Alaska Airlines and Horizon Air 2007 Annual Report Download - page 27

PROPOSAL 2.
APPROVAL OF THE ALASKA AIR GROUP, INC.
2008 PERFORMANCE INCENTIVE PLAN
General
At the Annual Meeting, stockholders will be
asked to approve the Alaska Air Group, Inc.
2008 Performance Incentive Plan (the “2008
Plan”), which was adopted, subject to
stockholder approval, by the Board of Directors
on March 13, 2008.
The Company believes that incentives and
stock-based awards focus employees on the
objective of creating stockholder value and
promoting the success of the Company, and that
incentive compensation plans like the proposed
2008 Plan are an important attraction, retention
and motivation tool for participants in the plan.
The Company currently maintains the Alaska
Air Group, Inc. 2004 Long-Term Incentive Equity
Plan (the “2004 Plan”). As of March 13, 2008, a
total of 1,706,529 shares of the Company’s
common stock were then subject to outstanding
awards granted under the 2004 Plan, and
145,615 shares of the Company’s common
stock were then available for new award grants
under the 2004 Plan. For all of the Company’s
equity incentive plans (including the 2004 Plan),
as of March 13, 2008, a total of 2,777,214
shares of the Company’s common stock were
subject to outstanding options (with a weighted-
average exercise price of $32.13 and a
weighted-average remaining term of 4.99 years),
and a total of 686,283 shares of the Company’s
common stock were subject to outstanding
restricted stock unit and performance unit
awards. In each case, these numbers are
calculated assuming that outstanding
performance unit awards are ultimately paid out
at target levels of performance. The Company’s
outstanding options generally may not be
transferred to third parties for value and do not
include dividend equivalent rights.
The Board of Directors approved the 2008
Plan based, in part, on a belief that the number
of shares currently available under the 2004
Plan does not give the Company sufficient
authority and flexibility to adequately provide for
future incentives. If stockholders approve the
2008 Plan, no new awards will be granted under
the 2004 Plan after the Annual Meeting. In that
case, the number of shares of the Company’s
common stock that remain available for award
grants under the 2004 Plan immediately prior to
the Annual Meeting will become available for
award grants under the 2008 Plan. An additional
2,100,000 shares of the Company’s common
stock will also be made available for award
grants under the 2008 Plan, so that if
stockholders approve the 2008 Plan, a maximum
of 2,245,615 shares will initially be available for
award grants under that plan. In addition, if
stockholders approve the 2008 Plan, any shares
of common stock subject to award grants under
the 2004 Plan that expire, are cancelled, or
otherwise terminate after the Annual Meeting will
also be available for award grant purposes under
the 2008 Plan.
If stockholders do not approve the 2008
Plan, the Company will continue to have the
authority to grant awards under the 2004 Plan. If
stockholders approve the 2008 Plan, the
termination of our grant authority under the 2004
Plan will not affect awards then-outstanding
under that plan.
Summary Description of the 2008
Performance Incentive Plan
The principal terms of the 2008 Plan are
summarized below. The following summary is
qualified in its entirety by the full text of the
2008 Plan, which appears as Exhibit A to this
Proxy Statement.
Purpose
The purpose of the 2008 Plan is to promote
the success of the Company and the interests of
our stockholders by providing an additional
means for us to attract, motivate, retain and
reward officers, employees, nonemployee
directors and other eligible persons through the
grant of awards and incentives for high levels of
individual performance and improved financial
performance of the Company. Equity-based
ŠProxy
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