greater
than five percent shareholder of the Company on May 30, 1996. Set forth
below is a brief description of certain agreements between the Company and
Kimberly-Clark, some of which remained in effect as of December 31, 1996.
In connection with the Offering, the Company, Midwest Express, Astral,
Kimberly-Clark and K-C Nevada, Inc., a Nevada corporation and wholly owned
subsidiary of Kimberly-Clark ("K-C Nevada"), entered into a Tax Allocation
and Separation Agreement (the "Tax Agreement"). Pursuant to the Tax
Agreement, the Company is responsible for all taxes with respect to the
Company for all periods, but K-C Nevada will be responsible for, or
entitled to, U.S. federal, state and local income and franchise tax
assessments or refunds with respect to periods ending on or prior to the
consummation of the Offering. Pursuant to the Tax Agreement, the Company
is treated for tax purposes as if it purchased all of Midwest Express'
assets, and as a result, the tax basis of Midwest Express' assets was
increased to the deemed purchase price of the assets. The tax on the
amount of the gain on the deemed asset purchase was paid by Kimberly-
Clark. This additional basis results in increased income tax deductions
and, accordingly, reduced income taxes payable by the Company. Pursuant
to the Tax Agreement, the Company is paying to K-C Nevada the amount of
such benefit with respect to the additional basis (retaining 10% of such
tax benefit), as realized on a quarterly basis, calculated by comparing
the Company's actual taxes to the taxes that would have been owed had the
increase in basis not occurred. In 1996, the Company made payments to K-C
Nevada in connection with such election in the amount of $9,243,000. In
the event of certain business combinations or other acquisitions involving
the Company, tax benefit amounts thereafter will not take into account,
under certain circumstances, income, losses, credits or carryovers of
businesses other than those historically conducted by Midwest Express or
the Company. The Company has agreed that it will not enter into any
transaction a significant purpose of which is to reduce the amount payable
to K-C Nevada under the Tax Agreement.
Prior to the Offering, Kimberly-Clark provided various administrative
and financial services to the Company and its subsidiaries, including
management information systems, employee benefits administration, legal,
tax, treasury, accounting and risk management services, and certain other
corporate staff and support services. Concurrently with the consummation
of the Offering, the Company and Kimberly-Clark entered into a shared
services agreement giving the Company the right to continue to receive
certain of these services (the "Shared Services Agreement"). Except for
the continued provision of certain management information systems and
health services, the Shared Services Agreement expired on December 31,
1996. The costs expensed by the Company for fees to Kimberly-Clark under
the Shared Services Agreement for 1996 were $445,855, which represent
rates approximately equivalent to Kimberly-Clark's cost of providing these
services.
Since January 24, 1994, Midwest Express has had a Corporate Promotion
Agreement with Kimberly-Clark, under which employees of Kimberly-Clark
receive a discount on airfares for flights on Midwest Express and Astral.
The agreement is on terms consistent with terms that Midwest Express
offers to certain unaffiliated parties after taking into account volume.
Kimberly-Clark has guaranteed leases relating to three of Midwest
Express' jet aircraft. The Company pays Kimberly-Clark an annual
guarantee fee equal to 1.25% of the outstanding lease balances subject to
guarantee. Under the guarantee fee arrangement, the Company cannot renew
or amend material economic terms of guaranteed leases without Kimberly-
Clark's consent. In 1996, the Company expensed guarantee fees payable to
Kimberly-Clark in the amount of approximately $207,000.
Kimberly-Clark provided the Company with a five-year $20 million
secondary revolving credit facility for use in the event that the Company
does not have amounts available for borrowing under its bank credit
facility. Borrowings under the Kimberly-Clark facility must be repaid
prior to repayments under the bank credit facility. Interest on the
Kimberly-Clark facility is at a rate equal to the then current rate on
bank credit facility borrowings plus 100 basis points. The Company did
not borrow under the Kimberly-Clark facility in 1996.
In connection with the Offering, the Company and Kimberly-Clark entered
into an Employee Matters Agreement. Pursuant to this agreement, the
Company is responsible for all compensation and benefit claims of
employees of the Company and its subsidiaries, with certain exceptions.
The Company has adopted successor plans and arrangements for employees of
the Company and its subsidiaries that in general duplicate those of
Kimberly-Clark that covered them prior to the Offering, and service has
been credited under the successor plans and arrangements for prior
service. Kimberly-Clark remains liable with respect to welfare benefit
claims of former employees and their dependents and claims of current
employees incurred prior to consummation of the Offering.
PROPOSED AMENDMENT TO THE MIDWEST
EXPRESS HOLDINGS, INC. 1995 STOCK OPTION PLAN
General
The shareholders of the Company adopted the Midwest Express Holdings,
Inc. 1995 Stock Option Plan at the Annual Meeting of Stockholders on April
19, 1996. The original plan authorized the issuance of up to 250,000
shares of Common Stock. Currently, no additional options may be granted
under the Option Plan. The Board of Directors wishes to continue the
Option Plan and accordingly is seeking the approval of the shareholders of
the Company to amend the Option Plan to authorize the issuance of up to
500,000 shares of Common Stock under the Option Plan (including the
250,000 shares currently authorized) and to provide that this number of
authorized shares will increase on a share-for-share basis for each share
of Common Stock that the Company may repurchase, if any, after the
Meeting, subject to a maximum increase of 200,000 shares. In December
1995, the Company announced a $5.0 million share repurchase program to be
executed from time to time in the open market or in privately negotiated
transactions. During 1996, the Company repurchased 103,700 shares at a
cost of $2.8 million. The Board of Directors of the Company may in its
discretion authorize additional repurchases from time to time in the
future, but there is no assurance that it will do so. The Board of
Directors also wishes to amend the Option Plan to extend its duration by
changing the Option Plan's expiration date from September 21, 1999, to
September 21, 2005.
The purpose of the amended Option Plan is to encourage those employees
who materially contribute to the success of the Company or any of its
affiliates to acquire an ownership interest in the Company, thereby
increasing their motivation for and interest in the Company's and its
affiliates' long-term success.
Administration and Eligibility
The amended Option Plan is administered by the Compensation Committee of
the Board of Directors (the "Committee"), which must consist of not less
than two directors each of whom qualify as a "non-employee director" under
Rule 16b-3 of the Exchange Act, and are also considered "outside
directors" as defined for purposes of Section 162(m) of the Code. The
Company's Board of Directors chooses which directors will serve on the
Committee. The Committee, in its absolute discretion, has the power to
interpret and construe the amended Option Plan and any option agreements
thereunder, but no such determination or action may increase the amount of
compensation that would otherwise be due in a manner that would result in
the disallowance of a deduction to the Company under Section 162(m) of the
Code. The Committee may authorize persons other than its members to carry
out its policies and directives, subject to the limitations and guidelines
of the Committee and applicable law.
Only employees (including officers and directors who are employees, but
excluding Non-employee Directors) of the Company and its subsidiaries are
eligible to participate in the amended Option Plan.
Option Grants Under the Amended Option Plan; Shares Available
Certain of the options issued under the amended Option Plan may
constitute incentive stock options within the meaning of Section 422 of
the Code. The remainder of the options issued under the amended Option
Plan will constitute nonqualified stock options. The amended Option Plan
will provide for the grant of options to purchase up to 500,000 shares of
Common Stock (including the 250,000 shares currently authorized) and to
provide that this number of authorized shares will increase on a share-
for-share basis for each share of Common Stock that the Company may
purchase, if any, after the Meeting, subject to a maximum increase of
200,000 shares. If an option granted under the amended Option Plan
expires, is canceled, or terminates unexercised as to any shares of Common
Stock subject thereto, such shares will again be available for purposes of
the amended Option Plan to the extent permitted under Section 16 of the
Exchange Act and to the extent determined to be appropriate by the
Committee. Shares issued under the Option Plan may be authorized but
unissued shares or shares acquired by the Company and held in its
treasury. No optionee may be granted options covering shares of Common
Stock in excess of 75,000, subject to adjustment as set forth below,
within any two consecutive calendar years. Shares subject to a cancelled
option continue to be counted against the 75,000 share maximum. In
addition, the aggregate fair market value of Common Stock with respect to
which any incentive stock options are exercisable for the first time by an
optionee during any calendar year under the amended Option Plan or any
other such plan of the Company cannot exceed $100,000. Grants of
nonqualified stock options are not subject to the $100,000 limitation.
As of March 3, 1997, options to purchase 244,000 shares of Common Stock
were outstanding and an equal number of shares of Common Stock were
reserved for issuance under the Option Plan. In addition to the shares of
Common Stock reserved for issuance under the Option Plan, 25,000 shares of
Common Stock are reserved for issuance pursuant to the Director Plan,
under which all or a portion of the compensation payable to Non-employee
Directors is paid in Common Stock; and 25,000 shares of Common Stock are
reserved for issuance under the Midwest Express Holdings, Inc. Annual
Incentive Plan, under which a portion of annual bonuses payable to
participants in the plan may be paid in Common Stock.
Term of Options
The option price per share of Common Stock will be fixed by the
Committee, but will not be less than 100% of the fair market value on the
date the option is granted. The Committee will determine the expiration
date of each option, but such expiration date will not be later than 10
years after the date of grant in the case of incentive stock options and
15 years for options that are not incentive stock options. No option is
assignable or transferable by an optionee, except by will or the laws of
descent and except that the Committee may grant to certain optionees the
right to transfer options to the extent permitted under Rule 16b-3 of the
Exchange Act, and options may be exercised during the life of the optionee
only by the optionee or a permitted transferee.
Vesting and Exercise of Options
Options granted under the amended Option Plan will vest either (i) at a
rate of 30% of the shares covered by the option grant on the first
anniversary of the grant date; an additional 30% on the second anniversary
of the grant date; and the remaining 40% of the shares on the third
anniversary of the grant date, or (ii) as otherwise determined by the
Committee.
An option may be exercised in full or in part by delivery to the Company
at its principal office of a written notice of exercise specifying the
number of shares with respect to which the option is being exercised. A
notice of exercise must be accompanied by full payment of the option price
of the shares being purchased in (a) cash or its equivalent; (b) shares of
Common Stock; or (c) any combination of (a) and (b). In addition, an
optionee may make arrangements with a broker to sell or margin shares of
Common Stock acquired on an option exercise to pay all or part of the
option price.
Amendment and Termination
The Committee may at any time amend, suspend or discontinue the amended
Option Plan or alter or amend any and all options under the amended Option
Plan to the extent (i) permitted by law, (ii) permitted by the rules of
any stock exchange on which the Common Stock or any other security of the
Company is listed, (iii) permitted under applicable provisions of the
Securities Act of 1933, as amended, and the Exchange Act and (iv) that
such action would not result in the disallowance of a deduction to the
Company under Section 162(m) of the Code or any successor section. If any
amendment, suspension or discontinuance requires shareholder approval,
then the Committee may take such action only subject to the approval of
the shareholders. The amended Option Plan will terminate on September 21,
2005 (which represents an extension from September 21, 1999), unless
sooner terminated. Termination of the amended Option Plan will not affect
the rights of optionees under options previously granted to them. All
unexpired options will continue until, by their own terms and conditions,
they lapse or terminate.
An optionee has no rights as a shareholder with respect to any shares
subject to any option until the date the option has been exercised, the
shares have been fully paid and a stock certificate has been issued.
Adjustments
In the event there are any changes in the Common Stock or the
capitalization of the Company through a corporate transaction, such as any
merger, acquisition through the issuance of capital stock of the Company,
any consolidation, any separation of the Company (including a spin-off or
other distribution of stock by the Company), any reorganization of the
Company, any partial or complete liquidation by the Company,
recapitalization, stock dividend, stock split or other change in the
corporate structure, appropriate adjustments and changes shall be made by
the Committee, to the extent necessary to preserve the benefit to the
optionees contemplated under the amended Option Plan, to reflect such
changes in (i) the aggregate number of shares subject to the amended
Option Plan, (ii) the maximum number of shares for which options may be
granted to any optionee, (iii) the number of shares and option price per
share of all shares of Common Stock subject to outstanding options and
(iv) such other provisions of the amended Option Plan as may be necessary
and equitable to carry out the foregoing purposes. However, no such
adjustment or change may be made to the extent it will result in a
disallowance of a deduction to the Company under Section 162(m) of the
Code.
Change of Control
Upon a change of control of the Company, all outstanding options will
vest and become immediately exercisable. For this purpose, a "change of
control" occurs if (i) any person (other than the Company or any of its
subsidiaries, a trustee or other fiduciary holding securities for an
employee benefit plan of the Company or any of its subsidiaries, or an
underwriter) becomes a beneficial owner of 25% or more of the outstanding
Common Stock; (ii) directors serving on January 1, 1996, or successors to
such directors who receive appropriate Board approval cease to constitute
a majority of the number of directors serving at any time; (iii) the
Company's shareholders approve a merger or consolidation involving the
Company or the issuance of the Company's voting securities in connection
with a merger or consolidation other than a merger or consolidation where
voting securities of the Company prior to the transaction continue to
represent at least 50% of the combined voting power of the Company
resulting from the transaction or a merger or a consolidation in which no
person (other than the excluded persons described above) becomes a
beneficial owner of 25% or more of the Common Stock; or (iv) the Company's
shareholders approve a plan of complete liquidation or dissolution of the
Company or an agreement for the sale or disposition of all or
substantially all of the Company's assets. However, "change of control"
does not include a transaction or a series of transactions that does not
alter the proportionate ownership of the recordholders of the Common
Stock.
Certain Federal Income Tax Consequences
Certain options granted under the amended Option Plan are intended to be
"incentive stock options" as defined in Section 422 of the Code. If an
optionee holds the shares received on exercise of an incentive stock
option for at least two years from the date of grant and one year from the
date of exercise, then the optionee will recognize no federal taxable
income as a result of exercise and any gain (or loss) realized by the
optionee on the disposition of the stock will be treated as a long-term
capital gain (or loss), and no deduction is allowed to the Company. If
the holding period requirements are not satisfied, then the optionee will
recognize ordinary income at the time of disposition equal to the lesser
of (i) the gain realized on the disposition or (ii) the excess of the fair
market value of the shares on the date of exercise over the exercise
price. Any additional gain on the disposition will be a long-term or
short-term capital gain, depending on the length of time the shares were
held. The Company is entitled to a deduction equal to the amount of
ordinary income recognized by the optionee.
Upon exercise of a nonqualified stock option, the excess of the fair
market value of the shares at the time of exercise over the exercise price
is taxable to the optionee as ordinary income. The Company is entitled to
a tax deduction in the same amount at the time income is recognized by the
optionee. A subsequent disposition of the shares will give rise to
long-term or short-term capital gain (or loss), depending on the length of
time the shares are held, to the extent the amount realized from the sale
differs from the tax basis, i.e., the fair market value of the shares on
the date of exercise.
Tax Withholding
The Company may deduct and withhold from any cash payable to an optionee
such amounts as may be required for the purpose of satisfying the
Company's obligation to withhold federal, state or local taxes as the
result of the exercise of an option. An optionee may be permitted to
satisfy the Company's withholding tax requirements by electing to have the
Company withhold shares of Common Stock otherwise issuable to the optionee
or deliver to the Company shares of Common Stock with a fair market value
equal to the amount required to be withheld.
Option Awards to Certain Persons
During 1996 and to date in 1997, the Compensation Committee has not
granted any stock options the effectiveness of which is contingent upon
shareholder approval of the amended Option Plan. While no options will
be awarded to non-executive directors of the Company, the Company cannot
currently determine the option awards that may be granted in the future to
the executive officers or non-executive officers of the Company. Such
determinations will be made from time to time by the Compensation
Committee.
Vote Required
The affirmative vote of a majority of the votes cast on the proposal is
required for approval of the amended Option Plan, provided that a majority
of the outstanding shares of Common Stock are voted on the proposal. For
purposes of determining the vote regarding this proposal, abstentions and
broker nonvotes will have no impact on the vote. The votes represented by
the proxies received will be voted FOR approval of the amendments to the
Option Plan, unless a vote against such approval or to abstain from voting
is specifically indicated on the proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE ADOPTION OF THE AMENDMENTS TO THE OPTION PLAN.
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the Company's independent auditors in
1996. The Company's independent auditors for 1997 will be formally
approved in June 1997. Representatives of Deloitte & Touche LLP will be
present at the Meeting to respond to appropriate questions and to make a
statement if they desire to do so.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors to file reports concerning the ownership of Company equity
securities with the Securities and Exchange Commission and the Company.
The Company has assumed the responsibility of filing required reports on
behalf of its officers and directors. In 1996, the Company was late in
filing a Form 5 on behalf of Brenda F. Skelton for the year ended December
31, 1995, due to an oversight that resulted in the failure to disclose
those shares of Common Stock that Ms. Skelton held through the Midwest
Express Airlines Savings and Investment Plan as of December 31, 1995. The
Company believes that, during the year ended December 31, 1996, all of its
other officers and directors complied with Section 16(a) filing
requirements.
OTHER MATTERS
The Company will file an Annual Report on Form 10-K with the Securities
and Exchange Commission for the year ended December 31, 1996. The Company
will provide a copy of this Form 10-K report (without exhibits) without
charge to each person who is a record or beneficial holder of shares of
Common Stock on the record date for the Meeting and who submits a written
request for it. Requests for copies of the Form 10-K should be addressed
to Midwest Express Holdings, Inc., Attention: Investor Relations HQ-14,
6744 South Howell Avenue, Oak Creek, Wisconsin 53154.
The cost of solicitation of proxies will be borne by the Company. The
Company expects to solicit proxies primarily by mail. Proxies also may be
solicited personally and by telephone by certain officers and regular
employees of the Company. Brokers, nominees and custodians who hold stock
in their names and who solicit proxies from the beneficial owners will be
reimbursed by the Company for out-of-pocket and reasonable clerical
expenses.
The Board of Directors does not intend to present at the Meeting any
matters other than those set forth herein and does not presently know of
any other matters that may be presented to the Meeting by others.
However, if any other matters should properly come before the Meeting, it
is the intention of the persons named in the enclosed proxy to vote said
proxy on any such matters in accordance with their best judgment.
A shareholder wishing to include a proposal in the Company's proxy
statement for the 1998 Annual Meeting of Shareholders must forward the
proposal to the Company by November 18, 1997. The Company's By-laws
establish procedures for shareholder nominations for elections of
directors of the Company and for bringing business before any annual
meeting of shareholders of the Company. Among other things, to bring
business before an annual meeting, a shareholder must give written notice
to the Secretary of the Company not more than 100 days nor less than 75
days prior to the first anniversary of the date of the Annual Meeting of
Shareholders of the Company in the immediately preceding year. The notice
must contain certain information about the proposed business or the
nominee and the shareholder making the proposal.
By Order of the
Board of Directors,
Timothy E. Hoeksema
Chairman of the Board, President and
Chief Executive Officer
Milwaukee, Wisconsin
March 18, 1997
<PAGE>
PROXY
1997 ANNUAL MEETING OF SHAREHOLDERS
MIDWEST EXPRESS HOLDINGS, INC.
The undersigned does hereby constitute and appoint Timothy E. Hoeksema
and Brenda F. Skelton, or either of them, as proxies for the undersigned
at the Annual Meeting of Shareholders of Midwest Express Holdings, Inc. to
be held on Wednesday, April 23, 1997, at The Grand Milwaukee Hotel, 4747
South Howell Avenue, Milwaukee, Wisconsin, at 10:00 a.m., and any
adjournments or postponements thereof, to vote thereat the shares of stock
held by the undersigned as fully and with the same effect as the
undersigned might or could do if personally present at said Annual Meeting
or any adjournments or postponements thereof, hereby revoking any other
Proxy heretofore executed by the undersigned for such Annual Meeting. The
undersigned acknowledges receipt of the notice of Annual Meeting of
Shareholders and the Proxy Statement.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THE PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED AND FOR APPROVAL OF
AMENDMENTS TO THE MIDWEST EXPRESS HOLDINGS, INC. 1995 STOCK OPTION PLAN.
PLEASE SIGN BELOW, DETACH AND RETURN USING THE ENVELOPE PROVIDED.
MIDWEST EXPRESS HOLDINGS, INC. ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. ELECTION OF DIRECTORS
1 - Oscar C. Boldt,
2 - Brenda F. Skelton,
3 - Richard H. Sonnentag [_] FOR [_] WITHHOLD
(Instructions: To withhold authority
to vote for any indicated nominee, write
the number(s) of the nominee(s) in
the box provided to the right.) __________________________
2. To approve amendments to the
Midwest Express Holdings, Inc.
1995 Stock Option Plan. [_] FOR [_] AGAINST [_] ABSTAIN
3. To transact such other business as may properly come before the Annual
Meeting, or any adjournments or postponements thereof.
Address Change? Date ______________ NO. OF SHARES
MARK BOX [_]
Indicate changes [_] Please check this
below: box if you plan to
attend the Annual
Meeting. Number of
persons attending:
__________.
SIGNATURE(S) IN BOX
Please sign exactly as your
name appears on your stock
certificate as shown directly
to the left. Joint owners
should each sign personally.
A corporation should sign in
full corporate name by duly
authorized officers. When
signing as attorney, executor,
administer, trustee or
guardian, please give full
title as such.
<PAGE>
[filed as an appendix pursuant to Instruction 3
to Item 10 of Regulation 14A; not provided to
shareholders as part of the proxy statement or
otherwise]
MIDWEST EXPRESS HOLDINGS, INC.
1995 STOCK OPTION PLAN
(as amended February 13, 1997 subject to shareholder approval)
1. PURPOSE
This 1995 Stock Option Plan (the "Plan") of Midwest Express Holdings,
Inc. (the "Corporation") is intended to encourage those employees who
materially contribute to the success of the Corporation or of an
Affiliate, to acquire an ownership interest in the Corporation, thereby
increasing their motivation for and interest in the Corporation's or
Affiliate's long-term success.
2. EFFECTIVE DATE
The Plan is adopted effective as of September 21, 1995, subject to
approval by the stockholders of the Corporation at the Corporation's 1996
Annual Meeting of Stockholders.
3. DEFINITIONS
"Affiliate" means any company in which the Corporation owns directly
or indirectly 20% or more of the equity interest (collectively, the
"Affiliates").
"Board" means the Board of Directors of the Corporation.
A "Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:
(1) any "Person" (as such term is defined in section 3(a)(9) of
the Exchange Act, as modified and used in sections 13(d) and 14(d)
thereof), other than (A) the Corporation or any of its subsidiaries,
(B) a trustee or other fiduciary holding securities under any
employee benefit plan of the Corporation or any of its subsidiaries,
(C) an underwriter temporarily holding securities pursuant to an
offering of such securities or (D) a corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock in the Corporation
("Excluded Persons"), is or becomes the "Beneficial Owner" (as
defined in rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Corporation or its Affiliates after January 1, 1996
pursuant to express authorization by the Board that refers to this
exception) representing 25% or more of either the then outstanding
shares of Common Stock or the combined voting power of the
Corporation's then outstanding voting securities; or
(2) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on January 1, 1996, constituted the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Corporation, as such
terms are used in Rule 14a-11 of Regulation 14A under the Exchange
Act) whose appointment or election by the Board or nomination for
election by the Corporation's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors on January 1, 1996 or whose appointment,
election or nomination for election was previously so approved; or
(3) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation or
approve the issuance of voting securities of the Corporation in
connection with a merger or consolidation of the Corporation (or any
direct or indirect subsidiary of the Corporation) pursuant to
applicable stock exchange requirements, other than (i) a merger or
consolidation that would result in the voting securities of the
Corporation outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 50% of the combined
voting power of the voting securities of the Corporation or such
surviving entity or any parent thereof outstanding immediately after
such merger or consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person (other than an Excluded
Person) is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Corporation or its Affiliates after January 1, 1996 pursuant
to express authorization by the Board that refers to this exception)
representing 25% or more of either the then outstanding shares of
Common Stock or the combined voting power of the Corporation's then
outstanding voting securities; or
(4) the stockholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or an
agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets (in one transaction or
a series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Corporation of all
or substantially all of the Corporation's assets to an entity at
least 75% of the combined voting power of the voting securities of
which are owned by Persons in substantially the same proportions as
their ownership of the Corporation immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series
of integrated transactions immediately following which the record holders
of the Common Stock immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate
ownership in an entity that owns all or substantially all of the assets of
the Corporation immediately following such transaction or series of
transactions.
"Code" means the Internal Revenue Code of 1986 and the regulations
thereunder, as amended from time to time.
"Committee" means the Compensation Committee of the Board, provided
that if the requisite number of members of the Compensation Committee are
not Disinterested Persons, the Plan shall be administered by a committee,
all of whom are Disinterested Persons, appointed by the Board and
consisting of two or more directors with full authority to act in the
matter. From and after September 18, 1996, "Committee" means the
Compensation Committee of the Board, provided that if the requisite number
of members of the Compensation Committee are not Non-Employee Directors,
the Plan shall be administered by a committee, all of whom are Non-
Employee Directors, appointed by the Board and consisting of two or more
directors with full authority to act in the matter. The term "Committee"
shall mean the Compensation Committee or the committee appointed by the
Board, as the case may be.
"Common Stock" means the common stock, par value $0.01 per share, of
the Corporation and shall include both treasury shares and authorized but
unissued shares and shall also include any security of the Corporation
issued in substitution, in exchange for, or in lieu of the Common Stock.
"Disinterested Person" means a person who is so defined for purposes
of rule 16b-3 under the Exchange Act, or any successor provision, and who
is also defined as an "outside director" for purposes of section 162(m) of
the Code or any successor section.
"Exchange Act" means the Securities Exchange Act of 1934 and the
rules and regulations thereunder, as amended from time to time.
"Fair Market Value" means the mean between the high and low sales
price of the Common Stock, on the relevant date as reported on the
composite list used by the Wall Street Journal for reporting stock prices,
or if no such sale shall have been made on that day, on the last preceding
day on which there was such a sale, or if no such prior sale information
is available then as determined by the Committee.
"Incentive Stock Option" means an Option which is so defined for
purposes of section 422 of the Code or any successor section.
"Insider" has the meaning set forth in subsection 12(h) of this Plan.
"Non-Employee Director" means a person who is so defined for purposes
of Rule 16b-3 under the Exchange Act, or any successor provision, and who
is also defined as an "outside director" for purposes of Section 162(m) of
the Code, or any successor section.
"Nonqualified Stock Option" means any Option which is not an
Incentive Stock Option.
"Option" means a right to purchase a specified number of shares of
Common Stock at a fixed option price equal to no less than 100% of the
Fair Market Value of the Common Stock on the date the Option is granted.
"Option Agreement" means an agreement entered into between the
Corporation and a Participant setting forth the terms and conditions
applicable to the Option granted to the Participant.
"Option Price" has the meaning set forth in subsection 6(b) of this
Plan.
"Participant" means an employee who the Committee selects to
participate in and receive Options under this Plan (collectively, the
"Participants").
"Retirement" and "Retire" means the termination of employment on or
after the date the Participant is entitled to receive immediate payments
under a qualified retirement plan of the Corporation or an Affiliate;
provided, however, if the Participant is not eligible to participate under
a qualified retirement plan of the Corporation or its Affiliates then such
Participant shall be deemed to have retired if his termination of
employment is on or after the date such Participant has attained age 55.
"Total and Permanent Disability" means Totally and Permanently
Disabled as defined in the Midwest Express Airlines, Inc. Salaried
Employees Retirement Plan, provided the Committee shall make a
determination of Total and Permanent Disability for any Participant
hereunder.
4. ADMINISTRATION
The Plan and all Options granted pursuant thereto shall be
administered by the Committee. The Committee, in its absolute discretion,
shall have the power to interpret and construe the Plan and any Option
Agreements; provided, however, that no such action or determination may
increase the amount of compensation payable that would otherwise be due in
a manner that would result in the disallowance of a deduction to the
Corporation under section 162(m) of the Code or any successor section.
Any interpretation or construction of any provisions of this Plan or the
Option Agreements by the Committee shall be final and conclusive upon all
persons. No member of the Board or the Committee shall be liable for any
action or determination made in good faith.
Within 60 days following the close of each calendar year that the
Plan is in operation, the Committee shall make a report to the Board
specifying the employees who received Options under the Plan during the
prior year, the number of Options to the individual employees, and the
status of prior Options.
The Committee shall have the power to promulgate Committee Rules and
other guidelines in connection with the performance of its obligations,
powers and duties under the Plan, including its duty to administer and
construe the Plan and Option Agreements.
The Committee may authorize persons other than its members to carry
out its policies and directives subject to the limitations and guidelines
set by the Committee, except that: (a) the authority to grant Options,
the selection of employees for participation and decisions concerning the
timing, pricing and amount of an Option shall not be delegated by the
Committee; (b) the authority to administer Options with respect to persons
who are subject to section 16 of the Exchange Act shall not be delegated
by the Committee; (c) any delegation shall satisfy all applicable
requirements of rule 16b-3 of the Exchange Act, or any successor
provision; and (d) no such delegation shall result in the disallowance of
a deduction to the Corporation under section 162(m) or any successor
section. Any person to whom such authority is granted shall continue to
be eligible to receive Options under the Plan.
5. ELIGIBILITY
The Committee shall from time to time select the Plan Participants
from those employees whom the Committee determines either to be in a
position to contribute materially to the success of the Corporation or
Affiliate or to have in the past so contributed. Only employees
(including officers and directors who are employees) of the Corporation
and its Affiliates are eligible to participate in the Plan.
6. OPTION TERMS
The Committee shall determine and designate from time to time those
Participants to whom Options are to be granted and the number of shares of
Common Stock to be optioned to each. Such Options may be in the form of
Incentive Stock Options or the in the form of Nonqualified Stock Options.
After granting an Option to a Participant, the Committee shall cause to be
delivered to the Participant an Option Agreement evidencing the granting
of the Option. The Option Agreement shall be in such form as the
Committee shall from time to time approve. The terms and conditions of
all Options granted under the Plan need not be the same, but all Options
must meet the applicable terms and conditions specified in subsections
6(a) through 6(i).
(a) Period of Option. The period of each Option shall be (i) 10
years from the date it is granted for a Nonqualified Stock Option or such
other period as may be determined by the Committee subject to a maximum
period of 15 years and (ii) no more than 10 years from the date it is
granted for an Incentive Stock Option.
(b) Option Price. The Option price shall be determined by the
Committee, but shall not in any instance be less than the Fair Market
Value of the Common Stock at the time that the Option is granted (the
"Option Price").
(c) Limitations on Exercise. At any time during the period of the
Option, either (i) the Participant may purchase after the end of the first
year after the granting of the Option up to 30 percent of the shares
covered by the Option; after the end of the second year, an additional 30
percent; and after the end of the third year, the remaining 40 percent of
the total number of shares covered by the Option, or (ii) the Participant
may purchase the percentage of shares each year as otherwise determined by
the Committee at the time the Option is granted; provided, however, that
if the Participant's employment with the Corporation or an Affiliate is
terminated for any reason other than death, Retirement or Total and
Permanent Disability, the Option shall be exercisable only for three
months following such termination and only for the number of shares of
Common Stock which were exercisable on the date of such termination unless
otherwise provided by the Committee. In no event, however, may an Option
be exercised more than 15 years after the date of its grant, if it is a
Nonqualified Stock Option, or 10 years after the date of its grant, if it
is an Incentive Stock Option. Provided, however, that a termination of
employment with the Corporation or an Affiliate to accept immediate
reemployment with the Corporation or an Affiliate shall not be deemed to
be a termination of employment for purposes of the Plan.
(d) Exercise after Death, Retirement and Disability. If a
Participant dies or becomes Totally and Permanently Disabled, without
having exercised the Option in full, the remaining portion of such Option
may be exercised, without regard to the limitations in subsection 6(c),
within a period not to exceed (i) three years from the date of any such
event or (ii) the remaining period of the Option, whichever is earlier.
Upon a Participant's death, the Option may be exercised by the person or
persons to whom such Participant's rights under the Option shall pass by
will or by applicable law or, if no such person has such rights, by his
executor or administrator. If a Participant Retires without having
exercised the Option in full, the remaining portion of such Option may be
exercised, without regard to the limitations in subsection 6(c), within a
period not to exceed (i) five years from the date of such event or (ii)
the remaining period of the Option, whichever is earlier.
(e) Change in Control. In the event of a Change in Control, each
holder of an Option shall have the right at any time thereafter to
exercise the remaining portion of such Option, without regard to the
limitations in subsection 6(c), at any time during the remaining period of
the Option. As of the date of the approval of the Plan by the
stockholders of the Corporation, any outstanding Option previously granted
under the Plan shall be deemed amended to provide to the holder of such
Option the rights under this subsection in the event of a Change in
Control. The Committee may, in its sole and absolute discretion, amend,
modify or rescind the provisions of this subsection if it determines that
the operation of this subsection may prevent a transaction in which the
Corporation or any Affiliate is a party from being accounted for on a
pooling-of-interests basis.
(f) Non-transferability. During the Participant's lifetime, Options
shall be exercisable only by such Participant. Options shall not be
transferable other than by will or the laws of descent and distribution
upon the Participant's death. Notwithstanding anything in this subsection
6(f) to the contrary, the Committee may also grant to designated
Participants the right to transfer such Options, to the extent allowed
under rule 16b-3 of the Exchange Act, subject to terms and conditions of
the Option Agreement and to Committee Rules on the date such right is
granted.
(g) Exercise; Notice Thereof. Options shall be exercised by
delivering to the Corporation, at the office of the Treasurer, written
notice of the number of shares with respect to which Option rights are
being exercised and by paying in full the Option Price of the shares at
the time being acquired. Payment may be made (i) in cash, (ii) by a check
payable to the Corporation, (iii) in shares of Common Stock transferable
to the Corporation and having a Fair Market Value on the transfer date
equal to the amount payable to the Corporation, (iv) by delivery
(including by telecopy) to the Corporation or its designated agent of an
executed irrevocable option exercise form together with irrevocable
instructions to a broker-dealer to sell or margin a sufficient portion of
the shares at the time being acquired and deliver the sale or margin loan
proceeds directly to the Corporation to pay the exercise price, or (v)
through any combination of the foregoing. The date of exercise shall be
deemed to be the date the Corporation receives the written notice and
payment for the shares being purchased. A Participant shall have none of
the rights of a stockholder with respect to shares covered by such Option
until the Participant becomes the record holder of such shares.
(h) Purchase for Investment. It is contemplated that the
Corporation will register shares sold to Participants pursuant to the Plan
under the Securities Act of 1933. In the absence of an effective
registration, however, a Participant exercising an Option hereunder may be
required to give a representation that he/she is acquiring such shares as
an investment and not with a view to distribution thereof.
(i) Limitations on Incentive Stock Option Grants.
(i) An Incentive Stock Option shall be granted only to an
individual who, at the time the Option is granted, does not own stock
possessing more than 10 percent of the total combined voting power of
all classes of stock of the Corporation or Affiliates.
(ii) The aggregate Fair Market Value of all shares with respect
to which Incentive Stock Options are exercisable by a Participant for
the first time during any year shall not exceed $100,000. The
aggregate Fair Market Value of such shares shall be determined at the
time the Option is granted.
(j) Options for Nonresident Aliens. In the case of any Option
awarded to a Participant who is not a resident of the United States or who
is employed by an Affiliate other than an Affiliate that is incorporated,
or whose place of business is, in a State of the United States, the
Committee may (i) waive or alter the conditions set forth in subsections
6(a) through 6(i) to the extent that such action is necessary to conform
such Option to applicable foreign law, or (ii) take any action, either
before or after the award of such Option, which it deems advisable to
obtain approval of such Option by an appropriate governmental entity;
provided, however, that no action may be taken hereunder if such action
would (1) increase any benefits accruing to any Participants under the
Plan, (2) increase the number of securities which may be issued under the
Plan, (3) modify the requirements for eligibility to participate in the
Plan, (4) result in a failure to comply with applicable provisions of the
Securities Act of 1933, the Exchange Act or the Code or (5) result in the
disallowance of a deduction to the Corporation under section 162(m) of the
Code or any successor section.
7. SHARES SUBJECT TO THE PLAN
The number of shares of Common Stock available with respect to
Options granted under this Plan shall not exceed 500,000; provided,
however, that (a) such maximum amount shall be increased on a share-for-
share basis for each share of Common Stock, if any, that the Corporation
repurchases from and after the date of the Corporation's 1997 Annual
Meeting of Shareholders, subject to a maximum increase of 200,000, and (b)
the limitation described in this section shall be subject to the
adjustment provision set forth in section 9 hereof.
8. INDIVIDUAL LIMITS
The maximum number of shares of Common Stock covered by Options which
may be granted to any Participant within any 2 consecutive calendar year
period shall not exceed 75,000, in the aggregate. If an Option which had
been granted to a Participant is canceled, the shares of Common Stock
which had been subject to such canceled Option shall continue to be
counted against the maximum number of shares for which Options may be
granted to the Participant. In the event that the number of Options which
may be granted is adjusted as provided in the Plan, the above limits shall
automatically be adjusted in the same ratio.
9. CHANGES IN CAPITALIZATION
In the event there are any changes in the Common Stock or the
capitalization of the Corporation through a corporate transaction, such as
any merger, any acquisition through the issuance of capital stock of the
Corporation, any consolidation, any separation of the Corporation
(including a spin-off or other distribution of stock by the Corporation),
any reorganization of the Corporation (whether or not such reorganization
comes within the definition of such term in section 368 of the Code), or
any partial or complete liquidation by the Corporation, recapitalization,
stock dividend, stock split or other change in the corporate structure,
appropriate adjustments and changes shall be made by the Committee, to the
extent necessary to preserve the benefit to the Participant contemplated
hereby, to reflect such changes in (a) the aggregate number of shares
subject to the Plan, (b) the maximum number of shares for which Options
may be granted to any Participant, (c) the number of shares and Option
Price per share of all shares of Common Stock subject to outstanding
options, and (d) such other provisions of the Plan as may be necessary and
equitable to carry out the foregoing purposes, provided, however that no
such adjustment or change may be made to the extent that such adjustment
or change will result in the disallowance of a deduction to the
Corporation under section 162(m) of the Code or any successor section.
10. EFFECT ON OTHER PLANS
All benefits under the Plan shall constitute special compensation and
shall not affect the level of benefits provided to or received by any
Participant (or the Participant's estate or beneficiaries) as part of any
employee benefit plan of the Corporation or an Affiliate. The Plan shall
not be construed to affect in any way a Participant's rights and
obligations under any other plan maintained by the Corporation or an
Affiliate on behalf of employees.
11. TERM OF THE PLAN
No Option may be granted after September 27, 2005 under the Plan, but
Options theretofore granted shall continue in force beyond that date
pursuant to their terms.
12. GENERAL PROVISIONS
(a) No Right of Continued Employment. Neither the
establishment of the Plan nor the payment of any benefits hereunder
nor any action of the Corporation, its Affiliates, the Board of
Directors of the Corporation or its Affiliates, or the Committee
shall be held or construed to confer upon any person any legal right
to be continued in the employ of the Corporation or its Affiliates,
and the Corporation and its Affiliates expressly reserve the right to
discharge any Participant without liability to the Corporation, its
Affiliates, the Board of Directors of the Corporation or its
Affiliates, or the Committee, except as to any rights which may be
expressly conferred upon a Participant under the Plan.
(b) Binding Effect. Any decision made or action taken by the
Corporation, the Board or by the Committee arising out of or in
connection with the construction, administration, interpretation and
effect of the Plan shall be conclusive and binding upon all persons.
(c) Modification of Awards. Subject to the requirements of the
Plan, the Committee may modify or amend any Option or waive any
restrictions or conditions applicable to any Option or the exercise
thereof, and the terms and conditions applicable to any Options may
at any time be amended, modified or canceled by mutual agreement
between the Committee and the Participant or any other persons as may
then have an interest therein, so long as any amendment or
modification does not increase the number of shares of Common Stock
issuable under the Plan. Action may be taken under this section
12(c) notwithstanding expiration of the Plan under section 11.
Notwithstanding anything in this subsection 12(c) to the contrary,
the Committee may not take any action to the extent that such action
would result in the disallowance of a deduction to the Corporation
under section 162(m) of the Code or any successor section.
(d) Inalienability of Benefits and Interest. Except as
provided in subsection 6(f), no benefit payable or interest in the
Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any
such attempted action shall be void and no such benefit or interest
shall be in any manner liable for or subject to debts, contracts,
liabilities, engagements, or torts of any Participant or beneficiary.
(e) Law to Govern. All questions pertaining to the
construction, interpretation, regulation, validity and effect of the
provisions of the Plan shall be determined in accordance with the
internal laws of the state in which the Corporation is incorporated
at the time of the question.
(f) Purchase of Common Stock. The Corporation and its
Affiliates may purchase from time to time shares of Common Stock in
such amounts as they may determine for purposes of the Plan. The
Corporation and its Affiliates shall have no obligation to retain,
and shall have the unlimited right to sell or otherwise deal with for
their own account, any shares of Common Stock purchased pursuant to
this paragraph.
(g) Use of Proceeds. The proceeds received by the Corporation
from the sale of Common Stock pursuant to the exercise of Options
shall be used for general corporate purposes.
(h) Withholding. The Committee shall require the withholding
of all taxes as required by law. A Participant may elect to have any
portion of the federal, state or local income tax withholding
required with respect to an exercise of a Nonqualified Stock Option
satisfied by tendering to the Corporation shares of Common Stock,
which, in the absence of such an election, would have been issued to
such Participant in connection with such exercise. In the event that
the value of the shares of Common Stock tendered to satisfy the
withholding tax required with respect to an exercise exceeds the
amount of such tax, the excess of such market value over the amount
of such tax shall be returned to the Participant, to the extent
possible, in whole shares of Common Stock, and the remainder in cash.
The value of a share of Common Stock tendered pursuant to this
subsection 12(h) shall be the Fair Market Value of the Common Stock
on the date on which such shares are tendered to the Corporation. An
election pursuant to this subjection 12(h) shall be made in writing
and signed by the Participant. An election pursuant to this
subsection 12(h) is irrevocable. A Participant who exercises an
Option and who is required to report to the Securities and Exchange
Commission under section 16(a) of the Exchange Act (an "Insider") may
satisfy the income tax withholding due in respect of such exercise
pursuant to this subsection 12(h) only if the Insider also satisfies
an exemption under section 16(b) of the Exchange Act (or the rules or
regulations promulgated thereunder) for such withholding.
(i) Amendments. The Committee may at any time amend, suspend,
or discontinue the Plan or alter or amend any or all Options and
Option Agreements under the Plan to the extent (1) permitted by law,
(2) permitted by the rules of any stock exchange on which the Common
Stock or any other security of the Corporation is listed, (3)
permitted under applicable provisions of the Securities Act of 1933,
as amended, and the Exchange Act (including rule 16b-3) and (4) that
such action would not result in the disallowance of a deduction to
the Corporation under section 162(m) of the Code or any successor
section (including the rules and regulations promulgated thereunder);
provided,however, that if any of the foregoing requires the approval
by stockholders of any such amendment, suspension or discontinuance,
then the Committee may take such action subject to the approval of
the stockholders. Except as provided in subsections 6(j) and 12(c)
no such amendment, suspension, or termination of the Plan shall,
without the consent of the Participant, adversely alter or change any
of the rights or obligations under any Options or other rights
previously granted the Participant under the Plan.
