EXHIBIT 10.19
ALASKA AIR GROUP PERFORMANCE BASED PAY PLAN
(formerly, the "Management Incentive Plan" or "MIP")
The Board of Directors (the "Board") of Alaska Air Group, Inc. (the "Company")
has adopted a plan to reward employees of Alaska Airlines, Inc. ("Alaska") and
Horizon Air Industries, Inc. ("Horizon"). The plan, formerly known as the
Management Incentive Plan, has been renamed as the Performance Based Pay Plan
("Plan"). This memorandum is provided to explain the key elements of how the
Plan will operate. The Performance Based Pay award ("Award") of each eligible
Participant will depend upon the degree to which the Company achieves the
performance goals set by the Compensation Committee of the Board for each
calendar year (a "Plan Year") and the discretion of the Compensation Committee
of the Board and Chief Executive Officer explained below. This Plan is effective
beginning with the 2003 Plan Year and each year thereafter until amended,
restated or terminated, pursuant to paragraph 8.
1. ELIGIBILITY
Eligibility to participate in the Plan during a Plan Year is limited to
officers and other employees of Alaska and Horizon who (a) are designated
by the Compensation Committee, and (b) are full-time employees of Alaska
or Horizon as of the first day of January immediately following the end of
the Plan Year, or (c) were full-time employees during the Plan Year and do
not meet the requirement of (b) because their employment ended due to
retirement at age 52 or older, disability or death (each a "Participant,"
or collectively "Participants"). Individuals may become Participants
during the Plan Year if they are newly hired or promoted during the year
and meet the requirements of the preceding sentence. Participants who are
on temporary medical leave, military leave, or otherwise not working
either full-time or part-time for Alaska or Horizon for reasons approved
by the Board, but who remain employed, also retain eligibility as
Participants. 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. An individual whose employment with Alaska
or Horizon ends for any reason not described in (c) above, such as
resignation or termination, forfeits eligibility upon such end of
employment.
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2. BASIS FOR PARTICIPATION
A Participant's Basis for a Plan Year is used to determine the dollar
amount of the Participant's Award for that year. The "Basis" is the actual
Basic Salary of the Participant earned during the Plan Year multiplied by
the percentage selected for that Participant by the Board. "Basic Salary"
means the compensation earned by the Participant for services performed
for Alaska or Horizon, INCLUDING amounts that the Participant could have
received in cash had the Participant not elected to contribute the amount
to an employee benefit plan maintained by Alaska, Horizon or the Company
and any other voluntary payment the Participant makes which reduces
his/her compensation (such as the 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 awards (including any Award 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), cash and non-cash fringe benefits and
perquisites (such as auto allowance and travel reimbursement).
3. CALCULATION OF THE AWARD
The size of the Award earned for a Plan Year will depend upon the extent
to which the performance goals of the Company have been achieved during
that Plan Year and the discretion of the Compensation Committee of the
Board. Separate performance weighting has been established for each
performance goal. The Award will equal the dollar amount achieved by
multiplying the Participant's Basis by the sum of the weighted percentage
achievement factors, as adjusted in the Compensation Committee's
discretion pursuant to paragraph 6. All calculations will be performed by
the Employee Services Department of Alaska and will be subject to approval
solely by the Board. Once approved by the Compensation Committee of the
Board, such calculations shall be conclusively presumed to be accurate.
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4. PERFORMANCE WEIGHTING
In order to achieve any Award for a particular performance goal, a
"Threshold" must be achieved. A full entitlement is achieved when the
"Target" is reached, and a double entitlement is possible if the "Maximum"
is achieved. This weighting applies to each goal individually. Once the
Threshold is achieved, the percentage of the difference between the
Threshold and Target achieved is multiplied by the weighting factor as
specified in the attachment for the applicable Plan Year. If the Target is
exceeded, the percentage of the difference between the Target and the
Maximum achieved is multiplied by the weighting factor as specified in the
attachment for the applicable Plan Year. Since the difference between the
Threshold and Target is, in most cases, arithmetically different from the
difference between the Target and the Maximum, calculations will be
performed utilizing either the Threshold-Target range, or Target-Maximum
range, as applicable, to locate the percentage of the Target, or the
percentage of the Maximum, as applicable, that has been achieved.
5. PERFORMANCE GOALS AND APPLICABLE PERFORMANCE WEIGHTING FACTORS
The Compensation Committee of the Board will establish the performance
goals for each Plan Year during the life of this Plan, and will provide an
annex to this Plan that outlines goals and the weighting factors. Each
such attachment will be labeled "Performance Based Pay Plan Goals and
Measures for (year)" and distributed to Eligible Participants.
6. DISCRETIONARY FACTOR
In the case of a Participant described in paragraph 1(c) who retired due
to age, terminated employment due to disability, or died during the year,
or a Participant who took a leave of absence or worked a reduced schedule
during any portion of the year, the Compensation Committee of the Board
retains absolute discretionary authority to adjust the Award to such
Participant based upon the Compensation Committee's determination of such
Participant's contribution to the Company.
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7. TIMING OF AWARDS
It is the intent of the Board to distribute the Award for a Plan Year no
later than March 15 of the following year for each Plan Year that
Participants have become entitled to an Award. A deceased Participant's
Award will be paid 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.
8. AMENDMENT
The Board, acting through the Compensation Committee, retains the right to
modify the Plan in any manner that it deems appropriate, provided that it
will not terminate the Plan for any Plan Year during that Plan Year unless
it is clear that Participants will not receive an Award for that Plan
Year. It is understood that the Compensation Committee of the Board will
review the Plan yearly and may make changes to the Plan for the next Plan
Year.
9. MISCELLANEOUS
a. This memorandum, 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 Participant.
c. In the event that a Participant has a written employment agreement
with Alaska or Horizon which entitles such Participant to
participate in the Management Incentive Plan, this Plan is intended,
for the purpose of such agreements, to be considered to be the same
plan and may continue to be referred to as the MIP.
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d. This memorandum 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.
e. No unpaid Award will be subject to the debts, liabilities, contracts
or engagements of any Participant, and may not be alienated,
pledged, garnished or sold, and any attempt to do so shall be void.
Dated January 1, 2003 Alaska Air Group, Inc.
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R. Marc Langland
Chairman, Compensation Committee
Alaska Air Group, Inc. Board of Directors
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