Exhibit 10.4

 

MESABA AVIATION, INC.
2003 INCENTIVE AWARD PLAN
AS ADOPTED NOVEMBER 19, 2003

 

SECTION 1
DEFINED TERMS

 

In addition to the other definitions contained herein, the following definitions
shall apply:

 

1.1           Award Agreement.  The term “Award Agreement” means the document
that evidences an Award and which sets forth the terms, conditions and
limitations relating to such Award.

 

1.2           Award.  The term “Award” shall mean any award or benefit granted
in accordance with the terms of the Plan.  Awards under the Plan may be in the
form of Stock Appreciation Rights, Performance Awards, Other Stock Based Awards
or Tax Offset Payments.  The terms and conditions of the Award shall be set
forth in an Award Agreement.

 

1.3           Board.  The term “Board” shall mean the Board of Directors of the
Company and any Committee appointed by the Board to administer the Plan pursuant
to Section 9.

 

1.4           Committee.  The term “Committee” shall mean a committee described
in Section 9.

 

1.5           Company.  The term “Company” shall mean Mesaba Aviation, Inc.

 

1.6           Director.  The term “Director” shall mean a member of the
Company’s Board.

 

1.7           Eligible Individual.  The term “Eligible Individual” shall mean
(a) key employees of the Company, (b) officers of the Company, and (c) members
of the Company’s Board.  All Eligible Individuals must be natural persons who
provide bona fide services to the Company.  An Award may be granted to an
Eligible Individual prior to the date the Eligible Individual performs services
for the Company, provided that such Award shall not become vested prior to the
date the Eligible Individual first performs such services.

 

1.8           Fair Market Value.  The term “Fair Market Value” of a share of
Stock on a given date shall mean the closing price of the share of Stock as
reported on the Nasdaq Stock Market on such date, if the share of Stock is then
quoted on the Nasdaq Stock Market or, if the market is closed on that date, the
closing price of the share of Stock on the previous trading day.  If the Stock
is not listed on the Nasdaq Stock Market, Fair Market Value shall be determined
in good faith by the Board.

 

1.9           Other Stock Based Award.  The term “Other Stock Based Award” shall
mean an Award, granted pursuant to Section 6, other than a SAR, that is valued
in whole or in part by reference to, or is otherwise based on Stock.

 

1.10         Performance Award.  The term “Performance Award” shall mean an
Award based upon the achievement of performance objectives, as contemplated by
Section 5.

 

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1.11         Plan.  The term “Plan” shall mean this 2003 Incentive Award Plan.

 

1.12         Stock.  The term “Stock” shall mean shares of common stock, $.01
par value, of MAIR Holdings, Inc., a Minnesota corporation that owns all of the
outstanding common stock of the Company.

 

1.13         Stock Appreciation Right.  The term “Stock Appreciation Right” or
“SAR” shall mean the grant, pursuant to Section 4, of a right to receive a
payment from the Company in cash, equal to the excess of the Fair Market Value
of one or more shares of Stock over the grant price of such shares under the
terms of such Stock Appreciation Right.

 

SECTION 2
PURPOSE

 

The Plan has been established by the Company to (i) attract and retain Eligible
Individuals; (ii) motivate Eligible Individuals, by means of appropriate
incentives, to achieve long-range goals; (iii) provide incentive compensation
opportunities that are competitive with those of other comparable companies; and
(iv) further align Eligible Individuals’ interests with those of the Company
through compensation based on the value of the Stock, thereby promoting the
long-term financial interest of the Company.

 

SECTION 3
PARTICIPATION

 

Subject to the terms and conditions of the Plan, the Board may determine and
designate, from time to time, Eligible Individuals who will be granted one or
more Awards under the Plan.  In its sole discretion and without shareholder
approval, the Board may grant to an Eligible Individual any Award or Awards
permitted under the provisions of the Plan.  Awards may be granted as
alternatives to or replacement of Awards outstanding under the Plan, or any
other plan or arrangement of the Company.

 

SECTION 4
STOCK APPRECIATION RIGHTS

 

SARs will be granted at not less than the Fair Market Value of the Stock on the
date an award is granted, unless the Board has determined, with the advice of
counsel, that a grant at less than Fair Market Value will not result in taxable
income to Eligible Individuals in the year of grant.  An SAR shall become vested
and may be exercised at such times as may be specified in an Award Agreement, in
whole or in installments, which may be cumulative and shall expire at such time
as the Board shall determine at the time of grant; provided that no SAR shall be
exercisable later than ten (10) years after the date granted.

 

SARs shall be exercised by the delivery of a written notice of exercise to the
Company setting forth the number of shares of Stock with respect to which the
SAR is to be exercised.

 

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SECTION 5
PERFORMANCE AWARDS

 

The Committee shall have the right to designate Awards as “Performance Awards.” 
The grant or vesting of a Performance Award shall be subject to the achievement
of performance objectives established by the Board based on one or more of the
following criteria, in each case applied to the Company or other business unit,
as specified by the Board in an Award Agreement, and which the Board may use as
an absolute measure, as a measure of improvement relative to prior performance,
or as a measure of comparable performance relative to a peer group of companies:
sales, operating profits, operating profits before interest expenses and taxes,
net earnings, earnings per share, return on equity, return on assets, return on
invested capital, total shareholder return, cash flow, debt to equity ratio,
market share, stock price, economic value added, market value added, or other
similar measure of performance.  The terms and conditions of a Performance Award
shall be set forth in an Award Agreement entered into between the Company and
the Eligible Individual.

 

SECTION 6
OTHER STOCK BASED AWARDS

 

The Board shall have complete discretion in determining the terms, conditions
and limitations pertaining to Other Stock Based Awards, including, without
limitation, phantom stock units, payments based upon the achievement of specific
business objectives, tenure, and other measurements of individual or business
performance, and the conditions under which such Awards will vest or lapse.

 

Payment of Other Stock Based Awards may be in the form of cash or other Awards,
or in such combinations thereof as the Board shall determine at the time of
grant, and with such restrictions as it may impose.  Payment may be made in a
lump sum or in installments as prescribed by the Board.  The Board may also
require or permit Eligible Individuals to elect to defer the settlement of
Awards in cash under such rules and procedures as it may establish under the
Plan.  The Board may also provide that deferred settlements include the payment
or crediting of interest on the deferred amounts.

 

SECTION 7
TAX OFFSET PAYMENTS

 

The Board may provide for a Tax Offset Payment to be made by the Company to an
Eligible Individual with respect to one or more Awards granted under the Plan. 
The Tax Offset Payment shall be in an amount specified by the Board, which shall
not exceed the amount necessary to pay the federal, state, local and other taxes
payable with respect to the applicable Award, assuming that the Eligible
Individual is taxed at the maximum tax rate applicable to such income.  The Tax
Offset Payment shall be paid solely in cash.  The terms and conditions of a Tax
Offset Payment Award shall be set forth in an Award Agreement entered into
between the Company and the Eligible Individual.

 

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SECTION 8
OPERATION AND ADMINISTRATION

 

8.1           Effective Date.  The Plan shall be effective as of November 17,
2003 (the “Effective Date”).  The Plan shall remain in effect until terminated
in writing by the Board, which the Board expressly reserves the right to do,
subject to the provisions of Section 9.2  hereof.

 

8.2           Tax Withholding.  Each Eligible Individual shall, no later than
the date as of which the value of an Award first becomes includible in such
person’s gross income for applicable tax purposes, pay, pursuant to such
arrangements as the Company may establish from time to time, any federal, state,
local or other taxes of any kind required by law to be withheld with respect to
the Award.  The obligations of the Company under the Plan shall be conditional
on such payment, and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Eligible Individual.

 

8.3           Payments.  Awards may be settled in cash or by other Awards, as
specified in the Award Agreement.  No Award may result in, or be paid by, the
issuance of Stock or other securities.  Any Award settlement, including payment
deferrals, may be subject to such conditions, restrictions and contingencies as
the Board shall determine.  The Board may permit or require the deferral of any
Award payment, subject to such rules and procedures as it may establish, which
may include provisions for the payment or crediting of interest.

 

8.4           Transferability.  Except as otherwise provided by the Board,
Awards under the Plan may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by beneficiary designation,
will or by the laws of descent and distribution.  If the Board makes an Award
transferable, the Award Agreement shall set forth such additional terms and
conditions regarding transferability as the Board deems appropriate.

 

8.5           Form and Time of Elections.  Unless otherwise specified herein,
each election required or permitted to be made by any Eligible Individual or
other person entitled to benefits under the Plan, and any permitted
modification, or revocation thereof, shall be in writing delivered to the
Company at such times, in such form, and subject to such restrictions and
limitations, not inconsistent with the terms of the Plan, as the Board shall
require.

 

8.6           Agreement With Company.  Any Award under the Plan shall be subject
to such terms and conditions, not inconsistent with the Plan, as the Board
shall, in its sole discretion, prescribe.  The terms and conditions of any Award
shall be reflected in an Award Agreement.

 

8.7           Limitation of Implied Rights.

 

(a)                                  Neither an Eligible Individual nor any
other person shall, by reason of participation in the Plan, acquire any right in
or title to any assets, funds or property of the Company or any of its
affiliates whatsoever, including, without limitation, any specific funds,
assets, or other property which the Company or any affiliate, in its sole
discretion, may set aside in anticipation of a liability under the Plan.  An
Eligible Individual shall have only a contractual right to the amounts, if any,
payable under the Plan,

 

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unsecured by any assets of the Company or its affiliates, and nothing contained
in the Plan shall constitute a guarantee that the assets of the Company shall be
sufficient to pay any benefits to any Eligible Individual.

 

(b)                                 This Plan does not constitute a contract of
employment, and selection as a Eligible Individual will not give the Eligible
Individual the right to be retained in the employ of the Company, nor any right
or claim to any future grants or to any benefit under the Plan, unless such
right or claim has specifically accrued under the terms of the Plan.

 

8.8           Termination for Cause.  If the employment of an Eligible
Individual is terminated by the Company for “cause,” then the Board shall have
the right to cancel any Awards granted to the Eligible Individual under the Plan
and the Eligible Individual shall forfeit any and all rights under the Plan. 
The term “cause” shall mean (1) the Eligible Individual’s violation of any
provision of any non-competition agreement or confidentiality agreement with the
Company; (2) an illegal or negligent action by the Eligible Individual that
materially and adversely affects the Company; (3) the Eligible Individual’s
failure or refusal to perform his or her duties (except when prevented by reason
of illness or disability); or (4) conviction of the Eligible Individual of a
felony involving moral turpitude or financial impropriety.

 

8.9           Evidence.  Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.

 

8.10         Awards to Section 16 Reporting Persons.  Any Award granted to an
Eligible Individual who is required to report his or her beneficial ownership of
Stock pursuant to Section 16(a) of the Securities Exchange Act of 1934 shall be
structured to satisfy the requirements for exemption under Rule 16b-3(d)(3). 
SARs granted to such persons shall first become exercisable not less than six
months after the date of grant.

 

8.11         Claims Procedure.

 

(a)                                  Claims Filing.  If for any reason a claim
for benefits under this Plan is denied by the Board, the Board shall deliver to
the claimant a written explanation setting forth the specific reasons for the
denial, pertinent references to the Plan section on which the denial is based,
such other data as may be pertinent and information on the procedures to be
followed by the claimant in obtaining a review of his or her claim, all written
in a manner calculated to be understood by the claimant.  The Company’s
explanation shall be delivered to the claimant within 90 days of the date the
claim is filed.  For this purpose, the claimant’s claim shall be deemed filed
when presented in writing to the Board.

 

(b)                                 Review Request.  The claimant shall have 60
days following his or her receipt of the denial of the claim to file with the
Board a written request for review of the denial.  For such review, the claimant
or his or her

 

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representative may submit pertinent documents and written issues and comments.

 

(c)                                  Review Procedure.  The Board shall decide
the issue on review and furnish the claimant with a copy within 60 days of
receipt of the claimant’s request for review.  The decision on review shall be
in writing and shall include specific reasons for the decision written in a
manner calculated to be understood by the claimant, as well as specific
reference to the pertinent Plan provisions on which the decision is based.  If a
copy of the decision is not so furnished to the claimant within 60 days, the
claim shall be deemed denied on review.

 

SECTION 9
AUTHORITY OF THE BOARD

 

9.1           Administration.  The Plan shall be administered by Board or such
Committee of one or more Directors as the Board shall designate to administer
the Plan.  The Board may administer the Plan or exercise any or all of the
administrative duties of the Committee at any time when a Committee has been
appointed by the Board.  All determinations made by the Board pursuant to the
provisions of the Plan shall be final and binding on all persons, including the
Company and Eligible Individuals.

 

9.2           Powers of Board.  The Board shall have the following authority
with respect to Awards under the Plan: to grant Awards; to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan as
it shall deem advisable; to interpret the terms and provisions of the Plan and
any Award granted under the Plan; and to otherwise supervise the administration
of the Plan.  In particular, and without limiting its authority and powers, the
Board shall have the authority:

 

(a)                                  to determine whether and to what extent any
Award or combination of Awards will be granted hereunder;

 

(b)                                 to select the Eligible Individuals to whom
Awards will be granted;

 

(c)                                  to determine the terms and conditions of
any Award granted hereunder, including, but not limited to, any vesting or other
restrictions based on such performance objectives and such other factors as the
Board may establish, to determine the acceleration of any vesting restrictions
under certain circumstances such as a change in control of the Company or any
affiliate, and to determine whether the performance objectives and other terms
and conditions of the Award are satisfied;

 

(d)                                 to determine the treatment of Awards upon
the Eligible Individual’s retirement, disability, death, termination for cause
or other termination of employment or service; and

 

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(e)                                  to amend the terms of any Award,
prospectively or retroactively; provided, however, that no amendment shall
impair the rights of the Eligible Individual without his or her written consent.

 

Determinations by the Board under the Plan relating to the form, amount, and
terms and conditions of Awards need not be uniform, and may be made selectively
among Eligible Individuals who receive Awards under the Plan, whether or not
such Eligible Individuals are similarly situated.  The Board shall have the
power to accelerate the time at which an Award may first be exercised or the
time during which an Award or any part thereof will vest in accordance with the
Plan, notwithstanding any provisions in an Award Agreement stating the time at
which the Award may first be exercised or the time during which the Award will
vest.

 

9.3           Delegation by Board.  Except to the extent prohibited by
applicable law, the Board may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it.  Any such allocation or delegation may be revoked by the Board
at any time.

 

9.4           Information to be Furnished to Board.  The Company shall furnish
the Board with such data and information as it determines may be required for it
to discharge its duties.  The records of the Company as to an Eligible
Individual’s employment, termination of employment, leave of absence,
reemployment and compensation shall be conclusive on all persons unless
determined to be incorrect.  Eligible Individuals and other persons entitled to
benefits under the Plan must furnish the Board such evidence, data or
information as the Board considers desirable to carry out the terms of the Plan.

 

9.5           Non-Liability of Board.  No member of the Board or any officer or
employee of the Company acting on behalf of the Board shall be personally liable
for any action, determination or interpretation taken or made with respect to
the Plan, and all members of the Board and all officers or employees of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.

 

SECTION 10
AMENDMENT AND TERMINATION

 

The Board may, at any time, amend or terminate the Plan, provided that no
amendment or termination may, in the absence of written consent to the change by
the affected Eligible Individual (or, if the Eligible Individual is not then
living, the affected beneficiary), adversely affect the rights of any Eligible
Individual or beneficiary under any Award granted under the Plan prior to the
date such amendment is adopted by the Board.  An amendment shall be subject to
approval by the Company’s shareholders only to the extent required by applicable
laws, regulations or rules of a stock exchange or similar entity.

 

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SECTION 11
GENERAL PROVISIONS

 

11.1         Award Agreements.  No Eligible Individual will have rights under an
Award granted to such Eligible Individual unless and until an Award Agreement
has been duly executed on behalf of the Company and the Eligible Individual.

 

11.2         No Limit on Other Compensation Arrangements.  Nothing contained in
the Plan shall prevent the Company from adopting or continuing in effect other
or additional compensation arrangements, and such arrangements may be either
generally applicable or applicable only in specific cases.

 

11.3         Headings.  The headings of the sections and subsections of this
Plan are intended for the convenience of the parties only and shall in no way be
held to explain, modify, construe, limit, amplify or aid in the interpretation
of the provisions hereof.

 

11.4         Beneficiaries.  An Eligible Individual may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under the Plan may be paid or transferred in case of death. 
Each designation will revoke all prior designations, shall be in a form
prescribed by the Board, and will be effective only when filed by the Eligible
Individual in writing with the Board during his or her lifetime.  In the absence
of any such designation, benefits outstanding at the Eligible Individual’s death
shall be paid or transferred to his or her estate.  There shall be no third
party beneficiaries of or to this Plan.  Any beneficiary of the Eligible
Individual shall have only a claim to such benefits as may be determined to be
payable hereunder, if any, and shall not, under any circumstances other than the
right to claim such benefits, be deemed a third party beneficiary of or to this
Plan.

 

11.5         Governing Law.  The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Minnesota,
except to the extent preempted by federal law, without regard to the principles
of comity or the conflicts of law provisions of any jurisdiction.

 

11.6         Employment Relationship.  Nothing in this Plan or any award made
hereunder shall interfere with or limit in any way the right of the Company to
terminate any Eligible Individual’s employment (if applicable) at any time, with
or without cause, nor confer upon any Eligible Individual any right to continue
in the employ of the Company.

 

11.7         Rights as a Shareholder.  The holder of an Award under this Plan
shall have no rights as a shareholder of Shares of MAIR Holdings, Inc. by virtue
of such Award, including rights to vote or receive dividends.

 

11.8         No Trust.  Nothing contained in this Plan and no action taken
pursuant to this Plan shall create or be construed to create a trust of any
kind.  The Eligible Individuals’ right to receive payments from the Company
under this Plan shall be no greater than the right of any unsecured creditor of
the Company.  Title to and beneficial ownership of any assets which the Company
may set aside or earmark to meet its contingent deferred obligation hereunder,
shall at all times remain in the name of the Company, and the Eligible
Individuals shall not under any circumstances acquire any property interest or
rights in any specific assets of the Company.

 

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11.9         Severability.  If any portion or provision of this Plan shall be
deemed invalid or unenforceable, in whole or in part, than such provision or
portion shall be deemed to be modified or restricted to the extent and in the
manner necessary to render the same valid and enforceable, or shall be deemed
excised from this Plan, as the case may require, and this Plan shall be
construed and enforced to the intent permitted by federal and Minnesota law, as
if so modified or restricted, or as if such provision or portion had not been
originally incorporated herein, as the case may be.

 

11.10       Adjustments Upon Changes in Capitalization.  The outstanding portion
of any unexercised Award based on Stock shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Stock resulting from
a stock split, reverse stock split, stock dividend, combination or
reclassification of Stock or any other increase or decrease in the number of
shares of Stock effected without receipt of consideration by MAIR Holdings,
Inc.  Such adjustment to Awards shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive.

 

[END OF PLAN]

 

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