Alaska Airlines and Horizon Air 2013 Annual Report Download - page 79

EXECUTIVE COMPENSATION
POTENTIAL PAYMENTS UPON CHANGE IN CONTROL AND TERMINATION
The Company has entered into change-in-
control agreements with each of the Named
Executive Officers. Under these agreements,
if a change of control occurs, a three-year
employment period would go into effect.
During the employment period, the executive
would be entitled to:
• receive the highest monthly salary the
executive received at any time during the
12-month period preceding the change in
control;
• receive an annual incentive payment
equal to the higher of the executive’s
target Performance-Based Pay incentive
or the average of the executive’s annual
incentive payments for the three years
preceding the year in which the change in
control occurs;
• continue to accrue age and service credit
under our retirement plans; and
• participate in fringe benefit programs that
are at least as favorable as those in
which the executive was participating
prior to the change in control.
If the executive’s employment is terminated
by the Company without cause or by the
executive for “good reason” during the
employment period (or, in certain
circumstances, if such a termination occurs
prior to and in connection with a change in
control), the executive would be entitled to
receive a lump-sum payment equal to the
value of the payments and benefits
identified above that the executive would
have received had he continued to be
employed for the entire employment period.
The amount an executive would be entitled
to receive would be reduced on a pro-rata
basis for any time the executive worked
during the employment period. (The terms
“cause,” “good reason” and “change in
control” are each defined in the change-in-
control agreements.) In 2012, the Company
eliminated the conditional gross-up provision
in favor of a modified cap provision for all
executives. Under this provision, in the
event that change in control benefits exceed
the threshold amount that would trigger an
excise tax under Section 280G of the
Internal Revenue Code, the executive would
receive the larger of the following amounts:
• the “safe harbor amount,” which is equal
to the level above which excise taxes are
triggered; or
• the full change-in-control benefits if, after
receipt of the full change-in-control
benefits and payment of the excise tax,
the after-tax amount is greater than the
safe harbor amount described above.
In addition, outstanding and unvested stock
options, restricted stock units and the target
number of performance stock units would
become vested under the terms of our
equity plans. Under the 2008 Performance
Incentive Plan, awards will not vest unless a
termination of employment without cause or
for good reason also occurs or an acquirer
does not assume outstanding awards.
Finally, the executive’s unvested benefits
under the Supplementary Retirement Plan
would vest on a change in control whether or
not the executive’s employment was
terminated. The outstanding equity awards
held by the executives as of December 31,
2013 are described in the Outstanding
Equity Awards at Fiscal Year End table and
each executive’s accrued benefits under our
retirement plans are described above under
Pension and Other Retirement Plans.
In the event the executive’s employment
terminates by reason of death, disability or
retirement, (i) restricted stock units would
72