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:
[ ] 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 date of
its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
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 22, 1998
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 Wyndham Hotel, 139 East Kilbourn Avenue, Milwaukee, Wisconsin,
on Wednesday, April 22, 1998, at 10:00 a.m. local time, for the following
purposes:
1. To elect one director to serve for a two-year term to expire at
the 2000 Annual Meeting and three directors to serve for a
three-year term to expire at the 2001 Annual Meeting; and
2. 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, 1998, 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,
/s/ Carol Skornicka
Carol Skornicka
Senior Vice President - Corporate
Development,
Secretary and General Counsel
Milwaukee, Wisconsin
March 17, 1998
<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 22, 1998
This Proxy Statement is furnished beginning on or about March 17,
1998, 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 22, 1998, at the Wyndham
Hotel, 139 East Kilbourn 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, 1998. As of the record
date, there were 9,421,865 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 four 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 one nominee named below to
serve as a director until the 2000 Annual Meeting of Shareholders and each
of the three other nominees named below to serve as directors until the
2001 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 7, 1998. 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 two-year term or a three-year term, as
the case may be, 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, 1998. 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 a
wholly owned subsidiary of Midwest Express Holdings, Inc. The four
nominees are currently directors of the Company. If any of the nominees
should be unable or unwilling to serve, then 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
Term Expiring at 2000 Annual Meeting
Business Experience During Last Director
Name Age Five Years Since
Samuel K. Skinner 59 President of Unicom Corporation January
and Commonwealth Edison Company 1998
(electric utility) since 1993.
Director of Unicom Corporation,
Commonwealth Edison Company, The
LTV Corporation, Union Pacific
Resources Group Inc., Antec
Corporation and The Broken Hill
Proprietary Company Limited.
Terms Expiring at 2001 Annual Meeting
Business Experience During Last Director
Name Age Five Years Since
John F. Bergstrom 51 Chairman and Chief Executive 1993
Officer of Bergstrom Corporation
(owner and operator of 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. 58 Chairman and Chief Executive 1987
Stratton, Jr. 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 66 Chief Executive Officer of Mutual 1995
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.
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 1999 Annual Meeting
Business Experience During Director
Name Age Last Five Years Since
Timothy E. Hoeksema 51 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.
James G. Grosklaus 62 Retired; Executive Vice 1988
President and Director of
Kimberly-Clark Corporation
(manufacturer of paper and
consumer products) from 1986
to 1996.
David H. Treitel 43 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.
Terms Expiring at 2000 Annual Meeting
Business Experience During Director
Name Age Last Five Years Since
Oscar C. Boldt 73 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 42 Senior Vice President - 1995
Marketing and Customer
Service of the Company since
March 1995; Vice President of
Marketing from February 1993
to March 1995.
Richard H. Sonnentag 57 Managing partner of Cobham 1997
Group LP (an investment
partnership) since December
1994. Private investor since
May 1990. Served as a
director of Midwest Express
from 1983 to 1990.
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 four times in 1997, consists of
Messrs. Boldt (Chairman), Skinner and Sonnentag. 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 1997, 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 once in 1997,
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 did not meet in 1997, 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 1997.
Each director who was a director in 1997 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 450 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, 1998, 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 89,862(1)(2)(3) *
Brenda F. Skelton 19,028(1)(2) *
Dennis J. Crabtree 18,285(1)(2) *
Carol Skornicka 9,120(1)(2) *
Robert S. Bahlman 5,746(1)(2) *
John F. Bergstrom 18,630(4)(5) *
Oscar C. Boldt 8,956(5) *
James G. Grosklaus 2,836 *
Samuel K. Skinner 159 *
Richard H. Sonnentag 8,612(5)(6) *
Frederick P. Stratton, Jr. 26,443(5) *
David H. Treitel 2,073(5) *
John W. Weekly 1,893 *
All directors and executive
officers as a group
(16 persons) 228,676(1)(2)(5) 2.4%
FMR Corp. and related persons 722,200(7) 7.7%
82 Devonshire Street
Boston, MA 02109
Granahan Investment 552,300(7) 5.9%
Management, Inc.
303 Wyman Street
Waltham, MA 02154
Heartland Advisors, Inc. 605,800(7) 6.4%
790 North Milwaukee Street
Milwaukee, WI 53202
State of Wisconsin Investment 763,850(7) 8.1%
Board
P.O. Box 7842
Madison, WI 53707
Vanguard Explorer Fund, Inc. 480,000(7) 5.1%
P.O. Box 2600
Valley Forge, PA 19482
_______________
* 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, 1997. 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, 60,750 shares;
Ms. Skelton, 18,000 shares; Mr. Crabtree, 18,000 shares; Ms.
Skornicka, 9,000 shares; Mr. Bahlman, 4,500 shares; and all directors
and executive officers as a group, 122,850 shares.
(3) Mr. Hoeksema holds 150 shares jointly with his wife.
(4) Mr. Bergstrom shares voting and investment control over 2,730 shares
that are held in trust for the benefit of Mr. Bergstrom's children.
(5) 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, 900 shares; Mr. Boldt, 1,456 shares; Mr.
Sonnentag, 962 shares; Mr. Stratton, 1,443 shares; and Mr. Treitel,
1,323 shares.
(6) Includes 1,650 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.
(7) 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
Other Annual Awards All Other
Name and Principal Fiscal Compensation Securities Underlying Compensa-
Position Year Salary ($) Bonus ($) ($) Options (#) tion ($)(4)
MEH(1)(2) K-C(3)
<S> <C> <C> <C> <C> <C> <C> <C>
Timothy E. Hoeksema, 1997 $ 300,000 $ 224,353 $ 0 52,500 0 $ 4,750
Chairman of the Board, 1996 300,000 265,566 0 0 0 4,750
President and Chief Executive 1995 299,700 280,000 0 75,000 20,000 4,725
Officer
Brenda F. Skelton, Senior 1997 160,000 63,763 0 15,000 0 4,750
Vice President-Marketing 1996 156,623 75,476 0 0 0 4,700
and Customer Service 1995 116,666 62,753 0 22,500 6,000 3,457
Dennis J. Crabtree(5), 1997 149,423 63,763 0 15,000 0 4,500
Senior Vice President- 1996 145,835 75,476 24,136(7) 0 0 4,375
Operations 1995 90,800 44,280 28,667(7) 22,500 0 1,050
Carol Skornicka(6), 1997 142,000 45,940 3,007(7) 15,000 0 4,260
Senior Vice President- 1996 84,777 53,668 52,650(7) 15,000 0 675
Corporate Development,
Secretary and General Counsel
Robert S. Bahlman, Senior 1997 122,820 45,940 0 15,000 0 3,684
Vice President, Chief 1996 94,820 30,873 29,868(7) 0 0 2,845
Financial Officer, Treasurer 1995 82,270 10,000 0 0 1,000 2,468
and Controller
_______________
(1) Represents options granted under the Midwest Express Holdings, Inc. 1995 Stock Option Plan.
(2) Reflects an adjustment for the 3-for-2 split of Common Stock effected on May 28, 1997.
(3) 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 unvested portion of
these options expired in August 1996.
(4) All amounts shown for 1997 and 1996 consist of Midwest Express' contributions under the Midwest Express Airlines Savings
& Investment Plan.
(5) Mr. Crabtree's employment with Midwest Express began on May 18, 1995.
(6) Ms. Skornicka's employment with Midwest Express began on May 13, 1996.
(7) Amounts consist solely of relocation expense and related tax gross-up.
</TABLE>
Option Grants in 1997
The following table presents certain information as to grants of
options to purchase Common Stock made to each of the named executive
officers during 1997 pursuant to the Midwest Express Holdings, Inc. 1995
Stock Option Plan (the "Option Plan").
<TABLE>
Option Grants in 1997
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for Option
Individual Grants Grant Term(1)
Percentage
of Total
Number of Options
Securities Granted to Exercise At 5% At 10%
Underlying Employees or Base Annual Annual
Options in Fiscal Price Expiration Growth Growth
Name Granted(2) Year ($/share) Date Rate Rate
Common Stock(3)
<S> <C> <C> <C> <C> <C> <C>
Timothy E. Hoeksema.. 52,500 27.6% $24.17 02/13/07 $798,021 $2,022,340
Brenda F. Skelton.... 15,000 7.9% $24.17 02/13/07 225,831 577,812
Dennis J. Crabtree... 15,000 7.9% $24.17 02/13/07 225,831 577,812
Carol Skornicka...... 15,000 7.9% $24.17 02/13/07 225,831 577,812
Robert S. Bahlman.... 15,000 7.9% $24.17 02/13/07 225,831 577,812
__________
(1) This presentation is intended to disclose the potential value that would accrue to the optionee if the option were
exercised the day before it would expire and if the per share value had appreciated at the compounded annual rate
indicated in each column. The assumed rates of appreciation of 5% and 10% are prescribed by the rules of the Securities
and Exchange Commission regarding disclosure of executive compensation. The assumed annual rates of appreciation are not
intended to forecast possible future appreciation, if any, with respect to the price of the Common Stock.
(2) Reflects an adjustment for the 3-for-2 split of Common Stock effected on May 28, 1997.
(3) The options to purchase Common Stock reflected in the table (which are nonstatutory stock options for purposes of the
Internal Revenue Code of 1986, as amended) were granted effective February 13, 1997, and vest 30% on the first anniversary
of the date of grant, another 30% on the second anniversary of the date of grant and the final 40% on the third
anniversary of the date of grant. The options are subject to early vesting in the case of the optionee's death,
disability or retirement or a change of control (as defined in the Option Plan) of the Company.
</TABLE>
Aggregated Option Exercises in 1997 and Year-End Option Values
None of the named executive officers exercised options to acquire
Common Stock during 1997. The following table sets forth information
regarding the year-end value of unexercised options held by such officers
under the Option Plan.
Aggregated Option Exercises in 1997
and Option Values as of December 31, 1997
Number of Securities
Underlying Value of Unexercised
Unexercised Options in-the-Money Options
at December 31, at December 31,
1997(#)(1) 1997($)(2)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
Timothy E. Hoeksema . . . . . 45,000/82,500 $1,206,563/$1,573,120
Brenda F. Skelton . . . . . . 13,500/24,000 361,969/460,950
Dennis J. Crabtree . . . . . 13,500/24,000 361,969/460,950
Carol Skornicka . . . . . . . 4,500/25,500 80,156/406,668
Robert S. Bahlman . . . . . . 0/15,000 0/219,637
__________
(1) Reflects an adjustment for the 3-for-2 split of Common Stock effected
on May 28, 1997.
(2) The dollar values are calculated by determining the difference
between the fair market value of the underlying stock as of the date
of exercise or December 31, 1997, as the case may be, and the
exercise price of the options.
<PAGE>
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.
Years of Benefit Service
Five-Year
Average
Remuneration 15 20 25 30 35 40
$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
800,000 180,000 240,000 300,000 360,000 420,000 480,000
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, 1997, years of benefit service for those named
executive officers currently eligible to participate in the Midwest
Express Pension Plan are as follows: Mr. Hoeksema, 27 years; Ms. Skelton,
10 years; Mr. Crabtree, 2 years; Ms. Skornicka, 1 year; and Mr. Bahlman,
16 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.
In 1996, the Company sponsored an Airline Industry Executive
Compensation Survey conducted by ORC (the "1996 ORC Compensation Survey").
Eleven airlines of various sizes participated in the survey and provided
information regarding base pay, annual bonuses and long-term incentive
compensation for 26 key executive positions in the airline industry. The
results were made more useful to the participants through the use of
linear regression analysis to take into account the size of the Company.
The results of the survey indicated generally that compensation for the
Company's officers in 1996 was in line with the airline industry given the
size of the Company.
1997 Compensation
Base Salary. The approach the Committee used to establish 1997
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.
With limited exceptions where the results of the 1996 ORC
Compensation Survey indicated that the Company had underestimated the
market value for two executive officer positions, for 1997 the Committee
generally continued to utilize the 1996 base salary market value for each
executive officer position.
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. Under the Annual Incentive Plan, for 1997 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 1996 ORC Compensation Survey indicated that these Target Award
percentages were competitive with respect to airline industry practice.
For the Company's executive officers for 1997, with one exception for
the president of Astral Aviation, Inc., a wholly owned subsidiary of
Midwest Express ("Astral"), the Committee chose operating income before
profit sharing, 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 a control measure based upon return on average shareholders' equity.
Long-Term Compensation. 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. For 1997, the Committee approved awards of
options to executive officers and certain members of senior management,
with the sizes of the awards determined relative to the size of the
position and market data without taking into account options previously
granted or an officer's shareholdings. All options were granted at fair
market value pursuant to the terms of the Option Plan approved by
shareholders.
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 (up to a maximum of
$4,750), 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 1997 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 1997
represented 75% of that market value. As noted above, the actual award
was dependent upon Company earnings per share and return on average
shareholders' equity. The actual incentive payment made to Mr. Hoeksema
in 1997 was $224,353 (representing 100% of his Target Award, but 75% of
his maximum potential payout), based upon the Company meeting the
Company's operating income before profit sharing target in 1997 and
meeting its minimum return on equity. In 1997, Mr. Hoeksema received
options to purchase 52,500 shares on the basis described above.
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, 1997, 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, 1997. The graph assumes
investments of $100 on September 22, 1995, in Common Stock at its initial
public offering price of $12.00 per share (as adjusted for the 3-for-2
split of Common Stock effected on May 28, 1997), 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, 1997
[chart]
9/22/95 12/29/95 12/31/96 12/31/97
Midwest Express Holdings 100.00 155.56 200.00 323.44
S&P Airlines Index(1) 100.00 102.77 112.96 190.32
S&P 500 Index 100.00 106.57 131.04 174.76
(1) The S&P Airlines Index consists of AMR Corp., Delta Air Lines,
Southwest Air and USAir Group.
CERTAIN TRANSACTIONS
On June 30, 1995, Midwest Express entered into a lease with Chocolate
Chip Limited Partnership, a Wisconsin limited partnership ("Chocolate
Chip") for the corporate headquarters built at 6744 South Howell Avenue,
Oak Creek, Wisconsin. 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 lease provided for rental payments of approximately $46,400 per month
for the first five years of the term that commenced in March 1996, with
higher payments due over the course of the remainder of the 15-year term.
In September 1997, Midwest Express purchased the corporate headquarters
from Chocolate Chip at a purchase price of $6,200,000. The sale price for
the building was determined on the basis of the actual construction cost
plus a reasonable return on investment. The Company believes the terms of
the lease for the corporate headquarters were, and the purchase price for
the corporate headquarters was, no less favorable to Midwest Express than
could be obtained from an unaffiliated party.
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the Company's independent auditors in
1997. The Company's independent auditors for 1998 will be formally
approved in June 1998. 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. The Company believes that, during
the year ended December 31, 1997, all of its 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, 1997.
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 1999 Annual Meeting of Shareholders must forward the
proposal to the Company by November 19, 1998. 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,
/s/ Carol Skornicka
Carol Skornicka
Senior Vice President - Corporate
Development,
Secretary and General Counsel
Milwaukee, Wisconsin
March 17, 1998
<PAGE>
PROXY
1998 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 22, 1998, at the Wyndham
Hotel, 139 East Kilbourn 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.
PLEASE COMPLETE AND 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: [_] FOR [_] WITHHOLD
1 - John F. Bergstrom, 2 - Samuel K.
Skinner, 3- Frederick P. Stratton, Jr.,
4 - John W. Weekly
____________________
(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 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 below
__________________________
Please check this [ ]
[_] 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, administrator,
trustee or guardian, please
give full title as such.
