ex10-2.htm


    
      
         


      

      
         


        
          

        

      

      
        Exhibit
10.2

      

    


    ALASKA
AIR GROUP, INC.

    2008
PERFORMANCE INCENTIVE PLAN

    NONQUALIFIED
STOCK OPTION AGREEMENT

     

    THIS NONQUALIFIED STOCK OPTION
AGREEMENT (this “Option
Agreement”) dated _______________, by and between ALASKA AIR GROUP, INC., a
Delaware corporation (the “Corporation”), and ____________
(the “Grantee”)
evidences the nonqualified stock option (the “Option”) granted by the
Corporation to the Grantee as to the number of shares of the Corporation’s
Common Stock first set forth below.

     

    
      	
              Number
      of Shares of Common Stock1:

            	 
      	
              Award
      Date:

            	 
      
	
              Exercise
      Price per Share1:

            	
              $

            	
              Expiration
      Date1,2:

            	 
      


    

    


    Vesting1,2
[The Option shall
become vested as to 25% of the total number of shares of Common Stock subject to
the Option on each of the first, second, third and fourth anniversaries of the
Award Date.]

     

    The
Option is granted under the Alaska Air Group, Inc. 2008 Performance Incentive
Plan (the “Plan”) and
subject to the Terms and Conditions of Nonqualified Stock Option (the “Terms”) attached to this
Option Agreement (incorporated herein by this reference) and to the
Plan.  The Option has been granted to the Grantee in addition to, and
not in lieu of, any other form of compensation otherwise payable or to be paid
to the Grantee.  Capitalized terms are defined in the Plan if not
defined herein.  The parties agree to the terms of the Option set
forth herein.  The Grantee acknowledges receipt of a copy of the
Terms, the Plan and the Prospectus for the Plan.

     

    


    
      	
              GRANTEE

            	
              ALASKA
      AIR GROUP, INC.

              a
      Delaware Corporation

            
	
              ______________________________________

            	
              By:
      _____________________________________

            
	 
      	
              William
      S. Ayer

              Chairman,
      President and CEO

               

            
	
              ______________________________________

            	 
      
	
              Co-Mail
      Code

            	 
      
	
              ______________________________________

            	 
      
	
              Home
      Address

            	 
      
	
              ______________________________________

            	 
      
	
              City,
      State, Zip

            	 
      


    

    


    1
Subject to adjustment under Section 7.1 of the Plan

    2
Subject to early termination under Section 4 of the Terms and Section 7.2
of the Plan


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


     

    TERMS
AND CONDITIONS OF NONQUALIFIED STOCK OPTION

     

    
      	
              1.  

            	
              1.           Vesting; Limits on
      Exercise; Incentive Stock Option Status; Possible
      Acceleration.

            


    

     

    The
Option shall vest and become exercisable in percentage installments of the
aggregate number of shares subject to the Option as set forth on the cover page
of this Option Agreement.  The Option may be exercised only to the
extent the Option is vested and exercisable.

     

    
      	
               
      

            	
              ·

            	
              Cumulative
      Exercisability.  To the extent that the Option is vested
      and exercisable, the Grantee has the right to exercise the Option (to the
      extent not previously exercised), and such right shall continue, until the
      expiration or earlier termination of the
Option.

            


    

     

    
      	
               
      

            	
              ·

            	
              No Fractional
      Shares.  Fractional share interests shall be disregarded,
      but may be cumulated.

            


    

     

    
      	
               
      

            	
              ·

            	
              Minimum
      Exercise.  No fewer than 100 shares of Common Stock
      (subject to adjustment under Section 7.1 of the Plan) may be purchased at
      any one time, unless the number purchased is the total number at the time
      exercisable under the Option.

            


    

     

    
      	
               
      

            	
              ·

            	
              Nonqualified Stock
      Option.  The Option is a nonqualified stock option and is
      not, and shall not be, an incentive stock option within the meaning of
      Section 422 of the Code.

            


    

     

    Notwithstanding
any other provision herein or in the Plan, the Option, to the extent not then
vested, shall become fully vested if (i) the Grantee’s employment with the
Corporation and its Subsidiaries is terminated by the Corporation or a
Subsidiary without Cause or by the Grantee for Good Reason, and (ii) such
termination occurs at any time within the period commencing six (6) months
before a Change of Control and ending twenty-four (24) months after such Change
of Control.  (For these purposes, the terms “Cause,” “Change of
Control” and “Good Reason” shall have the meanings ascribed to them in Exhibit A
attached hereto.)  In the event that, upon the occurrence of a Change
of Control, the Grantee is entitled to accelerated vesting of the Option
pursuant to this paragraph in connection with a termination of the Grantee’s
employment prior to such Change of Control, the Option, to the extent it had not
vested and was cancelled or otherwise terminated upon or prior to the date of
such Change of Control solely as a result of such termination of employment,
shall be reinstated and shall automatically become fully vested, and the Grantee
shall be given a reasonable opportunity to exercise such accelerated portion of
the Option before it terminates.

     

    
      	
              2.  

            	
              2.           Continuance of
      Employment/Service Required; No Employment/Service
      Commitment.

            


    

     

    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 Option and the rights and benefits
under this Option Agreement.  Employment or service for only a portion
of the vesting period, even if a substantial portion, will not entitle the
Grantee 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 4 below or under the Plan.

     

    Nothing contained in this Option
Agreement or the Plan constitutes an employment or service commitment by the
Corporation, affects the Grantee’s status as an employee at will who is subject
to termination without cause, confers upon the Grantee any right to remain
employed by or in service to the Corporation or any Subsidiary, interferes in
any way with the right of the Corporation or any Subsidiary at any time to
terminate such employment or services, or affects the right of the Corporation
or any

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Subsidiary
to increase or decrease the Grantee’s other compensation or
benefits.  Nothing in this paragraph, however, is intended to
adversely affect any independent contractual right of the Grantee without his
consent thereto.

     

    
      	
              3.  

            	
              3.           Method of Exercise of
      Option.

            


    

     

    The
Option shall be exercisable by the delivery to the Secretary of the Corporation
(or such other person as the Administrator may require pursuant to such
administrative exercise procedures as the Administrator may implement from time
to time) of:

     

    
      	
               
      

            	
              ·

            	
              a
      written notice stating the number of shares of Common Stock to be
      purchased pursuant to the Option or by the completion of such other
      administrative exercise procedures as the Administrator may require from
      time to time,

            


    

     

    
      	
               
      

            	
              ·

            	
              payment
      in full for the Exercise Price of the shares to be purchased in cash,
      check or by electronic funds transfer to the Corporation, or (subject to
      compliance with all applicable laws, rules, regulations and listing
      requirements and further subject to such rules as the Administrator may
      adopt as to any non-cash payment) in shares of Common Stock already owned
      by the Grantee, valued at their Fair Market Value on the exercise
      date;

            


    

     

    
      	
               
      

            	
              ·

            	
              if
      required by the Administrator, any written statements or agreements that
      the Administrator may deem necessary or desirable to assure compliance
      with all applicable legal and accounting requirements;
  and

            


    

     

    
      	
               
      

            	
              ·

            	
              satisfaction
      of the tax withholding provisions of Section 8.5 of the
    Plan.

            


    

     

    The
Administrator also may, but is not required to, authorize a non-cash payment
alternative by notice and third party payment in such manner as may be
authorized by the Administrator, or, subject to such procedures as the
Administrator may adopt, authorize a “cashless exercise” with a third party who
provides simultaneous financing for the purposes of (or who otherwise
facilitates) the exercise of the Option.

     

    
      	
              4.  

            	
              4.           Early
      Termination of Option.

            


    

     

    4.1 4.1           Possible Termination of Option upon
Certain Corporate Events.  The Option is subject to termination
in connection with certain corporate events as provided in Section 7.2 of the
Plan.

     

    4.2 4.2           Termination of Option upon a
Termination of Grantee’s Employment or Services.  Subject to
earlier termination on the Expiration Date of the Option or pursuant to Section
4.1 above, if the Grantee ceases to be employed by or ceases to provide services
to the Corporation, the following rules shall apply (the last day that the
Grantee is employed by or provides services to the Corporation is referred to as
the Grantee’s “Severance
Date”):

     

    
      	
               
      

            	
              ·

            	
              other
      than as expressly provided below in this Section 4.2, the Option (whether
      vested or not) shall terminate on the Severance
  Date;

            


    

     

    
      	
               
      

            	
              ·

            	
              if
      the termination of the Grantee’s employment or services is the result of
      the Grantee’s Retirement (as defined below), (a) the Option, to the extent
      not vested on the Severance Date and scheduled to vest at any time within
      the three-year period following the Severance Date, shall become fully
      vested as of the Severance Date, (b) the Grantee will have until the
      Expiration Date (as set forth on the cover page of this Option Agreement)
      to exercise the

            


    

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              Option,
      provided, however, that any portion of the Option that becomes vested
      pursuant to the foregoing clause (a) shall become exercisable only at such
      times as such portion would have otherwise vested pursuant to the original
      vesting schedule as provided herein had the Grantee’s employment not
      terminated, (c) the Option, to the extent not vested on the Severance Date
      (after giving effect to the foregoing clause (a)), shall terminate on the
      Severance Date, and (d) the Option, to the extent exercisable at any time
      prior to the Expiration Date and not exercised on or prior to such date,
      shall terminate at the close of business on the Expiration
      Date;

            


    

     

    
      	
               
      

            	
              ·

            	
              if
      the termination of the Grantee’s employment or services is the result of
      the Grantee’s death or Total Disability (as defined below), (a) the
      Option, to the extent not vested on the Severance Date, shall become fully
      vested as of the Severance Date, (b) the Grantee (or his beneficiary or
      personal representative, as the case may be) will have until the
      Expiration Date to exercise the Option, and (c) the Option, to the extent
      exercisable prior to the Expiration Date and not exercised prior to such
      date, shall terminate at the close of business on the Expiration
      Date.

            


    

     

    For
purposes of the Option, “Retirement” means that, as of
the Grantee’s Severance Date, the Grantee has either (i) attained age 55 with at least
five (5) full years of service with the Corporation, or (ii) has
attained age 60, or (iii) is a participant in and is entitled to commence a
benefit under a Corporation-sponsored defined benefit plan and has at least 10
years of service with the Corporation.  For purposes of the
Option, “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
Administrator).

     

    In all
events the Option is subject to earlier termination on the Expiration Date of
the Option or as contemplated by Section 4.1.  The Administrator shall
be the sole judge of whether the Grantee continues to render employment or
services for purposes of this Option Agreement.

     

    
      	
              5.  

            	
              5.           Non-Transferability.

            


    

     

    The
Option and any other rights of the Grantee under this Option Agreement or the
Plan are nontransferable and exercisable only by the Grantee, except as set
forth in Section 5.7 of the Plan.

     

    
      	
              6.  

            	
              6.           Notices.

            


    

     

    Any
notice to be given under the terms of this Option Agreement shall be in writing
and addressed to the Corporation at its principal office to the attention of the
Secretary, and to the Grantee at the address last reflected on the Corporation’s
payroll records, or at such other address as either party may hereafter
designate in writing to the other.  Any such notice shall be delivered
in person or shall be 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.  Any such notice shall be
given only when received, but if the Grantee is no longer employed by the
Corporation, shall be deemed to have been duly given five business days after
the date mailed in accordance with the foregoing provisions of this Section
6.

     

    
      	
              7.  

            	
              7.           Plan.

            


    

     

    The
Option and all rights of the Grantee under this Option Agreement are subject to
the terms and conditions of the Plan, incorporated herein by this
reference.  The Grantee agrees to be bound by the terms of the Plan
and this Option Agreement.  The Grantee acknowledges having read and
understanding the Plan, the Prospectus for the Plan, and this Option
Agreement.  Unless otherwise expressly provided in

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    other
sections of this Option Agreement, provisions of the Plan that confer
discretionary authority on the Board or the Administrator do not and shall not
be deemed to create any rights in the Grantee unless such rights are expressly
set forth herein or are otherwise in the sole discretion of the Board or the
Administrator so conferred by appropriate action of the Board or the
Administrator under the Plan after the date
hereof.

     

    
      	
              8.  

            	
              8.           Entire
      Agreement.

            


    

     

    This
Option 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 Option Agreement may be amended pursuant to Section 8.6 of the
Plan.  Such amendment must be in writing and signed by the
Corporation.  The Corporation may, however, unilaterally waive any
provision hereof in writing to the extent such waiver does not adversely affect
the interests of the Grantee 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.

     

    
      	
              9.  

            	
              9.           Governing
      Law.

            


    

     

    This
Option 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.

     

    
      	
              10.  

            	
              10.           Effect of this
      Agreement.

            


    

     

    Subject
to the Corporation’s right to terminate the Option pursuant to Section 7.2 of
the Plan, this Option Agreement shall be assumed by, be binding upon and inure
to the benefit of any successor or successors to the Corporation.

     

    
      	
              11.  

            	
              11.           Counterparts.

            


    

     

    This
Option 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.

     

    
      	
              12.  

            	
              12.           Section
      Headings.

            


    

     

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

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
A

     

    DEFINITIONS

     

    For
purposes of the Option, the following terms shall have the meanings set forth is
this Exhibit A.

     

    “Cause” means the occurrence of
any of the following:

     

    
      	
              (i)  

            	
              (i)           the
      Grantee is convicted of, or has pled guilty or nolo contendere to, a
      felony (other than traffic related offenses or as a result of vicarious
      liability); or

            


    

     

    
      	
              (ii)  

            	
              (ii)           the
      Grantee has engaged in acts of fraud, material dishonesty or other acts of
      willful misconduct in the course of his duties to the Corporation or any
      of its Subsidiaries; or

            


    

     

    
      	
              (iii)  

            	
              (iii)           the
      Grantee willfully and repeatedly fails to perform or uphold his duties to
      the Corporation or any of its Subsidiaries;
or

            


    

     

    
      	
              (iv)  

            	
              (iv)           the
      Grantee willfully fails to comply with reasonable directives of the Board
      which are communicated to him or her in
writing;

            


    

     

    provided,
however, that no act or omission by the Grantee shall be deemed to be “willful”
if the Grantee reasonably believed in good faith that such acts or omissions
were in the best interests of the Corporation.

     

     “Change of Control” means the
occurrence of any of the following:

     

    (i)           the
consummation of:

     

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

     

    (B)           any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, the assets of the
Corporation.

     

    
      	
               
      

            	
              (ii)

            	
              at
      any time during a period of twenty-four (24) months, fewer than a
      majority of the members of the Board are Incumbent
      Directors.  “Incumbent Directors”
      means (A) individuals who constitute the Board at the beginning of such
      period; and (B) individuals who were nominated or elected by all of, or a
      committee composed entirely of, the individuals described in (A); and (C)
      individuals who were nominated or elected by individuals described in
      (B).

            


    

     

    
      	
               
      

            	
              (iii)

            	
              any
      Person (meaning any individual, entity or group within the meaning of
      Section 13(d)(3) or 14(d) of the Exchange Act) shall, as a result of a
      tender or exchange offer, open market purchases, privately-negotiated
      purchases or otherwise, become the beneficial owner (within the meaning of
      Rule 13d-3 under the Exchange Act), directly or indirectly, of the
      then-outstanding securities of the Corporation ordinarily (and apart
      from

            


    

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              rights
      accruing under special circumstances) having the right to vote in the
      election of members of the Board (“Voting
      Securities” to be calculated as provided in paragraph (d) of
      Rule 13d-3 in the case of rights to acquire common stock of the
      Corporation) representing 20% or more of the combined voting power of the
      then-outstanding Voting Securities.

            


    

     

    
      	
               
      

            	
              (iv)

            	
              approval
      by the stockholders of the Corporation of any plan or proposal for the
      liquidation or dissolution of the
Corporation.

            


    

     

    Unless
the Board shall determine otherwise, a Change of Control shall not be deemed to
have occurred by reason of any corporate reorganization, merger, consolidation,
transfer of assets, liquidating distribution or other transaction entered into
solely by and between the Corporation and any affiliate thereof, provided such
transaction has been approved by at least two-thirds (2/3) of the Incumbent
Directors (as defined above) then in office and voting.

     

    Notwithstanding
the foregoing, in no event shall a transaction or other event that occurred
prior to the date of grant of the Option constitute a Change of Control, and no
Change of Control after the first Change of Control to occur after the grant
date shall be considered for purposes of the Option.

     

    “Good Reason” means, without
the Grantee’s express written consent, the occurrence of any one or more of the
following:

     

    
      	
              (v)  

            	
              (i)           a
      material reduction in the Grantee’s annual base
  salary;

            


    

     

    
      	
              (vi)  

            	
              (ii)           a
      material diminution or reduction of the Grantee’s authority, duties, or
      responsibilities;

            


    

     

    
      	
              (vii)  

            	
              (iii)           a
      material change in the geographic location at which the Grantee must
      perform services; or

            


    

     

    
      	
              (viii)  

            	
              (iv)           any
      material breach by the Corporation of any other provision of this
      Agreement;

            


    

     

    provided,
however, that any such condition shall not constitute “Good Reason” unless both
(x) the Grantee provides written notice to the Corporation of the condition
claimed to constitute Good Reason within ninety (90) days of the initial
existence of such condition, and (y) the Corporation fails to remedy such
condition within thirty (30) days of receiving such written notice thereof; and
provided, further, that in all events the termination of the Grantee’s
employment with the Corporation shall not be treated as a termination for “Good
Reason” unless such termination occurs not more than two (2) years following the
initial existence of the condition claimed to constitute “Good
Reason.”