[HORIZON AIR LOGO]
December 29, 1996
Mr. George D. Bagley President and Chief Executive Officer
Horizon Air Industries, Inc.
This letter will document the agreement between Horizon Air Industries, Inc. and
you with regard to certain benefits at the time of your transfer from Alaska
Airlines to Horizon Air.
Salaried Retirement Plan Benefits -- You are now 100% vested in the Alaska
Airlines Salaried Retirement Plan and are eligible for retirement benefits based
on your length of service as an employee of Alaska Airlines through October 23,
1995. Benefit calculations upon retirement will be based on length of service at
Alaska Airlines and final five years average salary through the date of transfer
to Horizon only. ERISA laws preclude continued participation by a participant
who transfers to a company that does not offer such a benefit to employees, and
Horizon Air does not offer this or any similar plan to its employees.
In connection with your accepting the position of President and Chief Executive
Officer, Horizon agrees to supplement your retirement benefits from the above
plan with a payment or payments such that the total benefit you eventually
receive will be equivalent to that to which you would have been entitled if the
employees of Horizon participated in the Alaska Airlines Salaried Retirement
Plan. Horizon will continue payroll deduction of the amount which you would have
contributed to Alaska's plan, had you continued as an employee of Alaska
On the earlier of your retirement or severance from Alaska Air Group and all of
its subsidiaries, we will request an actuarial calculation of the amount of this
supplemental benefit. Benefit payments will then be made to you at the same time
and in the same form as payments are made to you from the Alaska Airlines
Salaried Retirement Plan. This agreement does not give you rights to any
particular fund, and your rights hereunder are those of an unsecured creditor.
P.O. Box 48309 - Seattle, Washington 98148 - (206) 241-6757
George D. Bagley December 29, 1996
Benefits Agreement Page 2
Alaska Air Group Officers Supplemental Retirement Plan -- Participation
Alaskasaver 401(k) Plan -- No further contribution allowable per IRS
regulations. Existing account balances may be left for accumulation of future
investment earnings or may be "rolled over" to Horizon's savings investment
Horizon Savings Investment 401(k) Plan -- You are eligible to participate as a
Horizon employee, with no waiting period. However, because of the "make-whole"
arrangements described previously in connection with the Alaska Airlines
Salaried Retirement Plan, you will not be eligible to participate in the Horizon
Air Supplemental Savings Plan.
Please sign this letter confirming your agreement with the terms outlined,
retain one of the three originals for your files and return the other two to
/s/ John F. Kelly
John F. Kelly
Chairman, Horizon Air Industries, Inc.
Chairman, President and Chief Executive Officer, Alaska Air Group, Inc.
/s/George D. Bagley
George D. Bagley
President and Chief Executive Officer
Horizon Air Industries, Inc.