Exhibit 10.2

ALASKA AIR GROUP, INC.

2004 LONG-TERM INCENTIVE PLAN

STOCK UNIT AWARD AGREEMENT

THIS STOCK UNIT AWARD AGREEMENT (this “Agreement”) dated                     ,
by and between ALASKA AIR GROUP, INC., a Delaware corporation (“Air Group”), and
                     (the “Participant”) evidences the award of restricted stock
units (the “Award”) granted by Air Group to the Participant as to the number of
stock units (the “Stock Units”) first set forth below.

 

Number of Stock Units1:    Award Date:

Vesting1 The Award shall vest and become nonforfeitable with respect to 100% of
the total number of Stock Units subject to the Award on the third anniversary of
the Award Date.

The Award is granted under the Alaska Air Group, Inc. 2004 Long-Term Incentive
Plan (the “Plan”) and subject to the Terms and Conditions of Stock Unit Award
(the “Terms”) attached to this Agreement (incorporated herein by this reference)
and to the Plan. The Award has been granted to the Participant in addition to,
and not in lieu of, any other form of compensation otherwise payable or to be
paid to the Participant. Capitalized terms are defined in the Plan if not
defined herein. The parties agree to the terms of the Award set forth herein.
The Participant acknowledges receipt of a copy of the Terms, the Plan and the
Prospectus for the Plan.

 

PARTICIPANT    

ALASKA AIR GROUP, INC.

a Delaware Corporation

 

    By:  

 

   

William S. Ayer

Chairman, President and CEO

CONSENT OF SPOUSE

In consideration of Air Group’s execution of this Agreement, the undersigned
spouse of the Participant agrees to be bound by all of the terms and provisions
hereof and of the Plan.

 

Signature of Spouse:    Date:

 

  

 

--------------------------------------------------------------------------------

1 Subject to adjustment under Section 6 of the Plan.

--------------------------------------------------------------------------------

TERMS AND CONDITIONS OF STOCK UNIT AWARD

1. Stock Units. As used herein, the term “stock unit” shall mean a non-voting
unit of measurement which is deemed for bookkeeping purposes to be equivalent to
one outstanding share of Air Group’s Common Stock (subject to adjustment as
provided in Section 6 of the Plan) solely for purposes of the Plan and this
Agreement. The Stock Units shall be used solely as a device for the
determination of the payment to eventually be made to the Participant if such
Stock Units vest pursuant to this Agreement. The Stock Units shall not be
treated as property or as a trust fund of any kind.

2. Vesting; Change in Control. Subject to Section 7 below, the Award shall vest
and become nonforfeitable as set forth on the cover page of this Agreement.
Notwithstanding any other provision herein or in the Plan, the Award, to the
extent not then vested, shall become fully vested upon a Change in Control (as
defined in Exhibit A attached hereto); provided, however, that such acceleration
provision shall not apply if two-thirds or more of the Incumbent Directors (as
defined in Exhibit A) then in office specifically determine in advance of the
Change in Control that the Award shall not accelerate and shall continue in
accordance with the terms hereof.

3. Continuance of Employment. The vesting schedule requires continued employment
or service through each applicable vesting date as a condition to the vesting of
the applicable installment of the Award and the rights and benefits under this
Agreement. Employment or service for only a portion of the vesting period, even
if a substantial portion, will not entitle the Participant to any proportionate
vesting or avoid or mitigate a termination of rights and benefits upon or
following a termination of employment or services as provided in Section 7 below
or under the Plan.

Nothing contained in this Agreement or the Plan constitutes an employment or
service commitment by Air Group, affects the Participant’s status as an employee
at will who is subject to termination without cause, confers upon the
Participant any right to remain employed by or in service to the Company,
interferes in any way with the right of the Company at any time to terminate
such employment or services, or affects the right of the Company to increase or
decrease the Participant’s other compensation or benefits. Nothing in this
paragraph, however, is intended to adversely affect any independent contractual
right of the Participant without his consent thereto.

4. Limitations on Rights Associated with Units. The Participant shall have no
rights as a stockholder of Air Group, no dividend rights and no voting rights,
with respect to the Stock Units and any shares of Common Stock underlying or
issuable in respect of such Stock Units until such shares of Common Stock are
actually issued to and held of record by the Participant. No adjustments will be
made for dividends or other rights of a holder for which the record date is
prior to the date of issuance of the stock certificate.

5. Restrictions on Transfer. Neither the Award, nor any interest therein or
amount or shares payable in respect thereof may be sold, assigned, transferred,
pledged or otherwise disposed of, alienated or encumbered, either voluntarily or
involuntarily. The transfer restrictions in the preceding sentence shall not
apply to (a) transfers to Air Group, or (b) transfers by will or the laws of
descent and distribution.

6. Timing and Manner of Payment of Stock Units. On or as soon as
administratively practical following each vesting of the applicable portion of
the total Award pursuant to the terms hereof, Air Group shall deliver to the
Participant a number of shares of Common Stock (either by delivering one or more
certificates for such shares or by entering such shares in book entry form, as
determined by Air Group in its discretion) equal to the number of Stock Units
subject to this Award that vest on the applicable vesting date, unless such
Stock Units terminate prior to the given vesting date pursuant to Section 7. Air
Group’s obligation to deliver shares of Common Stock or otherwise make payment
with

--------------------------------------------------------------------------------

respect to vested Stock Units is subject to the condition precedent that the
Participant or other person entitled under the Plan to receive any shares with
respect to the vested Stock Units deliver to Air Group any representations or
other documents or assurances that the Committee may deem necessary or desirable
to assure compliance with all applicable legal and accounting requirements. The
Participant shall have no further rights with respect to any Stock Units that
are paid or that terminate pursuant to Section 7.

7. Effect of Termination of Employment. The Participant’s Stock Units shall
terminate to the extent such units have not become vested prior to the first
date the Participant is no longer employed by the Company, regardless of the
reason for the termination of the Participant’s employment with the Company;
provided, however, that (i) if the Participant’s employment terminates as a
result of the Participant’s death or Total Disability (as defined below), the
Participant’s Stock Units, to the extent such units are not then vested, shall
become fully vested as of the date of termination of the Participant’s
employment and shall be paid in accordance with Section 6; and (ii) if the
Participant’s employment terminates as a result of the Participant’s Retirement
(as defined below), the Participant’s Stock Units, to the extent such units are
not then vested and were scheduled to vest within the three-year period
following the date of such termination, shall become fully vested as of the date
of such termination and shall be paid in accordance with Section 6 on or as soon
as practicable after the date such Stock Units would have otherwise vested
pursuant to the original vesting schedule as provided herein had the
Participant’s employment not terminated. If any unvested Stock Units are
terminated hereunder, such Stock Units shall automatically terminate and be
cancelled as of the applicable termination date without payment of any
consideration by Air Group and without any other action by the Participant, or
the Participant’s beneficiary or personal representative, as the case may be.

For purposes of this Agreement, “Total Disability” means a “permanent and total
disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise
determined by the Committee). For purposes of this Agreement, “Retirement” means
that, as of the date of the termination of the Participant’s employment with the
Company, the Participant has either (i) attained age 55 with at least five
(5) full years of service with the Company, or (ii) has attained age 60, or
(iii) is a participant in and is entitled to commence a benefit under a
Company-sponsored defined benefit plan and has at least 10 years of service with
the Company.

8. Adjustments Upon Specified Events. The Committee may accelerate payment and
vesting of the Stock Units in such circumstances as it, in its sole discretion,
may determine. In addition, upon the occurrence of certain events relating to
Air Group’s stock contemplated by Section 6 of the Plan (including, without
limitation, an extraordinary cash dividend on such stock), the Committee shall
make adjustments in accordance with such section in the number of Stock Units
then outstanding and the number and kind of securities that may be issued in
respect of the Award. No such adjustment shall be made with respect to any
ordinary cash dividend paid on the Common Stock.

9. Tax Withholding. Subject to Section 19 of the Plan, upon any distribution of
shares of Common Stock in respect of the Stock Units, Air Group shall
automatically reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of whole shares, valued at their then Fair
Market Value (determined in accordance with the applicable provisions of the
Plan), to satisfy any withholding obligations of the Company with respect to
such distribution of shares at the minimum applicable withholding rates. In the
event that Air Group cannot legally satisfy such withholding obligations by such
reduction of shares, or in the event of a cash payment or any other withholding
event in respect of the Stock Units, the Company shall be entitled to require a
cash payment by or on behalf of the Participant and/or to deduct from other
compensation payable to the Participant any sums required by federal, state or
local tax law to be withheld with respect to such distribution or payment.

--------------------------------------------------------------------------------

10. Notices. Any notice to be given under the terms of this Agreement shall be
in writing and addressed to Air Group at its principal office to the attention
of the Secretary, and to the Participant at the Participant’s last address
reflected on Air Group’s records, or at such other address as either party may
hereafter designate in writing to the other. Any such notice shall be given only
when received, but if the Participant is no longer an employee of the Company,
shall be deemed to have been duly given by Air Group when enclosed in a properly
sealed envelope addressed as aforesaid, registered or certified, and deposited
(postage and registry or certification fee prepaid) in a post office or branch
post office regularly maintained by the United States Government.

11. Plan. The Award and all rights of the Participant under this Agreement are
subject to the terms and conditions of the provisions of the Plan, incorporated
herein by reference. The Participant agrees to be bound by the terms of the Plan
and this Agreement. The Participant acknowledges having read and understanding
the Plan, the Prospectus for the Plan, and this Agreement. Unless otherwise
expressly provided in other sections of this Agreement, provisions of the Plan
that confer discretionary authority on the Board or the Committee do not (and
shall not be deemed to) create any rights in the Participant unless such rights
are expressly set forth herein or are otherwise in the sole discretion of the
Board or the Committee so conferred by appropriate action of the Board or the
Committee under the Plan after the date hereof.

12. Entire Agreement. This Agreement and the Plan together constitute the entire
agreement and supersede all prior understandings and agreements, written or
oral, of the parties hereto with respect to the subject matter hereof. The Plan
and this Agreement may be amended pursuant to Section 14 of the Plan. Such
amendment must be in writing and signed by Air Group. Air Group may, however,
unilaterally waive any provision hereof in writing to the extent such waiver
does not adversely affect the interests of the Participant hereunder, but no
such waiver shall operate as or be construed to be a subsequent waiver of the
same provision or a waiver of any other provision hereof.

13. Limitation on Participant’s Rights. Participation in the Plan confers no
rights or interests other than as herein provided. This Agreement creates only a
contractual obligation on the part of Air Group as to amounts payable and shall
not be construed as creating a trust. Neither the Plan nor any underlying
program, in and of itself, has any assets. The Participant shall have only the
rights of a general unsecured creditor of Air Group with respect to amounts
credited and benefits payable, if any, with respect to the Stock Units, and
rights no greater than the right to receive the Common Stock as a general
unsecured creditor with respect to Stock Units, as and when payable hereunder.

14. Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

15. Section Headings. The section headings of this Agreement are for convenience
of reference only and shall not be deemed to alter or affect any provision
hereof.

16. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without regard to
conflict of law principles thereunder.

17. Construction. It is intended that the terms of the Award will not result in
the imposition of any tax liability pursuant to Section 409A of the Code. This
Agreement shall be construed and interpreted consistent with that intent.

--------------------------------------------------------------------------------

EXHIBIT A

DEFINITIONS

“Change in Control” means:

 

(a) Air Group’s stockholders shall approve and there shall occur:

 

  (i) any consolidation or merger of Air Group in which Air Group is not the
continuing or surviving corporation or pursuant to which shares of Common Stock
would be converted into cash, securities or other property, other than a merger
of Air Group in which the holders of Air Group’s Common Stock immediately prior
to the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;

 

  (ii) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, the assets of Air
Group or Alaska Airlines; or

 

  (iii) the adoption of any plan or proposal for the liquidation or dissolution
of Air Group or Alaska Airlines;

 

(b) at any time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Board (“Incumbent Directors”) shall
cease for any reason to constitute at least a majority thereof, unless each new
director during such two-year period was nominated or elected by the Incumbent
Directors, or a committee of the Incumbent Directors (new directors nominated or
elected by the Incumbent Directors or by a committee of the Incumbent Directors
shall also be deemed to be Incumbent Directors); or

 

(c) any “Person” (as such term is used in Section 13(d) of the Exchange Act)
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of then-outstanding securities of Air Group ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors (“Voting Securities,” to be calculated as provided in
paragraph (d) of such Rule 13d-3 in the case of rights to acquire Common Stock)
representing 20% or more of the combined voting power of the then-outstanding
Voting Securities.