Exhibit 10.1
ALASKA AIR GROUP PERFORMANCE
BASED PAY PLAN
(formerly, the “Management
Incentive Plan” or “MIP”)
(Amended and Restated
September 14, 2006)
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.
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. Unless otherwise provided for in a separate
Award agreement, 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.
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BASIS FOR
PARTICIPATION
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A Participant’s Basis for a
Plan Year is used to determine the dollar amount or initial target
value 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). Awards may be paid in cash or
by act of the Compensation Committee of the
Board, the Company’s Common
Stock. Alternatively, Awards may, by act of the Compensation
Committee of the Board, be denominated in shares of the
Company’s Common Stock that are subject to conditions and
restrictions established by the Compensation Committee and based on
the achievement of performance goals as provided for in a
Performance Share Award Agreement (such shares of Common Stock are
referred to as “Performance Shares”).
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3.
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CALCULATION
OF THE AWARD
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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
