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 ss. 240.14a-11(c) or ss. 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:
<PAGE>
[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 28, 1999
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
Midwest Express Center, 400 West Wisconsin Avenue, Milwaukee, Wisconsin, on
Wednesday, April 28, 1999, at 10:00 a.m. local time, for the following purposes:
1. To elect four directors to serve for a three-year term to expire
at the 2002 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 9, 1999, will be entitled to notice of and to vote at the Meeting and
any adjournments or postponements thereof.
Parking for shareholders who will attend the meeting is available at the
Hyatt Hotel, Hilton Hotel or Grand Avenue parking structures or at a lot located
at 701 East Wells Street.
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,
Carol Skornicka
Senior Vice President - Corporate Development,
Secretary and General Counsel
Milwaukee, Wisconsin
March 17, 1999
<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 28, 1999
This Proxy Statement is furnished beginning on or about March 17, 1999,
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 28, 1999, at the Midwest Express Center, 400 West
Wisconsin Avenue, Milwaukee, Wisconsin, and at any adjournments or postponements
thereof.
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 or in open
meeting. Unless 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 9, 1999. As of the record date, there
were 14,126,645 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 11 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 each of the four nominees named
below to serve as directors until the 2002 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 6, 1999. 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 9,
1999. 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
<PAGE>
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.
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION AS DIRECTORS
Term Expiring at 2002 Annual Meeting
Director
Name Age Business Experience During Last Five Years Since
- ---- --- ------------------------------------------ --------
<S> <C> <C> <C>
Timothy E. Hoeksema 52 Chairman of the Board, President and Chief Executive 1983
Officer of the Company since 1983. Director of The Marcus
Corporation and M&I Marshall & Ilsley Bank.
James G. Grosklaus 63 Retired; Executive Vice President and Director of 1988
Kimberly-Clark Corporation (consumer
products) from 1986 to 1996.
Ulice Payne, Jr. 43 Partner with the law firm of Foley & Lardner since June
February 1998; partner with the law firm of Reinhart, 1998
Boerner, Van Deuren, Norris & Rieselbach, S.C. from 1990
to 1998. Director of State Financial Services Corporation.
David H. Treitel 44 Chairman and Chief Executive Officer of SH&E, Inc. 1984
(aviation consulting) since 1996; President of SH&E, Inc.
from 1993 to September 1998.
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 2000 Annual Meeting
<CAPTION>
Director
Name Age Business Experience During Last Five Years Since
- ---- --- ------------------------------------------ --------
<S> <C> <C> <C>
Oscar C. Boldt 74 Chairman of the Board of The Boldt Group, Inc. 1983
(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.
-2-
<PAGE>
<CAPTION>
Director
Name Age Business Experience During Last Five Years Since
- ---- --- ------------------------------------------ --------
<S> <C> <C> <C>
Brenda F. Skelton 43 Senior Vice President-Marketing of the Company since 1998; 1995
Senior Vice President-Marketing and Customer Service from
1995 to 1998; Vice President of
Marketing from 1993 to 1995.
Samuel K. Skinner 60 Co-Chairman of the law firm Hopkins & Sutter since 1998; January
President of Unicom Corporation and Commonwealth Edison 1998
Company (electric utility) from 1993 to 1998. Director of
The LTV Corporation, Union Pacific Resources Group Inc.,
Antec Corporation, Stimsonite Corporation and Everen
Capital Corporation.
Richard H. Sonnentag 58 Managing partner of Cobham Group LP (an investment 1997
partnership) since 1994. Private investor since 1990.
Served as a director of Midwest Express from 1983 to 1990.
Terms Expiring at 2001 Annual Meeting
<CAPTION>
Director
Name Age Business Experience During Last Five Years Since
- ---- --- ------------------------------------------ --------
<S> <C> <C> <C>
John F. Bergstrom 52 Chairman and Chief Executive Officer of Bergstrom 1993
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, Kimberly-Clark Corporation and
Banta Corporation.
Frederick P. Stratton, Jr. 59 Chairman and Chief Executive Officer of Briggs & Stratton 1988
Corporation (engine manufacturing) since 1986. Director
of Briggs & Stratton Corporation, Bank One Corporation,
Weyco Group, Inc. and Wisconsin Energy Corporation.
John W. Weekly 67 Chairman and Chief Executive Officer of Mutual of Omaha 1995
Insurance Company and United of Omaha Life Insurance
Company (insurance companies) since March 1998; Vice
Chairman and Chief Executive Officer since 1997; Vice
Chairman, President and Chief Executive Officer since
1996; Vice Chairman, President and Chief Operating Officer
since 1995; and President and Chief Operating Officer
since 1990.
</TABLE>
-3-
<PAGE>
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 1998, 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 four times in 1998, 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 three times in
1998, consists of Messrs. Treitel (Chairman), Grosklaus, Payne 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 1998, 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 1998. Each
director who was a director in 1998 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 675
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
-4-
<PAGE>
Directors are reimbursed for expenses incurred in connection with attendance at
Board and committee meetings. To encourage directors to stay well informed about
the Company's operations and service levels, the Board adopted a Director Travel
Policy. Pursuant to the Director Travel Policy, each outside director and his or
her spouse and dependent children are (i) eligible to purchase airline tickets
at a price equal to the lowest fare structure for a specified flight and (ii)
entitled to one free roundtrip ticket per six-month period, in each case,
subject to seat availability at the time of reservation.
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of March 9, 1999, 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 245,318(1)(2)(3) 1.7%
Brenda F. Skelton 55,352(1)(2) *
Dennis J. Crabtree 0 *
Carol Skornicka 34,160(1)(2) *
Robert S. Bahlman 22,962(1)(2) *
John F. Bergstrom 28,620(4)(5) *
Oscar C. Boldt 14,421(5) *
James G. Grosklaus 5,224(6) *
Ulice Payne, Jr. 572 *
Samuel K. Skinner 1,227 *
Richard H. Sonnentag 15,904(5)(7) *
Frederick P. Stratton, Jr. 40,702(5) *
David H. Treitel 4,078(5) *
John W. Weekly 3,754 *
All directors and executive
officers as a group
(16 persons) 509,177(1)(2)(5) 3.5%
FMR Corp. and related persons 1,614,250(8) 11.4%
82 Devonshire Street
Boston, MA 02109
-5-
<PAGE>
Name of Beneficial Owner Shares Percent of Class
- ------------------------ ------ ----------------
Nicholas-Applegate Capital Management 718,750(8) 5.1%
600 West Broadway
San Diego, CA 92101
- ---------------
* 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, 1998. 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, 183,375 shares; Ms.
Skelton, 54,000 shares; Ms. Skornicka, 33,750 shares; Mr. Bahlman, 20,250
shares; and all directors and executive officers as a group, 324,225
shares.
(3) Mr. Hoeksema holds 225 shares jointly with his wife.
(4) Mr. Bergstrom shares voting and investment control over 4,095 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, 2,025 shares; Mr. Boldt, 3,171 shares; Mr. Skinner, 75
shares; Mr. Sonnentag, 2,429 shares; Mr. Stratton, 3,202 shares; and Mr.
Treitel, 2,953 shares.
(6) Includes 1,485 shares held by Mr. Grosklaus' wife.
(7) Includes 2,475 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.
-6-
<PAGE>
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
Annual Compensation Compensation Awards
--------------------------------------------- ----------------------
Other Annual Awards All Other
Name and Principal Fiscal Compensation Securities Underlying Compensation
Position Year Salary ($) Bonus ($) ($) Options (#)(1)(2) ($)(3)
- ----------------------- ----- ---------- --------- --- ----------------- ------
<S> <C> <C> <C> <C> <C> <C>
Timothy E. Hoeksema, Chairman 1998 $ 309,000 $ 288,276 $ 0 78,750 $ 5,000
of the Board, President and 1997 300,000 224,353 0 78,750 4,750
Chief Executive Officer 1996 300,000 265,566 0 0 4,750
Brenda F. Skelton, Senior 1998 165,859 81,931 0 22,500 4,976
Vice President-Marketing 1997 160,000 63,763 0 22,500 4,750
1996 156,623 75,476 0 0 4,700
Dennis J. Crabtree, Senior 1998 150,000 65,676 0 22,500(6) 88,154
Vice President-Operations(4) 1997 149,423 63,763 0 22,500(6) 4,500
1996 145,835 75,476 24,136 0 4,375
Carol Skornicka(5), 1998 152,776 81,931 0 22,500 4,574
Senior Vice 1997 142,000 45,940 3,007 22,500 4,260
President-Corporate 1996 84,777 53,668 52,650 22,500 675
Development, Secretary and
General Counsel
Robert S. Bahlman, Senior Vice 1998 145,824 81,931 0 22,500 4,375
President and Chief Financial 1997 122,820 45,940 0 22,500 3,684
Officer 1996 94,820 30,873 29,868 0 2,845
- ---------------
(1) Represents options granted under the Midwest Express Holdings, Inc. 1995
Stock Option Plan.
(2) Reflects adjustments for the 3-for-2 splits of Common Stock effected on
May 28, 1997 and May 27, 1998.
(3) Except for Mr. Crabtree, all amounts shown for 1998 consist of Midwest
Express' contributions under the Midwest Express Airlines Savings &
Investment Plan. Mr. Crabtree's amount consists of $4,500 of Midwest
Express' contributions under the Midwest Express Airlines Savings &
Investment Plan, $75,000 of severance payments made to Mr. Crabtree on
December 31, 1998 in connection with his resignation and $8,654 of
payments made to Mr. Crabtree on December 31, 1998 for vacation accrued
for 1999.
(4) Mr. Crabtree resigned as Senior Vice President-Operations effective
December 31, 1998.
-7-
<PAGE>
(5) Ms. Skornicka's employment with Midwest Express began on May 13, 1996.
(6) All of the options granted in 1998 were cancelled effective December 31,
1998. 15,750 of the options granted in 1997 were cancelled effective
December 31, 1998, and the other 6,750 of such options are only
exercisable through March 31, 1999.
</TABLE>
Option Grants in 1998
The following table presents certain information as to grants of options
to purchase Common Stock made to each of the named executive officers during
1998 pursuant to the Midwest Express Holdings, Inc. 1995 Stock Option Plan (the
"Option Plan").
<TABLE>
<CAPTION>
Option Grants in 1998
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for Option
Individual Grants Grant Term(1)
- ------------------------------------------------------------------------------------- ---------------------------
Percentage
of Total
Number of Options
Securities Granted to Exercise At 5% At 10%
Underlying Employees or Base Annual Annual
Options in Fiscal Price Expiration Growth Growth
Name Granted(2) Year ($/share) Date Rate Rate
Common Stock(3)
<S> <C> <C> <C> <C> <C> <C> <C>
Timothy E. Hoeksema.... 78,750 28.5% $30.5208 02/10/08 $1,511,545 $3,830,575
Brenda F. Skelton...... 22,500 8.1% $30.5208 02/10/08 431,870 1,094,450
Dennis J. Crabtree..... 22,500(4) 8.1% $30.5208 02/10/08 431,870 1,094,450
Carol Skornicka........ 22,500 8.1% $30.5208 02/10/08 431,870 1,094,450
Robert S. Bahlman...... 22,500 8.1% $30.5208 02/10/08 431,870 1,094,450
- --------------------
(1) This presentation is intended to disclose the potential value that would
accrue to the optionee if the option were exercised the day before it
would expire and if the per share value had appreciated at the compounded
annual rate indicated in each column. The assumed rates of appreciation
of 5% and 10% are prescribed by the rules of the Securities and Exchange
Commission regarding disclosure of executive compensation. The assumed
annual rates of appreciation are not intended to forecast possible future
appreciation, if any, with respect to the price of the Common Stock.
(2) Reflects adjustments for the 3-for-2 split of Common Stock effected on
May 27, 1998.
(3) The options to purchase Common Stock reflected in the table (which are
nonstatutory stock options for purposes of the Internal Revenue Code of
1986, as amended (the "Code")) were
-8-
<PAGE>
granted effective February 10, 1998, and vest 30% on the first
anniversary of the date of grant, another 30% on the second anniversary
of the date of grant and the final 40% on the third anniversary of the
date of grant. The options are subject to early vesting in the case of
the optionee's death, disability or retirement or a change of control (as
defined in the Option Plan) of the Company.
(4) All of such options were cancelled effective December 31, 1998.
Aggregated Option Exercises in 1998 and Year-End Option Values
</TABLE>
None of the named executive officers exercised options to acquire Common
Stock during 1998. The following table sets forth information regarding the
year-end value of unexercised options held by such officers under the Option
Plan.
<TABLE>
<CAPTION>
Option Values as of December 31, 1998
Number of Securities
Underlying Value of Unexercised
Unexercised Options in-the-Money Options
at December 31, at December 31,
1998(#)(1) 1998($)(2)
------------------------------ ------------------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- ------------- -------------
<S> <C> <C>
Timothy E. Hoeksema............................... 136,125/133,875 $2,301,164/$562,352
Brenda F. Skelton................................. 40,500/38,250 686,906/160,672
Dennis J. Crabtree(3)............................. 40,500/0 686,906/0
Carol Skornicka................................... 20,250/47,250 235,078/271,485
Robert S. Bahlman................................. 6,750/38,250 68,859/160,672
- -------------------
(1) Reflects adjustments for the 3-for-2 splits of Common Stock effected on
May 28, 1997 and May 27, 1998.
(2) The dollar values are calculated by determining the difference between
the fair market value of the underlying stock as of December 31, 1998 and
the exercise price of the options.
(3) All of Mr. Crabtree's unexercisable options were cancelled effective
December 31, 1998.
</TABLE>
-9-
<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.
<TABLE>
<CAPTION>
Years of Benefit Service
------------------------------------------------------------------------
Five-Year Average
Remuneration 15 20 25 30 35 40
- ------------------ -------- -------- -------- -------- -------- --------
<S> <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
800,000..... 180,000 240,000 300,000 360,000 420,000 480,000
</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 Corporation'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, 1998, years of benefit service for those named executive
officers currently eligible to participate in the Midwest Express Pension Plan
are as follows: Mr. Hoeksema, 28 years; Ms. Skelton, 11 years; Mr. Crabtree, 3
years; Ms. Skornicka, 2 years; and Mr. Bahlman, 17 years.
-10-
<PAGE>
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 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 the same 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.
-11-
<PAGE>
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 (Airlines Industrial Relations) Conference survey reflects information
concerning salary, benefits and work rules relating to 22 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 varying sizes of the participating companies. 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. The Company did
not sponsor an executive compensation study in 1997 to provide guidance in
determining 1998 compensation. The Company did, however, extrapolate from the
1996 ORC Compensation Survey using more recent generally available information
on executive compensation trends in the airline industry.
1998 Compensation
Base Salary. The approach the Committee used to establish 1998
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 midpoint for each position, the Committee approved a salary range for
each executive officer position, where the minimum salary was 20% below the
midpoint, and the maximum salary was 20% above the midpoint. 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 1998, base salary midpoints were generally set at a level 3% higher
than the 1997 base salary midpoint for each executive officer position.
-12-
<PAGE>
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 1998, the Committee amended the Annual Incentive Plan
so that the plan now provides incentives to create additional shareholder value,
or "Shareholder Value Added". Shareholder Value Added is a dollar amount equal
to the excess of net operating profit after tax over a calculated cost of the
capital employed in the Company. The Annual Incentive Plan provides that Target
Awards under the plan may focus on corporate Shareholder Value Added, subsidiary
Shareholder Value Added and/or individual performance measures that drive
shareholder value as determined by the Committee.
Under the Annual Incentive Plan, for 1998 the Committee approved for each
eligible employee an annual incentive Target Award that represented a percentage
of the base salary 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. The 1996 ORC Compensation Survey and more recent generally
available information on executive compensation indicate that these Target Award
percentages are competitive with respect to airline industry practice. The
Annual Incentive Plan does not provide for a maximum award; however, to provide
an incentive for executives to remain with the Company, the plan specifies that
any awards earned in excess of an employee's Target Award are credited to an
account for the participant in an "award bank." A participant's balance in the
award bank is subject to forfeiture, and one-third of the balance is payable
each year, assuming continued employment.
For the Company's executive officers for 1998, with one exception for the
president of Astral Aviation, Inc., a wholly owned subsidiary of Midwest
Express, the Committee chose a corporate level Shareholder Value Added 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. Awards were also
subject to control measures that gave the Committee the discretion to take into
account unusual Company or industry conditions or events. The Company achieved
results equal to 153% over its Shareholder Value Added target in 1998. Given
unusually low fuel costs and other favorable economic conditions in the airline
industry in 1998, the Committee exercised its discretion to set potential awards
at 75% over Target Awards. A portion of each participant's award is payable
currently and the remainder is subject to the operation of the award bank.
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 1998, 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.
-13-
<PAGE>
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 $5,000), 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 1998 base salary approximated the market value that the
Committee established for his position, and represented a 3% increase over his
1997 base salary. Mr. Hoeksema's annual incentive Target Award under the Annual
Incentive Plan for 1998 represented 75% of that market value. As noted above,
the actual award was dependent upon the level of Shareholder Value Added created
by the Company. Of the total incentive compensation potentially payable to Mr.
Hoeksema in respect of 1998 performance, $288,276 has been paid to Mr. Hoeksema
to date, consisting of his Target Award and one-third of Mr. Hoeksema's award
bank balance (i.e., one-third of the excess of the total incentive compensation
payable to Mr. Hoeksema in respect of 1998 performance over his Target Award).
The remainder of the total incentive compensation payable to Mr. Hoeksema in
respect of 1998 performance was credited to Mr. Hoeksema's award bank and
remains subject to forfeiture. In 1998, Mr. Hoeksema received options to
purchase 78,750 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, 1998, 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,
1998. The graph assumes investments of $100 on September 22, 1995, in Common
Stock at its initial public offering price of $8.00 per share (as adjusted for
the 3-for-2 splits of Common Stock effected on May 28, 1997 and May 27, 1998),
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.
-14-
<PAGE>
<TABLE>
<CAPTION>
MIDWEST EXPRESS HOLDINGS, INC.
Relative Market Performance
September 22, 1995, to December 31, 1998
{GRAPHIC OMITTED]
- -------------------------- ------------ ------------- ------------- ------------- -------------
9/22/95 12/29/95 12/31/96 12/31/97 12/31/98
- -------------------------- ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Midwest Express Holdings 100.00 155.56 200.00 323.44 328.91
- -------------------------- ------------ ------------- ------------- ------------- -------------
S&P Airlines Index(1) 100.00 102.76 112.82 189.90 184.08
- -------------------------- ------------ ------------- ------------- ------------- -------------
S&P 500 Index 100.00 105.88 127.33 166.82 211.31
- -------------------------- ------------ ------------- ------------- ------------- -------------
(1) The S&P Airlines Index consists of AMR Corp., Delta Air Lines, Southwest
Airlines and US Airways Group.
</TABLE>
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the Company's independent auditors in
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. The Company's independent auditors for 1999 will be formally approved in
June 1999.
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,
1998, all of its officers and directors complied with Section 16(a) filing
requirements.
-15-
<PAGE>
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, 1998. 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 pursuant to Rule 14a-8 under
the Exchange Act ("Rule 14a-8") in the Company's proxy statement for the 2000
Annual Meeting of Shareholders must forward the proposal to the Company by
November 17, 1999. The Company's By-laws establish procedures for shareholder
nominations for elections for directors of the Company and for bringing business
before any annual meeting of shareholders of the Company. Among other things,
under terms as currently in effect, 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. Under the
By-laws as currently in effect, if the Company does not receive a shareholder
proposal submitted otherwise than pursuant to Rule 14a-8 prior to February 12,
2000, then the notice will be considered untimely and the Company is not
required to present such proposal at the 2000 Annual Meeting of Shareholders. If
the Board of Directors chooses to present such proposal at the 2000 Annual
Meeting of Shareholders, then the persons named in proxies solicited by the
Board of Directors for the 2000 Annual Meeting of Shareholders may exercise
discretionary voting power with respect to such 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, 1999
-16-
<PAGE>
PROXY
1999 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 28, 1999, at the Midwest Express Center, 400 West Wisconsin
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: 1 - Timothy E. Hoeksema 2 - James G. Grosklaus
3 - Ulice Payne, Jr. 4 - David H. Treitel
[ ]FOR all nominees [ ] WITHHOLD AUTHORITY
listed to the left to vote for all
(except as nominees listed to
specified below). the left.
(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.
Check appropriate box Date
Indicate changes below:
Address Change? [ ] Name Change? [ ]
NO. OF SHARES
------------------------------------------------
[ ] 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.
