Alaska Airlines and Horizon Air 2007 Annual Report Download - page 30

Plan. The Company may not increase the
applicable share limits of the 2008 Plan by
repurchasing shares of common stock on the
market (by using cash received through the
exercise of stock options or otherwise).
Types of Awards
The 2008 Plan authorizes stock options,
stock appreciation rights, restricted stock, stock
bonuses and other forms of awards granted or
denominated in the Company’s common stock or
units of the Company’s common stock, as well
as cash bonus awards pursuant to Section 5.2
of the 2008 Plan. The 2008 Plan retains
flexibility to offer competitive incentives and to
tailor benefits to specific needs and
circumstances. Any award may be paid or settled
in cash.
A stock option is the right to purchase
shares of the Company’s common stock at a
future date at a specified price per share (the
“exercise price”). The per share exercise price of
an option generally may not be less than the fair
market value of a share of the Company’s
common stock on the date of grant. The
maximum term of an option is ten years from the
date of grant. An option may either be an
incentive stock option or a nonqualified stock
option. Incentive stock option benefits are taxed
differently from nonqualified stock options, as
described under “Federal Income Tax
Consequences of Awards Under the 2008 Plan”
below. Incentive stock options are also subject
to more restrictive terms and are limited in
amount by the U.S. Internal Revenue Code and
the 2008 Plan. Incentive stock options may only
be granted to employees of the Company or a
subsidiary.
A stock appreciation right is the right to
receive payment of an amount equal to the
excess of the fair market value of a share of the
Company’s common stock on the date of
exercise of the stock appreciation right over the
base price of the stock appreciation right. The
base price will be established by the
Administrator at the time of grant of the stock
appreciation right and generally may not be less
than the fair market value of a share of the
Company’s common stock on the date of grant.
Stock appreciation rights may be granted in
connection with other awards or independently.
The maximum term of a stock appreciation right
is ten years from the date of grant.
The per share exercise price of an option or
the per share base price of a stock appreciation
right may, however, be less than the fair market
value of a share of the Company’s common
stock on the date of grant if the option or stock
appreciation right will be treated as a full-value
award under the share-counting rules for the
2008 Plan described above.
The other types of awards that may be
granted under the 2008 Plan include, without
limitation, stock bonuses, restricted stock,
performance stock, stock units, dividend
equivalents, or similar rights to purchase or
acquire shares, and cash awards granted
consistent with Section 5.2 of the 2008 Plan as
described below.
Performance-Based Awards
The Administrator may grant awards that are
intended to be performance-based within the
meaning of Section 162(m) of the U.S. Internal
Revenue Code (“Performance-Based Awards”).
Performance-Based Awards are in addition to any
of the other types of awards that may be granted
under the 2008 Plan (including options and
stock appreciation rights which may also qualify
as performance-based awards for
Section 162(m) purposes). Performance-Based
Awards may be in the form of restricted stock,
performance stock, stock units, other rights, or
cash bonus opportunities.
The vesting or payment of Performance-
Based Awards (other than options or stock
appreciation rights) will depend on the absolute
or relative performance of the Company on a
consolidated, subsidiary, segment, division, or
business unit basis. The Administrator will
establish the criterion or criteria and target(s) on
which performance will be measured. The
Administrator must establish criteria and targets
in advance of applicable deadlines under the
U.S. Internal Revenue Code and while the
attainment of the performance targets remains
substantially uncertain. The criteria that the
14