EXHIBIT 10
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of January 30,
2002, is entered into between Alaska Airlines, Inc., an Alaska corporation
("Alaska"), a wholly owned subsidiary of Alaska Air Group, Inc., a Delaware
corporation ("AAG") and Xxxxxx X. Xxxxxx ("Executive").
1. EMPLOYMENT
Alaska shall employ Executive as its Executive Vice
President/Operations. Executive has the authority, subject to Alaska's Charter
and Bylaws, as may be granted from time to time by the Board of Directors of
Alaska. Executive will perform such duties as may be assigned from time to time
by the Board of Directors of Alaska, which relate to the business of Alaska, its
subsidiaries, its affiliates, or any business ventures in which Alaska, its
subsidiaries or its parent corporation may participate.
2. ATTENTION AND EFFORT
Executive will devote all of his entire productive time, ability,
attention and effort to Alaska's business and will serve its interests during
his employment by the Company; provided, however, that Executive may devote
reasonable periods of time to (a) engaging in personal investment activities and
(b) engaging in charitable or community service activities, so long as none of
the foregoing additional activities materially interfere with Executive's duties
under this Agreement.
3. COMPENSATION, STOCK OPTIONS, OFFICERS SUPPLEMENTAL RETIREMENT PLAN
Alaska agrees to pay or cause to be paid to Executive, and Executive
agrees to accept in exchange for the services rendered hereunder by him, the
following compensation:
3.1 BASE SALARY
Executive's compensation shall consist, in part, of an annual base
salary of $300,000 before all customary payroll deductions. Such annual base
salary shall be paid in substantially equal installments and at the same
intervals as other officers of Alaska are paid. The Board of Directors of AAG or
the Compensation Committee of the Board of Directors of AAG thereof (the
"Compensation Committee") shall determine any increases in the amount of the
annual base salary.
3.2 BONUS
Executive will be eligible to receive, in addition to the annual base salary
described above, an annual bonus under Alaska's Management Incentive Plan (the
"MIP") based on the
objectives that are established under the MIP from time to time by the
Compensation Committee. Executive shall participate in the MIP at a rate of 45%
of his base salary if "target" level goals are achieved.
3.3 STOCK OPTIONS
Subject to approval by the Shareholders of AAG of the issuance of
additional shares under the 1999 Long-Term Incentive Equity Plan, and further
subject to the condition that Executive shall not have issued a Notice of
Termination, AAG shall grant to Executive, between May 30, 2002 and August 28,
2002, an award of options to purchase 100,000 shares of AAG common stock.
The terms and conditions of such options shall include, without
limitation:
(a) the exercise price shall be equal to the closing price of such
stock on the date such options are awarded;
(b) such options shall vest in equal annual installments over four
(4) years;
(c) such options shall continue to vest and shall remain
exercisable for the earlier of the option expiration date or
three (3) years after retirement or termination unless
Executive is terminated for Cause in which case such options
shall immediately cease to vest and shall no longer be
exercisable;
(d) such other terms as the Compensation Committee shall determine.
In addition, Executive will be eligible for stock option awards under
Alaska's stock option plans.
3.4 OFFICERS SUPPLEMENTAL RETIREMENT PLAN
Executive shall continue to participate in the Alaska Airlines Officers
Supplemental Retirement Plan ("OSRP"). In the event of termination of the
Executive for any reason other than Cause (including, without limitation,
voluntary termination by Executive), Executive shall immediately become 100%
vested in all benefits under the OSRP, not withstanding anything to the contrary
in the OSRP.
3.5 HORIZON STOCK OPTIONS
If, prior to the earlier of (i) January 30, 2007, or (ii) Executive's
date of voluntary or involuntary termination, AAG should offer the sale to the
public stock in Horizon Air Industries, Inc. ("Horizon"), Executive shall be
entitled to options for the purchase of shares in Horizon or restricted shares
in Horizon, in the same amounts and on the same terms as are offered to
Horizon's then Chief Executive Officer in connection with such offering.
Executive shall not be entitled to such options which result by operation of law
in connection with previously existing stock options issued to Horizon's then
Chief Executive Officer. Executive shall, in addition to
-2-
the options set forth above, be entitled to options which result from operation
of law in connection with previously existing stock options issued to Executive.
4. BENEFITS
During the term of his employment by the Company, Executive will be
entitled to participate, subject to and in accordance with applicable
eligibility requirements, in fringe benefit programs, including, but not limited
to, health, dental and vision insurance, group life insurance, car allowance and
maintenance, and such other programs as shall be provided from time to time by
Alaska for its officers generally.
5. TERMINATION
Employment of Executive pursuant to this Agreement may be terminated as
follows, but in any case, the provisions of Section 7 hereof shall survive the
termination of this Agreement and the termination of Executive's employment
hereunder:
5.1 BY ALASKA
With or without Cause (as defined below), Alaska may terminate the
employment of Executive at any time during the term of employment upon giving
Notice of Termination (as defined below).
5.2 BY EXECUTIVE
Executive may terminate his employment at any time, for any reason, upon
giving Notice of Termination.
5.3 NOTICE
The term "Notice of Termination" shall mean at least 90 days' written
notice of termination of Executive's employment, during which period Executive's
employment and performance of services will continue; provided, however, that
Alaska may, upon notice to Executive and without reducing Executive's
compensation during such period, excuse Executive from any or all of his or her
duties during such period. The effective date of the termination of Executive's
employment hereunder shall be the date on which such 90-day period expires.
6. EFFECT OF TERMINATION
In the event of termination of the employment of Executive, all
compensation and benefits set forth in this Agreement shall terminate except as
specifically provided in this Section 6:
6.1 TERMINATION BY ALASKA
If Alaska terminates Executive's employment without Cause, Executive shall be
entitled to receive (i) any unpaid annual base salary which has accrued for
services already performed as
-3-
of the date termination of Executive's employment becomes effective, (ii)
continued rights in then issued and outstanding options as described in Section
3.3, and (iii) immediate vesting in OSRP as described in Section 3.4. If
Executive is terminated by Alaska for Cause, Executive shall not be entitled to
receive any of the foregoing benefits, other than those set forth in clause (i)
above.
6.2 TERMINATION BY EXECUTIVE
In the case of the termination of Executive's employment by Executive,
Executive shall nevertheless be entitled to receive (i) any unpaid annual base
salary which has accrued for services already performed as of the date
termination of Executive's employment becomes effective, (ii) continued rights
in then issued and outstanding options as described in Section 3.3(c), and (iii)
immediate vesting in OSRP as described in Section 3.4.
6.3 CAUSE
Wherever reference is made in this Agreement to termination being with
or without Cause, "Cause" shall mean as basis for termination for reason of
admission by the Executive or reasonable substantiation by the Company of
embezzlement, dishonesty or other fraud, conviction of a felony or conspiracy
against the Company or any willful or intentional injury to either the Company,
its property, or its employees in connection with the business affairs of the
Company.
7. NON-COMPETITION AND NON-SOLICITATION
7.1 APPLICABILITY
This Section 7 shall survive the termination of Executive's employment
with Alaska or the expiration of the term of this Agreement.
7.2 SCOPE OF COMPETITION
Executive agrees that he will not, directly or indirectly, during his
employment and for a period of one (1) year from the date on which his
employment with Alaska terminates for any reason, be employed by, consult with
or otherwise perform services for, own, manage, operate, join, control or
participate in the ownership, management, operation or control of or be
connected with, in any manner, any Competitor. A "Competitor" shall include, (a)
any entity which provides air transportation services anywhere in the world, and
(b) any business whose efforts are in competition with the efforts of the
company, including, without limitation, any business whose efforts involve any
research and development, products or services in competition with products or
services which are, during or at the end of the Term, either (i) produced,
marketed or otherwise commercially exploited by the Company or (ii) in actual or
demonstrably anticipated research or development by the Company, unless released
from such obligation in writing by Alaska's Board of Directors. Executive shall
be deemed to be related to or connected with a Competitor if such Competitor is
(x) a partnership in which he is a general or limited partner or employee, (y) a
corporation or association of which he is a shareholder, officer, employee or
director, or (z) a partnership, corporation or association of which he is a
member, consultant or
-4-
agent; provided, however, that nothing herein shall prevent the purchase or
ownership by Executive of shares which constitute less than five percent of the
outstanding equity securities of a publicly or privately held corporation, so
long as Executive has no other relationship with such corporation.
7.3 SCOPE OF NON-SOLICITATION
Executive shall not, during his employment and for a period of one (1)
year from the date on which his employment with Alaska terminate for any reason,
directly or indirectly solicit, influence or entice, or attempt to solicit,
influence or entice, any employee or consultant of Alaska to cease his or her
relationship with Alaska or solicit, influence, entice or in any way divert any
customer, distributor, partner, joint venturer or supplier of Alaska to do
business or in any way become associated with any Competitor. This Section 7.3
shall apply during the time period and geographical area described in Section
7.2 hereof.
7.4 NONDISCLOSURE; RETURN OF MATERIALS
During the term of his employment by Alaska and following termination of
such employment, he will not disclose (except as required by his duties to
Alaska), any concept, design, process, technology, trade secret, customer list,
business plan, embodiment, or invention, or any other confidential information,
of Alaska of which Executive becomes informed or aware during his employment,
whether or not developed by Executive. In the event of the termination of his
employment with Alaska or the expiration of this Agreement, Executive will
promptly return all documents, data and other materials of whatever nature,
including, without limitation, drawings, specifications, research, reports,
embodiments, software and manuals to Alaska which pertain to Alaska and shall
not retain or cause or allow any third party to retain photocopies or other
reproductions of the foregoing.
8. RENEGOTIATION
In the event that, on or prior to June 28, 2002 or such later date as
may be applicable, Company applies for the issuance of loans, guarantees, or
other financial assistance under Section 101(a)(1) of the Air Transportation
Safety and System Stabilization Act, the Company may be required, as a condition
to the issuance of said loans and guarantees, to enter into a legally binding
agreement with the Air Transportation Stabilization Board limiting Executives
compensation. In such event, and notwithstanding any other provisions in this
Agreement, Executive and Company agree that during the two-year period beginning
September 11, 2001, and ending September 11, 2003:
8.1 Executives total compensation from Alaska, AAG and Horizon shall
not, during any 12 consecutive months, exceed the total compensation
received by Executive in calendar year 2000; and
8.2 Executive shall not receive from Alaska, AAG and Horizon severance
pay or other benefits upon termination of employment which exceeds twice
the maximum total compensation received by Executive in Calendar year
2000.
-5-
The term "total compensation" includes salary, bonuses, awards of stock
and other financial benefits provided by Alaska, AAG and Horizon.
9. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, before such action is taken, the party asserting the breach
of this Agreement shall give the other party at least twenty (20) days' prior
written notice of the existence and the nature of such breach before taking
further action hereunder and shall give the party purportedly in breach of this
Agreement the opportunity to correct such breach during the 20-day period.
10. FORM OF NOTICE
All notices given hereunder shall be given in writing, shall
specifically refer to this Agreement and shall be personally delivered or sent
by telecopy or other electronic facsimile transmission or by registered or
certified mail, return receipt requested, at the address set forth below or at
such other address as may hereafter be designated by notice given in compliance
with the terms hereof:
If to Executive: Xxxxxx X. Xxxxxx
00 Xxxxxx Xxx
Xxxxxxxx, Xxxxxxxxxx 00000
If to Alaska: Alaska Airlines, Inc.
Attn: Chief Executive Officer
00000 Xxxxxxx Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to: General Counsel
Fax: (000) 000-0000
If notice is mailed, such notice shall be effective upon mailing, or if
notice is personally delivered or sent by telecopy or other electronic facsimile
transmission, it shall be effective upon receipt.
11. ASSIGNMENT
This Agreement is personal to Executive and shall not be assignable by
Executive. Alaska may assign its rights hereunder to (a) any corporation
resulting from any merger, consolidation or other reorganization to which Alaska
is a party or (b) any corporation, partnership, association or other person to
which Alaska may transfer all or substantially all of the assets and business of
Alaska existing at such time. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of and be enforceable by
the parties hereto and their respective successors and permitted assigns.
-6-
12. WAIVERS
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
13. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, nor consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by Alaska and
Executive, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by Alaska and Executive.
14. APPLICABLE LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the state of Washington, without regard
to any rules governing conflicts of laws.
15. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.
16. HEADINGS
All headings used herein are for convenience only and shall not in any
way affect the construction of, or be taken into consideration in interpreting,
this Agreement.
-7-
17. COUNTERPARTS
This Agreement, and any amendment or modification entered into pursuant
to Section 16 hereof, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
18. ENTIRE AGREEMENT
This Agreement, including exhibits hereto incorporated by reference, on
and as of the date hereof constitutes the entire agreement between Alaska and
Executive with respect to the subject matter hereof and all prior or
contemporaneous oral or written communications, understandings or agreements
between Alaska and Executive with respect to such subject matter are hereby
superseded and nullified in their entireties.
IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement on the date set forth above.
------------------------------------ ------------------------------------
Xxxxxx X. Xxxxxx Xxxx X. Xxxxx
Chairman
-8-
