Alaska Airlines and Horizon Air 2007 Annual Report Download - page 89

level or level using one or more of the Business Criteria set forth below (on an absolute or
relative basis) for the Corporation on a consolidated basis or for one or more of the
Corporation’s subsidiaries, segments, divisions or business units, or any combination of the
foregoing. Any Qualifying Option or Qualifying SAR shall be subject only to the requirements of
Section 5.2.1 and 5.2.3 in order for such award to satisfy the requirements for “performance-
based compensation” under Section 162(m) of the Code. Any other Performance-Based Award
shall be subject to all of the following provisions of this Section 5.2.
5.2.1 Class; Administrator. The eligible class of persons for Performance-Based Awards under
this Section 5.2 shall be officers and employees of the Corporation or one of its Subsidiaries.
The Administrator approving Performance-Based Awards or making any certification required
pursuant to Section 5.2.4 must be constituted as provided in Section 3.1 for awards that are
intended as performance-based compensation under Section 162(m) of the Code.
5.2.2 Performance Goals. The specific performance goals for Performance-Based Awards
(other than Qualifying Options and Qualifying SARs) shall be, on an absolute or relative basis,
established based on one or more of the following business criteria (“Business Criteria”) as
selected by the Administrator in its sole discretion: earnings per share, cash flow (which
means cash and cash equivalents derived from either net cash flow from operations or net
cash flow from operations, financing and investing activities), total stockholder return, gross
revenue, revenue growth, operating income (before or after taxes), net earnings (before or after
interest, taxes, depreciation and/or amortization), return on equity or on assets or on net
investment, cost containment or reduction, profitability, economic value added, market share,
productivity, safety, customer satisfaction, on-time performance, or any combination thereof.
These terms are used as applied under generally accepted accounting principles or in the
financial reporting of the Corporation or of its Subsidiaries. To qualify awards as performance-
based under Section 162(m), the applicable Business Criterion (or Business Criteria, as the
case may be) and specific performance goal or goals (“targets”) must be established and
approved by the Administrator during the first 90 days of the performance period (and, in the
case of performance periods of less than one year, in no event after 25% or more of the
performance period has elapsed) and while performance relating to such target(s) remains
substantially uncertain within the meaning of Section 162(m) of the Code. Performance targets
shall be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains
and losses, accounting changes or other extraordinary events not foreseen at the time the
targets were set unless the Administrator provides otherwise at the time of establishing the
targets. The applicable performance measurement period may not be less than three months
nor more than 10 years.
5.2.3 Form of Payment; Maximum Performance-Based Award. Grants or awards under this
Section 5.2 may be paid in cash or shares of Common Stock or any combination thereof.
Grants of Qualifying Options and Qualifying SARs to any one participant in any one calendar
year shall be subject to the limit set forth in Section 4.2(b). The maximum number of shares of
Common Stock which may be delivered pursuant to Performance-Based Awards (other than
Qualifying Options and Qualifying SARs, and other than cash awards covered by the following
sentence) that are granted to any one participant in any one calendar year shall not exceed
300,000 shares, either individually or in the aggregate, subject to adjustment as provided in
Section 7.1. In addition, the aggregate amount of compensation to be paid to any one
participant in respect of all Performance-Based Awards payable only in cash and not related to
shares of Common Stock and granted to that participant in any one calendar year shall not
exceed $1,000,000. Awards that are cancelled during the year shall be counted against these
limits to the extent required by Section 162(m) of the Code.
5.2.4 Certification of Payment. Before any Performance-Based Award under this Section 5.2
(other than Qualifying Options and Qualifying SARs) is paid and to the extent required to qualify
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