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ALASKA AIR GROUP, INC.2016 PERFORMANCE INCENTIVE PLAN
DIRECTOR DEFERRED STOCK UNIT AWARD AGREEMENT
THIS DIRECTOR DEFERRED STOCK UNIT AWARD AGREEMENT (this “Agreement”) dated ____________, by and between ALASKA AIR GROUP, INC., a Delaware corporation (the “Corporation”), and ___________ (the “Director”) evidences the award of stock units (the “Award”) granted by the Corporation to the Director as to the number of stock units (the “Stock Units”) first set forth below.
												
	Number of Stock Units1:  
		Award Date:	

Vesting:  The Stock Units shall be considered one hundred percent (100%) vested at all times.
The Award is granted under the Alaska Air Group, Inc. 2016 Performance Incentive Plan (the “Plan”) and subject to the Terms and Conditions of Director Deferred Stock Unit Award (the “Terms”) attached to this Agreement (incorporated herein by this reference) and to the Plan.  The Award has been granted to the Director in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Director.  Capitalized terms are defined in the Plan if not defined herein.  The parties agree to the terms of the Award set forth herein.  The Director acknowledges receipt of a copy of the Terms, the Plan and the Prospectus for the Plan.
						
	DIRECTOR	ALASKA AIR GROUP, INC.
a Delaware corporation

	_________________________________________	
		Bradley D. Tilden
Chairman, President and CEO

1 Subject to adjustment under Section 7.1 of the Plan.
TERMS AND CONDITIONS OF DIRECTOR DEFERRED STOCK UNIT AWARD
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1.Stock Units.  As used herein, the term “stock unit” shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock (subject to adjustment as provided in Section 7.1 of the Plan) solely for purposes of the Plan and this Agreement.  The Stock Units shall be used solely as a device for the determination of the payment to eventually be made to the Director pursuant to this Agreement.  The Stock Units shall not be treated as property or as a trust fund of any kind.
2.No Service Commitment.  Neither the Award nor anything contained in these Terms or the Plan constitutes a continued service commitment by the Corporation or interferes with the right of the Corporation to increase or decrease the compensation of the Director from the rate in existence at any time.
3.Limitations on Rights Associated with Units.
(a)        Limitations on Rights Associated with Units.  The Director shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Section 3(b) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of such Stock Units until such shares of Common Stock are actually issued to and held of record by the Director.  No adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date of issuance of such shares.
(b)        Dividend Equivalent Rights.  As of any date that the Corporation pays an ordinary cash dividend on its Common Stock, the Corporation shall credit the Director with an additional number of Stock Units equal to (i) the per share cash dividend paid by the Corporation on its Common Stock on such date, multiplied by (ii) the total number of Stock Units (including any dividend equivalents previously credited hereunder) (with such total number adjusted pursuant to Section 7.1 of the Plan) subject to the Award as of the related dividend payment record date, divided by (iii) the fair market value of a share of Common Stock on the date of payment of such dividend.  Any Stock Units credited pursuant to the foregoing provisions of this Section 3(b) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original Stock Units to which they relate.  No crediting of Stock Units shall be made pursuant to this Section 3(b) with respect to any Stock Units which, as of such record date, have been paid pursuant to Section 5.
4.Restrictions on Transfer.  Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily.  The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.
5.Timing and Manner of Payment of Stock Units.  On or as soon as administratively practical after (and in all events not more than ninety (90) days after) the first date on which the Director is no longer a member of the Board (the “Severance Date”), the Corporation shall deliver to the Director a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of Stock Units subject to this Award; provided, however, that in all events the Director’s Severance Date will be the date on which the Director incurs a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder (i.e. generally the date on which the Director is no longer a member of 
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the Board or employed by the Corporation or a Subsidiary); and provided, further, that in the event the Director is a “specified employee” (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the Severance Date, the Director shall not be entitled to any payment of the Stock Units until the earlier of (i) the date which is six (6) months after his separation from service with the Corporation for any reason other than death, or (ii) the date of the Director’s death, if and to the extent such delay in payment is required to comply with Section 409A of the Code.  The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to the Stock Units is subject to the condition precedent that the Director or other person entitled under the Plan to receive any shares with respect to the Stock Units deliver to the Corporation any representations or other documents or assurances that the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements. 
6.Adjustments Upon Specified Events.  Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Award.  No such adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are credited pursuant to Section 3(b).  
7.Tax Withholding.  Subject to Section 8.1 of the Plan, upon any distribution of shares of Common Stock in respect of the Stock Units, the Corporation shall automatically reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value (determined in accordance with the applicable provisions of the Plan), to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates.  In the event that the Corporation cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Stock Units, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Director and/or to deduct from other compensation payable to the Director any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.
8.Notices.  Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Director at the Director’s last address reflected on the Corporation’s records, or at such other address as either party may hereafter designate in writing to the other.  Any such notice shall be given only when received, but if the Director is no longer a member of the Board, shall be deemed to have been duly given by the Corporation when enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government.
9.Plan.  The Award and all rights of the Director under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference.  The Director agrees to be bound by the terms of the Plan and this Agreement.  The Director acknowledges having read and understanding the Plan, the Prospectus for the Plan, and this Agreement.  Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Director unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.
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10.Entire Agreement.  This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof.  The Plan and this Agreement may be amended pursuant to Section 8.6 of the Plan.  Such amendment must be in writing and signed by the Corporation.  The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Director hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.
11.Limitation on Director’s Rights.  Participation in the Plan confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  The Director shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to Stock Units, as and when payable hereunder.  
12.Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.  
13.Section Headings.  The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.
14.Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to conflict of law principles thereunder.
15.Construction.  It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code.  This Agreement shall be construed and interpreted consistent with that intent.

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ALASKA AIR GROUP 
OPERATIONAL PERFORMANCE REWARDS PLAN
Adopted January 3, 2005; Amended May 7, 2020 (Effective June 1, 2020)

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 2020 Plan year and each year thereafter until amended or terminated as provided herein. 

1. ELIGIBILITY

All regular employees and temporary variable-time 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.

2. ACCRUAL OF AWARDS
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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 the beneficiary designated by the Participant for purposes of the Company's group term life insurance plan covering the deceased Participant, and in the absence of any designation, will be paid 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. 

6. CLAWBACK POLICY
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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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