Exhibit 10.39
MIDWEST AIR GROUP, INC.
ANNUAL AND LONG-TERM INCENTIVE PLAN
ARTICLE 1.
PURPOSE AND DURATION
Section 1.1 . Purpose . The purpose of
the Midwest Air Group, Inc. Annual and Long-Term Incentive Plan is
to motivate key employees of the Company and its Affiliates who
have the prime responsibility for the operations of the Company and
its Affiliates to achieve performance objectives, measured on an
annual and long-term basis, that are aligned with the
Company’s strategic goals and which are intended to result in
increased value to the shareholders of the Company.
The
Plan replaces and supersedes the Midwest Air Group, Inc. Long-Term
Performance Plan and the Midwest Air Group Annual Incentive
Plan.
Section 1.2 . Duration . The Plan is
effective January 1, 2006, and will remain in effect until
terminated pursuant to Article 10.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Section 2.1 . Definitions . Wherever
used in the Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
(a)
“Administrator” means, with respect to executive
officers of the Company, the Committee, and with respect to all
other key employees, the Chief Executive Officer of the
Company.
(b)
“Affiliate” has the meaning ascribed to such term in
Rule 12b-2 promulgated under the Exchange Act, or any successor
rule or regulation thereto.
(c)
“Annual Incentive Award” means an Incentive Award with
a Performance Period of no more than one fiscal year of the Company
or an Affiliate, as applicable.
(d)
“Base Salary” of a Participant means the annual rate of
base pay in effect for such Participant as of the last day of the
Performance Period (or such other date as the Administrator may
specify by action taken at the time of grant of an Incentive
Award).
(e)
“Board” means the Board of Directors of the
Company.
(f)
“Cause” means: (1) if the Participant is subject
to an employment agreement that contains a definition of
“cause”, such definition, or (2) otherwise, any of the
following as determined by the Administrator: (A) violation
of the provisions of any employment agreement, non-competition
agreement, confidentiality agreement, or similar agreement with the
Company or an Affiliate, or the Company’s or an
Affiliate’s code of ethics, as then in effect, (B)
conduct
rising to the level of gross negligence or willful misconduct in
the course of employment with the Company or an Affiliate, (C)
commission of an act of dishonesty or disloyalty involving the
Company or an Affiliate, (D) violation of any federal, state or
local law in connection with the Participant’s employment, or
(E) breach of any fiduciary duty to the Company or an
Affiliate.
(g)
“Change of Control”means the earliest to occur of the
following:
(1)
any “Person” (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as modified and used in Sections 13(d)
and 14(d) thereof), other than (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities
under any employee benefit plan of the Company or any of its
subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation
owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of stock
in the Company (“Excluded Persons”), is or becomes the
“Beneficial Owner” (as defined in rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its affiliates
after January 1, 2005, pursuant to express authorization by the
Board that refers to this exception) representing more than 50% of
the then outstanding shares of Stock or 35% or more of the combined
voting power of the Company’s then outstanding voting
securities; or
(2)
the following individuals cease for any reason to constitute a
majority of the number of directors then serving during any
12-month period: individuals who, on January 1, 2005,
constituted the Board and any new director whose appointment or
election by the Board or nomination for election by the
Company’s shareholders was approved by a vote of at least a
majority of the directors then still in office who either were
directors on January 1, 2005, or whose appointment, election or
nomination for election was previously so approved; or
(3)
consummation of a merger or consolidation of the Company with any
other corporation or the issuance of voting securities of the
Company in connection with a merger or consolidation of the Company
(or any direct or indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than (i) a merger or
consolidation that would result in the voting securities of the
Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 50% of the
combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no
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Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates
after January 1, 2005, pursuant to express authorization by the
Board that refers to this exception) representing 25% or more of
either the then outstanding shares of Common Stock or the combined
voting power of the Company’s then outstanding voting
securities; or
(4)
consummation of the sale or disposition by the Company of all
or substantially all of the Company’s assets (in one
transaction or a series of related transactions during any 12-month
period), other than a sale or disposition by the Company of all or
substantially all of the Company’s assets to an entity at
least 75% of the combined voting power of the voting securities of
which are owned by Persons in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
For purposes hereof, a “sale or disposition by the
Company of all or substantially all of the Company’s
assets” will not be deemed to have occurred if the sale
involves assets having a total gross fair market value of less than
forty percent (40%) of the total gross fair market value of all
assets of the Company immediately prior to the acquisition.
For this purpose, “gross fair market value” means
the value of the assets without regard to any liabilities
associated with such assets.
Notwithstanding the foregoing, no “Change of Control”
shall be deemed to have occurred if there is consummated any
transaction or series of integrated transactions immediately
following which the record holders of the Common Stock immediately
prior to such transaction or series of transactions continue to
have substantially the same proportionate ownership in an entity
that owns all or substantially all of the assets of the Company
immediately following such transaction or series of
transactions.
In
addition, the definition of “Change of Control” shall
be interpreted in accordance with the meaning of a change of
control under Code Section 409A, which is incorporated herein by
reference. The Administrator must certify in writing that a
Change of Control has occurred.
(h)
“Code” means the Internal Revenue Code of 1986, as
amended. Any reference to a particular provision of the Code
shall be deemed to include any successor provision thereto.
(i)
“Company” means Midwest Air Group, Inc., a Wisconsin
corporation, and any successor thereto as provided in Article
13.
(j)
“Committee” means the Compensation Committee of the
Board, which shall consist of not less than two (2) members of the
Board each of whom is a “non-employee director” as
defined in Securities and Exchange Commission Rule 16b-3(b)(3), or
as such term may be defined in any successor regulation under
Section 16 of the Securities Exchange Act of 1934, as amended.
In addition, each member of the Committee shall be an outside
director within the meaning of Code Section 162(m).
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(k)
“Exchange Act” means the Securities Exchange Act of
1934, as amended. Any reference to a particular provision of
the Exchange Act shall be deemed to include any successor provision
thereto.
(l)
“Excluded Items” means any gains or losses from
the sale of assets outside the ordinary course of business, any
gains or losses from discontinued operations, any extraordinary
gains or losses, the effects of accounting changes, any unusual,
nonrecurring, transition, one-time or similar items or charges, and
any other items that the Administrator determines.
(m)
“Inimical Conduct” means any act or omission that is
inimical to the best interests of the Company or any Affiliate, as
determined by the Administrator in its sole discretion, including
but not limited to: (1) violation of any employment, noncompete,
confidentiality or other agreement in effect with the Company or
any Affiliate, (2) taking any steps or doing anything which would
damage or negatively reflect on the reputation of the Company or an
Affiliate, or (3) failure to comply with applicable laws relating
to trade secrets, confidential information or unfair
competition.
(n)
“Long Term Incentive Award” means an Incentive Award
with a Performance Period of more than one fiscal year of the
Company or an Affiliate, as applicable.
(o)
“Participant” means a key employee of the Company or an
Affiliate who has been approved for participation in the Plan.
(p)
“Incentive Award” means an opportunity granted to a
Participant to receive a payment of cash based in whole or part on
the extent to which one or more Performance Goals for one or more
Performance Measures are achieved for the Performance Period,
subject to the conditions described in the Plan and that the
Administrator otherwise imposes.
(q)
“Performance Measures” means the following categories
(in all cases after taking into account any Excluded Items, as
applicable), including in each case any measure based on such
category:
(1)
Basic earnings per common share for the Company on a consolidated
basis.
(2)
Diluted earnings per common share for the Company on a consolidated
basis.
(3)
Shareholder value added.
(4)
Net sales.
(5)
Cost of sales.
(6)
Gross profit.
(7)
Selling, general and administrative expenses.
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(8)
Operating income.
(9)
Income before interest and/or the provision for income taxes.
(10)
Net income.
(11)
Accounts receivables.
(12)
Inventories.
(13)
Return on equity.
(14)
Return on assets.
(15)
Return on capital.
(16)
Economic value added, or other measure of profitability that
considers the cost of capital employed.
(17)
Net cash provided by operating activities.
(18)
Net increase (decrease) in cash and cash equivalents.
(19)
Customer satisfaction.
(20)
Market share.
(21)
Cost per available seat mile.
(22)
Total revenue per available seat mile.
(23)
Earnings before interest, taxes, depreciation and aircraft
rent.
The Performance Measures described in items (3) through (23) may be
measured (A) for the Company on a consolidated basis, (B) for any
one or more Affiliates or divisions of the Company and/or (C) for
any other business unit or units of the Company or an Affiliate as
defined by the Administrator at the time of selection.
In addition, for any Incentive Award, the Committee may prescribe
subjective Performance Measures or Performance Measures based on
the Participant’s most recent employment evaluation as a
condition to receiving all or any portion of an award payment.
(r)
“Performance Goal” means the level(s) of performance
for a Performance Measure that must be attained in order for a
payment to be made under an award, and/or for the amount of payment
to be determined based on the Performance Scale.
(s)
“Performance Period” means:
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(1)
for an Annual Incentive Award, a period of one fiscal year or less
of the Company or an Affiliate as selected by the Administrator,
and
(2)
for a Long
