Document:

Exhibit 10.37

MIDWEST AIR GROUP, INC.

PARTICIPANT SUPPLEMENTAL PLAN

As Amended and Restated Effective January 1, 2005

With Amendments Through January 1, 2007

ARTICLE 1.

PURPOSE AND DURATION

Section 1.1.

Purpose.  The Midwest Air Group, Inc. Participant Supplemental Plan (the “Plan”) provides benefits to certain employees of the Company and its Affiliates that are unable to be provided under the Company’s qualified retirement plans due to limits imposed by the Internal Revenue Code.  

Section 1.2.

Restatement.  The Plan was last revised April 1, 2000, as an amendment and restatement of the Supplemental Benefit Plan to the Midwest Express Airlines Retirement Plan, which provided certain Participants benefits in addition to those provided under the Company’s qualified defined benefit pension plan, which was terminated effective March 31, 2000.  Effective January 1, 2005, the Plan is again amended and restated to comply with the requirements of Code Section 409A.   The Plan shall remain in effect until terminated by the Board pursuant to Section 8.14.

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, where the meaning is intended, the initial letter of the word is capitalized:

(a)

“Account” means the record keeping account maintained to record the interest of each Participant under Article 5 of the Plan.  An Account is established for record keeping purposes only and not to reflect the physical segregation of assets on the Participant’s behalf, and may consist of such subaccounts or balances as the Committee may determine to be necessary or appropriate.

(b)

“Affiliate” means each entity that is required to be included in the Company’s controlled group of corporations within the meaning of Code Section 414(b), or that is under common control with the Company within the meaning of Code Section 414(c).  

(c)

“Beneficiary” means the person(s) or entity(ies) designated by a Participant to be his beneficiary for purposes of this Plan as provided in Section 6.1.   

(d)

“Board” means the Board of Directors of the Company.

(e)

“Change of Control” shall occur on the date that:

(1)

Any person (including an entity) or persons acting as a group:

(a)

Acquires more than fifty percent (50%) of the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or

(b)

Acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) thirty-five (35%) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Company Voting Securities”);

provided, however, that no Change of Control shall result from any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any corporation with respect to which, following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, immediately prior to such acquisition; or

(2)

A majority of the Company’s Board (the “Incumbent Board”) on January 1, 2005, cease for any reason to constitute at least a majority of the Board during any 12-month period, provided that any individual becoming a director whose election or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board, shall be considered as though such individual were a member of the Incumbent Board; or

(3)

Any person (including an entity) or more than one person acting as a group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to more than 40% percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided that no Change of Control shall result from an acquisition by: (a) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its Company stock; (b) an entity 50% or more of, respectively, the then total value or total voting power of the then outstanding stock is then owned by the Company; (c) a person, or 

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more than one person acting as a group, that owns directly or indirectly, 50% or more of the Outstanding Company Stock or Company Voting Securities; (d) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in clause (c); or (e) any corporation with respect to which, following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such sale in substantially the same proportion as their ownership of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, immediately prior to such sale or disposition.   For purposes hereof, “gross fair market value” means the value of the assets without regard to any liabilities associated with such assets.  

All determinations of whether persons are considered to be acting as a “group” and any other determination regarding whether a Change of Control has occurred shall be determined in a manner consistent with and intended to comply with Code Section 409A.  

(f)

“Code” means the Internal Revenue Code of 1986, as interpreted by regulations and rulings issued pursuant thereto, all as amended and in effect from time to time.  Any reference to a specific provision of the Code shall be deemed to include reference to any successor provision thereto.

(g)

“Committee” means the Compensation Committee of the Board, or any successor thereto, 

(h)

“Company” means Midwest Air Group, Inc., and its successors as provided in Section 8.10.

(i)

“ERISA” means the Employee Retirement Income Security Act of 1974, as interpreted by regulations and rulings issued pursuant thereto, all as amended and in effect from time to time.  Any reference to a specific provision of ERISA shall be deemed to include reference to any successor provision thereto.

(j)

“Participant” means an employee of the Company or any Affiliate who meets the requirements of Section 3.2.  It is intended that those eligible to participate hereunder should at all times be limited to a select group of highly compensated management employees.  Where the context so requires, a Participant also means a former employee entitled to receive a benefit hereunder.  

(k)

“Plan Year” means the calendar year.

(l)

“Retirement Account Plan” means the Midwest Air Group, Inc. Retirement Account Plan, or any successor plan thereto. 

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(m)

 “Savings Plan” means the Midwest Air Group, Inc. Savings and Investment Plan, or any successor plan thereto.

(n)

“Separation from Service” means a Participant’s termination of employment from the Company and all Affiliates, subject to the following rules: 

(1)

If a Participant takes a leave of absence from the Company or an Affiliate for purposes of military leave, sick leave or other bona fide leave of absence, the Participant’s employment will be deemed to continue for the first six (6) months of the leave of absence, or if longer, for so long as the Participant’s right to reemployment is provided either by statute or by contract.  If the period of the leave exceeds six (6) months and the Participant’s right to reemployment is not provided by either statute or contract, the Participant will be considered to have incurred a Separation from Service on the first day of the seventh (7th) month of the leave of absence.  

(2)

If a Participant provides insignificant services to the Company or an Affiliate, the Participant will be deemed to have incurred a Separation from Service.  For this purpose, a Participant is not considered to be providing insignificant services if he or she provides services at an annual rate of at least twenty percent (20%) of the services rendered by such individual, on average, during the immediately preceding three (3) calendar years of employment (or such lesser period of employment) and the annual remuneration for such services is not less than twenty percent (20%) of the average annual remuneration earned during the final three (3) full calendar years of employment (or such less period of actual employment).

(3)

If a Participant continues to provide services to the Company or an Affiliate in a capacity other than as an employee, the Participant will not be deemed to have Separated from Service if the Participant is providing services at an annual rate that is at least fifty percent (50%) of the services rendered by such individual, on average, during the immediately preceding three (3) calendar years of employment (or such lesser period of employment) and the annual remuneration for such services is at least fifty percent (50%) of the average annual remuneration earned during the final three (3) full calendar years of employment (or such less period of employment). 

(o)

“Unforeseeable Emergency” means a severe financial hardship of the Participant, resulting from any of the following, as determined by the Committee:

(1)

an illness or accident of the Participant, his or her spouse or dependent (as defined in Code Section 152(a));

(2)

a loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise 

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covered by insurance, for example, as a result of a natural disaster); or

(3)

other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

(p)

“Valuation Date” means the last day of each calendar quarter, as of which the Committee will determine the value of each Account.

Section 2.2.

Construction.  Wherever any words are used in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are use in the singular or the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.  Titles of articles and sections are for general information only, and the Plan is not to be construed by reference to such items.

Section 2.3.

Severability.  In the event any provision of the Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

ARTICLE 3.

PARTICIPATION

Section 3.1.

Restatement Date.  Each individual entitled to a benefit hereunder as of December 31, 2004, shall continue in participation hereunder on January 1, 2005.

Section 3.2.

New Participants.  Each active employee of the Company or any Affiliate who is not represented for collective bargaining purposes and whose annual base salary in the following Plan Year will be in excess of the limits specified in Code Section 401(a)(17) shall automatically become a Participant on December 31 of such year.  Effective July 1, 2007, each active employee of the Company or any Affiliate who is not represented for collective bargaining purposes shall automatically become a Participant as of the first day of the second calendar quarter (but not later than December 31) following the calendar quarter in which his or her annual base salary first exceeds the Code Section 401(a)(17) limit.  

Section 3.3.

Cessation of Participant Status.  Once an employee has become a Participant, he or she shall continue as a Participant for all future Plan Years until his or her employment ends; provided that the Committee may terminate the active participation of any Participant effective the first day of any Plan Year.  

ARTICLE 4.

FROZEN PENSION BENEFIT

Section 4.1.

Frozen Pension Benefit.  Participants in this Plan as of March 31, 2000, the date the Company’s qualified defined benefit pension plan was terminated, are eligible to receive a supplemental benefit hereunder as of such date (the “Frozen Accrued Benefit”).  Exhibit A 

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attached hereto summarizes the list of such Participants and the amount of their monthly Frozen Accrued Benefit, payable at age 62 in the form of a single life annuity.  All Participants are fully vested in their Frozen Accrued Benefits.  

Section 4.2.

Time of Distribution.  Upon a Participant’s Separation from Service for any reason, the Participant, or his Beneficiary in the event of his death, shall be entitled to payment of the Participant’s Frozen Accrued Benefit.  If the initial benefit payment date is prior to the Participant’s age 62, the Participant’s Frozen Accrued Benefit will be adjusted, using the factors specified on Exhibit A, so that the benefit payable is the actuarial equivalent to the Participant’s age 62 Frozen Accrued Benefit.  

Section 4.3.

Distribution Election.  During the 2007 Plan Year, Participants who are in active employment will be permitted to make a distribution election and such election became effective and irrevocable as of December 31, 2007; provided that any such election is disregarded to the extent it would cause an acceleration of a payment into 2007 or delay a payment that would have been made in 2007 into a later year (based upon the terms of the Plan as in effect on December 31, 2004).  Such election shall be made in such form and manner as the Committee may prescribe. The election shall specify whether distribution of the Participant’s Frozen Accrued Benefit shall be made in a single lump sum or in three (3), five (5) or ten (10) annual installments.  In the absence of a valid distribution election, payment shall be made in five (5) annual installments.  Notwithstanding the foregoing, if the single sum actuarial equivalent value of the Participant’s Frozen Accrued Benefit at the date of his Separation from Service is $100,000 or less, such benefit shall be distributed in a single lump sum without regard to any distribution election then in effect.

Section 4.4.

Manner of Distribution.  The Participant’s Frozen Accrued Benefit shall be paid in cash in the following manner: 

(a)

Lump Sum.  If payment is to be made in a lump sum, for those Participants whose Separation from Service occurs during the period January 1 through June 30, payment shall be made in January of the following year, and for those Participants whose Separation from Service occurs during the period from July 1 through December 31 of a year, payment shall be made in July of the following year.  The lump sum payment shall be the actuarial equivalent of the Participant’s Frozen Accrued Benefit as determined using the actuarial factors specified in Exhibit A. 

(b)

Installments.  If payment is to be made in annual installments, the first annual payment shall be made, for those Participants whose Separation from Service occurs during the period January 1 through June 30, in January of the following year, and for those Participants whose Separation from Service occurs during the period from July 1 through December 31 of a year, in July of the following year.  The second annual payment shall be made in January of the second calendar year following the year in which the Participant’s Separation from Service occurred.  Each succeeding installment payment shall be made in January of each succeeding year.  The amount to be paid shall be the actuarial equivalent of the Participant’s Frozen Accrued Benefit as determined using the actuarial factors specified in Exhibit A.  

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ARTICLE 5.

ACCOUNT BALANCE BENEFIT

Section 5.1.

Annual Allocations.  On December 31 of each Plan Year, each Participant’s Account shall be credited with an amount equal to:

(a)

Matching Contributions. The excess, if any, of:

(1)

the amount of matching contributions that would have been credited under the Savings Plan without regard to the limitations imposed by reason of Code Section 415 or the limit on compensation under Code Section 401(a)(17); over

(2)

the amount of matching contributions actually allocated to the Participant under the Savings plan for such Plan Year;

provided the Participant has met the eligibility requirements to receive a matching contribution under the Savings Plan for such year; and provided further that the Committee may limit the amount credited as matching contributions hereunder for a Plan Year.  

(b)

Profit-Sharing Contributions.  The excess, if any, of:

(1)

The amount of profit-sharing contribution the Participant would have been entitled to under the Savings Plan without regard to the limitations imposed by reason of Code Section 415 or the limit on compensation under Code Section 401(a)(17); over

(2)

The amount of profit-sharing contribution actually allocated to the Participant under the Savings Plan for such Plan Year;

provided the Participant has met the eligibility requirements to receive a profit-sharing contribution under the Savings Plan for such year. 

(c)

Annual Retirement Account Contribution Credits.  The excess, if any, of:

(1)

The amount of retirement account (i.e., money purchase) contributions the Participant would have been entitled to under the Retirement Account Plan without regard to the limitations imposed by reason of Code Section 415 or the limit on compensation under Code Section 401(a)(17); over

(2)

The amount of retirement account contributions actually allocated to the Participant under the Retirement Account Plan for such Plan Year;

provided the Participant has met the eligibility requirements to receive a retirement account contribution under the Retirement Account Plan for such year.

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Section 5.2.

Earnings.  The Account of each Participant shall be credited with earnings on each Valuation Date with  an amount equal to the Account balance on the preceding Valuation Date multiplied by 25% of the prime rate charged by M&I Marshall & Ilsely Bank as in effect on the preceding Valuation Date.  

Section 5.3.

Vesting.  Allocations to a Participant’s Account shall be subject to the same vesting schedule that would have applied had the allocations been made to the Company’s qualified plans.

Section 5.4.

Distribution Election.  A Participant, within the first thirty  (30) days following his initial participation date, shall make a distribution election with respect to his Account.  Such election shall be made in such form and manner as the Committee may prescribe.  In addition, during the 2007 Plan Year, Participants who are in active employment will be permitted to make a new distribution election and such election became irrevocable as of December 31, 2007; provided that any such election is disregarded to the extent it would cause an acceleration of a payment into 2007 or delay a payment that would have been made in 2007 into a later year (based upon the terms of the Plan as in effect on December 31, 2004).  The election shall specify whether distributions shall be made in a single lump sum or in three (3), five (5) or ten (10) annual installments.  In the absence of a valid distribution election, payment shall be made in five (5) annual installments.  Notwithstanding the foregoing:

(a)

 A Participant may not make an initial distribution election under this Plan if he or she has already made an initial distribution election under another account balance deferred compensation plan of the Company or an Affiliate.  In such a case, the form of distribution elected by the Participant under such other plan shall be deemed the form of distribution elected under this Plan.  

(b)

If the balance of the Participant’s Account at the date of his Separation from Service is $100,000 or less, such Account shall be distributed in a lump sum without regard to any distribution election then in effect.

Section 5.5.

Time of Distribution.  Upon a Participant’s Separation from Service for any reason, the Participant, or his Beneficiary in the event of his death, shall be entitled to payment of the vested balance of such Participant’s Account.  

Section 5.6.

Manner of Distribution.  The Participant’s Account shall be paid in cash in the following manner: 

(a)

Lump Sum.  If payment is to be made in a lump sum, for those Participants whose Separation from Service occurs during the period January 1 through June 30, payment shall be made in January of the following year, and for those Participants whose Separation from Service occurs during the period from July 1 through December 31 of a year, payment shall be made in July of the following year.  The lump sum payment shall be in an amount equal to the vested balance of the Participant’s Account as of the Valuation Date immediately preceding the distribution date.  

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(b)

Installments.  If payment is to be made in annual installments, the first annual payment shall be made, for those Participants whose Separation from Service occurs during the period January 1 through June 30, in January of the following year, and for those Participants whose Separation from Service occurs during the period from July 1 through December 31 of a year, in July of the following year.  The amount of the first annual payment shall be equal to the value of 1/10 (or 1/5 or 1/3 as applicable) of the vested balance of the Participant’s Account as of the Valuation Date immediately preceding the distribution date.  The second annual payment shall be made in January of the second calendar year following the year in which the Participant’s Separation from Service occurred, and shall be in an amount equal to the value of 1/9 (or 1⁄4 or 1⁄2 as applicable) of the vested balance of the Participant’s Account as of the Valuation Date immediately preceding the distribution date.  Each succeeding installment payment shall be made in January of each succeeding year, and shall be determined in a similar manner, until the final installment which shall equal the then remaining vested balance of such Account as of the Valuation Date preceding such final payment date.  

ARTICLE 6.

DEATH BENEFITS; UNFORESEEABLE EMERGENCY

Section 6.1.

Distribution Following Participant’s Death.  

(a)

Distribution.  If a Participant dies prior to receiving his entire Frozen Accrued Benefit or the entire vested balance of his Account, the remaining benefit shall be paid to the Participant’s Beneficiary in a single lump sum as soon as practicable after the Participant’s death.  If a Participant’s Frozen Accrued benefit is to be paid to a Beneficiary, the single lump sum amount shall be determined using the actuarial factors specified on Exhibit A.  

(b)

Designation of Beneficiary.  Each Participant may designate a Beneficiary in such form and manner and within such time periods as the Committee may prescribe.  A Participant can change his beneficiary designation at any time, provided that each beneficiary designation shall revoke the most recent designation, and the last designation received by the Committee while the Participant was alive shall be given effect.  If a Participant designates a Beneficiary without providing in the designation that the Beneficiary must be living at the time of distribution, the designation shall vest in the Beneficiary the distribution payable after the Beneficiary’s death, and such distribution if not paid by the Beneficiary’s death shall be made to the Beneficiary’s estate.  In the event there is no valid beneficiary designation in effect at the time of the Participant’s death, in the event the Participant’s designated Beneficiary does not survive the Participant, or in the event that the beneficiary designation provides that the Beneficiary must be living at the time of distribution and such designated Beneficiary does not survive to the distribution date, the Participant’s spouse (or if the Participant is not married, the Participant’s estate) will be deemed the Beneficiary and will be entitled to receive payment.  If a Participant designates his spouse as a beneficiary, such beneficiary designation automatically shall become null and void on the date the Committee receives notice of the Participant’s divorce or legal separation.  

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Section 6.2.

Distribution in Event of Unforeseeable Emergency.  If requested by a Participant while in the employ of the Company or an Affiliate and if the Committee determines that an Unforeseeable Emergency has occurred, all or part of the vested balance of the Participant’s Account under Article 5 may be paid out to the Participant in a cash lump sum.  The amount to be distributed shall only be such amount as is needed to alleviate the Participant’s Unforeseeable Emergency, including any Federal, state or local income taxes or penalties reasonably anticipated to result from the distribution, after taking into account the extent to which the emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets (to the extent such liquidation would not itself cause a severe financial hardship), or by cessation of deferrals under the Executive Deferred Compensation Plan.

ARTICLE 7.

CHANGE OF CONTROL

Notwithstanding any other provision of this Plan, upon a Change of Control: (a) the Account of each Participant then employed by the Company or an Affiliate shall become fully vested, and (b) within thirty (30) days following the Change of Control, each Participant (or Beneficiary thereof), including a Participant or Beneficiary in pay status, shall be paid a lump sum payment equal to the single sum actuarial equivalent present value of the Participant’s unpaid Frozen Accrued Benefit and the vested balance of the Participant’s Account.

ARTICLE 8.

GENERAL PROVISIONS

Section 8.1.

Other Payment Provisions.  Notwithstanding anything in the Plan to the contrary:

(a)

Earlier Distribution.  A distribution may be made prior to the date otherwise specified in the Plan if an amount deferred under this Plan is required to be included in income under Code Section 409A prior to the date such amount is actually distributed.  In such event, a Participant shall receive a distribution, in a lump sum as soon as practicable after the date the Plan fails to meet the requirements of Code Section 409A, of the amount required to be included in the Participant’s income as a result of such failure.  

(b)

Delayed Distribution. A distribution may be delayed beyond the date it would have otherwise been paid under the Plan in the following circumstances:

(1)

If the Committee reasonably determines that a distribution will violate the terms of a loan agreement or other similar contract to which the Company or an Affiliate, as applicable, is a party, and if any such violation will cause material harm to the Company or Affiliate, the distribution shall be delayed until the first date that a violation will not occur or the violation will not cause material harm to the Company or an Affiliate.

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(2)

If the Committee reasonably determines that the funds of the Company are not sufficient to make payment on the date specified in the Plan without jeopardizing the solvency of the Company, then the distribution shall be delayed until the earliest date on which making the distribution will not jeopardize the Company’s solvency.

(c)

Grandfathered Distributions.  If any Participant had begun receiving distributions under the terms of the Plan prior to January 1, 2006, such distributions shall continue to be paid in accordance with the distribution provisions of the Plan as in effect on December 31, 2004.

Section 8.2.

Administration of Elections.  All elections must be made in the form and manner and within such time periods as the Committee prescribes in order to be effective.

Section 8.3.

Accounts are For Record Keeping Purposes Only.  Accounts and the record keeping procedures described herein serve solely as a device for determining the amount of benefits accumulated by a Participant under the Plan, and shall not constitute or imply an obligation on the part of the Company or any Affiliate to fund such benefits.  In any event, the Company or an Affiliate may, in its discretion, set aside assets equal to part or all of such Account balances and invest such assets in Company stock, life insurance or any other investment deemed appropriate.  Any such assets, including Company stock, shall be and remain the sole property of the employer that set aside such assets, and a Participant shall have no proprietary rights of any nature whatsoever with respect to such assets.

Section 8.4.

Tax Withholding.  The Company shall have the right to deduct from any deferral or payment of cash made hereunder, or from any other amount due a Participant, the amount sufficient to satisfy the Company’s or Affiliate’s foreign, federal, state or local income tax withholding obligations with respect to such deferral or payment.  In addition, if  prior to the date of distribution of any amount hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due, the Participant’s Frozen Accrued Benefit and/or Account balance shall be reduced by the amount needed to pay the Participant’s portion of such tax.  

Section 8.5.

Offset.  The Company or Affiliate shall have the right to offset from any amount payable hereunder any amount that the Participant owes to the Company or any Affiliate without the consent of the Participant (or his Beneficiary, in the event of the Participant’s death).

Section 8.6.

Administration.

(a)

General.  The Committee shall have overall authority with respect to administration of the Plan.  If at any time the Committee shall not be in existence, then all determinations shall be made by the Board or an officer of the Company or other committee appointed by the Board.  The Committee may, in its discretion, delegate any or all of its authority and responsibility, and to the extent of any such delegation, any references herein to the Committee shall be deemed references to such delegee.  Interpretation of the Plan shall be within the sole discretion of the Committee.  If any delegee of the Committee shall also be a Participant or Beneficiary, any determinations affecting the delegee’s participation in the Plan shall be made by the Committee.

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(b)

Authority and Responsibility.  In addition to the authority specifically provided herein, the Committee shall have the discretionary authority to take any action or make any determination it deems necessary for the proper administration of the Plan, including but not limited to:  (1) prescribe rules and regulations for the administration of the Plan; (2) prescribe forms for use with respect to the Plan; (3) interpret and apply all of the Plan’s provisions, reconcile inconsistencies or supply omissions in the Plan’s terms; (4) make appropriate determinations, including factual determinations, and calculations; and (5) prepare all reports required by law.  

(c)

Decisions Binding.  The Committee’s determinations shall be final and binding on all parties with an interest hereunder, unless determined to be arbitrary and capricious.

Section 8.7.

Claims Procedures.

(a)

Initial Claim.  If a Participant or Beneficiary (the “claimant”) believes that he is entitled to a distribution from the Plan that was not provided, the claimant or his legal representative shall file a written claim for such benefit with the Committee no later than ninety (90) days following the date the distribution should have been made.  The Committee shall review the claim within 90 days following the date of receipt of the claim; provided that the Committee may determine that an additional 90-day extension is necessary due to circumstances beyond the Committee’s control, in which event the Committee shall notify the claimant prior to the end of the initial period that an extension is needed, the reason therefor and the date by which the Committee expects to render a decision.  If the claimant’s claim is denied in whole or part, the Committee shall provide written notice to the claimant of such denial.  The written notice shall include:  the specific reason(s) for the denial; reference to specific Plan provisions upon which the denial is based; a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and a description of the Plan’s review procedures (as set forth in subsection (b)) and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse determination upon review.

(b)

Request for Appeal.  The claimant has the right to appeal the Committee’s decision by filing a written appeal to the Committee within 60 days after the claimant’s receipt of the decision or deemed denial.  The claimant will have the opportunity, upon request and free of charge, to have reasonable access to and copies of all documents, records and other information relevant to the claimant’s appeal.  The claimant may submit with the appeal written comments, documents, records and other information relating to his appeal.  The Committee will review all comments, documents, records and other information submitted by the claimant relating to the claim, regardless of whether such information was submitted or considered in the initial claim determination.  The Committee shall make a determination on the appeal within 60 days after receiving the claimant’s written appeal; provided that the Committee may determine that an additional 60-day extension is necessary due to circumstances beyond the Committee’s control, in which event the Committee shall notify the claimant prior to the end of the initial period that an extension is needed, the reason therefor and the date by which the Committee expects to render a decision.  If the claimant’s appeal is denied in whole or part, the Committee shall provide written notice to the claimant of such denial.  The written notice shall include:  the 

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specific reason(s) for the denial; reference to specific Plan provisions upon which the denial is based; a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claimant’s claim; and a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA.  If the claimant does not receive a written decision within the time period(s) described above, the appeal shall be deemed denied on the last day of such period(s).

(c)

ERISA Fiduciary.  For purposes of ERISA, the Committee shall be considered the named fiduciary and the plan administrator for the Plan.

Section 8.8.

Participant Rights Unsecured.

(a)

Unsecured Claim.  The right of a Participant or his Beneficiary to receive a distribution hereunder shall be an unsecured claim, and neither the Participant nor any Beneficiary shall have any rights in or against any amount credited to his Account or any other specific assets of the Company or a Affiliate.  The right of a Participant or Beneficiary to the payment of benefits under this Plan shall not be assigned, encumbered, or transferred, except as permitted under Section 6.1.  The rights of a Participant hereunder are exercisable during the Participant’s lifetime only by him or his guardian or legal representative.

(b)

Contractual Obligation.  The Company or an Affiliate may authorize the creation of a trust or other arrangements to assist it in meeting the obligations created under the Plan.  However, any liability to any person with respect to the Plan shall be based solely upon any contractual obligations that may be created pursuant to the Plan.  No obligation of the Company or an Affiliate shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company or any Affiliate.  Nothing contained in this Plan and no action taken pursuant to its terms shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company or a Affiliate and any Participant or Beneficiary, or any other person.

Section 8.9.

Amendment or Termination of Plan.

(a)

Amendment.  Subject to the provisions of Code Section 409A, the Board or the Committee may at any time amend the Plan, including but not limited to ceasing annual credits hereunder after the amendment effective date; provided, however, that no amendment may reduce or eliminate any Account balance accrued to the date of such amendment (except as such Account balance may be reduced as a result of investment losses allocable to such Account) without a Participant’s consent except as otherwise specifically provided herein.  

(b)

Termination.  The Board may terminate the Plan in accordance with the following provisions.  Upon termination of the Plan, any deferral elections then in effect shall be cancelled.

(1)

The Board may terminate the Plan within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts accrued under the Plan are distributed to the Participants or Beneficiaries, as applicable, in a single sum payment, regardless of any distribution election then in 

13

effect, in the later of: (A) the calendar year in which the Plan termination occurs or (B) the first calendar year in which payment is administratively practicable.  

(2)

The Board may terminate the Plan at any other time. In such event, the amounts accrued under the Plan shall be distributed to the Participants or Beneficiaries, as applicable, in a single sum payment, regardless of any distribution election then in effect on the first anniversary of the date of the Plan termination.  This provision shall not be effective unless all other plans required to be aggregated with this Plan under Code Section 409A are also terminated.  Notwithstanding the foregoing, any payment that would otherwise be paid during the 12-month period beginning on the Plan termination date pursuant to the terms of the Plan shall be paid in accordance with such terms.  In addition, the Company or any Affiliate shall be prohibited from adopting a new plan (that would have been required to be aggregated with this Plan under Code Section 409A if this Plan had remained in effect) unless any Participant in this Plan is precluded from participating in the new plan for at least five years from the date of termination of this Plan.  

Section 8.10.

Administrative Expenses.  Costs of establishing and administering the Plan will be paid by the Company.

Section 8.11.

Successors and Assigns.  This Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns and the Participants and their heirs, executors, administrators, and legal representatives.

Section 8.12.

Governing Law; Limitation on Actions; Dispute Resolution.

(a)

Governing Law.  This Plan is intended to be a plan of deferred compensation maintained for a select group of management or highly compensated employees as that term is used in ERISA, and shall be interpreted so as to comply with the applicable requirements thereof.  In all other respects, the Plan is to be construed and its validity determined according to the laws of the State of Wisconsin (without reference to conflict of law principles thereof) to the extent such laws are not preempted by federal law.  

(b)

Limitation on Actions.  Any action or other legal proceeding with respect to the Plan may be brought only after the claims and appeals procedures of Section 8.12 are exhausted and only within period ending on the earlier of (1) one year after the date claimant receives notice of a denial upon appeal (or the appeal is deemed denied) under Section 8.12(b), or (2) the expiration of the applicable statute of limitations period under applicable federal or state law.  

14

EXHIBIT A

FROZEN ACCRUED BENEFIT

		
	Participant

	Monthly Frozen Accrued Benefit, Payable as a Single Life Annuity at Age 62

	Tim Hoeksema

	$11,977.56

	Brenda Bendtsen-Skelton

	$982.43

	Carol Skornica

	$182.07

	Bob Bahlman

	$732.85

	David Reeve

	$79.01

Actuarial equivalent factors: The interest rate and mortality table used under Code Section 417(e).  The interest rate shall be determined for the month of December preceding the Plan Year for which such rate will apply, and such rate will apply for the entire Plan Year.

15Exhibit 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 

2

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).

3

(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.

4

(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:

5

(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-Term Incentive Award, a period of more than one fiscal year of the Company or an Affiliate as selected by the Administrator.

(t)

“Performance Scale” means, with respect to a Performance Measure, a scale from which the level of achievement may be calculated for any given level of actual performance for such Performance Measure.  The Performance Scale may be a linear function, a step function, a combination of the two, or any other manner of measurement as determined by the Administrator.

(u)

“Plan” means the arrangement described herein, as from time amended and in effect.

(v)

“Retirement” means termination of employment from the Company and its Affiliates (without Cause) on or after attainment of age 55 with at least ten years of vesting service (such vesting service to be determined within the meaning of the Midwest Airlines Savings and Investment Plan or any successor plan thereto).

(w)

“Total and Permanent Disability” means the Participant’s inability to perform the material duties of his or her occupation as a result of a medically-determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a period of at least 12 months, as determined by the Administrator.  The Participant will be required to submit such medical evidence or to undergo a medical examination by a doctor selected by the Administrator as the Administrator determines is necessary in order to make a determination hereunder.

Section 2.2.  Gender and Number.  Except where otherwise indicated by the context, any masculine term used herein includes the feminine, the plural includes the singular, and the singular the plural.

Section 2.3.  Severability.  In the event any provision of the Plan is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the said illegal or invalid provision had not been included.

ARTICLE 3.

ELIGIBILITY

Section 3.1.  Selection of Participants.  The Administrator shall select the key employees of the Company or an Affiliate for participation in the Plan.  The Administrator may select a key employee to receive an Annual Incentive Award, a Long-Term Incentive Award or both.  No employee shall have any right to receive an Incentive Award in any year even if an Incentive Award has been previously granted in prior years.  In general, it is expected that the Administrator will determine which key employees are to receive an Incentive Award prior to, or within the first ninety (90) days of, the first day of the applicable Performance Period.

6

Section 3.2.  Termination of Approval.  Until the earlier of the end of a Performance Period or a Participant’s termination of employment, the Administrator may withdraw its approval for participation for a Participant at any time.  In the event of such withdrawal, the employee concerned shall cease to be an active Participant as of the date selected by the Administrator, the employee’s Incentive Awards shall be cancelled, the employee shall not be entitled to any payment unless the Administrator determines otherwise.  The Administrator shall notify the employee of such withdrawal as soon as practicable following such action.

Section 3.3.  New Hires; Transfers In, Out and Between Eligible Positions.

(a)

Notwithstanding Section 3.1, for a key employee who is hired or promoted into a position that is eligible for an Incentive Award, the Administrator may (1) select such key employee as a Participant at any time during the course of a Performance Period, (2) take action as a result of which there is an additional Incentive Award made to a key employee who, as to a Performance Period that is in progress, is already a Participant and as to whom a Performance  Award is already in effect where the additional Incentive Award relates to the same Performance Period, or (3) change the Performance Goals, Performance Measures, Performance Scale or potential award amount under an Incentive Award that is already in effect.  In such event, the Administrator may, but is not required to, prorate the amount that would otherwise be payable under such Incentive Award if the Participant had been employed during the entire Performance Period to reflect the period of actual employment during the Performance Period.

(b)

If a Participant is demoted during a Performance Period, the Administrator may decrease the potential award amount of any Incentive Award, or revise the Performance Goals, Performance Measures or Performance Scale, as determined by the Administrator to reflect the demotion, or may withdraw its approval for participation in accordance with Section 3.2.

(c)

If a Participant is transferred from employment by the Company to the employment of an Affiliate, or vice versa, the Administrator may revise the Participant’s Incentive Award to reflect the transfer, including but not limited to, changing the potential award amount, Performance Measures, Performance Goals and Performance Scale.

Section 3.4.  Termination of Employment.

(a)

Except as otherwise provided under the terms of an employment or severance agreement between a Participant and the Company, no Participant shall earn an incentive award for a Performance Period unless the Participant is employed by the Company or an Affiliate (or is on an approved leave of absence) on the last day of such Performance Period, unless employment was terminated during the year as a result of Retirement, Total and Permanent Disability or death at a time when the Participant could not have been terminated for Cause, or unless payment is approved by the Administrator after considering the cause of termination.

(b)

If a Participant’s employment is terminated as a result of death, Total and Permanent Disability or Retirement, at a time when the Participant could not have been terminated for Cause, then unless otherwise determined by the Administrator, the Participant (or the Participant’s estate in the event of his or her death) shall be entitled to receive an amount equal to the product of (x) the award amount calculated under Section 5.1 and (y) a fraction, the 

7

numerator of which is the number of the Participant’s days of employment during the Performance Period for such award and the denominator of which is the number of days in the Performance Period for such award.  Payment shall be made in accordance with Section 5.2, subject to Section 5.3.

ARTICLE 4.

CONTINGENT INCENTIVE AWARDS

At the time of grant of an Incentive Award, the Administrator shall determine for each award the Performance Measure(s), the Performance Goal(s) for each Performance Measure, the Performance Scale (which may vary for different Performance Measures), and the amount payable to the Participant if and to the extent the Performance Goals are met (as measured from the Performance Scale).  The amount payable to a Participant may be designated as a flat dollar amount or as a percentage of the Participant’s Base Salary, or may be determined by any other means as the Administrator may specify at the time the Incentive Award is made.

ARTICLE 5.

PAYMENT

Section 5.1.  Evaluating Performance and Computing Awards.

(a)

As soon as practicable following the close of a Performance Period, the Administrator shall determine and certify whether and to what extent the Performance Goals and other material terms of the Incentive Award issued for such period were satisfied, and shall determine whether any discretionary adjustments under Subsection (b) shall be made.  Based on such certification, the Administrator (or its delegee) shall determine the award amount payable to a Participant under the Incentive Award for that Performance Period, provided that the maximum award amount for any Participant shall be:

(1)

with respect to any and all Annual Incentive Awards of such Participant with Performance Periods covering (or ending within) the same fiscal year of the Company, one million dollars ($1,000,000); and

(2)

with respect to any and all Long-Term Incentive Awards of such Participant with Performance Periods ending on the last day of, or at any time within, the same fiscal year of the Company, five hundred thousand dollars ($500,000).

(b)

The Administrator may adjust each Participant’s potential award amount under any Incentive Award, based upon overall individual performance and attainment of goals up to a maximum of plus one hundred and fifty percent (+150%) or down to a maximum of minus eighty percent (-80%).

8

Section 5.2.  Timing and Form of Payment.  When the payment due to the Participant has been determined, unless otherwise deferred pursuant to a Participant’s election under the Company’s deferred compensation plan, payment shall be made in a cash lump sum within 21⁄2 months following the close of the Performance Period.

Section 5.3.  Inimical Conduct.  Notwithstanding the foregoing, after the end of the Performance Period for which the payment has accrued, but before payment or deferral is made, if the Participant engages in Inimical Conduct, or if the Company determines after a Participant’s termination of employment that the Participant could have been terminated for Cause, the Incentive Award shall be automatically cancelled and no payment or deferral shall be made.  The Administrator may suspend payment or deferral (without liability for interest thereon) pending the Administrator’s determination of whether the Participant was or should have been terminated for Cause or whether the Participant has engaged in Inimical Conduct.

ARTICLE 6.

CHANGE OF CONTROL

Notwithstanding any other provision of this Plan, within 30 days after a Change of Control, each Participant shall be entitled to receive, with respect to each Incentive Award of the Participant for which the Performance Period has not ended as of the date of the Change of Control, a lump sum payment in cash equal to the product of (x) such Participant’s maximum potential award amount for the Performance Period(s) in which the Change of Control occurs, as specified in the Incentive Award and (y) a fraction, the numerator of which is the number of days after the first day of the Performance Period on which the Change of Control occurs and the denominator of which is the number of days in the Performance Period. If, however, the Participant has a deferral election in effect with respect to any such amount, such amount shall be deferred pursuant to such election and shall not be paid in a lump sum as provided hereinabove.

ARTICLE 7.

ADJUSTMENTS

In the event of any change in the outstanding shares of Company Common Stock by reason of any stock dividend or split, recapitalization, reclassification, merger, consolidation or exchange of shares or other similar corporate change, then if the Administrator shall determine, in its sole discretion, that such change necessarily or equitably requires an adjustment in the Performance Goals established under an Incentive Award, such adjustments shall be made by the Administrator and shall be conclusive and binding for all purposes of this Plan.  No adjustment shall be made in connection with the issuance by the Company of any warrants, rights, or options to acquire additional shares of Common Stock or of securities convertible into Common Stock.

ARTICLE 8.

RIGHTS OF PARTICIPANTS

Section 8.1.  No Funding.  No Participant shall have any interest in any fund or in any specific asset or assets of the Company (or any Affiliate) by reason of any Incentive Award under the 

9

Plan.  It is intended that the Company has merely a contractual obligation to make payments when due hereunder and it is not intended that the Company (or any Affiliate) hold any funds in reserve or trust to secure payments hereunder.

Section 8.2.  No Transfer.  No Participant may assign, pledge, or encumber his or her interest under the Plan, or any part thereof.

Section 8.3.  No Implied Rights; Employment.  Nothing contained in this Plan shall be construed to:

(a)

Give any employee or Participant any right to receive any award other than in the sole discretion of the Administrator;

(b)

Limit in any way the right of the Company or an Affiliate to terminate a Participant’s employment at any time; or

(c)

Be evidence of any agreement or understanding, express or implied, that a Participant will be retained in any particular position or at any particular rate of remuneration.

ARTICLE 9.

ADMINISTRATION

Section 9.1.  General.  The Plan shall be administered by the Administrator. If at any time the Committee shall not be in existence, the Board shall assume the Committee’s functions and each reference to the Committee herein shall be deemed to include the Board.

Section 9.2.  Authority.  In addition to the authority specifically provided herein, the Administrator shall have full power and discretionary authority to: (a) administer the Plan, including but not limited to the power and authority to construe and interpret the Plan; (b) correct errors, supply omissions or reconcile inconsistencies in the terms of the Plan or any Incentive Award; (c) establish, amend or waive rules and regulations, and appoint such agents, as it deems appropriate for the Plan’s administration; and (d) make any other determinations, including factual determinations, and take any other action as it determines is necessary or desirable for the Plan’s administration.

Section 9.3.  Delegation of Authority.  The Administrator may delegate to one or more officers of the Company any or all of the authority and responsibility of the Administrator. If the Administrator has made such a delegation, then all references to the Administrator in this Plan include such officer(s) to the extent of such delegation.

Section 9.5.  Decision Binding.  The Administrator’s determinations and decisions made pursuant to the provisions of the Plan and all related orders or resolutions of the Board shall be final, conclusive and binding on all persons who have an interest in the Plan or an award, and such determinations and decisions shall not be reviewable.

Section 9.6.  Procedures of the Committee.  The Committee’s determinations must be made by not less than a majority of its members present at the meeting (in person or otherwise) at which a quorum is present, or by written majority consent, which sets forth the action, is signed by each 

10

member of the Committee and filed with the minutes for proceedings of the Committee.  A majority of the entire Committee shall constitute a quorum for the transaction of business.  Service on the Committee shall constitute service as a director of the Company so that the Committee members shall be entitled to indemnification, limitation of liability and reimbursement of expenses with respect to their Committee services to the same extent that they are entitled under the Company’s By-laws and Wisconsin law for their services as directors of the Company.

ARTICLE 10.

AMENDMENT AND TERMINATION

Section 10.1.  Amendment.  The Committee may modify or amend, in whole or in part, any or all of the provisions of the Plan, and may suspend the Plan, at any time; provided, however, that no such modification, amendment, or suspension may, without the consent of the Participant or his or her legal representative in the case of his or her death, reduce the right of a Participant, or his or her estate, as the case may be, to any payment due under the Plan except as specifically provided herein.  Notwithstanding the foregoing, the Committee may amend the provisions of Article 6 prior to the effective date of a Change of Control.

Section 10.2.  Termination.  The Committee may terminate the Plan in accordance with the provisions of this Section 10.2.  In order for the provisions of this Section 10.2 to apply, the Committee must designate in writing that the Plan is being terminated in accordance with this Section.

(a)

The Committee may terminate the Plan within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts accrued under the Plan (as determined by the Committee) are distributed to the Participants in a single sum payment in the later of: (1) the calendar year in which the Plan termination occurs or (2) the first calendar year in which payment is administratively practicable.

(b)

The Committee may terminate the Plan upon or within twelve (12) months following a Change of Control, provided that all substantially similar arrangements (within the meaning of Code Section 409A) sponsored by the Company are terminated.

(c)

The Committee may terminate the Plan at any other time. In such event, all amounts accrued to the date of termination (as determined by the Committee) will be distributed to all Participants in a single sum payment during the period that begins 12 months after the date of termination and ends not more than 24 months after the date of termination.  This provision shall not be effective unless all other plans required to be aggregated with this Plan under Code Section 409A are also terminated.

ARTICLE 11.

TAX WITHHOLDING

The Company shall have the right to deduct from all cash payments made hereunder (or from any other payments due a Participant) any foreign, federal, state, or local taxes required by law to be withheld with respect to such cash payments.

11

ARTICLE 12.

OFFSET

The Company shall have the right to offset from any amount payable hereunder any amount that the Participant owes to the Company or any Affiliate without the consent of the Participant (or his or her estate, in the event of the Participant’s death).

ARTICLE 13.

SUCCESSORS

All obligations of the Company under the Plan with respect to Incentive Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company.  The Plan shall be binding upon and inure to the benefit of the Participants and their heirs, executors, administrators and legal representatives.

ARTICLE 14.

DISPUTE RESOLUTION

This Plan and the rights and obligations hereunder shall be governed by and construed in accordance with the internal laws of the State of  Wisconsin (excluding any choice of law rules that may direct the application of the laws of another jurisdiction).  Unless prohibited by law, any legal action or proceeding with respect to this Plan or any Incentive Award, or for recognition and enforcement of any judgment in respect to this Plan or any Incentive Award, may only be heard in  a “bench” trial, and any party to such action or proceeding shall agree to waive its right to a jury trial.  Any legal action or proceeding with respect to this Plan or any Incentive Award must be brought within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint.

12

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