Southwest Airlines 1995 Annual Report Download - page 35

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35
9. STOCK PLANS
In May 1991, the Company’s stockholders approved the Incentive Stock Option Plan and the
Non-Qualified Stock Option Plan. Under the Incentive Stock Option Plan, options to purchase a
maximum of 9,000,000 shares of Southwest common stock may be granted to key Employees.
Under the Non-Qualified Stock Option Plan, options to purchase up to 750,000 shares of
Southwest common stock may be granted to key Employees and non-employee directors. Under
each plan, the option price per share may not be less than the fair market value of a share on the
date the option is granted and the maximum term of an option may not exceed ten years.
Effective January 12, 1995, the Company adopted, pursuant to a collective bargaining
agreement between the Company and the Southwest Airlines Pilots’ Association (SWAPA), the
1995 SWAPA Non-Qualified Stock Option Plan (SWAPA Plan). Under the terms of the SWAPA
Plan, 18,000,000 common shares have been reserved for issuance. An initial grant of
approximately 14.5 million shares was made on the effective date at an option price of $20.00
per share. On September 1 of each year of the agreement, commencing September 1, 1996,
additional options will be granted to Pilots that became eligible during that year at an option price
equal to the fair market value of the common stock of the Company on the date of grant plus 5
percent. Options vest in ten annual increments of ten percent and must be exercised prior to
January 31, 2007, or within a specified time upon retirement or termination. In the event that
SWAPA exercises its option to make the collective bargaining agreement amendable on
September 1, 1999, any unexercised options will be canceled on December 1, 1999.