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ALASKA AIR GROUP PERFORMANCE BASED PAY PLAN
 (Amended May 6, 2021)

The Board of Directors (the “Board”) of Alaska Air Group, Inc. (the “Company”) has adopted the Performance-Based Pay Plan (the “Plan”) to reward employees of Alaska Airlines, Inc. (“Alaska”) and Horizon Air Industries, Inc. (“Horizon”).  The Board has delegated authority to the Compensation and Leadership Development Committee (the “Committee”) to administer the Plan.  The Performance Based Pay Award (“Award”) of each eligible Plan Participant will depend upon the degree to which the Company, Alaska and Horizon achieve the applicable performance goals and, if applicable, an award modifier, set by the Committee for each calendar year (a “Plan Year”) and upon the discretion of the Committee as explained below.  

This Amended and Restated Plan is effective beginning with the 2019 Plan Year and each year thereafter until amended, restated or terminated, pursuant to Paragraph 8.  For the terms of Awards granted for any earlier Plan Year, refer to the version of the Plan in effect for the applicable Plan Year.

1.    ELIGIBILITY
Eligibility to participate in the Plan during a Plan Year is limited to all regular, temporary variable time and temporary pool U.S. and Canadian employees, and Mexico management employees, of Alaska and Horizon (“Eligible Employees”) who:

(a)     are employees of Alaska or Horizon on December 31 of the Plan Year for which the Award is being paid, or

(b)     were employees during a portion of the Plan Year for which the Award is being paid but were not employees on December 31 because their employment ended due to retirement, disability or death.  (For example, if an employee retires from Alaska or Horizon and his/her last day of employment is on or between January 1 and December 31, 2019, he/she would be eligible for an award for the 2019 Plan Year, but would not be eligible for an Award for the 2020 Plan Year because he/she was not an employee during any part of the 2020 Plan Year, even though his/her first day of retirement might be January 1, 2020.)

For the sake of clarity, “Eligible Employees” shall not include temporary employees (other than variable time and temporary pool employees) or Mexico non-management employees of Alaska or Horizon, or employees of McGee Air Services, Inc.

Eligible Employees who are on temporary medical leave, military leave, furlough, or company-approved leave of absence as of December 31 of the Plan Year shall remain eligible under the Plan.  Unless otherwise provided in a separate agreement, an individual whose employment with Alaska or Horizon ends prior to December 31 of the Plan Year for any reason not set forth above, for example, resignation or termination (with or without cause), forfeits any Award under this Plan.  In addition, employees terminated for cause, as determined by Alaska or Horizon, shall forfeit any Award under this Plan, regardless of their employment status on December 31 of the Plan Year.  Notwithstanding the foregoing, contract employees or independent contractors as classified by Alaska or Horizon, shall be excluded from participation hereunder, regardless of whether an agency or court subsequently re-classifies such individuals as employees of Alaska or Horizon. An Eligible Employee who meets all the requirements for an Award is a “Plan Participant” for such Plan Year.  Participation in the Plan does not guarantee that any Award will be paid if applicable performance goals specified for the Plan Year are not achieved for the year.

2.    CALCULATION OF THE AWARD
The size of the Award earned for a Plan Year will depend upon the extent to which the performance goals and, if applicable, an award modifier has been achieved during that Plan Year, and upon the discretion of the Committee.  Separate performance weighting has been established for each performance goal.  

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    A Plan Participant’s Award is determined by the following formula:  Eligible Earnings X Participation Rate X Payout Award Percentage.  

     “Eligible Earnings” means the aggregate wages or salary paid during the Plan Year to the Plan Participant for services performed for Alaska or Horizon, including cash received for vacation payouts in connection with the Plan Participant’s transfer between any two entities (i.e., Alaska and Horizon) or in connection with retirement, death or disability, amounts that the Plan Participant could have received in cash had the Plan Participant not elected to contribute the amount to an employee benefit plan maintained by the Company or an affiliate and any other voluntary payment the Plan Participant makes which reduces his/her compensation (such as the Plan Participant’s voluntary contribution to an Internal Revenue Code (“Code”) Section 401(k) Plan, Code Section 125 medical account, dependent day care spending account, or charitable gift), but excluding commissions, all bonuses (including any payment received under this Plan), and all other forms of incentive or other supplemental pay, employee benefits paid by the employer (such as employer contributions to a Code Section 401(k) Plan), worker’s compensation payments, disability payments, cash and non-cash fringe benefits and perquisites (such as per diems, auto expense reimbursement, relocation reimbursement or travel reimbursement).  

    “Participation Rate” shall mean the percentage level communicated to each Eligible Employee or class of Eligible Employee.

    “Payout Award Percentage” means the sum of the weighted payout of each performance goal, calculated in the manner specified by Paragraph 3, herein.  Awards may be paid in cash only.

All calculations will be performed by the Finance Department of Alaska and will be subject to approval by the Committee.  Once approved by the Committee, such calculations shall be conclusively presumed to be accurate.

3.    PERFORMANCE WEIGHTING
In order for any Award to be payable as to a particular performance goal, a “Threshold” performance level for that goal must be achieved.  The payout percentage for a particular performance goal will be 50% if the “Threshold” level is reached, 100% if the “Target” level is reached, and 200% if the “Maximum” level is achieved.  This determination applies to each goal individually.  If performance for a particular goal is between the Threshold and Target levels, or between the Target and Maximum levels, the payout percentage for that goal will be determined by linear interpolation between those two levels. The payout percentage for each goal as so determined will then be multiplied by the weighting factor for that goal, as specified in Annex 1 Performance-Based Pay Plan Goals and Measures described in Paragraph 4 for the applicable Plan Year (the “weighted payout percentages”).   

4.    PERFORMANCE GOALS AND APPLICABLE PERFORMANCE WEIGHTING FACTORS
The Committee will establish the performance goals and, if applicable, an award modifier for each Plan Year during the life of this Plan, and will annually approve an Annex 1 Performance-Based Pay Plan Goals and Measures to this Plan that outlines the performance goals, award modifiers and the weighting factors and an Annex 2 Performance-Based Pay Plan Participation Rates.  

5.    DISCRETIONARY FACTOR
In the case of a Plan Participant described in Paragraph 1 who retired, terminated employment due to disability, or died during the year, or a Plan Participant who took a leave of absence or worked a reduced schedule during any portion of the year, the Committee retains absolute discretionary authority to adjust the Award to such Plan Participant based upon the Committee’s determination of such Plan Participant’s contribution to the Company or its affiliates or any other factors as the Committee may determine appropriate.  

6.    TIMING OF AWARDS
Payment of Awards for a Plan Year will be made no later than March 15 of the following year.  A deceased Plan Participant's Award will be paid to the Participant’s estate.

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7.    PLAN PARTICIPANT TRANSFERS BETWEEN ALASKA AND HORIZON
If a Plan Participant transfers between Alaska and Horizon, the Plan Participant’s Award under this Plan, and any payment in respect of such Award, shall be separately determined by the Committee based on Eligible Earnings, Participation Rate and Payout Award Percentage attributable to each entity.  This will result in a separate Award based on Alaska service and performance, and a separate Award based on Horizon service and performance, as applicable.

8.    AMENDMENT
The Board, acting on its own or through the Committee, retains the right to modify the Plan at any time in any manner that it deems appropriate, provided that (a) no amendment that adversely affects the rights of Plan Participants or their beneficiaries shall be effective for a Plan Year that ended prior to the Plan Year in which the amendment was adopted, and (b) it will not terminate the Plan for any Plan Year during that Plan Year unless it is clear that Plan Participants will not receive any payment with respect to Awards granted for that Plan Year.  

9.    CLAWBACK POLICY.
The Award is subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require forfeiture of the Award and repayment or forfeiture of any cash received with respect to the Award.

10.    MISCELLANEOUS
a.    This Plan, including its attachments, constitutes the entire understanding relating to an Award to any employee of Alaska or Horizon, and supersedes all prior oral or written agreements, representations or commitments relating to such Awards. 

b.    This Plan is not a commitment of the Company, Alaska or Horizon, to any officer or employee of such company, to continue that individual in its employ in order to qualify for an Award.  Nothing contained in this Plan may be considered to be a promise of continued employment.  Any employee who shall file suit against his or her employer for wrongful termination shall automatically cease to be a Plan Participant.

c.    This Plan and the rights and obligations provided for herein shall be construed and interpreted in accordance with the law of the state of Washington, excluding its conflicts of law rules.

d.    No unpaid Award will be subject to the debts, liabilities, contracts or engagements of any Plan Participant, and may not be alienated, pledged, garnished or sold, and any attempt to do so shall be void.

e.    All Awards are subject to applicable federal, state, and local deductions.

f.    This Plan is intended to be an exception to, or otherwise be in compliance with, Section 409A of the Internal Revenue Code of 1986, as amended.  This Plan shall be interpreted to comply with Section 409A.  

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ALASKA AIR GROUP 
OPERATIONAL PERFORMANCE REWARDS PLAN
Adopted January 3, 2005; Amended May 6, 2021 (Effective June 1, 2021)

The Board of Directors of Alaska Air Group, Inc. (the “Company”) has adopted the Operational Performance Rewards Plan (the “Plan”) to reward employees of Alaska Airlines, Inc. (“Alaska”) and  Horizon Air Industries, Inc. (“Horizon”) (each a “Subsidiary”) for achieving certain operational performance targets.  This description is provided to explain the key elements of how the Plan will operate.  This Plan is effective beginning with the 2021 Plan year and each year thereafter until amended or terminated as provided herein. 

1.    ELIGIBILITY

All regular employees,temporary variable-time and temporary pool employees of Alaska and Horizon (including employees outside of the United States, if permitted by applicable law and labor contracts) are eligible to participate in the Plan (“Eligible Employees”), and will receive one or more payments under the Plan if they meet the criteria in this paragraph.  Payments under the Plan (“Awards”) are earned monthly and paid quarterly. Eligible Employees on active status or on an approved leave of absence as of the close of business on the last day of the quarter during which (a) any of the monthly operational targets applicable to such employee's applicable Subsidiary are met and (b) employee had eligible earnings as defined in the Company's Performance Based Pay Plan during the quarter or, if employee had no eligible earnings, employee was on a COVID-related unpaid capacity reduction leave will be eligible for a payout for each month of the quarter in which the employee's applicable Subsidiary's operational targets are met.  For persons with Voluntary Severance Incentive or equivalent severance packages (whether voluntary or not), the last day of eligible employment will not include any of the period during which the employee has ceased working but is still otherwise treated as on payroll.

Unless otherwise provided in a separate agreement, an individual whose employment with Alaska and Horizon ends prior to the last day of the quarter for any reason not set forth above, for example, resignation or termination (with or without cause), forfeits any Award under this Plan. In addition, employees terminated for cause, as determined by such employee’s applicable subsidiary, shall forfeit any Award under this Plan, regardless of their employment status on the last day of the quarter. Notwithstanding the foregoing, contract employees or independent contractors as classified by Alaska or Horizon, as applicable, shall be excluded from participation hereunder, regardless of whether an agency or court subsequently re-classifies such individuals as employees of Alaska or Horizon. An Eligible Employee who meets all the requirements for an Award is a “Plan Participant."  Participation in the Plan does not guarantee that any Award will be paid if applicable operational targets are not achieved.

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2.    ACCRUAL OF AWARDS

An Award will accrue for each Participant as of the close of business of the last day of any quarter in which the applicable Subsidiary has achieved one or more of the performance goals set forth in Exhibit A.  Each Subsidiary does not need to achieve all of the performance goals in a given quarter to accrue an Award; each goal reached in a given Target Period (as defined in Exhibit A) will apply separately towards the Award to that Subsidiary’s Participants for that quarter.

3.    PAYMENT OF AWARDS

Accrued Awards will be paid quarterly.  The Company will use reasonable efforts to pay accrued Awards to Participants within sixty (60) days after the end of each calendar quarter. The Company may pay Awards through regular payroll or by separate check in the Company’s discretion, and in either case the Company may withhold applicable taxes and garnishments from such payments.  The Company will pay a deceased Participant's Award to to the Participant’s estate.

4.    ESTABLISHMENT OF PERFORMANCE GOALS 

The Compensation and Leadership Development Committee of the Board (the “Compensation Committee”) will establish the periodic performance goals for each Plan year during the life of this Plan, and will provide an exhibit to this Plan that outlines goals and the payout amounts for each goal.  Each such attachment will be labeled “Exhibit A: Operational Performance Rewards Plan Goals and Award Levels for [year]” and communicated to eligible employees.

5.    AMENDMENT; TERMINATION; INTERPETATION

The Board, acting through the Compensation Committee, retains the right at any time to modify the Plan in any manner that it deems appropriate or to terminate the Plan, provided that no amendment or termination shall be effective sooner than the first day of the month following the Compensation Committee’s action on such amendment or termination.  No termination of the Plan shall affect Awards accrued before the effective date of termination.  Management may interpret or amend this Plan Description with respect to administrative issues that do not affect benefit amounts and are not otherwise material to the overall benefits provided by the Plan.  The Compensation Committee shall have discretion to interpret and resolve any material issue or dispute under the Plan, and its decision concerning any aspect of the operation of the Plan will be final and conclusive. The Compensation Committee will review the Plan annually and may make changes to the Plan and/or Exhibit A for the next Plan year. 

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6.    CLAWBACK POLICY

Awards are subject to the terms of the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require forfeiture of the Awards and repayment or forfeiture of any cash received with respect to the Awards.

7.    MISCELLANEOUS

This description, including its attachments, constitutes the entire understanding relating to the Plan, and supersedes all prior oral or written agreements, representations or commitments relating to the Plan or any Award.  This Plan is not a commitment of the Company, Alaska or Horizon, to any officer or employee of any such company to continue that individual in its employ for any reason.  Any employee who files suit against his or her employer for wrongful termination shall automatically cease to be a Participant. This description and the rights and obligations provided for herein shall be construed and interpreted in accordance with the law of the state of Washington, excluding its conflicts of law rules.  

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