EXHIBIT 10.17
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED
COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
TABLE OF CONTENTS
Page
PREAMBLE..................................................................................... 1
SECTION 1 DEFINITIONS........................................................................ 2
1.1 Account......................................................................... 2
1.2 Administrative Committee........................................................ 2
1.3 Affiliated Companies............................................................ 2
1.4 Beneficiary..................................................................... 2
1.5 Board........................................................................... 3
1.6 Change of Control............................................................... 3
1.7 Code............................................................................ 4
1.8 Company......................................................................... 4
1.9 Deferral Election Form.......................................................... 4
1.10 Deferral Period................................................................ 4
1.11 Contribution................................................................... 4
1.12 Effective Date................................................................. 5
1.13 Elected Officer................................................................ 5
1.14 Eligible Employee.............................................................. 5
1.15 Employer....................................................................... 5
1.16 Enrollment Period.............................................................. 5
l.17 ERISA.......................................................................... 5
1.18 Involuntary Termination........................................................ 5
1.19 MIP............................................................................ 6
1.20 Participant.................................................................... 6
1.21 Plan........................................................................... 6
1.22 Plan Year...................................................................... 6
1.23 Qualified Plan................................................................. 6
1.24 Valuation Date................................................................. 6
1.25 Additional Definitions in Plan ................................................ 6
SECTION 2 ELIGIBILITY AND PARTICIPATION...................................................... 7
2.1 Enrollment...................................................................... 7
2.2 Termination of Participation.................................................... 7
2.3 Inactive Participation.......................................................... 7
SECTION 3 PLAN CONTRIBUTIONS................................................................. 8
3.1 Participant Deferrals........................................................... 8
3.2 Cancellation of Election........................................................ 8
3.3 Deferral Period Election........................................................ 8
3.4 Employer Contributions.......................................................... 8
SECTION 4 ACCOUNTS........................................................................... 9
4.1 Account(s)...................................................................... 9
4.2 Earnings........................................................................ 9
SECTION 5 PAYMENT OF BENEFITS................................................................ 10
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
Table of Contents, Continued
Page
----
5.1 Benefit Commencement and Payment Form........................................... 10
5.2 Benefit Amount.................................................................. 10
5.3 Payment Form.................................................................... 10
5.4 Payment-Form Election........................................................... 10
5.5 Hardship Distributions.......................................................... 11
SECTION 6 CHANGE OF CONTROL BENEFITS......................................................... 12
6.1 Change of Control Benefit....................................................... 12
6.2 Form of Payment................................................................. 12
6.3 Plan Termination................................................................ 12
SECTION 7 DEATH BENEFITS..................................................................... 13
7.1 Death After Benefit Payments Begin.............................................. 13
7.2 Death Before Benefit Payments Begin............................................. 13
SECTION 8 VESTING............................................................................ 14
8.1 Vesting......................................................................... 14
SECTION 9 POWERS AND DUTIES OF THE COMMITTEE................................................. 15
9.1 Appointment of Administrative Committee......................................... 15
9.2 Powers and Duties............................................................... 15
9.3 Administrative Committee Procedures............................................. 16
9.4 Appointment of Agents........................................................... 16
9.5 Administrative Committee Expenses............................................... 16
9.6 Administrative Expenses......................................................... 16
9.7 Determinations.................................................................. 16
9.8 Claim and Review Procedure...................................................... 17
9.9 Exemption From Liability/Indemnification........................................ 19
SECTION 10 AMENDMENT AND TERMINATION......................................................... 20
10.1 Amendment or Termination....................................................... 20
SECTION 11 MISCELLANEOUS PROVISIONS.......................................................... 22
11.1 Appendices..................................................................... 22
11.2 ERISA Status................................................................... 22
11.3 Unfunded Nature of the Obligation.............................................. 22
11.4 Facility of Payment............................................................ 22
11.5 Governing Law.................................................................. 22
11.6 Limitation on Assignment....................................................... 22
11.7 No Additional Rights........................................................... 23
11.8 Notice......................................................................... 23
11.9 Severability................................................................... 23
11.10 Tax Consequences and Withholding.............................................. 23
SIGNATURE PAGE............................................................................... 24
APPENDIX I................................................................................... 25
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
PREAMBLE
The purpose of this Alaska Air Group, Inc. Nonqualified Deferred
Compensation Plan is to attract and retain capable individuals to serve as
executive employees of Alaska Air Group, Inc. (the "Company") and of certain
affiliated companies by providing a select group of executive employees the
opportunity to defer receipt of compensation, to which the executives otherwise
would be entitled currently.
The Plan is intended to qualify for exemption from Parts 2, 3 and 4 of
Subtitle B of Title I of the Employee Retirement Income Security Acts of 1974,
as amended ("ERISA"), as a plan which is unfunded and which is maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees under Section 201(2), 301(a)(3)
and 401(a)(1) of ERISA.
The Plan set forth in the following pages is adopted by the Company,
effective January 1, 1998.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
1
SECTION 1
DEFINITIONS
Whenever capitalized in this Plan, the following capitalized terms shall have
the meanings set forth below except where otherwise provided. As used in the
Plan, the masculine, feminine, and neuter genders shall each be deemed to
include the other or others.
1.1 Account
"Account" means one or more book reserve records maintained by the
Company for the purpose of determining a Participant's benefits under
the Plan.
1.2 Administrative Committee
"Administrative Committee" means a committee appointed by the Chairman
of the Board to administer the Plan pursuant to Section 9.
1.3 Affiliated Companies
"Affiliated Companies" or "Affiliate" means:
(a) the Company;
(b) any other corporation which is a member of a controlled group
of corporations which includes the Company (as defined in Code
Section 414(b));
(c) any other trade or business under common control with the
Company (as defined in Code Section 4l4(c)); or
(d) any other member of an affiliated service group which includes
the Company (as defined in Code Section 4l4(m)).
1.4 Beneficiary
"Beneficiary" means the person or persons entitled to receive a
Participant's benefits payable under the Plan. The Beneficiary is the
person or persons named in the Participant's latest written designation
filed with the Administrative Committee, provided that the consent of
the Participant's spouse (if any) is required for the election of a
nonspouse Beneficiary and for any subsequent changes of the
Participant's Beneficiary designation. Spousal consent must be in
writing, name the designated Beneficiary and be notarized.
If no designation has been filed with the Administrative Committee, or
if the person or persons designated do not survive the Participant, the
Beneficiary shall be the following persons in the following order of
priority: (1) the surviving spouse (regardless of length of marriage),
and (2) the estate of the Participant.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
2
If the Beneficiary dies after the death of the Participant, but before
full distribution has been made to that Beneficiary, the balance, if
any, shall be distributed to the estate of that deceased Beneficiary.
1.5 Board
"Board" means the Board of Directors of the Company, or a committee
composed of fewer than all of the members of the Board of Directors of
the Company that is authorized to act on behalf of the Board.
1.6 Change of Control
"Change of Control" means the occurrence of any of the following:
(a) the Board approves (or, if approval of the Board is not
required as a matter of law, the shareholders of the Company
approve):
(i) any consolidation or merger of the Company in which
the Company is not the continuing or surviving
corporation or pursuant to which shares of common
stock of the Company would be converted into cash,
securities or other property, other than a merger of
the Company in which the holders of common stock of
the Company immediately prior to the merger have the
same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, the assets of the
Participant's Employer; or
(iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Participant's
Employer;
(b) at any time during a period of twenty-four (24) months, fewer
than a majority of the members of the Board are Incumbent
Directors. "Incumbent Directors" means:
(i) individuals who constituted the Board at the
beginning of such period; and
(ii) individuals who were nominated or elected by all of,
or a committee composed entirely of, the individuals
described in (i); and
(iii) individuals who were nominated or elected by
individuals described in (ii).
(iv) any person (as such term is used in Section 13(d) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) shall, as a
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
3
result of a tender or exchange offer, open market
purchases, privately-negotiated purchases or
otherwise, become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, of the then-outstanding
securities of the Company ordinarily (and apart from
rights accruing under special circumstances) having
the right to vote in the election of members of the
Board ("Voting Securities" to be calculated as
provided in paragraph (d) of Rule 13d-3 in the case
of rights to acquire common stock of the Company)
representing 20% or more of the combined voting power
of the then-outstanding Voting Securities.
Unless the Board shall determine otherwise, a Change of Control shall
not be deemed to have occurred by reason of any corporate
reorganization, merger, consolidation, transfer of assets, liquidating
distribution or other transaction entered into solely by and between
the Company and an Employer, or any Affiliates thereof, provided such
transaction has been approved by at least two-thirds (K) of the
Incumbent Directors (as defined above) then in office and voting.
1.7 Code
"Code" means the Internal Revenue Code of 1986, as amended and
regulations promulgated under the Code.
1.8 Company
"Company" means Alaska Air Group, Inc., a corporation organized and
existing under the laws of the State of Delaware, and its successors in
interest.
1.9 Deferral Election Form
"Deferral Election Form" means an agreement between a Participant and
the Company whereby the Participant elects to reduce his or her MIP for
a future Plan Year and the Company promises to pay benefits under the
Plan in the future. The form and content of the Deferral Election Form
shall be prescribed by the Administrative Committee.
1.10 Deferral Period
"Deferral Period" means the number of years selected by a Participant
pursuant to Section 3 during which payment of his or her Contribution
for a Plan Year is postponed.
1.11 Contribution
"Contribution" means an Employer contribution for a Plan Year made on
behalf of a Participant pursuant to Section 3.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
4
1.12 Effective Date
"Effective Date" means January 1, 1998.
1.13 Elected Officer
"Elected Officer" means an officer of an Employer that is elected by
the Board, pursuant to the bylaws of the Employer.
1.14 Eligible Employee
" Eligible Employee" means any person who is:
(a) employed by an Employer as a common law employee for federal
employment tax purposes;
(b) eligible for the MIP; and
(c) named by the Board to participate in the Plan.
1.15 Employer
"Employer" means the Company and any Affiliate that adopts this Plan in
writing with the consent of the Board, and agrees to be bound by the
terms and conditions of the Plan and any amendments or modifications
thereto, and which is listed in Appendix I. In the event an Employer
ceases participation in the Plan, the date participation ceases shall
be indicated in the Appendix.
1.16 Enrollment Period
"Enrollment Period" means an election period that is established by the
Administrative Committee for submission of a Deferral Election Form
pursuant to Section 3.1
1.17 ERISA
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and regulations promulgated thereto.
1.18 Involuntary Termination
"Involuntary Termination" and its derivatives as the context requires
(such as "Involuntarily Terminated") means no longer employed by an
Employer or Affiliated Company as a common law employee for federal
employment tax purposes due to discharge, lay off, or similar Employer
action.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
5
1.19 MIP
"MIP" means the Alaska Air Group, Inc. Management Incentive Program,
under which incentive compensation may be awarded annually.
1.20 Participant
"Participant" means each Eligible Employee who participates in this
Plan pursuant to the provisions of Section 2.
1.21 Plan
"Plan" means the Alaska Air Group, Inc. Nonqualified Deferred
Compensation Plan, as set forth herein and amended from time to time.
1.22 Plan Year
"Plan Year" means the calendar year beginning on the Effective Date and
each subsequent calendar year.
1.23 Qualified Plan
"Qualified Plan" means any defined contribution retirement plan that is
qualified or is intended to be qualified under Code Section 401(k) and
that is maintained by an Affiliated Company.
1.24 Valuation Date
"Valuation Date" means the first day of each month or any other date
the Committee designates from time to time.
1.25 Additional Definitions in Plan
The following terms are defined in the following Sections of the Plan:
Change of Control Benefit....................................................... 6.1
Review panel.................................................................... 9.8(c)
Interest Rate................................................................... 4.2(b)
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
6
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1 Enrollment
Each Eligible Employee shall become a Participant on the later of:
(a) the Effective Date, or
(b) the first day of the Plan Year to which the Eligible
Employee's first Deferral Election Form relates.
2.2 Termination of Participation
A Participant's participation in the Plan will terminate when the
Participant's benefits under this Plan have been paid in full.
2.3 Inactive Participation
A Participant shall cease to be a Participant upon written notification
by the Board. In that event, the former Participant shall be considered
an inactive Participant. An inactive Participant shall continue
participation with respect to amounts credited to his or her Account,
but no additional Contributions shall be credited to his or her Account
pursuant to Section 3 after the date the Participant becomes inactive.
The Accounts of inactive Participants shall continue to be adjusted for
earnings and payments pursuant to Section 4.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
7
SECTION 3
PLAN CONTRIBUTIONS
3.1 Participant Deferrals
Except as provided in Section 3.2, a Participant may elect to defer
receipt of a MIP payment for a future Plan Year by completing a
Deferral Election Form that specifies a percentage of the future MIP
payment (in 1% increments) which the Participant elects to defer, and
authorizes the Employer to make a corresponding payroll deduction from
the Participant's MIP.
A Deferral Election Form must be submitted to the Administrative
Committee during the Enrollment Period immediately preceding the first
day of the Plan Year during which the MIP would be payable if awarded.
Once the Deferral Election Form is submitted, a Participant cannot
change or revoke the amount of MIP deferral elected on the Deferral
Election Form. If a Participant fails to complete and submit a Deferral
Election Form before the end of an Enrollment Period, the Participant
is deemed to have elected not to defer any MIP for the following Plan
Year.
3.2 Cancellation of Election
If a Participant receives a hardship distribution under a Qualified
Plan any Deferral Election Form that applies to a MIP payable during
the twelve-month period following the date of the hardship distribution
is deemed canceled. The Participant may resume MIP deferrals by
submitting another Deferral Election Form during any Enrollment Period
after the twelve-month period expires.
3.3 Deferral Period Election
On each Deferral Election Form, a Participant must elect a Deferral
Period. The Deferral Period is measured from the first day of the Plan
Year to which the Deferral Election Form relates. The Deferral Period
elected must be stated in whole Plan Years, and in no event will a
Deferral Period be shorter than two (2) Plan Years. Once the Deferral
Election Form is submitted, a Participant cannot change the Deferral
Period elected on the Deferral Election Form.
3.4 Employer Contributions
No Employer Contributions are authorized under the Plan.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
8
SECTION 4
ACCOUNTS
4.1 Account(s)
Each Plan Year, the Administrative Committee shall establish on the
Company's books and records an Account for that Plan Year in the name
of each Participant whose MIP for that Plan Year is deferred, in whole
or in part. The Administrative Committee shall credit the Participant's
Account as of the date the MIP was paid with the Participant's
Contribution for that Plan Year. The Administrative Committee will
credit earnings to each Account pursuant to Section 4.2. If installment
payments are made to the Participant in accordance with Section 5.3(b),
the Administrative Committee will debit the Account as of the first day
of the month in which the payment is made by the amount of any
installment payment made pursuant to Section 5.3(b).
4.2 Earnings
(a) Earnings Credit
The Administrative Committee shall credit each Account with
earnings as of each Valuation Date. The earnings credit for
each Valuation Date is determined by applying the Interest
Rate to the Account balance determined as of the Valuation
Date for which earnings are being credited, reduced by any
installment payment under Section 5.3(b) for that month.
(b) Interest Rate
The Interest Rate for each Plan Year is the mean between the
high and the low during the first eleven months of the
preceding Plan Year of yields of Ba2-rated industrial bonds as
determined in the discretion of the Administrative Committee,
rounded to the nearest one quarter of one percent (0.25%). The
Administrative Committee will notify Participants annually of
the established Interest Rate for the Plan Year.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
9
SECTION 5
PAYMENT OF BENEFITS
5.1 Benefit Commencement and Payment Form
(a) General Rule
Benefit payments to a Participant shall begin as soon as
administratively feasible after the first day of the April
immediately following the last day of the Deferral Period.
(b) Involuntary Termination
Notwithstanding any other Plan provision to the contrary, in
the event of Involuntary Termination, benefit payments shall
begin as soon as administratively feasible after the
Participant is Involuntarily Terminated, regardless of the
Deferral Period elected.
5.2 Benefit Amount
(a) General Rule
The amount of benefits shall be the balance of the
Participant's Account or Accounts to which the expired
Deferral Period relates, determined as of the Valuation Date
immediately preceding the date benefits commence.
(b) Involuntary Termination
In the event of Involuntary Termination, the amount of
benefits shall be the balance of all the Participant's
Accounts determined as of the Valuation Date immediately
preceding the date benefits commence.
5.3 Payment Form
(a) Except as provided in Section 5.4, all benefits shall be paid
in annual installments over ten (10) years. The amount of each
installment shall equal the balance of the Account or Accounts
as of the immediately preceding Valuation Date divided by the
number of remaining installments (including the installment
being determined). All installment payments will be made as of
April 1 of each year.
5.4 Payment-Form Election
Subject to approval of the Administrative Committee, a Participant may
elect a single sum payment of his or her benefits provided that the
election is made at least one (1) year before the April 1 as of which
payments are to begin. Once benefit payments commence, the payment form
cannot be changed by the
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
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Participant or Beneficiary. All payment-form elections shall be made in
the form and manner prescribed by the Administrative Committee and
shall be subject to approval of the Administrative Committee.
5.5 Hardship Distributions
A Participant may apply to the Administrative Committee for a hardship
distribution before the date benefits would otherwise commence. A
hardship distribution is subject to Administrative Committee approval,
and is available only for an unanticipated emergency caused by an event
beyond the Participant's control that results in a severe financial
hardship. Examples of expenses that will not be considered severe
financial hardships include the purchase of a residence and educational
expenses. The amount of a hardship distribution may not exceed the
amount needed to meet the emergency and may not exceed the value of the
Participant's vested Accounts. A hardship distribution will be paid
from the Employer's general assets, and the Participant's Account will
be reduced as of the distribution date by the amount of the
distribution.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
11
SECTION 6
CHANGE OF CONTROL BENEFITS
6.1 Change of Control Benefit
Notwithstanding any other provision of the Plan, in the event of a
Change of Control, each Participant (or his or her Beneficiary), except
a participant Terminated For Cause before the date of the Change of
Control, shall receive a Change of Control Benefit in accordance with
this Section, in lieu of all other benefits payable under this Plan. A
Participant's Change of Control Benefit shall be the aggregate balance
of all the Participant's Accounts determined as of the Valuation Date
immediately preceding the date benefits commence.
6.2 Form of Payment
All Change of Control Benefits shall be paid in the form of a single
sum payment within sixty (60) days after a Change of Control.
6.3 Plan Termination
After payment of all Change of Control Benefits, this Plan shall
terminate automatically, and no Participant or Beneficiary will have
any further rights under the Plan.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
12
SECTION 7
DEATH BENEFITS
7.1 Death After Benefit Payments Begin
If a Participant dies after benefit payments have begun in a form other
than a single sum, but before receiving all payments to which the
Participant is entitled under the Plan, the aggregate balance of all
the Participant's Accounts as of the Valuation Date coinciding with or
immediately preceding the date of death shall be paid to the
Participant's Beneficiary in a single sum as soon as administratively
feasible after the date of death.
7.2 Death Before Benefit Payments Begin
If a Participant dies before benefit payments begin, the aggregate
balance of all the Participant's Accounts as of the Valuation Date
coinciding with or immediately preceding the date of death shall be
paid to the Participant's Beneficiary in a single sum as soon as
administratively feasible, after the date of death.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
13
SECTION 8
VESTING
8.1 Vesting:
At all times, each Participant shall have a vested, nonforfeitable
right to the Participant's benefits under this Plan.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
14
SECTION 9
POWERS AND DUTIES OF THE COMMITTEE
9.1 Appointment of Administrative Committee
The Plan shall be administered by the Administrative Committee which
shall be appointed by the Chairman of the Board. The Administrative
Committee shall be composed of at least three (3) members, all of whom
are Elected Officers. No bond or other security shall be required of
any Administrative Committee member in such capacity.
The Chairman of the Board shall be the Chairman of the Administrative
Committee. Administrative Committee members may participate in the Plan
if they are otherwise eligible to do so.
9.2 Powers and Duties
The Administrative Committee shall have the power and the duty to take
all action and to make all decisions necessary or proper to carry out
the Plan, including the discretionary authority to interpret the
provisions of the Plan and the facts and circumstances of claims for
benefits. The Administrative Committee shall have the absolute
discretion to decide all issues of fact or law. Any decision by the
Administrative Committee that is not shown to be an abuse of discretion
must be upheld by a court of law. Without limiting the foregoing, the
Administrative Committee shall have the following administrative powers
and duties:
(a) to require any Participant or Beneficiary to furnish
information as they may request for the purpose of the proper
administration of the Plan as a condition to receiving any
benefit under the Plan;
(b) to make and enforce rules and regulations and prescribe the
use of forms as they shall deem necessary for the efficient
administration of the Plan;
(c) to interpret the Plan and to resolve ambiguities,
inconsistencies and omissions in a nondiscriminatory manner;
(d) to determine tax withholding;
(e) to compute the amount of benefits which shall be payable to
any person in accordance with the provisions of the Plan; and
(f) to delegate any of their administrative powers or duties
hereunder to any of their agents or employees.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
15
9.3 Administrative Committee Procedures
A majority of the Administrative Committee members in office may
fulfill any act which the Plan authorizes or requires of the
Administrative Committee, provided that no Administrative Committee
member who participates in the Plan shall vote on any matter that
pertains to the member or to the member's rights and/or benefits under
the Plan unless such matter pertains to all Participants or all
Participant's rights and/or benefits under the Plan. Each member of the
Administrative Committee shall be excused from voting on any action
pertaining solely to the member or members of the Administrative
Committee or their rights and/or benefits under the Plan, and the
action shall be taken by a majority of the remaining members of the
Administrative Committee, or if the remaining members do not constitute
a quorum, by the Compensation Administrative Committee of the Board.
The action of such majority of the Administrative Committee expressed
from time to time by a vote at a meeting, or in writing without a
meeting, shall constitute the action of the Administrative Committee
and shall have the same effect for all purposes as if assented to by
all Administrative Committee members. The majority of Administrative
Committee members may delegate in writing to any of them the authority
to give certified notice in writing of any action taken by the
Administrative Committee.
9.4 Appointment of Agents
The Administrative Committee may appoint such actuaries, accountants,
counsel, specialists, and other persons or organizations as they shall
deem necessary for administration of the Plan and they shall be
entitled to prudently rely upon any tables, valuations, certificates,
opinions, or reports which shall be furnished to them by such persons
or organizations.
9.5 Administrative Committee Expenses
The Administrative Committee shall serve without compensation for
services as such, but any reasonable expenses incurred by them in the
performance of their duties as Administrative Committee members shall
be paid by the Company.
9.6 Administrative Expenses
All expenses incurred by the Administrative Committee in connection
with the administration of the Plan, including but not limited to the
compensation of any actuary, accountant, counsel, specialist, or other
persons or organizations who shall be employed by the Administrative
Committee in connection with the administration thereof, shall be paid
by the Company.
9.7 Determinations
All determinations hereunder made by the Board or the Administrative
Committee shall be made in the sole and absolute discretion of the
Board, the Compensation
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
16
Administrative Committee of the Board or of the Administrative
Committee, as the case may be.
In the event that any disputed matter shall arise hereunder, including,
without in any manner limiting the generality of the foregoing, any
matter relating to the eligibility of any person to participate under
the Plan, the participation of any person under the Plan, the amounts
payable to any person under the Plan, and the applicability and the
interpretation of the provisions of the Plan, the decision of the
Administrative Committee, Board, or Compensation Administrative
Committee of the Board upon such matter shall be binding and conclusive
upon all persons, including, without in any manner limiting the
generality of the foregoing, the Company, the Board, all persons at any
time in the employ of the Company, the Participants and their
Beneficiaries, and upon the respective successors, assigns, executors,
administrators, heirs, next of kin, and distributees of all the
foregoing.
9.8 Claim and Review Procedure
(a) Application for Benefits
Any application for benefits under the Plan shall be submitted
to the Company at its principal office. Such application shall
be in writing on the prescribed form and shall be signed by
the applicant.
(b) Denial of Applications
In the event that any application for benefits is denied in
whole or in part, the Company shall notify the applicant in
writing of the right to a review of the denial. Such written
notice shall set forth, in a manner calculated to be
understood by the applicant, specific reasons for the denial,
specific references to the Plan provisions on which the denial
was based, a description of any information or material
necessary to perfect the application, an explanation of why
such material is necessary, and an explanation of the Plan's
review procedure. Such written notice shall be given to the
applicant within 90 days after the Company receives the
application unless special circumstances require an extension
of time for processing the application. In no event shall such
an extension exceed a period of ninety (90) days after the end
of the initial 90-day period. If such an extension is
required, written notice thereof shall be furnished to the
applicant before the end of the initial 90-day period. Such
notice shall indicate the special circumstances requiring an
extension of time and the date by which the Company expects to
render a decision. If written notice is not given to the
applicant within the period prescribed by this Subsection (b),
the application shall be deemed to have been denied for
purposes of Subsection (d) upon the expiration of such period.
(c) Review Panel
The Company from time to time shall appoint a Review Panel.
The "Review Panel" shall consist of three or more individuals
who may (but need not) be
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
17
Employees of the Company and shall be the named fiduciary with
the authority to act on any Employee benefit appeal. Members
of the Administrative Committee may be appointed to the Review
Panel. The Review Panel has discretionary authority to decide
all issues of fact or law. Any decision by the Review Panel
that is not established to be an abuse of discretion must be
upheld by a court of law.
(d) Requests for Review
Any person whose application for benefits is denied in whole
or in part (or such person's duly authorized representative)
may appeal from the denial by submitting to the Review Panel a
request for a review of such application within six (6) months
after receiving written notice of the denial. The Review Panel
shall give the applicant or such representative an opportunity
to review pertinent documents in preparing such request for
review and to submit issues and comments in writing. The
request for review shall be in writing and shall be addressed
to the Company's principal office. The request for review
shall set forth all of the grounds on which it is based, all
facts in support of the request, and any other matters which
the applicant deems pertinent. The Review Panel may require
the applicant to submit such additional facts, documents or
other material as it may deem necessary or appropriate in
making its review.
(e) Decisions on Review
The Review Panel shall act upon each request for review within
sixty (60) days after receipt thereof, unless special
circumstances require an extension of time for processing, but
in no event shall the decision on review be rendered more than
one hundred twenty (120) days after the Review Panel receives
the request for review. If such an extension is required,
written notice thereof shall be furnished to the applicant
before the end of the initial sixty (60)-day period. The
Review Panel shall give prompt, written notice of its decision
to the applicant and to the Company. In the event that the
Review Panel confirms the denial of the application for
benefits in whole or in part, such notice shall set forth, in
a manner calculated to be understood by the applicant, the
specific reasons for such denial and specific references to
the Plan provisions on which the decision is based. To the
extent that the Review Panel overrules the denial of the
application for benefits, such benefits shall be paid to the
applicant.
(f) Rules and Procedures
The Review Panel shall adopt such rules and procedures,
consistent with ERISA and the Plan, as it deems necessary or
appropriate in carrying out its responsibilities under this
Section 9.8.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
18
(g) Exhaustion of Administrative Remedies
No legal or equitable action for benefits under the Plan shall
be brought unless and until the claimant (1) has submitted a
written application for benefits in accordance with Subsection
(a); (2) has been notified that the application is denied; (3)
has filed a written request for a review of the application in
accordance with Subsection (d); and (4) has been notified in
writing that the Review Panel has affirmed the denial of the
application; provided, however, that an action may be brought
after the Company or the Review Panel has failed to act on the
claim within the time prescribed in Subsection (b) and
Subsection (e), respectively.
9.9 Exemption From Liability/Indemnification
The members of the Administrative Committee, collectively and
individually, shall be free from all liability, joint or several, for
their acts, omissions, and conduct, and for the acts, omissions, and
conduct of their duly-appointed agents, in the administration of the
Plan, except for those acts or omissions and conduct resulting from
willful misconduct or lack of good faith.
The Company shall indemnify each member of the Administrative
Committee, and any other employee, officer, or director of the Company
against any claims, loss, damage, expense, or liability, by insurance
or otherwise (other than amounts paid in settlement not approved by the
Company), reasonably incurred by the individual in connection with any
action or failure to act by reason of membership on the Administrative
Committee or performance of an authorized duty or responsibility for or
on behalf of the Company pursuant to the Plan, unless the same is
judicially determined to be the result of the individual's gross
negligence or willful misconduct. Such indemnification by the Company
shall be made only to the extent such expense or liability is not
payable to or on behalf of such person under any liability insurance
coverage. The foregoing right to indemnification shall be in addition
to any other rights to which any such person may be entitled as a
matter of law.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
19
SECTION 10
AMENDMENT AND TERMINATION
10.1 Amendment or Termination
(a) Right to Amend or Terminate
Except as otherwise provided in this Section, the Company
reserves the right at any time and from time to time to amend
any or all provisions of the Plan or terminate the Plan, in
whole or in part, for any reason and without consent of any
person, and without liability to any person for such amendment
or termination. Notwithstanding the preceding sentence, no
amendment of the Plan shall:
(i) adversely affect the benefits or rights of a
Participant or Beneficiary under the Plan (other than
election or availability of a form of benefit payment
under Section 4) earned and vested as of the
effective date of the amendment without the written
consent of each affected Participant and Beneficiary
unless such change is required by law or regulations
or is necessary to avoid unfavorable tax
consequences; or
(ii) adversely affect the features of the Plan in effect
as of the effective date of the amendment without the
written consent of each affected Participant and
Beneficiary unless such change is required by law or
regulations or is necessary to avoid unfavorable tax
consequences; or
(iii) be adopted or become effective after a Change of
Control without the written consent of all
Participants and Beneficiaries.
(b) Plan Termination
Nothing in this Plan shall be construed to require
continuation of this Plan with respect to existing or future
Participants or Beneficiaries. Notwithstanding Section
10.1(a)(i), the Company may amend the Plan to cease all future
Contributions and shall pay benefits according to the then
existing or amended distribution provisions. Notwithstanding
Section 10.1(a)(i), the Company may terminate the Plan and in
that event, shall distribute all benefits as soon as
administratively feasible in the form of single sum payments
determined as though the benefits were Change of Control
Benefits under Section 6.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
20
(c) Procedures
Any amendment or termination of the Plan shall be adopted by
the Board, made in writing, and executed on behalf of the
Company by an authorized officer of the Company.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
21
SECTION 11
MISCELLANEOUS PROVISIONS
11.1 Appendices
Any Appendix to this Plan, as amended from time to time, is
incorporated into the Plan and made a part of the terms and conditions
of this Plan.
11.2 ERISA Status
This Plan shall constitute a plan which is unfunded and which is
maintained primarily for the purpose of providing deferred compensation
benefits for a select group of management or highly compensated
employees within the meaning of Sections 201(2), 301(a)(3), and
401(a)(1) of ERISA.
11.3 Unfunded Nature of the Obligation
The obligation to pay benefits under the Plan shall at all times be an
unfunded, unsecured obligation of the Employer. The Employer is not
obligated to purchase any annuity contracts to provide benefits under
the Plan, to establish a trust for the purpose of receiving
contributions and paying benefits under the Plan, or to otherwise set
aside funds for the purpose of providing Plan benefits.
11.4 Facility of Payment
In the event any benefit under this Plan shall be payable to a person
who is under legal disability or is in any way incapacitated so as to
be unable to manage his or her financial affairs, the Administrative
Committee may direct payment of such benefit to a duly appointed
guardian, committee or other legal representative of such person, or in
the absence of a guardian or legal representative, to a custodian for
such person under a Uniform Gifts to Minors Act or to any relative of
such person by blood or marriage, for such person's benefit. Any
payment made in good faith pursuant to this provision shall fully
discharge the Company and the Plan of any liability to the extent of
such payment.
11.5 Governing Law
The Plan shall be construed in accordance with ERISA and the laws of
the State of Washington, to the extent not preempted by ERISA.
11.6 Limitation on Assignment
Benefits under this Plan may not be assigned, sold, transferred, or
encumbered, and any attempt to do so shall be void. A Participant's or
Beneficiary's interest in benefits under the Plan shall not be subject
to debts or liabilities of any kind and shall not be subject to
attachment, garnishment or other legal process.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
22
11.7 No Additional Rights
No person shall have any rights under the Plan, except as, and only to
the extent, expressly provided for in the Plan. Neither the
establishment or amendment of the Plan or the creation of any fund or
account, or the payment of benefits, nor any action of an Employer or
the Administrative Committee shall be held or construed to confer upon
any person any right to be continued as an employee, or, upon
dismissal, any right or interest in any account or fund other than as
herein provided. The Company and the other Employers expressly reserve
the right to discharge any employee at any time with or without cause.
11.8 Notice
All notices, statements, reports and other communications from the
Company or Administrative Committee to any employee or other person
required or permitted under the Plan shall be deemed to have been duly
given when delivered to, or when mailed by first-class mail, postage
prepaid and addressed to, such employee, or other person at his or her
address last appearing on the Company's records.
11.9 Severability
If any provision of this Plan is held unenforceable or invalid for any
reason, such determination shall not affect the remaining provisions of
this Plan which shall be construed as if the unenforceable or invalid
provisions had never been included.
11.10 Tax Consequences and Withholding
The Company does not represent or guarantee that any particular federal
or state income, payroll, Social Security, or other tax consequences
will result from participation in the Plan. A Participant should
consult with professional tax advisors to determine the tax
consequences of his or her participation in the Plan.
All payments of federal or state income, Social Security, payroll, or
other tax required with respect to contributions or benefits under the
Plan shall be satisfied by withholding the required amount from the
Participant's salary or Plan benefit payment, or if the Participant's
salary or benefit payment is insufficient to satisfy any required tax
payments, the Participant shall satisfy the payments in a manner
approved by the Administrative Committee.
Determinations by the Administrative Committee with respect to tax
withholding shall be binding on the Participant and Beneficiaries.
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
23
IN WITNESS WHEREOF, the Company has caused this Plan to be signed by
its duly authorized officer this 19th day of December, 1997.
ALASKA AIR GROUP, INC.
Witness:
/s/ Keith Loveless By: /s/ John F. Kelly
- -------------------- -------------------------
Keith Loveless John F. Kelly
Corporate Secretary Chairman, President, and
Chief Executive Officer
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
24
APPENDIX I
"Employer" as defined in Section 1.19 shall also include the following employers
during the following period of time.
Employer Beginning Date Ending Date
-------- -------------- -----------
1. Alaska Airlines, Inc. January 1, 1998
2. Horizon Air Industries, Inc. January 1, 1998
ACKNOWLEDGED AND ACCEPTED
ALASKA AIR GROUP, INC.
By: /s/ John F. Kelly
------------------------------------------------
John F. Kelly
Chairman, President, and Chief Executive Officer
Date: December 19, 1997
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1998
25
CONTRACT REVIEW AND APPROVAL FORM* ALASKA AIRLINES, INC.
SUBJECT Alaska Air Group, Inc. Nonqualified Deferred Compensation Plan
E.J. NUMBER E.J. AMOUNT E.J. APPROVED? CONTRACT #
- ----------- ----------- -------------- ----------
SPONSOR COMMENTS/DEADLINES______________________________________________________
________________________________________________________________________________
REVIEW OF THIS CONTRACT IS NOT REQUIRED BECAUSE OF THE REASON(S) CHECKED BELOW:
[ ] ON ALASKA AIRLINES PRINTED FORM CONTRACT WHICH HAS NOT BEEN AMENDED
AND IS NOT PURCHASING SERVICES
[ ] CALLS FOR EXPENDITURE OF LESS THAN $50,000 AND CONTAINS NO HOLD
HARMLESS OR INDEMNITY PROVISION
[ ] IS A LEASE OF LESS THAN 90 DAYS PREPARED AND REVIEWED BY PROPERTIES &
FACILITIES
OTHER DEPARTMENTS
-----------------
REVIEW SPONSOR LEGAL FINANCE Emp Svcs
------ ------- ----- ------- --------
NAME OF REVIEWER K. Lovless K. Loveless D. Hamel
INITIALS KL KL
DATE 12/19/97 12/19/97
WORKING COPY REQUIRED?**
APPROVAL
NAME (INITIAL) DATE
EXECUTING OFFICER ___________________ _______________ _____________________
SECOND OFFICER
CONCURRENCE ___________________ _______________ _____________________
(IF OVER $250,000)
DEPARTMENT REVIEW COMMENTS - USE REVERSE IF NECESSARY
_____________________ _________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_____________________ _________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
* SEE SYSTEM REGULATIONS SECTION 1.450 FOP CONTRACT APPROVAL PROCEDURES AND
SEND THE ORIGINAL SIGNED CONTRACT TO CORPORATE RECORDS ALONG WITH THIS FORM.
** INDICATE WHETHER YOUR DEPARTMENT REQUIRES A WORKING COPY OF THE EXECUTED
CONTRACT. IF SUCH A COPY IS REQUIRED. THE SPONSOR IS RESPONSIBLE FOR
FORWARDING IT TO THE REQUESTING DEPARTMENT UPON EXECUTION.
L-3 (Rev. 5/87)
FIRST AMENDMENT
TO THE
ALASKA AIR GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
The Alaska Air Group, Inc. Nonqualified Deferred Compensation Plan
effective January 1, 1998 (the "Plan"), is amended as follows, effective January
1, 2003 unless otherwise provided below:
I. The Preamble is amended by inserting the words "or management" in the
first paragraph as follows;
The purpose of this Alaska Air Group, Inc. Nonqualified Deferred
Compensation Plan is to attract and retain capable individuals to serve
as executive employees of Alaska Air Group, Inc. (the "Company") and of
certain affiliated companies by providing a select group of executive
or management employees the opportunity to defer receipt of
compensation, to which the executives otherwise would be entitled
currently.
II. The last paragraph of Section 1.6 Change of Control is amended by
replacing "(K)" with "(2/3)."
III. Section 1.19 MIP is deleted in its entirety and replaced with the
following:
Before January 1, 2003, "MIP" means the Alaska Air Group, Inc.
Management Incentive Program, under which incentive compensation may be
awarded annually. On and after January 1, 2003, "MIP" means the Alaska
Air Group, Inc. Performance Based Pay Plan.
IV. The following new Section 1.21 PBP is inserted immediately after
Section 1.20 Participant and the subsequent Sections are
correspondingly renumbered Sections 1.22 through 1.26:
1.21 PBP
"PBP" means the Alaska Air Group, Inc. Performance Based Pay Plan.
V. Effective January 1, 2002, Section 3.2 Cancellation of Election is
amended to replace "twelve-month" with "six-month" in both the first
and second sentences.
1
VI. Effective January 1, 2002, Section 9.8 Claim and Review Procedure is
deleted in its entirety and replaced with the following:
9.8 Claim and Review Procedure
(a) Application for Benefits
Any person or the person's authorized representative
(the "Claimant") may apply for, claim, or request
information about, Plan benefits by submitting a
signed, written application to the Administrative
Committee.
(b) Denial of Application
If the Administrative Committee denies an application
in whole or in part, the Administrative Committee
shall notify the Claimant in writing or
electronically of the denial and the Claimant's right
to request a review of the denial. The notice of
denial shall set forth, in a manner calculated to be
understood by the Claimant:
(i) specific reasons for the denial,
(ii) specific references to the applicable Plan
provisions on which the denial was based,
(iii) a description of any information or material
necessary to perfect the application and an
explanation of why such material is
necessary,
(iv) an explanation of the Plan's review
procedure and the time limits for review,
and
(v) a statement of the Claimant's right to bring
a civil action under ERISA following an
adverse determination on review.
The denial notice will be given to the Claimant
within ninety (90) days after the Administrative
Committee receives the application unless special
circumstances require an extension of time for
processing the application. In no event will an
extension exceed a period of ninety (90) days after
the end of the initial 90-day period. If an extension
is required, written notice of the extension shall be
furnished to the Claimant before the end of the
initial 90-day period. The extension notice will
indicate the special circumstances requiring an
extension of time and the date
2
by which the Administrative Committee expects to
render a decision. If a written denial notice is not
given to the Claimant within the period prescribed by
this Section 9.8(b), the application is deemed to
have been denied for purposes of Section 9.8(d).
(c) Review Panel
From time to time, the Company shall appoint a Review
Panel. The "Review Panel" will consist of three (3)
or more individuals who may be (but need not be)
Employees of the Company and shall be the named
fiduciary with authority to act on any appeal of a
denied application. Members of the Administrative
Committee may be appointed to the Review Panel. The
Review Panel has discretionary authority to decide
all issues of fact or law. Any decision by the Review
Panel that is not established to be an abuse of
discretion must be upheld.
(d) Request for Review
A Claimant whose application is denied, in whole or
in part, may appeal the denial by submitting to the
Review Panel a written request for a review of the
denial. The request for review must be submitted to
the Review Panel within sixty (60) days after the
Claimant receives written notice of the denial. Upon
request and free of charge, the Claimant shall be
permitted reasonable access to, and copies of,
relevant information and documents. The Review Panel
shall give the Claimant an opportunity to submit
written information, documents, records and comments
in support of the appeal. In making its decision, the
Review Panel will take the Claimant's submissions
into account, regardless of whether this information
was available in considering the initial request.
(e) Decision on Review
The Review Panel will deliver to the Claimant an
electronic or written decision within a reasonable
time, but no later than sixty (60) days after receipt
of the Claimant's request for review. In special
circumstances, the period may be extended up to an
additional sixty (60) days. If an extension is
required, written notice of the extension will be
furnished to the Claimant before the end of the
initial 60-day period. The extension notice will
indicate the special circumstances requiring an
extension of time and the date by which the Review
Panel expects to render a
3
decision. If a written decision is not given to the
Claimant within the period prescribed by this Section
9.8(e), the decision is deemed to be adverse. If the
decision is adverse, in whole or in part, the
decision shall set forth in a manner calculated to be
understood by the Claimant:
(i) specific reasons for the adverse decision
with specific references to the applicable
Plan provisions on which the decision was
based,
(ii) a statement that, upon request and free of
charge, the Claimant is entitled reasonable
access to, and copies of, relevant
information and documents,
(iii) a description of any voluntary appeals
procedures and a statement of the Claimant's
right to obtain information about these
procedures, and
(iv) a statement of the Claimant's right to bring
a civil action under ERISA.
(f) Rules and Procedures
The Administrative Committee and the Review Panel
shall establish additional administrative procedures
in accordance with this Section 9.8 and ERISA as they
deem necessary or appropriate, including safeguards
to insure and verify that decisions under this
Section 9,8 are made in accordance with the Plan
document and are applied consistently to
similarly-situated Participants and Beneficiaries.
Additional administrative procedures may include, but
are not limited to, protocols, guidelines, periodic
review and audits.
(g) Exhaustion of Administrative Remedies
No legal or equitable action for benefits under the
Plan shall be brought unless and until the Claimant
has satisfied the procedures in this Section 9.8.
4
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
signed by its duly authorized officer this 8th day of September, 2003.
ALASKA AIR GROUP, INC.
Witness:
/s/ Keith Loveless /s/ William S. Ayer
- ---------------------------------- -----------------------
Keith Loveless William S. Ayer
Vice President of Legal & Chairman and CEO
Corporate Affairs, General Counsel
5