<PAGE>
EXHIBIT 10.2
ALASKA AIR GROUP, INC.
2004 LONG-TERM INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON MARCH 31, 2004
APPROVED BY ALASKA AIR GROUP SHAREHOLDERS ON MAY 18, 2004
AMENDED BY THE BOARD OF DIRECTORS ON JUNE 2, 2004
1. PURPOSE
The
purpose of the Alaska Air Group, Inc. 2004 Long-Term Incentive
Equity
Plan (the "Plan") is to promote the
long-term profitability of Alaska Air Group,
Inc. ("Air Group" and together with its
subsidiaries, the "Company") and to
enhance value for its stockholders by
offering incentives and rewards to key
employees, officers and directors of the
Company, to retain their services and
to encourage them to acquire and maintain
stock ownership in the Company.
2. TERM
The Plan
shall become effective as of May 18, 2004, subject to the
approval of the stockholders of Air Group,
and shall terminate at the close of
business on the tenth anniversary of such
approval date unless terminated
earlier by the Board. After termination of
the Plan, no future awards may be
granted, but previously granted awards
shall remain outstanding in accordance
with their applicable terms and conditions
and the terms and conditions of the
Plan.
3. PLAN ADMINISTRATION
The
Compensation Committee (the "Committee") of the Board of Directors
of
the Air Group (the "Board") shall be
responsible for administering the Plan. The
members of the Committee shall be appointed
by the Board and shall consist
solely of three or more nonemployee members
of the Board who are "independent"
directors as defined in the New York Stock
Exchange's Listed Company Manual and
who are intended to qualify to administer
the Plan as contemplated by (a) Rule
16b-3 under the Securities and Exchange Act
of 1934 (the "Exchange Act") or any
successor rules, and (b) Section 162(m) of
the Internal Revenue Code of 1986, as
amended (the "Code"). The Committee shall
have full and exclusive power to
interpret the Plan and to adopt such rules,
regulations and guidelines for
carrying out the Plan as it may deem
necessary or proper, all of which power
shall be executed in the best interests of
the Company and in keeping with the
objectives of the Plan. This power includes
but is not limited to selecting
award recipients, establishing all award
terms and conditions and adopting
modifications, amendments and procedures,
as well as rules and regulations
governing awards under the Plan, and to
make all other determinations necessary
or advisable for the administration of the
Plan. In no event, however, shall the
Committee have the power to cancel
outstanding stock options or stock
appreciation rights ("SARs") for the
purpose of replacing or re-granting such
options or SARs with a purchase price that
is less than the purchase price of
the original option or SAR. The
interpretation and construction of any provision
of the Plan or any option or right granted
hereunder and all determinations by
the Committee in each case shall be final,
binding and conclusive with respect
to all interested parties.
4. ELIGIBILITY
Any
employee or director of the Company shall be eligible to
receive
awards under the Plan. "Employee" shall
also include any former employee or
director of the Company eligible to receive
an assumed or replacement award as
contemplated in Sections 6 and 8 and any
person to whom an offer of employment
has been extended. "Company" includes any
entity that is directly or indirectly
controlled by the Company, as determined by
the Committee; provided however,
that ISOs (as defined in Section 8(a)) may
only be granted to an employee of Air
<PAGE>
Group or one of its "subsidiary
corporations" (as that term is defined in
Section 424(f) of the Code). A director who
is not an employee of the Company (a
"nonemployee director") is eligible to
receive payments as set forth in Section
8(d) for payment of such nonemployee
director's annual retainer (exclusive of
any per-meeting fees, committee chair fees
or expense reimbursements) ("Annual
Retainer").
5. SHARES OF COMMON STOCK SUBJECT TO THE
PLAN
Subject to
the provisions of Section 6 of the Plan, the aggregate number
of shares of common stock, $1.00 par value,
("Common Stock") of Air Group
("shares") which may be awarded and
delivered to participants under the Plan
shall not exceed the sum of (i) 1,700,000,
(ii) any shares available for future
awards, as of the effective date of this
Plan, under the Alaska Air Group, Inc.
1999 Long-Term Incentive Equity Plan (the
"1999 Equity Plan") and (iii) any
shares that are represented by awards under
the 1999 Equity Plan which, after
the effective date of this Plan, are
forfeited, expired, are cancelled without
delivery of shares, or otherwise result in
the return of shares to the Company.
Notwithstanding any provision to the contrary, the following award
limits
shall apply (subject to adjustment as
provided in Section 6 below):
(a)
In no event
shall a participant receive an award or awards during
any one (1) calendar year covering in the aggregate more than
300,000 shares;
(b)
In no event
shall there be granted during the term of the Plan
shares pursuant to Section 8(c) of the Plan covering more than
fifty
percent (50%) of the total shares authorized under this Plan.
Shares
subject to awards under the Plan which expire, terminate or are
canceled prior to exercise or, in the case
of awards granted under Section 8(c),
do not vest shall thereafter be available
for the granting of other awards.
Shares otherwise issuable pursuant to an
award that have been exchanged by a
participant as full or partial payment to
the Company in connection with any
award under the Plan also shall thereafter
be available for the granting of
other awards. In instances where an SAR or
other award is settled in cash, the
shares covered by such award shall remain
available for the granting of other
awards. Likewise, the payment of cash
dividends and dividend equivalents paid in
cash in conjunction with outstanding awards
shall not be counted against the
shares available for issuance.
Any shares
issued under the Plan may consist in whole or in part of
authorized and unissued shares or of
treasury shares, and no fractional shares
shall be issued under the Plan. Cash may be
paid in lieu of any fractional
shares in settlements of awards under the
Plan.
6. ADJUSTMENTS AND REORGANIZATIONS
In the
event of any stock dividend, stock split, combination or
exchange
of shares, merger, consolidation, spin-off,
recapitalization or other
distribution (other than normal cash
dividends) of Company assets to
stockholders, or any other change affecting
shares or share price, the Committee
shall make a proportionate adjustment, as
the Committee in its sole discretion
deems equitable or appropriate, with
respect to: (a) the aggregate number of
shares that may be issued under the Plan;
(b) each outstanding award made under
the Plan; and (c) the exercise price per
share for any outstanding stock
options, SARs or similar awards under the
Plan.
7. FAIR MARKET VALUE
Fair
Market Value for all purposes under the Plan shall mean the
closing
price of a share of Common Stock as
reported daily on the New York Stock
Exchange (or, if the shares are not listed
on the New York Stock Exchange, such
other established national securities
exchange or association that the Committee
shall designate). If no sales of shares
were made on such date, the closing
price of a share as reported for the
preceding day on which a sale of shares
occurred shall be used.
<PAGE>
8. AWARDS
The
Committee shall determine the type or types of award(s) to be made
to
each participant. Awards may be granted
singly, in combination or in tandem.
Awards also may be made in combination or
in tandem with, in replacement of, as
conversion or substitution for, as
alternative to, or as the payment form for,
grants or rights under any other
compensation plan or individual contract or
agreement of the Company including those of
any acquired entity. The Committee
shall have the right to substitute or
assume awards under this Plan in
connection with mergers, reorganizations,
separations, or other transaction to
which Section 424(a) of the Code applies,
provided such substitutions and
assumptions are permitted by Section 424 of
the Code and the regulations
promulgated thereunder. The types of awards
that may be granted under the Plan
are:
(a) Stock Options -- This is a grant of a right to purchase a
specified
number of shares during a specified period as determined by the
Committee.
Each stock option shall be in such form and shall contain such
terms and
conditions as the Committee shall deem appropriate. Stock
options
granted under the Plan may either be incentive stock options
("ISOs")
which are qualified under Section 422 of the Code, with respect
to grants
to participating employees, or nonqualifed stock options
("Nonqualified Options"), with respect to grants to
participating
employees
or other eligible Plan participants. All stock options shall be
separately
designated ISOs or Nonqualified Options at the time of grant.
Stock
options converted or substituted under the Plan for any or all
outstanding stock options and stock appreciation rights held by
employees,
consultants, advisors or other option holders of an acquired entity
are
referred
to in this Plan as "Conversion Options." The purchase price per
share for
each stock option shall be not less than 100% of Fair Market
Value on
the date of grant (except (1) for Conversion Options and (2) if
a
stock
option is granted retroactively in tandem with or as a
substitution
for an
SAR, the exercise price may be no lower than the exercise price
per
share for
such tandem or replaced SAR). The exercise price for a stock
option
shall be paid in full by the optionee at the time of the
exercise
in cash or
such other method permitted by the Committee, including (i)
tendering
(either actually or by attestation) shares, (ii) authorizing a
third
party to sell the shares (or a sufficient portion thereof)
acquired
upon
exercise of a stock option and assigning the delivery to the
Company
of a
sufficient amount of the sale proceeds to pay for all the
shares
acquired
through such exercise, or (iii) any combination of the above.
(I) Incentive Stock Options. Notwithstanding anything to the
contrary herein, each ISO granted pursuant to this Plan shall
include the following provisions: ISOs may be granted only to
individuals who are employees of the Company at the time the ISO
is
granted. The purchase price per share for each ISO (except for
Conversion
Options) shall not be less than 100% of Fair Market Value
on the date of grant. No employee shall be eligible for an ISO
if,
on the date of grant, such employee owns (including ownership
through the attribution provisions of Section 422 of the Code)
in
excess of 10% of the total combined voting power of all classes
of
stock of the Company unless the following two conditions are
met:
(A) the option price for the shares of Common Stock subject to
the
ISO is at least 110% of the Fair Market Value on the date of
grant
and (B) the option agreement under which the stock option was
granted provides that the term of the ISO does not exceed five
years. No employee shall be eligible to receive ISOs (under
this
Plan and all other stock option plans of the Company) that are
exercisable for the first time in any calendar year with respect
to
shares with a Fair Market Value (determined at the date of grant)
in
excess of $100,000. No ISO shall be exercisable after the
expiration
of ten (10) years from the date it was granted. An ISO shall not
be
transferable except by will or by the laws of descent and
distribution and, during the lifetime of the option holder, shall
be
exercisable only by the option holder.
(b) SARs -- This is a right to receive a payment, in cash
and/or
shares,
equal to the excess of the Fair Market Value of a specified
number
of shares
on the date the SAR is exercised over the Fair Market Value on
the date
the SAR was granted (except that if an SAR is granted
retroactively in tandem with or in substitution for a stock option,
the
designated
Fair Market Value shall be no lower than the exercise price per
share for
such tandem or replaced stock option).
<PAGE>
(c) Stock Awards -- This is an award made or denominated in
shares
or units
equivalent in value to shares. All or part of any stock award
may
be subject
to conditions and restrictions established by the Committee
which may
be based on continuous service with the Company or the
achievement of performance goals related to profits, profit
growth,
profit-related return ratios, cash flow or stockholder returns, or
other
performance goals as the Committee deems appropriate, where such
goals may
be stated
in absolute terms or relative to comparison companies. Stock
awards
based on continuous service will vest over a period of three
years
or more.
Stock awards based on performance measures will vest over a
period of
one year or more, as the Committee may determine.
(d) Stock Payments - This is payment of a portion or all of the
Annual
Retainer to be paid to a nonemployee director in shares of
Common
Stock (a
"Stock Payment") rather than cash for services rendered as a
director
of the Company. On the first business day following the
Company's
Annual
Meeting of Stockholders, or such later date during the period
beginning
on the date immediately following the Company's Annual Meeting
of
Stockholders for that year and ending immediately prior to the
Company's
Annual Meeting of Stockholders in the next succeeding calendar
year (the
"Plan Year") that a nonemployee director is elected or
appointed
to the
Board, a Stock Payment will be made to each nonemployee
director
for a
fixed portion of such nonemployee director's Annual Retainer.
The
fixed
portion shall be determined by the Board. A nonemployee director
may
also make
an election to increase the amount of the Stock Payment up to
the full
amount of such nonemployee director's Annual Retainer. Such an
election
shall be made on a form provided by the Committee and returned
to
the
Committee on such date as the Committee shall establish, but in
any
case no
later than the first day of the Plan Year to which the election
relates.
The election form shall state the amount by which the
nonemployee
director
desires to reduce the cash portion of his or her Annual
Retainer,
which
shall be applied toward the purchase of Common Stock on the
same
date that
the Stock Payment is made; provided, however, that no
fractional
shares may
be purchased. Any funds withheld but not able to be applied to
the
purchase of whole shares shall be paid to the nonemployee director
in
cash. A
nonemployee director shall not be allowed to change or revoke
any
election
for the relevant year, but may change his or her election for
any
subsequent
Plan Year.
(e) Cash Award - This is an award paid in cash upon the
achievement,
in whole
or part, of performance goals relating to one or more of the
following
business criteria within the meaning of Section 162(m) of the
Code:
profitability, revenue, cost, cash flow, earnings, share price,
return on
equity, return on assets, return on invested capital, economic
value
added, market share, productivity, safety, customer
satisfaction,
on-time
performance or other objective operational measures. Any of
these
criteria
may be used to measure the performance of the Company as a
whole
or any
business unit or division of the Company. These criteria shall
be
calculated
under a methodology established in writing by the Committee
prior to
the issuance of an award. Such writing may be a plan or other
arrangement established by the Committee hereunder, which shall set
forth
the terms
and conditions of the performance-based cash awards, provided
that such
plan or arrangement shall not expand the class of individuals
entitled
to participate under the 2004 Long-Term Incentive Plan, add to
any of the
performance criteria described above, or increase the maximum
amount
payable to any single participant with respect to any calendar
year, as set forth
below. The maximum amount of any cash payment under a
plan or
arrangement established by the Committee hereunder to any
single
participant with respect to any calendar year will not exceed twice
the
participant's base salary as in effect on the last day of the
preceding
fiscal
year and in no event will exceed $1,000,000.
9. DIVIDENDS AND DIVIDEND EQUIVALENTS
The
Committee may provide that any awards under the Plan earn dividends
or
dividend equivalents. Such dividends or
dividend equivalents may be paid
currently or may be credited to a
participant's account. Any crediting of
dividends or dividend equivalents may be
subject to such restrictions and
conditions as the Committee may establish,
including reinvestment in additional
shares or share equivalents.
<PAGE>
10. DEFERRALS AND SETTLEMENTS
Payment of
awards may be in the form of cash, stock, other awards or
combinations thereof as the Committee shall
determine, and with such
restrictions as it may impose. The
Committee also may require or permit
participants to elect to defer the issuance
of shares or the settlement of
awards in cash under such rules and
procedures as it may establish under the
Plan. It also may provide that deferred
settlements include the payment or
crediting of interest on the deferral
amounts, or the payment or crediting of
dividend equivalents where the deferral
amounts are denominated in shares.
11. TRANSFERABILITY AND EXERCISABILITY
Awards
granted under the Plan shall not be transferable or assignable
other than by will or the laws of descent
and distribution, except to the extent
permitted by the Committee, in its sole
discretion. However, any award so
transferred shall continue to be subject to
all the terms and conditions
contained in the instrument evidencing such
award.
12. EVIDENCE OF AWARDS
Awards
under the Plan shall be evidenced by instruments as approved by
the
Committee that set forth the terms,
conditions and limitations for each award
which may include the term of an award, the
provisions applicable in the event
the participant's employment terminates,
and the Committee's authority to
unilaterally or bilaterally amend, modify,
suspend, cancel or rescind any award.
13. ACCELERATION AND SETTLEMENT OF
AWARDS
In the
event of a proposed sale, merger, consolidation,
reorganization,
liquidation, or upon a change in control of
the Company as defined by the Board
of Directors, the Committee shall have the
discretion to provide for the
acceleration of vesting and for settlement,
including cash payment or assumption
and/or conversion, of an award granted
under the Plan. Such provision for the
acceleration of vesting and for settlement,
including cash payment or assumption
and/or conversion may be set forth in an
award agreement made pursuant to this
Plan. However, the granting of awards under
the Plan shall in no way affect the
right of the Company to adjust, reclassify,
reorganize, or otherwise change its
capital or business structure, or to merge,
consolidate, dissolve, liquidate,
sell or transfer all or any portion of its
businesses or assets In addition, the
Committee shall have
