SkyWest Airlines, Inc.: Amendments to Loan and Guarantee Agreement with Treasury (January 15, 2021)
Summary
A letter agreement dated January 15, 2021 amending the Loan and Guarantee Agreement of September 29, 2020, as amended and restated on October 28, 2020, among SkyWest Airlines, Inc. as Borrower, SkyWest, Inc. as Parent, the United States Department of the Treasury and The Bank of New York Mellon as Administrative Agent and Collateral Agent. Treasury agrees to three changes: a new definition of PSP2 Warrant Agreement, the warrant agreement of January 15, 2021 between SkyWest, Inc. and Treasury; a restated definition of Warrants covering the Warrant Agreement, PSP Warrant Agreement and PSP2 Warrant Agreement; and in Section 2.07 the replacement of March 26, 2021 with May 28, 2021. The file continues with the conformed agreement and schedules, including Schedule 3.17 listing SkyWest Leasing, Inc. and SkyWest Insurance Company, Inc. as excluded subsidiaries.
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Cite this document
“SkyWest Airlines, Inc.: Amendments to Loan and Guarantee Agreement with Treasury (January 15, 2021).”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/skywest-airlines-inc-amendments-to-loan-and-guarantee-agreement-with-t-b088a7855a/
, SHA-256 95e54818457aa950d7553265d3721ada29c41344886ad98109af530db77201a9.Full text
January 15, 2021
SKYWEST AIRLINES, INC.
444 South River Road
St. George, Utah 84790
Re: Amendments to Loan and Guarantee Agreement
Reference is made to that certain Loan and Guarantee Agreement, dated as of September
29, 2020 and amended and restated pursuant to that certain Restatement Agreement, dated as of October
28, 2020 (the “Existing Loan and Guarantee Agreement”, and as amended hereby and as may be further
amended, supplemented and restated or otherwise modified from time to time, the “Loan and Guarantee
Agreement”), among SKYWEST AIRLINES, INC., a corporation organized under the laws of Utah
(the “Borrower”), SKYWEST, INC., a corporation organized under the laws of Utah (the “Parent”), the
United States Department of the Treasury (“Treasury”) and The Bank of New York Mellon as
Administrative Agent and Collateral Agent. Capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to such terms in the Loan and Guarantee Agreement.
WHEREAS, Pursuant to Section 11.02 of the Loan and Guarantee Agreement, the Borrower
has requested amendments to the Existing Loan and Guarantee Agreement as set forth herein; and
WHEREAS, Treasury, as the Initial Lender and constituting the Required Lenders, has agreed
to amend the Existing Loan and Guarantee Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Effective as of the date hereof, Section 1.01 of the Existing Loan and Guarantee Agreement is
hereby amended by inserting the following definition, in alphabetical order:
““PSP2 Warrant Agreement” means that certain warrant agreement, dated as of January 15,
2021 between SkyWest, Inc. and Treasury.”
2. Effective as of the date hereof, the definition of “Warrants” in Section 1.01 of the Existing
Loan and Guarantee Agreement is hereby amended and restated in its entirety as follows:
““Warrants” means, collectively, those certain warrants issued to Treasury under the Warrant
Agreement, the PSP Warrant Agreement or the PSP2 Warrant Agreement.”
3. Effective as of the date hereof, Section 2.07 of the Existing Loan and Guarantee Agreement is
hereby amended by deleting the reference to “March 26, 2021” and replacing it with “May 28, 2021”.
4. This letter agreement shall be limited as written and nothing herein shall be deemed to
constitute an amendment or waiver of any other term, provision or condition of the Loan and
Guarantee Agreement or any of the other Loan Documents in any other instance than as expressly set
forth herein or prejudice any right or remedy that any Lender, the Administrative Agent or the
Collateral Agent may now have or may in the future have under the Loan and Guarantee Agreement
or any of the other Loan Documents. For the avoidance of doubt, this letter agreement is hereby
deemed to be a Loan Document under the Loan and Guarantee Agreement. Except as herein
provided, the Loan and Guarantee Agreement and the other Loan Documents shall remain unchanged
and in full force and effect. This letter agreement shall not constitute a novation of the Loan and
Guarantee Agreement or any other Loan Documents.
5. The Agents assume no responsibility for, and shall be entitled to rely on, without any
obligation to ascertain or investigate, the correctness of the recitals and statements contained herein.
The Agents shall not be liable or responsible in any manner whatsoever for, or in respect of, the
validity or sufficiency of the amendments contained in this letter agreement.
6. Sections 11.06(b) (Electronic Execution), 11.09 (Governing Law; Jurisdiction; Etc.) and
11.10 (Waiver of Jury Trial) of the Loan and Guarantee Agreement shall apply mutatis mutandis to
this letter agreement as if set out herein.
7. This letter agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. Delivery of an executed counterpart of a signature page of
this letter agreement by facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as
delivery of a manually executed counterpart of this letter agreement.
The Lenders party hereto hereby authorize and direct the Administrative Agent and the Collateral
Agent to acknowledge this letter agreement.
[Remainder of this page intentionally left blank.]
Acknowledged:
THE BANK OF NEW YORK MELLON, as Administrative Agent
By: _______________________
Name: Bret S. Derman
Title: Vice President
THE BANK OF NEW YORK MELLON, as Collateral Agent
By: _______________________
Name: Bret S. Derman
Title: Vice President
[Signature Page to Letter Agreement – SkyWest]
Execution
RESTATEMENT AGREEMENT
RESTATEMENT AGREEMENT, dated as of October 28, 2020 (this “Restatement
Agreement”), to that certain Loan and Guarantee Agreement, dated as of September 29, 2020 (the
“Existing Loan and Guarantee Agreement”, and as amended and restated by this Restatement
Agreement, and as may be further amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the “Loan and Guarantee Agreement”), among SKYWEST
AIRLINES, INC., a corporation organized under the laws of Utah (the “Borrower”), SKYWEST,
INC., a corporation organized under the laws of Utah (the “Parent”), the Guarantors party hereto
from time to time, the UNITED STATES DEPARTMENT OF THE TREASURY (“Treasury”),
as Initial Lender and THE BANK OF NEW YORK MELLON, as Administrative Agent and as
Collateral Agent. Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to such terms in the Loan and Guarantee Agreement.
W I T N E S S E T H:
WHEREAS, the Parent, the Borrower, Treasury and the Agents are each party to
the Existing Loan and Guarantee Agreement;
WHEREAS, the Borrower has requested that Treasury extend additional
Commitments to the Borrower (the “Additional Commitments”) as is permissible under the
Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 (Mar. 27, 2020), as the
same may be amended form time to time (the “CARES Act”) to the Borrower, and Treasury is
willing to do so on the terms and conditions set forth herein;
WHEREAS, pursuant to Section 4003(h)(1) of the CARES Act, for purposes of the
Code, the Loans made pursuant to the Commitments (as increased by the Additional Commitments
being provided hereby) shall be treated as indebtedness and as having been issued for their
aggregate stated principal amount, and the interest payable pursuant to Section 2.09(a) of the Loan
and Guarantee Agreement shall be treated as qualified stated interest;
WHEREAS, Loans made pursuant to the Commitments (as increased by the
Additional Commitments being provided hereby) will be secured by Liens on the Collateral
securing the existing Obligations, together with Liens on any Additional Collateral, subject to the
distribution priorities set forth in the Loan and Guarantee Agreement;
WHEREAS, pursuant to Section 11.02 of the Loan and Guarantee Agreement, the
Borrower has requested amendments to the Existing Loan and Guarantee Agreement as set forth
in this Restatement Agreement; and
WHEREAS, Treasury has agreed to amend the Existing Loan and Guarantee
Agreement as more particularly set forth in this Restatement Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. Additional Commitments. Treasury hereby agrees to provide
Additional Commitments to the Borrower on the Restatement Effective Date on the terms set forth
herein and in the Loan and Guarantee Agreement and the other Loan Documents, and subject to
the conditions set forth below, in an aggregate principal amount, together with the Closing Date
Commitment, not to exceed the amount of the Commitments as defined in the Loan and Guarantee
Agreement (as amended hereby). The Additional Commitments shall be deemed to be
“Commitments” under and as defined in the Loan and Guarantee Agreement (as amended hereby)
for all purposes of the Loan and Guarantee Agreement and the other Loan Documents, and shall
be secured by the applicable Liens granted to the Collateral Agent for the benefit of the Secured
Parties and entitled to the benefits of the applicable Security Documents.
Section 2. Amendments. Effective as of the Restatement Effective Date, (a)
the Existing Loan and Guarantee Agreement is hereby amended and restated, in its entirety, to be
in the form attached as Annex A hereto and (b) all of the other Schedules and Exhibits to the
Existing Loan and Guarantee Agreement remain in the forms attached to the Existing Loan and
Guarantee Agreement.
Section 3. Representations and Warranties. The Credit Parties represent
and warrant to the Administrative Agent, the Collateral Agent and the Lenders as of the
Restatement Effective Date that:
(a) The execution, delivery and performance by each Credit Party of this
Restatement Agreement and each other Loan Document to which it is party have been duly
authorized by all necessary corporate or other organizational action, and do not and will not
(a) contravene the terms of its Organizational Documents, (b) conflict with or result in any
breach or contravention of, or the creation of any Lien under, or require any payment to be made
under (i) any material Contractual Obligation to which each Credit Party is a party or affecting
each Credit Party or the material properties of any Credit Party or (ii) any material order,
injunction, writ or decree of any Governmental Authority or any arbitral award to which any
Credit Party or its property is subject or (c) violate any Law, except to the extent such violation
could not reasonably be expected to have a Material Adverse Effect.
(b) No approval, consent, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person is necessary or required
in connection with the execution, delivery or performance by, or enforcement against, each
Credit Party of this Restatement Agreement or any other Loan Document, except for (i) such
approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained,
taken or made and in full force and effect and (ii) filings and consents contemplated by the
Security Documents or Section 5.14 of the Loan and Guarantee Agreement.
(c) This Restatement Agreement has been, and each other Loan
Document, when delivered hereunder, will have been, duly executed and delivered by each
Credit Party set forth on the signature pages to this Restatement Agreement. This Restatement
Agreement constitutes, and each other Loan Document when so delivered will constitute, the
legal, valid and binding obligation of each Credit Party hereto enforceable against such Credit
Party in accordance with its terms, except as such enforceability may be limited by bankruptcy,
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insolvency, reorganization, receivership, moratorium or other Laws affecting the creditors’
rights generally and by general principles of equity.
(d) No Default exists under the Loan and Guarantee Agreement.
(e) All representations and warranties contained in the Loan and
Guarantee Agreement and the other Loan Documents are true and correct in all material respects
as of the date hereof, except to the extent that (A) such representations or warranties are qualified
by a materiality standard, in which case they are true and correct in all respects, and (B) such
representations or warranties expressly relate to an earlier date (in which case such
representations and warranties are true and correct in all material respects as of such earlier date).
Section 4. Conditions Precedent to Effectiveness. The effectiveness of this
Restatement Agreement and the Additional Commitments provided hereby are subject to the
satisfaction (or waiver in accordance with Section 11.02 of the Loan and Guarantee Agreement)
of the following conditions (and, in the case of each document specified in this Section to be
received by the Initial Lender (and the applicable Agent or Agents), such document shall be in
form and substance satisfactory to the Initial Lender and/or the applicable Agent or Agents) (the
date on which such conditions are satisfied or waived being the “Restatement Effective Date”)
when:
(a) Executed Counterparts. The Initial Lender and the Agents shall have
received from each Credit Party hereto a counterpart of this Restatement Agreement and an
amendment to the Pledge and Security Agreement, substantially in the form attached hereto as
Annex B (such amendment, the “First Amendment to the Pledge and Security Agreement”), each
signed on behalf of such Credit Party. Notwithstanding anything herein to the contrary, delivery
of an executed counterpart of a signature page of this Restatement Agreement or the First
Amendment to the Pledge and Security Agreement by telecopy or other electronic means, or
confirmation of the execution of this Restatement Agreement and the First Amendment to the
Pledge and Security Agreement on behalf of a party by an email from an authorized signatory of
such party shall be effective as delivery of a manually executed counterpart of this Restatement
Agreement and the First Amendment to the Pledge and Security Agreement.
(b) Certificates. The Initial Lender and any applicable Agent shall have
received such customary certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of the Credit Parties as the Lenders may require
evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to
act as a Responsible Officer in connection with the Loan Documents;
(c) Organizational Documents. The Initial Lender shall have received
customary resolutions or evidence of corporate authorization, secretary’s certificates and such
other documents and certificates (including Organizational Documents and good standing
certificates) as the Initial Lender may request relating to the organization, existence and good
standing of each Credit Party and any other legal matters relating to the Credit Parties, the Loan
Documents or the transactions contemplated thereby.
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(d) Opinion of Counsel to Credit Parties. The Initial Lender and the
applicable Agent or Agents shall have received all opinions of counsel (including opinions of
counsel covering the creation and perfection, or the continuing creation and perfection, of the
security interests on Collateral, consistent with the opinions delivered on the Closing Date, and
including substantially similar opinions with respect to any Additional Collateral) to the Credit
Parties that is acceptable to the Initial Lender, addressed to the Initial Lender and the applicable
Agent or Agents and dated as of the Restatement Effective Date, in form and substance
satisfactory to the Initial Lender and the applicable Agent (and the Parent hereby instructs such
counsel to deliver such opinions to such Persons).
(e) Expenses. The Borrower shall have paid all reasonable fees, expenses
(including the reasonable fees and expenses of legal counsel) and other amounts due to the Initial
Lender, the Administrative Agent and the Collateral Agent (to the extent that statements for such
expenses shall have been delivered to the Borrower on or prior to the Restatement Effective
Date); provided that such expenses payable by the Borrower may be offset against the proceeds
of any Loans funded on the Restatement Effective Date.
(f) Officer’s Certificate. The Initial Lender shall have received a
certificate executed by a Responsible Officer of the Parent and the Borrower confirming (i) that
the representations and warranties contained in Section 3 of this Restatement Agreement are true
and correct on and as of the Restatement Effective Date, (ii) that the information provided in the
Loan Application Form submitted by the Borrower was true and correct on and as of the date of
delivery thereof, (iii) the satisfaction of Sections 4(j) and (l) herein as of the Restatement
Effective Date, (iv) the satisfaction of all other conditions precedent to the Restatement Effective
Date described in this Section 4 and (v) that no Default or Event of Default exists or will result
from the terms of this Restatement Agreement on the Restatement Effective Date.
(g) Appraisals. The Initial Lender shall have received Appraisals of
Additional Collateral satisfactory in form and substance and performed by an Eligible Appraiser
dated as of a date no earlier than thirty (30) days prior to the Restatement Effective Date.
(h) Consents and Authorizations. Each Credit Party shall have obtained
all consents and authorizations from Governmental Authorities and all consents of other Persons
(including shareholder approvals, if applicable) that are necessary or advisable in connection
with this Restatement Agreement, any Loan Document, any of the transactions contemplated
hereby or thereby or the continuing operations of the Credit Parties and each of the foregoing
shall be in full force and effect and in form and substance satisfactory to the Initial Lender.
(i) Lien Searches. The Initial Lender shall have received (i) UCC and
other applicable lien searches, including tax and judgment liens searches, conducted in the
jurisdictions and offices where such liens on material assets of the Credit Parties are required to
be filed or recorded, in each case, as of the date that such lien searches were last conducted
pursuant to the Loan and Guarantee Agreement and (ii) to the extent any Additional Collateral
consists of (x) Aircraft and Engine Assets (as defined in the Pledge and Security Agreement),
aircraft registry lien searches conducted with the FAA and the International Registry or (y) Spare
Part Assets (as defined in the Pledge and Security Agreement), registry lien searches conducted
with the FAA (with reference to each Designated Spare Parts Location set forth on Schedule 2.1
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of the Pledge and Security Agreement), in each case, reflecting the absence of Liens on the assets
of the Credit Parties, other than Permitted Liens or Liens to be discharged on or prior to the
Restatement Effective Date pursuant to documentation satisfactory to the Initial Lender.
(j) Collateral Coverage Ratio. On the Restatement Effective Date (and
after giving pro forma effect to any Borrowings on such date), the Collateral Coverage Ratio
shall not be less than 2.0 to 1.0.
(k) Solvency Certificate. The Initial Lender shall have received a
certificate of the chief financial officer or treasurer (or other comparable officer) of the Parent
certifying that the Borrower and its Subsidiaries (taken as a whole) are, and will be immediately
after giving effect to the Restatement Agreement, Solvent.
(l) No Material Adverse Effects. Since the Closing Date, (i) there has
been no event or circumstance that, either individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect and (ii) none of the Credit Parties has
made a Disposition (including any sale of Currency) of any assets of the type that would be
included in the Collateral other than as would have been permitted under the Loan and Guarantee
Agreement.
(m) Audits. On the Restatement Effective Date, the opinion of the
independent public accountants (after giving effect to any reissuance or revision of such opinion)
on the most recent audited consolidated financial statements delivered by the Parent pursuant to
Section 5.01(a) of the Loan and Guarantee Agreement shall not include a “going concern”
qualification under GAAP as in effect on the date of this Restatement Agreement or, if there is
a change in the relevant provisions of GAAP thereafter, any like qualification or exception under
GAAP after giving effect to such change; and
(n) Perfection Certificate. The Initial Lender and the Agents shall have
received from each Credit Party hereto an amended and restated Perfection Certificate or
supplement thereof, updated to include all Additional Collateral, signed on behalf of such Credit
Party. Notwithstanding anything herein to the contrary, delivery of an executed signature page
of an amended and restated Perfection Certificate or supplement thereof by telecopy or other
electronic means, or confirmation of the execution of an amended and restated Perfection
Certificate or supplement thereof on behalf of a party by an email from an authorized signatory
of such party shall be effective as delivery of a manually executed counterpart of an amended
and restated Perfection Certificate or supplement thereof.
(o) Perfection of Liens on Collateral. On or prior to the Restatement
Effective Date, in connection with the execution of the Pledge and Security Agreement, the
Perfection Requirement (as defined in the Pledge and Security Agreement) shall have been
satisfied and all of the perfection steps thereunder shall have been completed, and copies or
evidence, if available, of any relevant filings, recordings and other perfection documentation
shall have been provided to the Initial Lender, the Administrative Agent and the Collateral
Agent.
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Section 5. Miscellaneous.
(a) Fees. The Borrower shall pay all fees required to be paid to the
Administrative Agent, the Collateral Agent and the Lenders and all expenses (including fees and
expenses of counsel) required to be paid to the Administrative Agent, Collateral Agent and the
Lenders, in each case as required by and in accordance with the terms of the Loan and Guarantee
Agreement, as they are due and payable in connection with this Restatement Agreement.
(b) Continued Effectiveness. Notwithstanding anything contained herein,
the terms of this Restatement Agreement shall not constitute a novation or termination of the
Existing Loan and Guarantee Agreement or any other Loan Documents and are not intended to
and do not serve to effect a novation or termination of the obligations outstanding under the
Existing Loan and Guarantee Agreement or instruments guaranteeing or securing the same,
which instruments shall remain and continue in full force and effect.
(c) Governing Law; Jurisdiction, Etc. THIS RESTATEMENT
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE FEDERAL LAW OF THE UNITED STATES IF AND TO THE EXTENT SUCH
LAW IS APPLICABLE, AND OTHERWISE IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
(d) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH CREDIT PARTY AND EACH LENDER HEREBY
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY CIVIL LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
(e) Entire Agreement. This Restatement Agreement, the Loan and
Guarantee Agreement and the other Loan Documents constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. The Borrower and the
Agents hereby designate this Restatement Agreement as a Loan Document.
(f) Counterparts. This Restatement Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
Delivery of an executed counterpart of a signature page of this Restatement Agreement by
facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually
executed counterpart of this Agreement.
(g) Electronic Execution. The words “execution,” “signed,” “signature,”
and words of like import in this Restatement Agreement shall be deemed to include electronic
signatures or the keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in any Applicable
Law, including the Federal Electronic Signatures in Global and National Commerce Act, the
6
New York State Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.
(h) Successors and Assigns. When this Restatement Agreement has been
executed by the Parent, the Borrower, the Agents and the Lenders party hereto, this Restatement
Agreement shall thereafter be binding upon and inure to the benefit of the parties and their
respective successors and assigns, in accordance with the terms of the Loan and Guarantee
Agreement.
(i) Severability. If any provision of this Restatement Agreement or the
other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity
and enforceability of the remaining provisions of this Restatement Agreement and the other Loan
Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good
faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
(j) Headings. The headings of this Restatement Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning hereof.
(k) Direction to Agents. The Lenders party hereto hereby authorize and
direct the Administrative Agent and the Collateral Agent to execute and deliver this Restatement
Agreement.
(l) Release by Credit Parties. Each Credit Party hereto hereby
acknowledges and agrees that it has no actual knowledge of any defenses or claims against any
Lender, the Agents, any of their respective Affiliates or any of their respective officers, directors,
employees, attorneys, representatives, predecessors, successors or assigns with respect to the
Obligations, and that if such Credit Party now has, or ever did have, any defenses or claims with
respect to the Obligations against any Lender, the Agents, any of the respective Affiliates or any
of their respective officers, directors, employees, attorneys, representatives, predecessors,
successors, or assigns, whether known or unknown, at law or in equity, from the beginning of
the world through this date and through the time of effectiveness of this Restatement Agreement,
all of them are hereby expressly WAIVED, and the Borrower hereby RELEASES each Lender,
each Agent, their respective Affiliates and their respective officers, directors, employees,
attorneys, representatives, predecessors, successors and assigns from any liability therefor.
(m) No Liability of Agents. The Agents assume no responsibility for, and
shall be entitled to rely on, without any obligation to ascertain or investigate, the correctness of
the recitals and statements contained herein. The Agents shall not be liable or responsible in any
manner whatsoever for, or in respect of, the validity or sufficiency of this Restatement
Agreement.
Section 6. Reaffirmation.
(a) Each Credit Party hereto hereby consents to the execution, delivery
and performance of this Restatement Agreement and agrees that each reference to “the Loan and
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Guarantee Agreement,” “this Agreement,” “hereunder,” “hereof” or words of like import
referring to the Loan and Guarantee Agreement in the Loan Documents shall, on and after the
Restatement Effective Date, be deemed to be a reference to the Loan and Guarantee Agreement,
as amended and restated by this Restatement Agreement.
(b) Each Credit Party hereto hereby reaffirms all of its respective
obligations and liabilities under the Loan Documents to which it is a party, as such obligations
and liabilities have been amended by this Restatement Agreement, and acknowledges and agrees
that such obligations and liabilities remain in full force and effect.
(c) Each Credit Party hereto hereby irrevocably and unconditionally
ratifies each Loan Document to which it is a party (as such Loan Documents are amended to and
including the date hereof) and ratifies and reaffirms such Credit Party’s guarantee and grant of
liens and security interests under the Security Documents and confirms that the guarantees, liens
and security interests granted thereunder continue to secure the Obligations, including, without
limitation, any additional Obligations resulting from or incurred pursuant to the Loan and
Guarantee Agreement.
[Remainder of this page intentionally left blank.]
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THE BANK OF NEW YORK MELLON, as
Administrative Agent
By: _______________________
Name: Bret S. Derman
Title: Vice President
THE BANK OF NEW YORK MELLON, as
Collateral Agent
By: _______________________
Name: Bret S. Derman
Title: Vice President
[Signature Page to Restatement Agreement – SkyWest]
Annex A
Form of Amended and Restated Loan and Guarantee Agreement
See Attached.
EXECUTION
LOAN AND GUARANTEE AGREEMENT
dated as of
September 29, 2020,
and as amended and restated as of
October 28, 2020
among
SKYWEST AIRLINES, INC., as Borrower,
the Guarantors party hereto from time to time,
THE UNITED STATES DEPARTMENT OF THE TREASURY,
and
THE BANK OF NEW YORK MELLON,
as Administrative Agent and Collateral Agent
__________
EXECUTION
LOAN AND GUARANTEE AGREEMENT
dated as of
September 29, 2020,
and as amended and restated as of
October 28, 2020
among
SKYWEST AIRLINES, INC., as Borrower,
the Guarantors party hereto from time to time,
THE UNITED STATES DEPARTMENT OF THE TREASURY,
and
THE BANK OF NEW YORK MELLON,
as Administrative Agent and Collateral Agent
__________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Defined Terms ............................................................................................................ 1
SECTION 1.02 Terms Generally ....................................................................................................... 29
SECTION 1.03 Accounting Terms; Changes in GAAP..................................................................... 29
SECTION 1.04 Rates ......................................................................................................................... 29
SECTION 1.05 Divisions ................................................................................................................... 29
ARTICLE II
COMMITMENTS AND BORROWINGS
SECTION 2.01 Commitments ........................................................................................................... 30
SECTION 2.02 Loans and Borrowings .............................................................................................. 30
SECTION 2.03 Borrowing Requests ................................................................................................. 30
SECTION 2.04 [Reserved]................................................................................................................. 31
SECTION 2.05 [Reserved]................................................................................................................. 31
SECTION 2.06 Prepayments ............................................................................................................. 31
SECTION 2.07 Reduction and Termination of Commitments .......................................................... 32
SECTION 2.08 Repayment of Loans ................................................................................................. 32
SECTION 2.09 Interest ...................................................................................................................... 32
SECTION 2.10 Benchmark Replacement Setting.............................................................................. 32
SECTION 2.11 Evidence of Debt ...................................................................................................... 34
SECTION 2.12 Payments Generally .................................................................................................. 34
SECTION 2.13 Sharing of Payments ................................................................................................. 35
SECTION 2.14 Compensation for Losses.......................................................................................... 35
SECTION 2.15 Increased Costs ......................................................................................................... 36
SECTION 2.16 Taxes......................................................................................................................... 37
SECTION 2.17 [Reserved]................................................................................................................. 40
SECTION 2.18 [Reserved]................................................................................................................. 40
SECTION 2.19 Mitigation Obligations; Replacement of Lenders..................................................... 40
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Existence, Qualification and Power.......................................................................... 41
SECTION 3.02 Authorization; No Contravention ............................................................................. 41
SECTION 3.03 Governmental Authorization; Other Consents ......................................................... 41
SECTION 3.04 Execution and Delivery; Binding Effect .................................................................. 42
SECTION 3.05 Financial Statements; No Material Adverse Change ................................................ 42
SECTION 3.06 Litigation .................................................................................................................. 42
SECTION 3.07 Contractual Obligations; No Default ........................................................................ 42
SECTION 3.08 Property .................................................................................................................... 42
SECTION 3.09 Taxes......................................................................................................................... 42
i
SECTION 3.10 Disclosure ................................................................................................................. 43
SECTION 3.11 Compliance with Laws ............................................................................................. 43
SECTION 3.12 ERISA Compliance .................................................................................................. 43
SECTION 3.13 Environmental Matters ............................................................................................. 44
SECTION 3.14 Investment Company Act ......................................................................................... 44
SECTION 3.15 Sanctions; Export Controls; Anti-Corruption; AML Laws ...................................... 44
SECTION 3.16 Solvency ................................................................................................................... 45
SECTION 3.17 Subsidiaries............................................................................................................... 45
SECTION 3.18 Senior Indebtedness .................................................................................................. 45
SECTION 3.19 Insurance Matters ..................................................................................................... 45
SECTION 3.20 Labor Matters ........................................................................................................... 45
SECTION 3.21 Insolvency Proceedings ............................................................................................ 45
SECTION 3.22 Margin Regulations .................................................................................................. 45
SECTION 3.23 Liens ......................................................................................................................... 46
SECTION 3.24 Perfected Security Interests ...................................................................................... 46
SECTION 3.25 US Citizenship .......................................................................................................... 46
SECTION 3.26 Air Carrier Status ...................................................................................................... 46
ARTICLE IV
CONDITIONS
SECTION 4.01 Closing Date and Initial Borrowing.......................................................................... 46
SECTION 4.02 Each Borrowing ........................................................................................................ 48
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01 Financial Statements ................................................................................................. 49
SECTION 5.02 Certificates; Other Information ................................................................................ 50
SECTION 5.03 Notices ...................................................................................................................... 51
SECTION 5.04 Preservation of Existence, Etc. ................................................................................. 52
SECTION 5.05 Maintenance of Properties ........................................................................................ 52
SECTION 5.06 Maintenance of Insurance......................................................................................... 52
SECTION 5.07 Payment of Obligations ............................................................................................ 52
SECTION 5.08 Compliance with Laws ............................................................................................. 52
SECTION 5.09 Environmental Matters ............................................................................................. 52
SECTION 5.10 Books and Records ................................................................................................... 52
SECTION 5.11 Inspection Rights ...................................................................................................... 53
SECTION 5.12 Sanctions; Export Controls; Anti-Corruption Laws and AML Laws ....................... 53
SECTION 5.13 Guarantors; Additional Collateral ............................................................................ 53
SECTION 5.14 Post-Closing Matters ................................................................................................ 54
SECTION 5.15 Further Assurances ................................................................................................... 54
SECTION 5.16 Delivery of Appraisals .............................................................................................. 54
SECTION 5.17 Ratings ...................................................................................................................... 55
SECTION 5.18 Regulatory Matters ................................................................................................... 55
ii
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01 [Reserved]................................................................................................................. 55
SECTION 6.02 Liens ......................................................................................................................... 55
SECTION 6.03 Fundamental Changes............................................................................................... 55
SECTION 6.04 Dispositions .............................................................................................................. 56
SECTION 6.05 Restricted Payments ................................................................................................. 57
SECTION 6.06 Investments ............................................................................................................... 58
SECTION 6.07 Transactions with Affiliates...................................................................................... 59
SECTION 6.08 [Reserved]................................................................................................................. 60
SECTION 6.09 [Reserved]................................................................................................................. 60
SECTION 6.10 Changes in Nature of Business ................................................................................. 60
SECTION 6.11 Sanctions; AML Laws .............................................................................................. 60
SECTION 6.12 Amendments to Organizational Documents ............................................................. 60
SECTION 6.13 [Reserved]................................................................................................................. 60
SECTION 6.14 Prepayments of Junior Indebtedness ........................................................................ 60
SECTION 6.15 Lobbying................................................................................................................... 60
SECTION 6.16 Use of Proceeds ........................................................................................................ 60
SECTION 6.17 Financial Covenants ................................................................................................. 61
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 Events of Default ...................................................................................................... 61
SECTION 7.02 Application of Payments .......................................................................................... 64
ARTICLE VIII
AGENCY
SECTION 8.01 Appointment and Authority ...................................................................................... 65
SECTION 8.02 Collateral Matters. .................................................................................................... 65
SECTION 8.03 Removal or Resignation of Administrative Agent ................................................... 65
SECTION 8.04 Exculpatory Provisions ............................................................................................. 66
SECTION 8.05 Reliance by Agent .................................................................................................... 67
SECTION 8.06 Delegation of Duties ................................................................................................. 68
SECTION 8.07 Non-Reliance on Agents and Other Lenders ............................................................ 68
SECTION 8.08 Administrative Agent May File Proofs of Claim ..................................................... 68
ARTICLE IX
GUARANTEE
SECTION 9.01 Guarantee of the Obligations .................................................................................... 69
SECTION 9.02 Payment or Performance by a Guarantor.................................................................. 69
SECTION 9.03 Liability of Guarantors Absolute .............................................................................. 69
SECTION 9.04 Waivers by Guarantors ............................................................................................. 70
SECTION 9.05 Guarantors’ Rights of Subrogation, Contribution, etc. ............................................. 71
iii
SECTION 9.06 Subordination ........................................................................................................... 71
SECTION 9.07 Continuing Guarantee ............................................................................................... 71
SECTION 9.08 Financial Condition of the Borrower ........................................................................ 71
SECTION 9.09 Reinstatement ........................................................................................................... 71
SECTION 9.10 Discharge of Guarantees........................................................................................... 72
ARTICLE X
CARES ACT REQUIREMENTS
SECTION 10.01 CARES Act Compliance .......................................................................................... 72
SECTION 10.02 Dividends and Buybacks .......................................................................................... 72
SECTION 10.03 Maintenance of Employment Levels ........................................................................ 72
SECTION 10.04 United States Business.............................................................................................. 73
SECTION 10.05 Limitations on Certain Compensation ...................................................................... 73
SECTION 10.06 Continuation of Certain Air Service ......................................................................... 73
SECTION 10.07 Treasury Access........................................................................................................ 74
SECTION 10.08 Additional Defined Terms ........................................................................................ 74
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Notices; Public Information...................................................................................... 75
SECTION 11.02 Waivers; Amendments ............................................................................................. 77
SECTION 11.03 Expenses; Indemnity; Damage Waiver .................................................................... 78
SECTION 11.04 Successors and Assigns ............................................................................................ 80
SECTION 11.05 Survival..................................................................................................................... 82
SECTION 11.06 Counterparts; Integration; Effectiveness; Electronic Execution............................... 83
SECTION 11.07 Severability ............................................................................................................... 83
SECTION 11.08 Right of Setoff .......................................................................................................... 83
SECTION 11.09 Governing Law; Jurisdiction; Etc ............................................................................. 84
SECTION 11.10 Waiver of Jury Trial ................................................................................................. 84
SECTION 11.11 Headings ................................................................................................................... 84
SECTION 11.12 Treatment of Certain Information; Confidentiality .................................................. 84
SECTION 11.13 Money Laundering; Sanctions .................................................................................. 85
SECTION 11.14 Interest Rate Limitation ............................................................................................ 85
SECTION 11.15 Payments Set Aside .................................................................................................. 85
SECTION 11.16 No Advisory or Fiduciary Responsibility ................................................................. 86
SECTION 11.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions ............... 86
iv
SCHEDULES
SCHEDULE 3.05 - Financial Statements
SCHEDULE 3.17 - Subsidiaries
SCHEDULE 5.14 - Post-Closing Matters
SCHEDULE 6.05(i) - Restricted Payments
SCHEDULE 6.06 - Investments
SCHEDULE 6.07 - Affiliate Transactions
EXHIBITS
EXHIBIT A - Assignment and Assumption
EXHIBIT B-1 - Form of U.S. Tax Compliance Certificate
EXHIBIT B-2 - Form of U.S. Tax Compliance Certificate
EXHIBIT B-3 - Form of U.S. Tax Compliance Certificate
EXHIBIT B-4 - Form of U.S. Tax Compliance Certificate
EXHIBIT C - Form of Note
EXHIBIT D - Form of Borrowing Request
v
LOAN AND GUARANTEE AGREEMENT dated as of September 29, 2020 (as
amended and restated by the Restatement Agreement, this “Agreement”), among SKYWEST AIRLINES,
INC., a corporation organized under the laws of Utah (the “Borrower”), SKYWEST, INC., a corporation
organized under the laws of Utah (the “Parent”), the Guarantors party hereto from time to time, the
UNITED STATES DEPARTMENT OF THE TREASURY (“Treasury”) and THE BANK OF NEW
YORK MELLON as Administrative Agent and Collateral Agent.
WHEREAS, the Borrower has requested that the Initial Lender (as defined below) extend
credit as is permissible under the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136
(Mar. 27, 2020), as the same may be amended form time to time (the “CARES Act”) to the Borrower, and
the Initial Lender is willing to do so on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 4003(h)(1) of the CARES Act, for purposes of the Code
(as defined below) the Loans (as defined below) shall be treated as indebtedness and as having been
issued for their aggregate stated principal amount, and the interest payable pursuant to Section 2.09(a)
shall be treated as qualified stated interest.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Defined Terms. As used in this Agreement, the following terms have the
meanings specified below:
“Additional Collateral” shall mean (a) cash and Cash Equivalents pledged to the
Collateral Agent for the benefit of the Secured Parties under the Security Documents (and subject to an
account control agreement in form and substance satisfactory to the Appropriate Party), (b) airframes,
aircraft, engines and Spare Parts, registered, habitually located, or located in a designated location,
respectively, in the United States and that are eligible for the benefits of Section 1110 of the Bankruptcy
Code, 11 U.S.C. § 1110 or otherwise acceptable to the Required Lenders (provided that any airframe must
be less than 20 years old at the time of its designation as Additional Collateral), (c) Route Authorities for
routes with at least one end point located in the United States and all Slots and Gate Leaseholds related
from time to time thereto or otherwise acceptable to the Required Lenders, (d) real property, (e) ground
support equipment, (f) flight simulators and (g) any other assets acceptable to the Required Lenders, and
all of which assets shall (i) (other than Additional Collateral of the type described in clause (a)) be valued
by a new Appraisal at the time the Parent designates such assets as Additional Collateral, (ii) as of any
date of addition of such assets as Collateral, be subject, to the extent purported to be created by the
applicable Security Document, to a perfected first priority Lien and/or mortgage (or comparable Lien), in
favor of the Collateral Agent for the benefit of the Secured Parties and otherwise subject only to
Permitted Liens (excluding those referred to in clause (4) of the definition of “Permitted Lien”), (iii)
pledged to the Collateral Agent for the benefit of the Secured Parties pursuant to security agreement(s) or
mortgage(s), as applicable, in a form satisfactory to the Appropriate Party and (iv) at the time of their
designation as Additional Collateral, be accompanied by a legal opinion in form satisfactory to the
Appropriate Party; provided that, in accordance with Section 8.06, the Collateral Agent may designate a
sub-agent to accept the security interest in any Additional Collateral for the benefit of the Secured Parties;
provided further that, with respect to Additional Collateral of the type described in clause (c), (d) and (g),
the Borrower agrees to notify the Collateral Agent as promptly as practicable of any new categories of
assets which are expected to be designated as Additional Collateral or any new jurisdictions in which any
asset is to be secured or located; provided further that, with respect to Additional Collateral of the type
described in clause (d), (e) or (f), (i) such assets are acceptable to the Required Lenders, (ii) the Borrower
shall have delivered Appraisals acceptable in form and substance to the Required Lenders with respect to
such assets, (iii) such assets are subject to a loan to value framework acceptable to the Required Lenders,
(iv) such assets are pledged pursuant to documentation acceptable in form and substance to the Required
Lenders and (v) the benefits of pledging such assets outweigh the associated cost, burden, difficulty or
other consequences, as determined by the Required Lenders in their sole discretion.
“Adjusted LIBO Rate” means, as to any Borrowing for any Interest Period, an interest
rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for
such Interest Period divided by (b) one minus the Eurodollar Reserve Percentage.
“Administrative Account” means the account opened with the Administrative Agent in
the name of the Initial Lender as notified to the Borrower and the Initial Lender, or such other account as
the Administrative Agent shall advise the Borrower and each Lender from time to time.
“Administrative Agency Fee Letter” means any fee letter entered into between the
Borrower, the Administrative Agent and the Collateral Agent, or with any successor administrative agent
or collateral agent, in its capacity as administrative agent and in its capacity as collateral agent under any
of the Loan Documents.
“Administrative Agent” means The Bank of New York Mellon, in its capacity as
administrative agent under any of the Loan Documents, or any successor administrative agent.
“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by or otherwise acceptable to the Administrative Agent.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK
Financial Institution.
“Affiliate” means any Person that directly or indirectly controls, is controlled by, or is
under common control with, any other Person. For purposes of this definition, “control” of a Person shall
mean having the power, directly or indirectly, to direct or cause the direction of the management and
policies of such Person, whether by ownership of voting equity, by contract, or otherwise.
“Agent Parties” has the meaning specified in Section 11.01(d)(ii).
“Agent Responsible Officer” means, when used with respect to an Agent, any vice
president, assistant vice president, assistant treasurer or trust officer in the corporate trust and agency
administration of the Agent or any other officer of the Agent customarily performing functions similar to
those performed by any of the above-designated officers, and, in each case, who shall have direct
responsibility for the administration of this Agreement and also means, with respect to a particular agency
matter, any other officer to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
“Agents” means any of the Administrative Agent and the Collateral Agent.
“Agreement” has the meaning specified in introductory paragraph hereof.
“Air Carrier” has the meaning such term has under Section 40102 of Title 49, United
States Code.
“Alternate Base Rate” means, for any day, a rate per annum equal to the highest of (a) the
Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50%
and (c) the Adjusted LIBO Rate for a one-month term in effect on such day (taking into account any
LIBO Rate floor under the definition of “Adjusted LIBO Rate”) plus 1.00%. Any change in the Alternate
Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or such Adjusted LIBO
Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal
Funds Effective Rate or such Adjusted LIBO Rate, respectively.
“AML Laws” means (a) the USA Patriot Act of 2001 (Pub. L. No. 107-56), (b) the U.S.
Money Laundering Control Act of 1986, as amended, (c) the Bank Secrecy Act, 31 U.S.C. sections 5301
et seq., (d) Laundering of Monetary Instruments, 18 U.S.C. section 1956, (e) Engaging in Monetary
Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957, (f) the
Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulations (Title 31 Part
103 of the US Code of Federal Regulations), or (g) any other applicable money laundering or financial
recordkeeping Laws.
“Applicable Law” means, as to any Person, all applicable Laws binding upon such
Person or to which such a Person is subject.
“Applicable Percentage” means, with respect to any Lender, the percentage of the total
Outstanding Amount of Loans of all Lenders represented by the aggregate Outstanding Amount of Loans
of such Lender at such time.
“Applicable Rate” means 3.00%.
“Appraisal” means any appraisal specifying a value in Dollars (and not a range of
values), dated as of the delivery thereof, prepared by an Eligible Appraiser that certifies, at the time of
determination, in reasonable detail the Appraised Value of Eligible Collateral; provided that any
methodology, form of presentation, and all assumptions must be acceptable to the Appropriate Party;
provided further that the methodology, form of presentation and assumptions in the Appraisal delivered
on the Closing Date pursuant to Section 4.01(i) shall be satisfactory for any subsequent Appraisal with
respect to the same category and specific type of Eligible Collateral.
“Appraised Value” means, as of any date, (a) the specific value in Dollars (and not a
range of values) of any property constituting Eligible Collateral (other than cash and Cash Equivalents) as
reflected in the most recent Appraisal, (b) with respect to any cash pledged or being pledged at such time
as Collateral, 160% of the face amount and (c) with respect to any Cash Equivalents pledged or being
pledged at such time as Collateral, 100% of the fair market value thereof as determined by the Parent in
accordance with customary financial market practices determined no earlier than 45 days prior to such
date; provided that (i) if no Appraisal relating to such Eligible Collateral has been delivered to the
Collateral Agent prior to such date, the Appraised Value of such Eligible Collateral shall be deemed to be
zero and (ii) in the case of any such property consisting of ground support equipment, the Appraised
Value shall be deemed to be 50% of the value set forth in the most recent Appraisal..
“Appropriate Party” means (i) while the Initial Lender holds any Commitment or Loan,
the Initial Lender and (ii) if the Initial Lender is no longer a Lender, the Administrative Agent (acting at
the direction of the Required Lenders).
“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.
“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is required by
Section 11.04), and accepted by the Administrative Agent, in substantially the form of Exhibit A or any
other form approved by the Administrative Agent.
“Attributable Indebtedness” means, as of any date of determination, (a) in respect of any
Capitalized Lease Obligations of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any
Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant
lease that would appear on a balance sheet of such Person prepared as of such date in accordance with
GAAP if such lease were accounted for as a capital lease.
“Available Tenor” means, as of any date of determination and with respect to the then-
current Benchmark, as applicable, any tenor for such Benchmark or payment period for interest
calculated with reference to such Benchmark, as applicable, that is or may be used for determining
the length of an Interest Period pursuant to this Agreement as of such date and not including, for the
avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of
“Interest Period” pursuant to clause (d) of Section 2.10.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by an
applicable Resolution Authority in respect of any liability of any Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing
Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European
Union, the implementing Law for such EEA Member Country from time to time which is described in the
EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United
Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule
applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms
or other financial institutions or their affiliates (other than through liquidation, administration or other
insolvency proceedings).
“Benchmark” means, initially, USD LIBO Rate; provided that if a Benchmark
Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement
Date have occurred with respect to USD LIBO Rate or the then-current Benchmark, then
“Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark
Replacement has replaced such prior benchmark rate pursuant to Section 2.10(a).
“Benchmark Replacement” means, for any Available Tenor, the first alternative set
forth in the order below that can be determined by the Required Lenders for the applicable
Benchmark Replacement Date:
(1) the sum of: (a) Term SOFR and (b) the related Benchmark Replacement Adjustment;
(2) the sum of: (a) Daily Simple SOFR and (b) the related Benchmark
Replacement Adjustment;
(3) the sum of: (a) the alternate benchmark rate that has been selected by (y) so long as the
Initial Lender is a Lender, the Initial Lender and (z) otherwise, the Required Lenders
and the Borrower, in each case, as the replacement for the then-current Benchmark for
the applicable Corresponding Tenor giving due consideration to (i) any selection or
recommendation of a replacement benchmark rate or the mechanism for determining
such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing
market convention for determining a benchmark rate as a replacement for the then-
current Benchmark for U.S. dollar-denominated syndicated credit facilities at such time
and (b) the related Benchmark Replacement Adjustment;
provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a
screen or other information service that publishes such rate from time to time as selected by the
Required Lenders in their reasonable discretion and such screen is administratively acceptable as
determined by the Administrative Agent in its reasonable discretion. If the Benchmark
Replacement as determined pursuant to clause (1), (2) or (3) above would be less than the Floor, the
Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the
other Loan Documents; provided further that any such Benchmark Replacement shall be
administratively feasible as determined by the Administrative Agent in its reasonable discretion.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the
then- current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest
Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:
(1) for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the
first alternative set forth in the order below that can be determined by the Required
Lenders:
(a) the spread adjustment, or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero) as of the
Reference Time such Benchmark Replacement is first set for such Interest Period
that has been selected or recommended by the Relevant Governmental Body for
the replacement of such Benchmark with the applicable Unadjusted Benchmark
Replacement for the applicable Corresponding Tenor;
(b) the spread adjustment (which may be a positive or negative value or zero) as of
the Reference Time such Benchmark Replacement is first set for such Interest
Period that would apply to the fallback rate for a derivative transaction
referencing the ISDA Definitions to be effective upon an index cessation event
with respect to such Benchmark for the applicable Corresponding Tenor; and
(2) for purposes of clause (3) of the definition of “Benchmark Replacement,” the spread
adjustment, or method for calculating or determining such spread adjustment, (which may be a
positive or negative value or zero) that has been selected by (y) so long as the Initial Lender is
a Lender, the Initial Lender and (z) otherwise, the Required Lenders and the Borrower, in
each case, for the applicable Corresponding Tenor giving due consideration to (i) any
selection or recommendation of a spread adjustment, or method for calculating or determining
such spread adjustment, for the replacement of such Benchmark with the applicable
Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable
Benchmark Replacement Date or (ii) any evolving or then-prevailing market convention for
determining a spread adjustment, or method for calculating or determining such spread
adjustment, for the replacement of such Benchmark with the applicable Unadjusted
Benchmark Replacement for U.S. dollar- denominated syndicated credit facilities;
provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other
information service that publishes such Benchmark Replacement Adjustment from time to time
as selected by the Required Lenders in their reasonable discretion and such screen is
administratively acceptable as determined by the Administrative Agent in its reasonable
discretion; provided that, any such Benchmark Replacement Adjustment shall be
administratively feasible as determined by the Administrative Agent in its reasonable
discretion.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark
Replacement, any technical, administrative or operational changes (including changes to the definition
of “Alternate Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing
and frequency of determining rates and making payments of interest, timing of borrowing requests or
prepayment, conversion or continuation notices, length of lookback periods, the applicability of
breakage provisions, and other technical, administrative or operational matters) that the Administrative
Agent (after consultation with the Required Lenders) decides may be appropriate to reflect the
adoption and implementation of such Benchmark Replacement and to permit the administration thereof
by the Administrative Agent in a manner substantially consistent with market practice (or, if the
Administrative Agent (after consultation with the Required Lenders) decides that adoption of any
portion of such market practice is not administratively feasible or if the Administrative Agent (after
consultation with the Required Lenders) determines that no market practice for the administration of
such Benchmark Replacement exists, in such other manner of administration as the Administrative
Agent (after consultation with the Required Lenders) decides is reasonably necessary in connection
with the administration of this Agreement and the other Loan Documents). The Required Lenders
shall cooperate in good faith with the Administrative Agent so that the Administrative Agent may
determine such Benchmark Replacement Conforming Changes.
“Benchmark Replacement Date” means the earliest to occur of the following events with
respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of
(a) the date of the public statement or publication of information referenced therein and (b)
the date on which the administrator of such Benchmark (or the published component used in
the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of
such Benchmark (or such component thereof);
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the
public statement or publication of information referenced therein; or
(3) in the case of an Early Opt-in Election, (y) so long as the Initial Lender is a Lender, the sixth
(6th) Business Day after the date notice of such Early Opt-in Election is provided to the
Administrative Agent and (z) otherwise, the sixth (6th) Business Day after the date notice of
such Early Opt-in Election is provided to the Administrative Agent, so long as the
Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th)
Business Day after the date notice of such Early Opt-in Election is provided to the Lenders,
written notice of objection to such Early Opt-in Election from Lenders comprising the
Required Lenders.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on
the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark
Replacement Date will be deemed to have occurred prior to the Reference Time for such
determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the
case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or
events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the
published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following
events with respect to the then-current Benchmark:
(1) a public statement or publication of information by or on behalf of the administrator of
such Benchmark (or the published component used in the calculation thereof) announcing
that such administrator has ceased or will cease to provide all Available Tenors of such
Benchmark (or such component thereof), permanently or indefinitely, provided that, at the
time of such statement or publication, there is no successor administrator that will continue
to provide any Available Tenor of such Benchmark (or such component thereof);
(2) a public statement or publication of information by the regulatory supervisor for the
administrator of such Benchmark (or the published component used in the calculation
thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency
official with jurisdiction over the administrator for such Benchmark (or such component), a
resolution authority with jurisdiction over the administrator for such Benchmark (or such
component) or a court or an entity with similar insolvency or resolution authority over the
administrator for such Benchmark (or such component), which states that the administrator of
such Benchmark (or such component) has ceased or will cease to provide all Available Tenors
of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at
the time of such statement or publication, there is no successor administrator that will
continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(3) a public statement or publication of information by the regulatory supervisor for the
administrator of such Benchmark (or the published component used in the calculation
thereof) announcing that all Available Tenors of such Benchmark (or such component
thereof) are no longer representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with
respect to any Benchmark if a public statement or publication of information set forth above has
occurred with respect to each then-current Available Tenor of such Benchmark (or the published
component used in the calculation thereof).
“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time
that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at
such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes
hereunder and under any Loan Document in accordance with Section 2.10 and (y) ending at the time
that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder
and under any Loan Document in accordance with Section 2.10.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-
5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person”
(as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have
beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise
of other securities, whether such right is currently exercisable or is exercisable only after the passage of
time.
“Beneficial Ownership Certification” means a certification regarding beneficial
ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Borrower” has the meaning specified in introductory paragraph hereof.
“Borrower Materials” has the meaning specified in Section 11.01(e).
“Borrowing” means a borrowing of Loans.
“Borrowing Request” means a request for a Borrowing in substantially the form of
Exhibit D or any other form approved by the Administrative Agent.
“Business Day” means any day on which Treasury and the Federal Reserve Bank of New
York are both open for business that is not a Saturday, Sunday or other day that is a legal holiday under
the laws of the State of New York or is a day on which banking institutions in such state are authorized or
required by Law to close; provided that, when used in connection with a Loan, the term “Business Day”
means any such day that is also a day on which dealings in Dollar deposits are conducted by and between
banks in the London interbank market.
“Capital Markets Offering” means any offering of “securities” (as defined under the
Securities Act and, including, for the avoidance of doubt, any offering of pass-through certificates by any
pass-through trust established by the Parent or any of its Subsidiaries) in (a) a public offering registered
under the Securities Act, or (b) an offering not required to be registered under the Securities Act
(including, without limitation, a private placement under Section 4(a)(2) of the Securities Act, an exempt
offering pursuant to Rule 144A and/or Regulation S of the Securities Act and an offering of exempt
securities).
“Capitalized Lease Obligations” means, at the time any determination thereof is to be
made, the amount of the liability in respect of a Capitalized Lease that would at such time be required to
be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in
accordance with GAAP; provided that all leases of such Person that are or would have been treated as
operating leases for purposes of GAAP prior to the issuance of the ASU shall continue to be accounted
for as operating leases for purposes of all financial definitions and calculations for purposes of this
Agreement (whether or not such operating lease obligations were in effect on such date) notwithstanding
the fact that such obligations are required in accordance with the ASU (on a prospective or retroactive
basis or otherwise) to be treated as capitalized lease obligations for other purposes.
“Capitalized Leases” means all leases that have been or should be, in accordance with
GAAP as in effect on the Closing Date, recorded as capitalized leases; provided that for all purposes
hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted
for as a liability in accordance with GAAP; provided, further, that all leases of such Person that are or
would have been treated as operating leases for purposes of GAAP prior to the issuance of the ASU shall
continue to be accounted for as operating leases for purposes of all financial definitions and calculations
for purposes of this Agreement (whether or not such operating lease obligations were in effect on such
date) notwithstanding the fact that such obligations are required in accordance with the ASU (on a
prospective or retroactive basis or otherwise) to be treated as capitalized lease obligations for other
purposes.
“CARES Act” has the meaning specified in the preamble to this Agreement.
“Cash Equivalents” means:
(a) direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the United States of America), in each case maturing
within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within one year from the date of
acquisition thereof and having, at such date of acquisition, a rating of at least A-2 from S&P or at least P-
2 from Moody’s;
(c) investments in certificates of deposit, banker’s acceptances and time deposits
maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State thereof that has a combined capital
and surplus and undivided profits of not less than $250,000,000;
(d) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7
under the Investment Company Act of 1940, (ii) are rated AAA and Aaa (or equivalent rating) by at least
two (2) Credit Rating Agencies and (iii) have portfolio assets of at least $5,000,000,000;
(e) deposits available for withdrawal on demand with commercial banks organized
in the United States having capital and surplus in excess of $100,000,000; and
(f) other short-term liquid investments held by the Parent and the Subsidiaries as of
the Closing Date in accordance with their normal investment policies and practices for cash management.
“CCR Certificate” has the meaning specified in Section 6.17(b).
“CCR Certificate Delivery Date” has the meaning specified in Section 6.17(b).
“CCR Reference Date” has the meaning specified in Section 6.17(b).
“CFC” means a controlled foreign corporation within the meaning of Section 957 of the
Code.
“CFC Holdco” means any Domestic Subsidiary that has no material assets other than
Equity Interests of one or more Foreign Subsidiaries that are CFCs.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any
law, rule, regulation or treaty or in the administration, interpretation, implementation or application
thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or
directive (whether or not having the force of law) by any Governmental Authority; provided that
notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the
United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be
deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Change of Control” means the occurrence of any of the following: (a) the sale, lease,
transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the properties or assets of the Borrower and its
Subsidiaries, or if the Borrower is a direct or indirect Subsidiary of the Parent, the Parent and its
Subsidiaries, taken as a whole to any Person (including any “person” (as that term is used in Section
13(d)(3) of the Exchange Act)); (b) the consummation of any transaction (including, without limitation,
any merger or consolidation), the result of which is that any Person (including any “person” (as defined
above)) becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of
the Borrower or the Parent, as applicable, (measured by voting power rather than number of shares), other
than (i) any such transaction where the Voting Stock of the Borrower or the Parent, as applicable,
(measured by voting power rather than number of shares) outstanding immediately prior to such
transaction constitutes or is converted into or exchanged for at least a majority of the outstanding shares
of the Voting Stock of such Beneficial Owner (measured by voting power rather than number of shares),
or (ii) the consummation of any merger or consolidation of the Borrower or the Parent, as applicable, with
or into any Person (including any “person” (as defined above)) which owns or operates (directly or
indirectly through a contractual arrangement) a Permitted Business (a “Permitted Person”) or a Subsidiary
of a Permitted Person, in each case, if immediately after such transaction no Person (including any
“person” (as defined above)) is the Beneficial Owner, directly or indirectly, of more than 50% of the total
Voting Stock of such Permitted Person (measured by voting power rather than number of shares); (c) if
the Borrower is a direct or indirect Subsidiary of the Parent, the Parent ceasing to own, directly or
indirectly, 100% of the Equity Interests of the Borrower; (d) the adoption of a plan relating to the
liquidation or dissolution of the Borrower or the Parent or (e) the occurrence of a “change of control”,
“change in control” or similar event under any Material Indebtedness of the Borrower, the Parent or any
parent entity of the foregoing.
“Closing Date” means the first date all the conditions precedent in Section 4.01 are
satisfied.
“Closing Date Commitment” means the commitment of the Initial Lender on the Closing
Date to make Loans in the amount of $573,000,000, as such commitment may have been reduced or
terminated pursuant to Section 2.07.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Collateral Agent” means The Bank of New York Mellon, in its capacity as collateral
agent under any of the Loan Documents, or any successor collateral agent.
“Collateral Coverage Ratio” means, as of any date of determination, the ratio of (i) the
Appraised Value of the Eligible Collateral as of the date of the Appraisal most recently delivered pursuant
to Section 5.16 (or in the case of cash and Cash Equivalents, as of such date of determination) to (ii) the
aggregate principal amount of all Loans and Commitments outstanding as of such date; provided that for
the purposes of calculating clause (i) above, (x) no more than 25% of the Appraised Value of the Eligible
Collateral may correspond to ground support equipment and (y) any amounts held in the Collateral
Proceeds Account shall not be included.
“Collateral Proceeds Account” means a deposit account in the name of the Borrower that
is subject to an agreement, in form and substance satisfactory to the Appropriate Party, establishing
Control (as defined in the Pledge and Security Agreement) of such account by the Collateral Agent.
“Commitment” means the commitment of the Initial Lender to make Loans in the amount
of $725,000,000 (which, for the avoidance of doubt, is an increase of the Closing Date Commitment by
$152,000,000, pursuant to that certain Restatement Agreement), as such commitment may be reduced or
terminated pursuant to Section 2.07.
“Communications” has the meaning specified in Section 11.01(d)(ii).
“Competitor” means (i) any Person operating an Air Carrier or a commercial passenger
air carrier business and (ii) any Affiliate of any Person described in clause (i) (other than any Affiliate of
such Person as a result of common control by a Governmental Authority or instrumentality thereof and
any Affiliate of such Person under common control with such Person which Affiliate is not actively
involved in the management and/or operations of such Person).
“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Contractual Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound.
“Control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability to exercise voting power,
by contract or otherwise. “Controlling” and “Controlled” have meanings analogous thereto.
“Convertible Indebtedness” means Indebtedness of the Parent that is convertible into
common Equity Interests of the Parent (and cash in lieu of fractional shares) and/or cash (in an amount
determined by reference to the price of such common Equity Interests).
“Corresponding Tenor” with respect to any Available Tenor means, as applicable,
either a tenor (including overnight) or an interest payment period having approximately the same
length (disregarding business day adjustment) as such Available Tenor.
“Credit Parties” means the Borrower and the Guarantors.
“Credit Rating” means a rating as determined by a Credit Rating Agency of the Parent’s
non-credit-enhanced, senior unsecured long-term indebtedness.
“Credit Rating Agency” means a nationally recognized credit rating agency that evaluates
the financial condition of issuers of debt instruments and then assigns a rating that reflects its assessment
of the issuer’s ability to make debt payments.
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate
(which will include a lookback) being established by the Required Lenders in accordance with the
conventions for this rate selected or recommended by the Relevant Governmental Body for determining
“Daily Simple SOFR” for business loans; provided, that if the Administrative Agent decides that any
such convention is not administratively feasible for the Administrative Agent, then the Required
Lenders may establish another convention in its reasonable discretion, subject to the determination by
the Administrative Agent of the administrative feasibility of such convention.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and
all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States
or other applicable jurisdictions from time to time in effect.
“Default” means any event or condition that constitutes an Event of Default or that, with
the giving of any notice, the passage of time, or both, would be an Event of Default.
“Default Rate” means an interest rate (before as well as after judgment) equal to the
applicable interest rate plus 2.00% per annum.
“Disposition” or “Dispose” means the sale, transfer (including through a plan of
division), license, lease or other disposition of any property by any Person (including (i) any sale and
leaseback transaction, any issuance of Equity Interests by a Subsidiary of such Person and (ii) with
respect to Intellectual Property, any covenant not to sue, release, abandonment, lapse, forfeiture,
dedication to the public or other similar disposition of Intellectual Property ), including any sale,
assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or
any rights and claims associated therewith.
“Disqualified Equity Interest” means any Equity Interest that, by its terms (or the terms
of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or
upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely
for Equity Interests that are not Disqualified Equity Interests), pursuant to a sinking fund obligation or
otherwise (except as a result of a change of control or asset sale so long as any rights of the holders
thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior
repayment in full of the Loans and all other Obligations that are accrued and payable and the termination
of the Commitments), (b) is redeemable at the option of the holder thereof, in whole or in part,
(c) provides for scheduled payments of dividends in cash, or (d) is or becomes convertible into or
exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity
Interests, in each case, prior to the date that is ninety-one (91) days after the Maturity Date; provided that
if such Equity Interests are issued pursuant to a plan for the benefit of employees of the Parent or any
Subsidiary or by any such plan to such employees, such Equity Interests shall not constitute Disqualified
Equity Interests solely because they may be required to be repurchased by the Parent or its Subsidiaries in
order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s
termination, death or disability.
“Dollar” and “$” mean lawful money of the United States.
“Domestic Subsidiary” means any Subsidiary that is organized under the Laws of the
United States of America, any state thereof, or the District of Columbia.
“DOT” means the U.S. Department of Transportation.
“Early Opt-in Election” means, if the then-current Benchmark is USD LIBO Rate, the
occurrence of:
(1) (x) so long as the Initial Lender is a Lender, the Initial Lender and (y) otherwise, the Required
Lenders, in each case notifying to the Administrative Agent that the Initial Lender or the
Required Lenders have determined that at least five currently outstanding U.S. dollar-
denominated syndicated credit facilities at such time contain (as a result of amendment or as
originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based
upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such
notice and are publicly available for review), and
(2) (x) so long as the Initial Lender is a Lender, the election by the Initial Lender and (y) otherwise,
the joint election by the Required Lenders and the Borrower to trigger a fallback from USD
LIBO Rate and, in each case, the provision to the Administrative Agent and the other Lenders
of written notice of such election.
“EEA Financial Institution” means (a) any credit institution or investment firm
established in any EEA Member Country that is subject to the supervision of an EEA Resolution
Authority, (b) any entity established in an EEA Member Country that is a parent of an institution
described in clause (a) of this definition, or (c) any financial institution established in an EEA Member
Country that is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject
to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union,
Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person
entrusted with public administrative authority of any EEA Member Country (including any delegee)
having responsibility for the resolution of any EEA Financial Institution.
“Eligible Appraiser” means (a) with respect to aircraft or engines: Morten Beyer &
Agnew, International Bureau of Aviation, Ascend Worldwide Group, ICF International Inc., BK
Associates, Inc., Aircraft Information Services Inc., AVITAS, Inc., PAC Appraisal Inc., Aviation
Specialists Group, Aviation Asset Management Inc. or IBA Group Ltd., (b) with respect to slots, gates or
routes: Morten Beyer & Agnew, ICF International Inc., PAC Appraisal Inc. or BK Associates, Inc., (c)
with respect to parts, Morten Beyer & Agnew, ICF International Inc., Sage-Popovich, Inc., PAC
Appraisal Inc., Aviation Asset Management Inc. or Alton Aviation Consultancy LLC, (d) with respect to
any other type of property, Deloitte & Touche LLP, Andersen Tax LLC, BBC Aviation Enterprises
Aviation Advisors Group, LLC, PricewaterhouseCoopers, CBRE Group Inc. and Jones Lang LaSalle
Incorporated, and (e) any independent appraisal firm appointed by the Borrower and acceptable to the
Appropriate Party.
“Eligible Assignee” means any Person that meets the requirements to be an assignee
under Section 11.04(b)(iii), 11.04(b)(v) and 11.04(b)(vi) (subject to such consents, if any, as may be
required under Section 11.04(b)(iii)); provided that no Competitor shall be an Eligible Assignee.
“Eligible Collateral” means, as of any date, all Collateral on which the Collateral Agent
has, as of such date, to the extent purported to be created by the applicable Security Document, a valid
and perfected first priority Lien and/or mortgage (or comparable Lien) for the benefit of the Secured
Parties and which is otherwise subject only to Permitted Liens and satisfies the requirements set out in the
Loan Documents for such type of Collateral.
“Environmental Laws” means any and all federal, state, local, and foreign statutes, Laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or governmental restrictions, including all common law, relating to pollution or the
protection of health, safety or the environment or the release of any materials into the environment,
including those related to Hazardous Materials, air emissions, discharges to waste or public systems and
health and safety matters.
“Environmental Liability” means any liability or obligation, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines, penalties or indemnities),
directly or indirectly, resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment, disposal or permitting or arranging for the
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials or (e) any contract, agreement or other consensual
arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Equity Interests” means, as to any Person, all of the shares of capital stock of (or other
ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase
or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other
ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition
from such Person of such shares (or such other interests), and all of the other ownership or profit interests
in such Person (including partnership, member or trust interests therein), whether voting or nonvoting,
and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of
determination (other than Convertible Indebtedness or any other debt security that is convertible into or
exchangeable for Equity Interests of such Person and the Warrants).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under
common control with any Credit Party within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code or
Section 302 of ERISA).
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the
failure by any Credit Party or any ERISA Affiliate to meet all applicable requirements under the Pension
Funding Rules or the filing of an application for the waiver of the minimum funding standards under the
Pension Funding Rules; (c) the incurrence by any Credit Party or any ERISA Affiliate of any liability
pursuant to Section 4063 or 4064 of ERISA or a cessation of operations with respect to a Pension Plan
within the meaning of Section 4062(e) of ERISA; (d) a complete or partial withdrawal by any Credit
Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization or insolvent (within the meaning of Title IV of ERISA); (e) the filing of a notice of intent
to terminate a Pension Plan under, or the treatment of a Pension Plan amendment as a termination under,
Section 4041 of ERISA; (f) the institution by the PBGC of proceedings to terminate a Pension Plan;
(g) any event or condition that constitutes grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan; (h) the determination that any Pension
Plan is in at-risk status (within the meaning of Section 430 of the Code or Section 303 of ERISA) or that a
Multiemployer Plan is in endangered or critical status (within the meaning of Section 432 of the Code or
Section 305 of ERISA); (i) the imposition or incurrence of any liability under Title IV of ERISA, other
than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Credit Party or
any ERISA Affiliate; (j) the engagement by any Credit Party or any ERISA Affiliate in a transaction that
could be subject to Section 4069 or Section 4212(c) of ERISA; (k) the imposition of a lien upon any
Credit Party pursuant to Section 430(k) of the Code or Section 303(k) of ERISA; or (l) the making of an
amendment to a Pension Plan that could result in the posting of bond or security under Section 436(f)(1)
of the Code.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published
by the Loan Market Association (or any successor person), as in effect from time to time.
“Eurodollar Reserve Percentage” means, for any day during any Interest Period, the
reserve percentage in effect on such day, whether or not applicable to any Lender, under regulations
issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, special, supplemental or other marginal reserve requirement) with respect to
eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D). The Adjusted
LIBO Rate for each outstanding Loan shall be adjusted automatically as of the effective date of any
change in the Eurodollar Reserve Percentage.
“Event of Default” has the meaning specified in Article VII.
“Excluded Assets” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Excluded Subsidiary” means any Subsidiary of the Parent (other than the Borrower) that
(i) is not wholly-owned, directly or indirectly, by the Parent, (ii) is a captive insurance company, (iii) is an
Immaterial Subsidiary, (iv) is a Receivables Subsidiary or (v) is a Foreign Subsidiary or a CFC Holdco
existing on the Closing Date; provided that, notwithstanding the foregoing, (1) a Subsidiary will not be an
Excluded Subsidiary if it (x) owns assets that are intended to be included in the Collateral, (y) owns
individually, or in the aggregate with other Subsidiaries (including any Subsidiary that would otherwise
qualify as an Excluded Subsidiary), a majority of the Equity Interests of any Subsidiary that owns any
assets that are intended to be included in the Collateral or (z) guarantees Material Indebtedness of the
Parent or any of its Subsidiaries (other than any acquired Subsidiary that guarantees assumed
Indebtedness of a Person acquired pursuant to an acquisition permitted under this Agreement that is
existing at the time of such acquisition or investment; provided that such Indebtedness was not created in
contemplation of or in connection with such acquisition and the amount of such Indebtedness is not
increased), and (2) SkyWest Leasing, Inc. and SkyWest Insurance Company, Inc. shall be Excluded
Subsidiaries.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a
Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or
measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case,
(i) imposed as a result of such Recipient being organized under the laws of, or having its principal office
or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax
(or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender,
U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with
respect to an applicable interest in a Loan pursuant to a law in effect on the date on which (i) such Lender
acquires such interest in the Loans (other than pursuant to an assignment request by the Borrower under
Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that,
pursuant to Section 2.16, amounts with respect to such Taxes were payable either to such Lender's
assignor immediately before such Lender became a party hereto or to such Lender immediately before it
changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with
Section 2.16(g) and (d) any withholding Taxes imposed under FATCA.
“Export Control Laws” means any applicable export control Laws including the
International Traffic in Arms Regulations (22 C.F.R. 120 et seq.) and the Export Administration
Regulations (15 C.F.R. 730 et seq.).
“FAA” means the United States Federal Aviation Administration and any successor
thereto.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable and not materially
more onerous to comply with), any current or future regulations or official interpretations thereof, any
agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory
legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention
among Governmental Authorities and implementing such Sections of the Code.
“FCPA” has the meaning specified in Section 3.15(b).
“Federal Funds Effective Rate” means, for any day, the greater of (a) the rate calculated
by the Federal Reserve Bank of New York based on such day’s Federal funds transactions by depositary
institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its
public website from time to time) and published on the next succeeding Business Day by the Federal
Reserve Bank of New York as the Federal funds effective rate and (b) 0%.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System
of the United States.
“Finance Entity” means any Person created or formed by or at the direction of the Parent
or any of its Subsidiaries for the purpose of financing aircraft and aircraft related assets and related pre-
delivery payment obligations of Parent or such Subsidiaries that; provided, that, such (i) Person holds no
material assets other than the aircraft or aircraft related assets to be financed or assets pursuant to which
related pre-delivery payment obligations arise, (ii) financing is in the ordinary course of business of the
Parent and its Subsidiaries or otherwise customary for airlines based in the United States and (iii) Person
holds no assets constituting, or otherwise intended to be included in, Collateral.
“Financial Officer” means, as to any Person, the chief financial officer, principal
accounting officer, treasurer or controller of such Person.
“Fitch” means Fitch Ratings and any successor to its rating agency business.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as
of the execution of this Agreement, the modification, amendment or renewal of this Agreement or
otherwise) with respect to USD LIBO Rate. As of the Closing Date, the Floor shall be 0%.
“Foreign Lender” means any Lender that is not a U.S. Person.
“Foreign Plan” means any employee pension benefit plan, program, policy, arrangement
or agreement maintained or contributed to by the Parent or any Subsidiary with respect to employees
employed outside the United States (other than any governmental arrangement).
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of
credit in the ordinary course of its activities.
“GAAP” means, subject to Section 1.03, United States generally accepted accounting
principles as in effect from time to time; provided that if at any time any change in GAAP would affect
the computation of any financial ratio or financial requirement, or compliance with any covenant, set
forth in any Loan Document, the Required Lenders and the Borrower will negotiate in good faith to
amend such ratio, requirement or covenant to preserve the original intent thereof in light of such change
in GAAP (subject to the approval of the Required Lenders); provided that until so amended, (a) such
ratio, requirement or covenant will continue to be computed in accordance with GAAP prior to such
change therein and (b) the Borrower will provide to the Administrative Agent and the Lenders
reconciliation statements to the extent requested.
“Gate Leasehold” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Governmental Authority” means the government of the United States of America or any
other nation, or of any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or pertaining to government
(including any supra-national bodies such as the European Union or the European Central Bank).
“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such
Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation
payable or performable by another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to
purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such
Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation,
(iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or
level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (iv) entered into for the purpose of assuring in any other manner the
obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part) or (b) any Lien on any assets of
such Person securing any Indebtedness or other obligation of any other Person, whether or not such
Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any
holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not
include endorsements for collection or deposit in the ordinary course of business. The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.
“Guaranteed Obligations” has the meaning specified in Section 9.01.
“Guarantor” means the Parent and each other Guarantor listed on the signature page to
this Agreement and any other Person that Guarantees the Obligations under this Agreement and any other
Loan Document.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates,
asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical
wastes, and other substances or wastes of any nature regulated under or with respect to which liability or
standards of conduct are imposed pursuant to any Environmental Law.
“Immaterial Subsidiaries” means one or more Subsidiaries, for which (a) the assets of all
such Subsidiaries constitute, in the aggregate, no more than 7.50% of the total assets of the Parent and its
Subsidiaries on a consolidated basis (determined as of the last day of the most recent fiscal quarter of
Parent for which financial statements are available), and (b) the revenues of all such Subsidiaries account
for, in the aggregate, no more than 7.50% of the total revenues of the Parent and its Subsidiaries on a
consolidated basis for the four (4) fiscal quarter period ending on the last day of the most recent fiscal
quarter of Parent for which financial statements are available; provided that (x) a Subsidiary will not be
an Immaterial Subsidiary if it (i) directly or indirectly guarantees, or pledges any property or assets to
secure, any Obligations, (ii) owns any assets that are intended to be included in the Collateral or is party to
any agreements that constitute (or would constitute) Collateral or (iii) owns a majority of the Equity
Interests of any Subsidiary that owns any assets that are intended to be included in the Collateral and (y)
the Borrower shall not be an Immaterial Subsidiary.
“Indebtedness” means, as to any Person at a particular time, without duplication, all of
the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) all direct or contingent obligations of such Person arising under (i) letters of
credit (including standby and commercial), bankers’ acceptances and bank guaranties and (ii) surety
bonds, performance bonds and similar instruments issued or created by or for the account of such Person;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property
owned or being purchased by such Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have been assumed by such Person or
is limited in recourse;
(f) all Attributable Indebtedness;
(g) all obligations of such Person in respect of Disqualified Equity Interests; and
(h) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership
or joint venture (other than a joint venture that is itself a corporation or limited liability company) in
which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date
shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any
Indebtedness of any Person for purposes of clause (e) that is expressly made non-recourse or limited-
recourse (limited solely to the assets securing such Indebtedness) to such Person shall be deemed to be
equal to the lesser of (i) the aggregate principal amount of such Indebtedness and (ii) the fair market value
of the property encumbered thereby as determined by such Person in good faith.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with
respect to any payment made by or on account of any obligation of the Borrower under any Loan
Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Indemnitee” has the meaning specified in Section 11.03(b).
“Information” has the meaning specified in Section 11.12.
“Initial Lender” means Treasury or its designees (but, for the avoidance of doubt,
excluding any assignee of the Loans).
“Intellectual Property” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Interest Payment Date” means the first Business Day following the 14th day of each
March, June, September and December (beginning with September 15, 2021), and the Maturity Date.
“Interest Period” means, as to any Borrowing, (a) for the initial Interest Period, the period
commencing on the date of such Borrowing and ending on the next succeeding Interest Payment Date and
(b) for each Interest Period thereafter, the period commencing on the last day of the next preceding
Interest Period and ending on the next succeeding Interest Payment Date.
“International Registry” has the meaning assigned to such term in the Pledge and
Security Agreement.
“Interpolated Rate” means, at any time, the rate per annum determined by the
Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be
equal to the rate that results from interpolating on a linear basis between: (a) the rate as displayed on the
Bloomberg “LIBOR01” screen page (or any successor or replacement screen on such service; in each
case the “Screen Rate”) for the longest period (for which that Screen Rate is available) that is shorter than
three (3) months and (b) the Screen Rate for the shortest period (for which that Screen Rate is available)
that is equal to or exceeds three (3) months, in each case, at approximately 11:00 a.m., London time, two
(2) Business Days prior to the commencement of such Interest Period.
“Investment” means, as to any Person, any direct or indirect acquisition or investment by
such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other
securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of
debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another
Person, including any partnership or joint venture interest in such other Person and any arrangement
pursuant to which the investor incurs Indebtedness of the type referred to in clause (h) of the definition of
“Indebtedness” in respect of such other Person, or (c) the purchase or other acquisition (in one transaction
or a series of transactions) of all or substantially all of the property and assets or business of another
Person or assets constituting a business unit, line of business or division of such Person. For purposes of
covenant compliance, the amount of any Investment shall be the amount actually invested, without
adjustment for subsequent increases or decreases in the value of such Investment but giving effect to any
returns or distributions of capital or repayment of principal actually received in case by such Person with
respect thereto.
“IRS” means the United States Internal Revenue Service.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International
Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time
to time, or any successor definitional booklet for interest rate derivatives published from time to time by
the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Laws” means, collectively, all international, foreign, federal, state and local statutes,
treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or
authorities, including the interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all applicable administrative orders,
directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental
Authority, in each case whether or not having the force of law.
“Lenders” means the Initial Lender and any other Person that shall have become party
hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Assumption.
“LIBO Rate” means, the greater of (a) the rate appearing on the Bloomberg “LIBOR01”
screen page (or any successor or replacement screen on such service) at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity of three (3) months; provided that (i) if such rate is not available at such
time for any reason, then the “LIBO Rate” shall be the Interpolated Rate, and (ii) if the Interpolated Rate
is not available (except as set forth in Section 2.10), the “LIBO Rate” shall be the LIBO Rate for the
immediately preceding Interest Period, two (2) Business Days prior to the commencement of such Interest
Period and (b) 0%.
“Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, any option or other agreement to sell or give
a security interest in an asset, or preference, priority, or other security interest or preferential arrangement
of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any
easement, right of way or other encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).
“Liquidity” means the sum of (i) all unrestricted cash and Cash Equivalents of Parent and
its Subsidiaries, (ii) cash or Cash Equivalents of the Parent and its Subsidiaries restricted in favor of the
Obligations or in connection with the Payroll Support Program Agreement (other than any amounts held
in the Collateral Proceeds Account), (iii) the aggregate principal amount committed and available to be
drawn by the Parent and its Subsidiaries (taking into account all borrowing base limitations or other
restrictions) under all revolving credit facilities of the Parent and its Subsidiaries, (iv) any remaining
aggregate principal amount committed and available to be drawn (taking into account any applicable
restrictions) by the Parent and its Subsidiaries in respect of the Loans and (v) the scheduled net proceeds
(after giving effect to any expected repayment of existing Indebtedness using such proceeds) of any
Capital Markets Offering of the Parent or any of its Subsidiaries that has priced but has not yet closed
(until the earliest of the closing thereof, the termination thereof without closing or the date that falls five
(5) Business Days after the initial scheduled closing date thereof).
“Loan” means a loan made by a Lender to the Borrower pursuant to this Agreement.
“Loan Application Form” means the application form and any related materials submitted
by the Borrower to the Initial Lender in connection with an application for the Loans under Division A,
Title IV, Subtitle A of the CARES Act.
“Loan Documents” means, collectively, this Agreement, any Security Document, any
promissory notes issued pursuant to Section 2.11(b) and any other documents entered into in connection
herewith (including an Administrative Agency Fee Letter, if any).
“Margin Stock” means margin stock within the meaning of Regulations T, U and X.
“Material Adverse Effect” means (a) a material adverse change in, or a material adverse
effect on, the operations, business, properties, liabilities (actual or contingent), condition (financial or
otherwise) or prospects of the Parent and its Subsidiaries taken as a whole; or (b) a material adverse effect
on (i) the ability of the Borrower or any Credit Party to perform its Obligations, (ii) the legality, validity,
binding effect or enforceability against the Borrower or any Credit Party of any Loan Document to which
it is a party or the validity, perfection and first priority of the Liens on the Collateral in favor of the
Collateral Agent taken as a whole or with respect to a substantial portion of the Collateral, or (iii) the
rights, remedies and benefits available to, or conferred upon, the Lenders or the Agents under any Loan
Documents; provided that the impacts of the COVID-19 disease outbreak will be disregarded for purposes
of clauses (a) of this definition to the extent (i) publicly disclosed in any SEC filing of the Parent or
otherwise provided to the Initial Lender prior to the Closing Date and (ii) the scope of such adverse effect
is no greater than that which has been disclosed as of the Closing Date.
“Material Indebtedness” means Indebtedness of the Parent or any of its Subsidiaries
(other than the Loans) outstanding under the same agreement in a principal amount exceeding
$50,000,000.
“Material Subsidiary” means any Subsidiary that is not an Immaterial Subsidiary.
“Maturity Date” means the date that is five (5) years after the Closing Date (except that,
if such date is not a Business Day, the Maturity Date shall be the preceding Business Day).
“Maximum Rate” has the meaning specified in Section 11.14.
“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency
business.
“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which any Credit Party or any ERISA Affiliate makes or is obligated to
make contributions, during the preceding five (5) plan years has made or been obligated to make
contributions, or has any liability.
“Multiple Employer Plan” means a Plan with respect to which any Credit Party or any
ERISA Affiliate is a contributing sponsor, and that has two (2) or more contributing sponsors at least two
(2) of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
“Net Proceeds” means in connection with any Disposition or Recovery Event, the
aggregate cash and Cash Equivalents received by the Parent or any of its Subsidiaries in respect of a
Disposition of Collateral (including, without limitation, any cash or Cash Equivalents received in respect
of or upon the Disposition of any non-cash consideration received in any such Disposition of Collateral)
or Recovery Event, net of the direct costs and expenses relating to such Disposition and incurred by the
Parent or a Subsidiary (including the sale or disposition of such non-cash consideration) or any such
Recovery Event, including, without limitation, legal, accounting and investment banking fees, and sales
commissions, and any relocation expenses incurred as a result of the Disposition or Recovery Event, taxes
paid or reasonably estimated to be payable as a result of the Disposition or Recovery Event, in each case,
after taking into account any available tax credits or deductions and any tax sharing arrangements.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver
or amendment that (a) requires the approval of all or all affected Lenders in accordance with the terms of
Section 11.02 and (b) has been approved by the Required Lenders.
“Note” means the promissory note executed by the Borrower pursuant to Section 2.11(b).
“Obligations” means all advances to, and debts, liabilities, obligations, covenants and
duties of, each Credit Party arising under any Loan Document or otherwise with respect to any Loan,
whether direct or indirect (including those acquired by assumption), absolute or contingent, due or
required to be performed, or to become due or to be performed, now existing or hereafter arising and
including interest and fees that accrue after the commencement by or against any Credit Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
Without limiting the foregoing, the Obligations include (a) the obligation to pay principal, interest,
charges, expenses, fees, indemnities and other amounts payable by the Borrower or any other Credit Party
under any Loan Document, (b) the obligation of any Credit Party to reimburse any amount in respect of
any of the foregoing that the Lenders, in each case in their sole discretion, may elect to pay or advance on
behalf of any Credit Party and (c) the obligation of any Credit Party or any of its Subsidiaries to take any
action or refrain from taking any action as required by the covenants and other provisions contained in
this Agreement and any other Loan Document.
“Obligee Guarantor” has the meaning specified in Section 9.06.
“Organizational Documents” means (a) as to any corporation, the charter or certificate or
articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect
to any non-U.S. jurisdiction), (b) as to any limited liability company, the certificate or articles of
formation or organization and operating or limited liability agreement and (c) as to any partnership, joint
venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement
of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in
connection with its formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or
organization of such entity.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a
result of a present or former connection between such Recipient and the jurisdiction imposing such Tax
(other than connections arising from such Recipient having executed, delivered, become a party to,
performed its obligations under, received payments under, received or perfected a security interest under,
engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an
interest in the Loans or Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible,
recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery,
performance, enforcement or registration of, from the receipt or perfection of a security interest under, or
otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes
imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19(b)).
“Outstanding Amount” means, with respect to Loans on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowings and prepayments or
repayments of Loans occurring on such date.
“Parent” has the meaning specified in introductory paragraph hereof.
“Participant” has the meaning specified in Section 11.04(d).
“Participant Register” has the meaning specified in Section 11.04(d).
“Payroll Support Program Agreement” means that certain Payroll Support Program
Agreement dated as of April 23, 2020, between the Borrower and Treasury.
“PBGC” means the Pension Benefit Guaranty Corporation.
“Pension Act” means the Pension Protection Act of 2006.
“Pension Funding Rules” means the rules of the Code and ERISA (as modified by the
CARES Act) regarding minimum funding standards and minimum required contributions (including any
installment payment thereof) to Pension Plans and Multiemployer Plans and set forth in, with respect to
plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302
of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436
of the Code and Sections 302, 303, 304 and 305 of ERISA.
“Pension Plan” means any employee pension benefit plan (including a Multiple
Employer Plan, but excluding a Multiemployer Plan) that is maintained or is contributed to by any Credit
Party or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum
funding standards under Section 412 of the Code.
“Perfection Requirement” has the meaning specified in the Pledge and Security
Agreement.
“Permitted Bond Hedge Transaction” means any call or capped call option (or
substantively equivalent derivative transaction) on the Parent’s common Equity Interests purchased by the
Parent in connection with the issuance of any Convertible Indebtedness; provided that the purchase price
for such Permitted Bond Hedge Transaction does not exceed the net proceeds received by the Parent from
the sale of such Convertible Indebtedness issued in connection with the Permitted Bond Hedge
Transaction.
“Permitted Business” means any business that is the same as, or reasonably related,
ancillary, supportive or complementary to, the business in which the Parent and its Subsidiaries are
engaged on the date of this Agreement.
“Permitted Liens” means:
(1) Liens created for the benefit of (or to secure the payment and performance of) the
Obligations or any Guaranteed Obligations;
(2) Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other appropriate provision as is required in conformity
with GAAP has been made therefor;
(3) Liens imposed by law, including carriers’, vendors’, materialmen’s,
warehousemen’s, landlord’s, mechanics’, repairmen’s, employees’ or other like Liens, in each case,
incurred in the ordinary course of business;
(4) Liens arising by operation of law in connection with judgments, attachments or
awards which do not constitute an Event of Default hereunder;
(5) Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods in the ordinary course of
business;
(6) [Reserved];
(7) to the extent applicable, salvage or similar rights of insurers, in each case as it
relates to Collateral; and
(8) Liens expressly permitted by the Pledge and Security Agreement.
“Permitted Refinancing” means with respect to any Person, any refinancings, renewals,
or extensions of any Indebtedness of such Person so long as: (a) such refinancings, renewals, or
extensions do not result in an increase in the principal amount of the Indebtedness so refinanced, renewed,
or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in
connection therewith and by the amount of unfunded commitments with respect thereto; (b) such
refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity
(measured as of the refinancing, renewal, or extension) of the Indebtedness so refinanced, renewed, or
extended, nor are they on terms or conditions that, taken as a whole, are or could reasonably be expected
to be materially adverse to the interests of the Lenders; (c) if the Indebtedness that is refinanced, renewed,
or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension must include subordination terms and conditions that are at least as
favorable to the Lenders as those that were applicable to the refinanced, renewed, or extended
Indebtedness; (d) the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person
that is liable on account of the Obligations other than those Persons which were obligated with respect to
the Indebtedness that was refinanced, renewed, or extended and (e) to the extent the Indebtedness that is
refinanced, renewed, or extended is unsecured, the Indebtedness resulting from such refinancing, renewal
or extension must be unsecured.
“Person” means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, Governmental Authority or other entity.
“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA,
maintained for employees of the Parent or any Subsidiary, or any such plan to which the Parent or any
Subsidiary is required to contribute on behalf of any of its employees or with respect to which any Credit
Party has any liability.
“Platform” means Debt Domain, Intralinks, Syndtrak, DebtX or a substantially similar
electronic transmission system.
“Pledge and Security Agreement” means the Pledge and Security Agreement executed
and delivered by the Borrower and each Guarantor on the Closing Date in form and substance acceptable
to the Initial Lender and the Collateral Agent, as amended and restated pursuant to that certain First
Amendment to the Pledge and Security Agreement, dated as of October 28, 2020, by the Borrower, the
Parent, the Guarantors party thereto and the Collateral Agent, and as it may be further amended,
supplemented, restated or otherwise modified from time to time. For the avoidance of doubt, the terms of
the “Pledge and Security Agreement” shall include the terms of all Applicable Annexes (as defined in the
Pledge and Security Agreement).
“Prepayment Notice” means a notice by the Borrower to prepay Loans, which shall be in
such form as the Appropriate Party may approve.
“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal
as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per
annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15
(519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein,
any similar rate quoted therein (as determined by the Required Lenders) or any similar release by the
Federal Reserve Board (as determined by the Required Lenders). Any change in the Prime Rate shall
take effect at the opening of business on the day such change is publicly announced or quoted as being
effective.
“Proceeds” means “proceeds,” as defined in Article 9 of the UCC.
“PSP Warrant Agreement” means that certain warrant agreement, dated as of April 23,
2020 between the Parent and Treasury.
“Public Lender” has the meaning specified in Section 11.01(e).
“Receivables Subsidiary” means (x) a Wholly-Owned Subsidiary of the Parent formed
for the purpose of and which engages in no activities other than in connection with the financing or
securitization of accounts receivables (a) no portion of the Indebtedness or any other obligations
(contingent or otherwise) of which (1) is guaranteed by the Parent by any Subsidiary of the Parent, and
excluding any guarantees of obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings, (2) is recourse to or obligates the Parent or any
Subsidiary of the Parent in any way other than pursuant to Standard Securitization Undertakings or (3)
subjects any property or asset of the Parent or any Subsidiary of the Parent (other than accounts
receivable and related assets) or any property or asset of the type that is intended to be include in the
Collateral, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant
to Standard Securitization Undertakings, (b) with which neither the Parent nor any Subsidiary of the
Parent (other than another Receivables Subsidiary) has any material contract, agreement, arrangement or
understanding (other than pursuant to the related financing of accounts receivable) other than on terms no
less favorable to the Parent or such Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Parent and (c) with which neither the Parent nor any Subsidiary of the Parent
has any obligation to maintain or preserve such Subsidiary’s financial condition, other than a minimum
capitalization in customary amounts, or to cause such Subsidiary to achieve certain levels of operating
results or (y) any Subsidiary of a Receivables Subsidiary. For the avoidance of doubt, the Parent and any
Subsidiary of the Parent may enter into Standard Securitization Undertakings for the benefit of a
Receivables Subsidiary..
“Recipient” means (a) the Administrative Agent, (b) the Collateral Agent or (c) any
Lender, as applicable.
“Recovery Event” means any settlement of or payment in respect of any property or
casualty insurance claim or any condemnation proceeding relating to any Collateral or any Event of Loss
(as defined in the Pledge and Security Agreement).
“Reference Time” with respect to any setting of the then-current Benchmark means (1) if
such Benchmark is USD LIBO Rate, 11:00 a.m. (London time) on the day that is two London banking
days preceding the date of such setting, and (2) if such Benchmark is not USD LIBO Rate, the time
determined by the Required Lenders in their reasonable discretion, provided that such time is determined
to be administratively feasible by the Administrative Agent.
“Register” has the meaning specified in Section 11.04(c).
“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time
to time and all official rulings and interpretations thereunder or thereof.
“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time
to time and all official rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time
to time and all official rulings and interpretations thereunder or thereof.
“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time
to time and all official rulings and interpretations thereunder or thereof.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the
partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and
representatives of such Person and of such Person’s Affiliates.
“Relevant Governmental Body” means the Federal Reserve Board or the Federal
Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve
Board or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other
than events for which the thirty (30)-day notice period has been waived.
“Required Lenders” means, at any time, Lenders having Loans representing more than
50% of the aggregate Outstanding Amount of Loans of all Lenders at such time.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK
Financial Institution, a UK Resolution Authority.
“Responsible Officer” means (a) the chief executive officer, president, executive vice
president or a Financial Officer of the Borrower or such Credit Party, as applicable, (b) solely for
purposes of the delivery of incumbency certificates and certified Organizational Documents and
resolutions pursuant to Section 4.01, any vice president, secretary or assistant secretary of the Borrower or
such Credit Party and (c) solely for purposes of Borrowing Requests, prepayment notices and notices for
Commitment terminations or reductions given pursuant to Article II, any other officer or employee of the
Borrower so designated from time to time by one of the officers described in clause (a) in a notice to the
Administrative Agent (together with evidence of the authority and capacity of each such Person to so act
in form and substance satisfactory to the Administrative Agent). Any document delivered hereunder that
is signed by a Responsible Officer of the a Credit Party shall be conclusively presumed to have been
authorized by all necessary corporate, partnership or other action on the part of such Credit Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of such Credit Party.
“Restatement Agreement” means that certain Restatement Agreement, dated as of
October 28, 2020, to this Agreement, between the Borrower, the Parent, the Guarantors party thereto from
time to time, Treasury, the Administrative Agent and the Collateral Agent.
“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interest of any Person, or any payment (whether in
cash, securities or other property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interest, or
on account of any return of capital to such Person’s shareholders, partners or members (or the equivalent
Persons thereof).
“Route Authority” has the meaning assigned to such term in the Pledge and Security
Agreement. “S&P” means S&P Global Ratings, and any successor to its rating agency business.
“Sanctioned Country” has the meaning specified in Section 3.15(a).
“Sanctioned Person” has the meaning specified in Section 3.15(a).
“Sanctions” has the meaning specified in Section 3.15(a).
“Screen Rate” has the meaning specified in the definition of the term “Interpolated Rate”.
“SEC” means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.
“Secured Parties” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Securities Act” means the Securities Act of 1933, as amended.
“Security Document” means the Pledge and Security Agreement and any security or
pledge agreement, mortgage, hypothecation or other agreement, instrument or document relating to
collateral for the Loans (including any short form agreements, supplements, control agreements, collateral
access agreements and registrations executed or made) that may exist at any time and from time to time,
as amended from time to time.
“Slot” has the meaning assigned to such term in the Pledge and Security Agreement.
“SOFR” means, with respect to any Business Day, a rate per annum equal to the secured
overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR
Administrator’s Website at approximately 8:00 a.m. (New York City time) on the immediately
succeeding Business Day.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor
administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New
York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight
financing rate identified as such by the SOFR Administrator from time to time.
“Solvent” means, as to any Person as of any date of determination, that on such date
(a) the fair value of the property of such Person is greater than the total amount of liabilities, including
contingent liabilities, of such Person, (b) the present fair saleable value of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such
Person is not engaged in a business or a transaction, and is not about to engage in a business or a
transaction, for which such Person’s property would constitute an unreasonably small capital. The
amount of any contingent liability at any time shall be computed as the amount that, in light of all of the
facts and circumstances existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability. For the avoidance of doubt, a Person shall not fail to be Solvent on
any date solely as a result of such person’s audit having a “going concern” or like qualification, exception
or explanatory paragraph or any qualification, exception or explanatory paragraph as to the scope of such
audit solely due to the COVID-19 disease outbreak.
“Spare Parts” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Standard Securitization Undertakings” means all representations, warranties, covenants,
indemnities, performance Guarantees and servicing obligations entered into by the Parent or any
Subsidiary (other than a Receivables Subsidiary), which are customary in connection with any financing
of accounts receivable.
“Subsidiary” of a Person means a corporation, partnership, limited liability company,
association or joint venture or other business entity of which a majority of the Equity Interests having
ordinary voting power for the election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency) are at the time owned or
the management of which is controlled, directly, or indirectly through one or more intermediaries, by such
Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer
to a Subsidiary or Subsidiaries of the Parent.
“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or
options or forward bond or forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency
swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other
similar transactions or any combination of any of the foregoing (including any options to enter into any of
the foregoing), whether or not any such transaction is governed by or subject to any master agreement,
and (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms
and conditions of, or governed by, any form of master agreement published by the International Swaps
and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other
master agreement (any such master agreement, together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any Master Agreement.
“Swap Termination Value” means, as to any one or more Swap Contracts, after taking
into account the effect of any legally enforceable netting agreement relating to such Swap Contracts,
(a) for any date on or after the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any date prior to the date
referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap
Contracts, as determined based upon one or more mid-market or other readily available quotations
provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate
of a Lender).
“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-
called synthetic, off-balance sheet or tax retention lease or (b) an agreement for the use or possession of
property creating obligations that do not appear on the balance sheet of such Person but, upon the
insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person
(without regard to accounting treatment).
“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term SOFR” means, for the applicable Corresponding Tenor as of the applicable
Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by
the Relevant Governmental Body.
“Trade Date” means the date on which an assigning Lender enters into a binding
agreement to sell and assign all or a portion of its rights and obligations under this Agreement to another
Person.
“Treasury” has the meaning specified in the preamble to this Agreement.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under
the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential
Regulation Authority) or any Person falling within IFPRU 11.6 of the FCA Handbook (as amended from
time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain
credit institutions and investment firms, and certain affiliates of such credit institutions or investment
firms.
“UK Resolution Authority” means the Bank of England or any other public
administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement
excluding the related Benchmark Replacement Adjustment.
“Uniform Commercial Code” and “UCC” means the Uniform Commercial Code as in
effect from time to time in the State of New York or, when the context implies, the Uniform Commercial
Code as in effect from time to time in any other applicable jurisdiction.
“United States” and “U.S.” mean the United States of America.
“USD LIBO Rate” means the LIBO Rate for U.S. dollars.
“U.S. Person” means any Person that is a “United States Person” as defined in
Section 7701(a)(30) of the Code.
“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.16(g).
“Voting Stock” of any specified Person as of any date means the equity interests of such
Person that is at the time entitled to vote in the election of the board of directors of such Person.
“Warrant Agreement” means the warrant agreement, dated as of the date hereof between
the Parent and Treasury, pursuant to which the Parent agrees to issue Warrants to Treasury upon each
Borrowing.
“Warrants” means, collectively, those certain warrants issued to Treasury under the
Warrant Agreement or the PSP Warrant Agreement.
“Wholly-Owned” means, as to a Subsidiary of a Person, a Subsidiary of such Person all
of the outstanding Equity Interests of which (other than (a) director’s qualifying shares and (b) shares
issued to foreign nationals to the extent required by Applicable Law) are owned by such Person and/or by
one or more Wholly-Owned Subsidiaries of such Person.
“Withholding Agent” means the Borrower and the Administrative Agent or other person
making or transferring to any Lender any payment on behalf of the Borrower.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution
Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time
under the Bail-In Legislation for the applicable EEA Member Country, which powers are described in the
EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the
applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the
form of a liability of any UK Financial Institution or any contract or instrument under which that liability
arises, to convert all or part of that liability into shares, securities or obligations of such Person or any
other Person, to provide that any such contract or instrument is to have effect as if a right had been
exercised under it or to suspend any obligation in respect of that liability or any of the powers under that
Bail-In Legislation that are related to or ancillary to any of those power .
SECTION 1.02 Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be
construed to have the same meaning and effect as the word “shall.” The word “or” is not exclusive. The
word “year” shall refer (i) in the case of a leap year, to a year of three hundred sixty-six (366) days, and (ii)
otherwise, to a year of three hundred sixty-five (365) days. Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed
to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein
to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless
otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to
time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and
to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.03 Accounting Terms; Changes in GAAP.
(a) Accounting Terms. Except as otherwise expressly provided herein, all accounting
terms not otherwise defined herein shall be construed in conformity with GAAP. Financial statements
and other information required to be delivered by the Parent to the Lenders pursuant to Sections 5.01(a)
and 5.01(b) shall be prepared in accordance with GAAP as in effect at the time of such preparation.
Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the
computation of any financial covenant) contained herein, Indebtedness of the Parent and its Subsidiaries
shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of
FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.
(b) Changes in GAAP. If the Borrower notifies the Administrative Agent (who will
forward such notification to the Lenders) that the Borrower requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the
Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether
any such notice is given before or after such change in GAAP or in the application thereof, then such
provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such
change shall have become effective until such notice shall have been withdrawn, the Required Lenders
shall have notified the Borrower (with a copy to the Administrative Agent) of their objection to such
amendment or such provision shall have been amended in accordance herewith.
SECTION 1.04 Rates. The Administrative Agent does not warrant or accept responsibility
for, and shall not have any liability with respect to, the administration, submission or any other matter
related to the rates in the definition of “LIBO Rate” or with respect to any comparable or successor rate
thereto.
SECTION 1.05 Divisions. For all purposes under the Loan Documents, in connection with
any division or plan of division under Delaware law (or any comparable event under a different
jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right,
obligation or liability of a different Person, then it shall be deemed to have been transferred from the
original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person
shall be deemed to have been organized on the first date of its existence by the holders of its Equity
Interests at such time.
ARTICLE II
COMMITMENTS AND BORROWINGS
SECTION 2.01 Commitments. Subject to the terms and conditions set forth herein, the
Initial Lender agrees to make the Loans to the Borrower in one or more installments on or after the Closing
Date in an aggregate principal amount not to exceed the Initial Lender’s Commitment. Amounts borrowed
under this Section 2.01 and repaid or prepaid may not be reborrowed.
SECTION 2.02 Loans and Borrowings.
(a) Borrowings. The Borrower shall request the initial Borrowing of the Loans on
the Closing Date and may request one or more subsequent Borrowings of the Loans; provided that the
Borrower shall request no more than three (3) total Borrowings.
(b) Minimum Amounts. Each Borrowing shall be in an aggregate amount of
$60,000,000 or a larger multiple of $5,000,000; provided that, the final Borrowing may be in an amount
equal to the aggregate remaining outstanding Commitment available to the Borrower under the terms and
conditions of this Agreement.
(c) Funding of Borrowings. Each Lender shall make the amount of each Borrowing
to be made by it hereunder available to the Administrative Agent by wire transfer of immediately
available funds to the Administrative Account not later than 12:00 noon (New York City time) on the
proposed date thereof. The Administrative Agent will make all such funds so received available to the
Borrower in like funds, by wire transfer of such funds in accordance with the instructions provided in the
applicable Borrowing Request; provided that if all such requested funds are not received by the
Administrative Agent by 12:00 noon (New York City time) on the proposed date for such Borrowing, the
Administrative Agent shall distribute such funds on the next succeeding Business Day.
SECTION 2.03 Borrowing Requests.
(a) Notice by Borrower. In order to request a Borrowing, the Borrower shall notify
the Administrative Agent of such request in writing not later than 11:00 a.m. (New York City time) (i)
with respect to the initial Borrowing under this Agreement, three (3) Business Days prior to the date of
the requested Borrowing and (ii) for each subsequent Borrowing, five (5) Business Days before such
Borrowing. Each such notice shall be irrevocable and shall be in the form of a written Borrowing
Request, appropriately completed and signed by a Responsible Officer of the Borrower. The
Administrative Agent shall promptly advise the applicable Lenders of any Borrowing Request given
pursuant to this Section 2.03(a) (and the contents thereof), and of each Lender’s portion of the requested
Borrowing.
(b) Content of Borrowing Requests. Each Borrowing Request for a Borrowing
pursuant to this Section shall specify the following information in compliance with Section 2.02: (i) the
aggregate amount of the requested Borrowing; (ii) the date of such Borrowing (which shall be a Business
Day); and (iii) the location and number of the Borrower’s account to which funds are to be disbursed.
SECTION 2.04 [Reserved].
SECTION 2.05 [Reserved].
SECTION 2.06 Prepayments.
(a) Optional Prepayments. The Borrower may, upon written notice to the
Administrative Agent, at any time and from time to time prepay the Loans in whole or in part without
premium or penalty, subject to the requirements of this Section. Partial prepayments of the Loans shall be
in a minimum aggregate principal amount of $1,000,000 or a whole multiple of $100,000 in excess
thereof. Notwithstanding anything herein to the contrary, the Borrower may at any time elect to prepay
the loans with funds contained in the Collateral Proceeds Account.
(b) Mandatory Prepayments.
(i) Dispositions of Collateral. Within three (3) Business Days of the receipt
by the Parent or any of its Subsidiaries of any Net Proceeds from a Disposition of Collateral not
permitted by Section 6.04, the Borrower shall prepay the Loans in an amount equal to 100% of
such Net Proceeds.
(ii) Recovery Events. Within three (3) Business Days of the receipt by the
Parent or any of its Subsidiaries of any Net Proceeds from a Recovery Event in respect of
Collateral, the Borrower shall either (x) prepay the Loans in an amount equal to 100% of such
Net Proceeds or (y) deposit such Net Proceeds into the Collateral Proceeds Account for such
purpose and thereafter such Net Proceeds shall be applied (to the extent not otherwise applied
pursuant to the immediately succeeding proviso) to prepay the Loans; provided that (I) the
Borrower may use such Net Proceeds to (A) replace the assets which are the subject of such
Recovery Event with assets that are of the same type of Collateral, or (B) repair the assets which
are the subject of such Recovery Event, in each case, within 270 days after such deposit is made,
(II) all such Net Proceeds amount may, at the option of the Borrower at any time, be applied to
repay the Loans, and (III) upon the occurrence of an Event of Default, the amount of any such
deposit may be applied by the Administrative Agent to repay the Loans.
(iii) Certain Debt Issuances. Immediately upon receipt by the Parent or any
of its Subsidiaries of any proceeds from the incurrence of any Indebtedness that is secured by
Liens on the Collateral (other than Permitted Liens), the Borrower shall prepay the Loans in an
amount equal to 100% of any such proceeds from any such Indebtedness.
(iv) Change of Control. Immediately upon the occurrence of a Change of
Control, the Borrower shall prepay the Loans in an amount equal to 100% of the aggregate
outstanding principal amount of Loans.
(c) Notices. Each such notice pursuant to this Section shall be in the form of a
written Prepayment Notice, appropriately completed and signed by a Responsible Officer of the
Borrower, and must be received by the Administrative Agent not later than 11:00 a.m. (New York City
time) three (3) Business Days before the date of prepayment (which delivery may initially be by
electronic communication including fax or email and shall be followed by an original authentic
counterpart thereof) . Each Prepayment Notice shall specify (x) the prepayment date and (y) the principal
amount of the Loans or portion thereof to be prepaid. Each Prepayment Notice shall be irrevocable.
(d) Payments. Any prepayment of the Loans pursuant to this Section 2.06 shall be
accompanied by accrued interest on the principal amount prepaid as set forth in Section 2.09(c).
SECTION 2.07 Reduction and Termination of Commitments. The Initial Lender’s
Commitment shall (x) automatically and permanently be reduced by the amount of any Borrowing of a Loan
and (y) automatically and permanently terminate on March 26, 2021. The Borrower may, upon not less than
three (3) Business Days’ notice to the Initial Lender and the Administrative Agent, terminate the Commitment
or, from time to time, reduce the Commitment. Any such reduction in the Commitment shall be in an amount
equal to $1,000,000 or a whole multiple thereof, and shall permanently reduce the Commitment.
SECTION 2.08 Repayment of Loans. The Borrower shall repay to the Administrative Agent
for the ratable account of the Lenders the aggregate principal amount of all Loans outstanding on the Maturity
Date.
SECTION 2.09 Interest.
(a) Interest Rates. Subject to paragraph (b) of this Section, the Loans shall bear
interest at a rate per annum equal to the Adjusted LIBO Rate plus the Applicable Rate.
(b) Default Interest. If any amount payable by the Borrower under this Agreement
or any other Loan Document (including principal of any Loan, interest, fees and other amount) is not paid
when due, whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear
interest at a rate per annum equal to the applicable Default Rate. Upon the request of the Required
Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all
Loans outstanding hereunder at a rate per annum equal to the applicable Default Rate.
(c) Payment Dates. Accrued interest on each Loan shall be payable in arrears on or
before 12:00 noon (New York City time) on each Interest Payment Date applicable thereto and at such
other times as may be specified herein; provided that (i) interest accrued pursuant to paragraph (b) of this
Section shall be payable on demand and (ii) in the event of any repayment or prepayment of any Loan
(including mandatory prepayments under Section 2.06(b)), accrued interest on the principal amount
repaid or prepaid shall be payable on the date of such repayment or prepayment.
(d) Interest Computation. All interest hereunder shall be computed on the basis of a
year of three hundred sixty (360) days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The Adjusted LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.10 Benchmark Replacement Setting.
(a) Benchmark Replacement. Notwithstanding anything to the contrary herein or in
any other Loan Document, if a Benchmark Transition Event or an Early Opt-in Election, as applicable,
and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any
setting of the then-current Benchmark, as notified by the Required Lenders to the Administrative Agent in
writing, then (x) if a Benchmark Replacement is determined in accordance with clause (1) or (2) of the
definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark
Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in
respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or
further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a
Benchmark Replacement is determined in accordance with clause (3) of the definition of “Benchmark
Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such
Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark
setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of
such Benchmark Replacement is provided to the Lenders and the Administrative Agent by the Required
Lenders without any amendment to, or further action or consent of any other party to, this Agreement or
any other Loan Document so long as the Administrative Agent has not received, by such time, written
notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders.
(b) Benchmark Replacement Conforming Changes. In connection with the
implementation of a Benchmark Replacement, the Administrative Agent (after consultation with the
Required Lenders) will have the right to make Benchmark Replacement Conforming Changes from time
to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any
amendments implementing such Benchmark Replacement Conforming Changes will become effective
without any further action or consent of any other party to this Agreement or any other Loan Document.
(c) Notices; Standards for Decisions and Determinations. The Initial Lender or the
Required Lenders, as the case may be, will promptly notify the Administrative Agent, which will then
promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or
an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (ii) the
implementation of any Benchmark Replacement, (iii) the removal or reinstatement of any tenor of a
Benchmark pursuant to clause (d) below and (iv) the commencement or conclusion of any Benchmark
Unavailability Period. The Administrative Agent will promptly notify the Borrower and the Lenders of
the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or
election that may be made by any Lender (or group of Lenders) or the Administrative Agent, if
applicable, pursuant to this Section 2.10, including any determination with respect to a tenor, rate or
adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to
take or refrain from taking any action or any selection, will be conclusive and binding absent manifest
error and may be made in its or their sole discretion and without consent from any other party to this
Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this
Section 2.10. Notwithstanding anything in this Agreement to the contrary, the Administrative Agent does
not warrant or accept any responsibility for, and shall not have any liability with respect to, any
determination made by it in connection with the adoption of Benchmark Replacement Conforming
Changes or for the impact of such Benchmark Replacement Conforming Changes, nor for the failure to
adopt any Benchmark Replacement Conforming Changes due to the failure of the Required Lenders to
cooperate in good faith in connection with the determination of any Benchmark Replacement Conforming
Changes.
(d) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary
herein or in any other Loan Document, at any time (including in connection with the implementation of a
Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or USD
LIBO Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other
information service that publishes such rate from time to time as selected by the Administrative Agent in
its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has
provided a public statement or publication of information announcing that any tenor for such Benchmark
is or will be no longer representative, then the definition of “Interest Period” may be modified for any
Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if
a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or
information service for a Benchmark (including a Benchmark Replacement) used by the Administrative
Agent or (B) is not, or is no longer, subject to an announcement that it is or will no longer be
representative for a Benchmark (including a Benchmark Replacement), then the definition of “Interest
Period” may be modified for all Benchmark settings at or after such time to reinstate such previously
removed tenor.
(e) Benchmark Unavailability Period. During any Benchmark Unavailability Period,
all calculations of interest by reference to a LIBO Rate hereunder shall instead be made by reference to
the Alternate Base Rate.
SECTION 2.11 Evidence of Debt.
(a) Maintenance of Records. The Administrative Agent shall maintain the Register
in accordance with Section 11.04(c). The entries made in the records maintained pursuant to this
paragraph (a) shall be prima facie evidence absent manifest error of the existence and amounts of the
obligations recorded therein. Any failure of the Administrative Agent to maintain such records or make
any entry therein or any error therein shall not in any manner affect the obligations of the Borrower under
this Agreement and the other Loan Documents.
(b) Promissory Notes. The Borrower shall prepare, execute and deliver to such
Lender a promissory note of the Borrower payable to such Lender (or, if requested by such Lender, to
such Lender and its registered assigns) and a form attached as Exhibit C hereto, which shall evidence such
Lender’s Loan.
SECTION 2.12 Payments Generally.
(a) Payments by Borrower. All payments to be made by the Borrower hereunder and
the other Loan Documents shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff. Except as otherwise expressly provided herein, all such payments shall be made to
the Administrative Agent, for the account of the respective Lenders to which such payment is owed, to
the Administrative Account in immediately available funds not later than 12:00 noon (New York City
time) on the date specified herein. All amounts received by a Lender or the Administrative Agent after
such time on any date shall be deemed to have been received on the next succeeding Business Day and
any applicable interest or fees shall continue to accrue. The Administrative Agent will promptly
distribute to each Lender its ratable share (or other applicable share as provided herein) of such payment
in like funds as received by wire transfer to such Lender’s applicable lending office (or otherwise
distribute such payment in like funds as received to the Person or Persons entitled thereto as provided
herein). If any payment to be made by the Borrower shall fall due on a day that is not a Business Day,
payment shall be made on the next succeeding Business Day and such extension of time shall be reflected
in computing interest or fees, as the case may be; provided that, if such next succeeding Business Day
would fall after the Maturity Date, payment shall be made on the immediately preceding Business Day.
Except as otherwise expressly provided herein, all payments hereunder or under any other Loan
Document shall be made in Dollars.
(b) Application of Insufficient Payments. Subject to Section 7.02, if at any time
insufficient funds are received by and available to the Lenders or the Administrative Agent to pay fully all
amounts of principal, interest, fees and other amounts then due hereunder, such funds shall be applied
(i) first, to pay interest, fees and other amounts then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest, fees and other amounts then due to such parties, and
(ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance
with the amounts of principal then due to such parties.
(c) Presumptions by Administrative Agent. Unless the Administrative Agent shall
have received notice from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such
payment, the Administrative Agent may assume that the Borrower has made such payment on such date
in accordance herewith and may, in reliance upon such assumption, but shall not be obligated to distribute
to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then
each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender, with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater
of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation. Notwithstanding the foregoing, the
Administrative Agent is not required to make any payment to the Lenders until it is in possession of
cleared funds from the Borrower.
(d) Deductions by Administrative Agent. If any Lender (other than the Initial
Lender) shall fail to make any payment required to be made by it pursuant to Section 2.13 or 11.03(c),
then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof,
(i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender for
the benefit of the Administrative Agent to satisfy such Lender’s obligations to the Administrative Agent
until all such unsatisfied obligations are fully paid or (ii) hold any such amounts in a segregated account
as cash collateral for, and for application to, any future funding obligations of such Lender under any such
Section, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative
Agent in its discretion.
(e) Several Obligations of Lenders. The obligations of the Lenders hereunder to
make Loans and to make payments pursuant to Section 11.03(c) are several and not joint. The failure of
any Lender to make any Loan or to make any such payment on any date required hereunder shall not
relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Loan or to make its payment under
Section 11.03(c).
SECTION 2.13 Sharing of Payments. If any Lender shall, by exercising any right of setoff
or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or
other obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate
amount of its Loans and accrued interest thereon or other such obligations greater than its pro rata share
thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the
Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and
such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and other amounts owing them; provided that:
(i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest; and
(ii) the provisions of this paragraph shall not be construed to apply to (x) any
payment made by the Borrower pursuant to and in accordance with the express terms of this
Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans to any assignee or participant, other than to the
Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under
Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully
as if such Lender were a direct creditor of the Borrower in the amount of such participation.
SECTION 2.14 Compensation for Losses. In the event of (a) the payment of any principal
of the Loans other than on the last day of an Interest Period (including as a result of an Event of Default),
(b) the failure to borrow or prepay the Loans (or any portion thereof) on the date specified in any notice
delivered pursuant hereto, or (c) the assignment of the Loans (or any portion thereof) other than on the last
day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.19(b), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an
amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have
accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that
would have been applicable to such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow, for the date that would have been
the applicable Interest Period), over (ii) the amount of interest that would accrue on such principal amount
for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and period from other banks in the London interbank
eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is
entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate
promptly after receipt thereof.
SECTION 2.15 Increased Costs.
(a) Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except any reserve
requirement reflected in the Adjusted LIBO Rate);
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes,
(B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and
(C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or
other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii) impose on any Lender or the London interbank market any other
condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such
Lender;
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient
of making or maintaining any Loan or to reduce the amount of any sum received or receivable by such
Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon
request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the
case may be, such additional amount or amounts as will compensate such Lender or other Recipient, as
the case may be, for such additional costs incurred or reduction suffered.
(b) [Reserved].
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as
specified in paragraph (a) of this Section and delivered to the Borrower, shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate
within ten (10) days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such
compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this
Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date
that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or
reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Change in
Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to
above shall be extended to include the period of retroactive effect thereof).
SECTION 2.16 Taxes.
(a) Defined Terms. For purposes of this Section, the term “Applicable Law”
includes FATCA.
(b) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower under any Loan Document shall be made without deduction or withholding for
any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith
discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from
any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to
make such deduction or withholding and shall timely pay the full amount deducted or withheld to the
relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified
Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or
withholding has been made (including such deductions and withholdings applicable to additional sums
payable under this Section) the applicable Recipient receives an amount equal to the sum it would have
received had no such deduction or withholding been made. Borrower acknowledges and agrees that,
absent a Change in Law, Borrower is not required to withhold or deduct from any such payments to the
Initial Lender on account of any U.S. federal withholding taxes or Taxes imposed pursuant to FATCA.
(c) Payment of Other Taxes by Borrower. The Borrower shall timely pay to the
relevant Governmental Authority in accordance with Applicable Law, or at the option of the Initial
Lender, the Required Lenders or the Administrative Agent timely reimburse it for the payment of, any
Other Taxes.
(d) Indemnification by Borrower. The Borrower shall indemnify each Recipient,
within thirty (30) days after demand therefor, for the full amount of any Indemnified Taxes (including
Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable
or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and
any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes
were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the
Administrative Agent if such Lender is not the Initial Lender), or by the Administrative Agent on its own
behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(e) Indemnification by the Lenders. Each Lender (other than the Initial Lender) shall
severally indemnify the Administrative Agent, within thirty (30) days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already
indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of
the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions
of Section 11.04(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes
attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in
connection with any Loan Document, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or liability delivered to any such
Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender (other than
the Initial Lender) hereby authorizes the Administrative Agent to set off and apply any and all amounts at
any time owing to such Lender under any Loan Document or otherwise payable by the Administrative
Agent to such Lender from any other source against any amount due to the Administrative Agent under
this paragraph (e).
(f) Evidence of Payments. As soon as practicable after any payment of Taxes by the
Borrower to a Governmental Authority pursuant to this Section, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(g) Status of Lenders. (i) Any Lender (other than the Initial Lender) that is entitled
to an exemption from or reduction of withholding Tax with respect to payments made under any Loan
Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably
requested by the Borrower or the Administrative Agent, such properly completed and executed
documentation reasonably requested by the Borrower (or, if such Lender is not the Initial Lender, the
Administrative Agent) as will permit such payments to be made without withholding or at a reduced rate
of withholding. In addition, any Lender (other than the Initial Lender), if reasonably requested by the
Borrower (or the Administrative Agent), shall deliver such other documentation prescribed by Applicable
Law or reasonably requested by the Borrower (or the Administrative Agent) as will enable the Borrower
(or the Administrative Agent) to determine whether or not such Lender is subject to backup withholding
or information reporting requirements. Notwithstanding anything to the contrary in the preceding two
sentences, the completion, execution and submission of such documentation (other than such
documentation set forth in paragraphs (g)(ii)(A), (ii)(B) and (ii)(D) of this Section) shall not be required if
in the Lender’s reasonable judgment such completion, execution or submission would subject such
Lender to any material unreimbursed cost or expense or would materially prejudice the legal or
commercial position of such Lender.
(ii) Without limiting the generality of the foregoing,
(A) any Lender (other than the Initial Lender) that is a U.S. Person
shall deliver to the Borrower and the Administrative Agent on or about the date on which
such Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the reasonable request of the Borrower or the Administrative Agent), executed
copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup
withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do
so, deliver to the Borrower and the Administrative Agent (in such number of copies as
shall be requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), whichever of the
following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of
an income tax treaty to which the United States is a party (x) with respect to
payments of interest under any Loan Document, executed copies of IRS
Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “interest” article of
such tax treaty and (y) with respect to any other applicable payments under any
Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E establishing an
exemption from, or reduction of, U.S. federal withholding Tax pursuant to the
“business profits” or “other income” article of such tax treaty;
(2) executed copies of IRS Form W-8ECI (or any successor
forms) and, in the case of an Agent, a withholding certificate that satisfies the
requirements of Treasury Regulation Sections 1.1441-1(b)(2)(iv) and 1.1441-
1(e)(3)(v) as applicable to a U.S. branch that has agreed to be treated as a U.S.
Person for withholding tax purposes;
(3) in the case of a Foreign Lender claiming the benefits of
the exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate substantially in the form of Exhibit B-1 to the effect that such Foreign
Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a
“10 percent shareholder” of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, or a “controlled foreign corporation” related to
the Borrower as described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or IRS
Form W-8BEN-E; or
(4) to the extent a Foreign Lender is not the beneficial
owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-
8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance
Certificate substantially in the form of Exhibit B-2 or Exhibit B-3, IRS Form W-
9, and/or other certification documents from each beneficial owner, as applicable;
provided that if the Foreign Lender is a partnership and one or more direct or
indirect partners of such Foreign Lender are claiming the portfolio interest
exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate
substantially in the form of Exhibit B-4 on behalf of each such direct and indirect
partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do
so, deliver to the Borrower and the Administrative Agent (in such number of copies as
shall be requested by the recipient) on or about the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), executed copies of any
other form prescribed by Applicable Law as a basis for claiming exemption from or a
reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by Applicable Law to permit the
Borrower or the Administrative Agent to determine the withholding or deduction
required to be made; and
(D) if a payment made to a Lender (other than the Initial Lender)
under any Loan Document would be subject to U.S. federal withholding Tax imposed by
FATCA if such Lender were to fail to comply with the applicable reporting requirements
of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as
applicable), such Lender shall deliver to the Borrower and the Administrative Agent at
the time or times prescribed by law and at such time or times reasonably requested by the
Borrower or the Administrative Agent such documentation prescribed by Applicable Law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower or the Administrative Agent as may
be necessary for the Borrower and the Administrative Agent to comply with their
obligations under FATCA and to determine that such Lender has complied with such
Lender’s obligations under FATCA or to determine the amount, if any, to deduct and
withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall
include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or
becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify
the Borrower and the Administrative Agent in writing of its legal inability to do so. Notwithstanding
anything to the contrary in this Agreement, the Initial Lender shall be entitled to the benefits of this
Section 2.16 and all related provisions under this Agreement without regard to whether it provides any
documentation described in Section 2.16(g).
(h) Treatment of Certain Refunds. If any party determines, in its sole discretion
exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified
pursuant to this Section (including by the payment of additional amounts pursuant to this Section), it shall
pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity
payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-
pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party,
upon the request of such indemnified party, shall repay to such indemnified party the amount paid over
pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) in the event that such indemnified party is required to repay such refund to such
Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will
the indemnified party be required to pay any amount to an indemnifying party pursuant to this
paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the Tax subject to indemnification and giving
rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification
payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not
be construed to require any indemnified party to make available its Tax returns (or any other information
relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(i) Survival. Each party’s obligations under this Section shall survive the
resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement
of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all
obligations under any Loan Document.
SECTION 2.17 [Reserved].
SECTION 2.18 [Reserved].
SECTION 2.19 Mitigation Obligations; Replacement of Lenders.
(a) Designation of a Different Lending Office. If any Lender requests compensation
under Section 2.15, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any
Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such
Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office
for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of
its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.16, as the case may be, in the
future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs
and expenses incurred by any Lender in connection with any such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under
Section 2.15, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any
Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16 and, in
each case, such Lender has declined or is unable to designate a different lending office in accordance with
paragraph (a) of this Section, or if any Lender is a Non-Consenting Lender, then the Borrower may, at its
sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 11.04), all of its interests, rights (other than its existing rights to payments
pursuant to Section 2.15 or Section 2.16) and obligations under this Agreement and the related Loan
Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that:
(i) the Borrower shall have paid to the Administrative Agent the assignment
fee (if any) specified in Section 11.04;
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any amounts under
Section 2.14) from the assignee (to the extent of such outstanding principal and accrued interest
and fees) or the Borrower (in the case of all other amounts);
(iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.15 or payments required to be made pursuant to Section 2.16, such
assignment will result in a reduction in such compensation or payments thereafter;
(iv) such assignment does not conflict with Applicable Law; and
(v) in the case of any assignment resulting from a Lender becoming a Non-
Consenting Lender, the applicable assignee shall have consented to the applicable amendment,
waiver or consent.
A Lender shall not be required to make any such assignment or delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to
require such assignment and delegation cease to apply.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Credit Parties represent and warrant to the Administrative Agent, the Collateral
Agent and the Lenders on the Closing Date and on the date of each Borrowing that:
SECTION 3.01 Existence, Qualification and Power. Each of the Credit Parties and their
respective Material Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good
standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power
and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or
lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan
Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good
standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license, except, in each case referred to in clause (a)
(other than with respect to any Credit Party), (b)(i) or (c), to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.02 Authorization; No Contravention. The execution, delivery and
performance by each Credit Party of each Loan Document to which it is party have been duly authorized by
all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of its
Organizational Documents, (b) conflict with or result in any breach or contravention of, or the creation of
any Lien under, or require any payment to be made under (i) any material Contractual Obligation to which
each Credit Party is a party or affecting each Credit Party or the material properties of any Credit Party or
(ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to
which any Credit Party or its property is subject or (c) violate any Law, except to the extent such violation
could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.03 Governmental Authorization; Other Consents. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any
other Person is necessary or required in connection with the execution, delivery or performance by, or
enforcement against, each Credit Party of this Agreement or any other Loan Document, except for (i) such
approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained, taken or
made and in full force and effect, and (ii) filings and consents contemplated by the Security Documents or
Section 5.14.
SECTION 3.04 Execution and Delivery; Binding Effect. This Agreement has been, and
each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each
Credit Party. This Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of each Credit Party, enforceable against each Credit Party
in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other Laws affecting creditors’ rights generally and by general
principles of equity.
SECTION 3.05 Financial Statements; No Material Adverse Change.
(a) Financial Statements. The financial statements described in Schedule 3.05 were
prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, and fairly present in all material respects the financial condition of the
Parent and its Subsidiaries as of the date thereof and their results of operations and cash flows for the
period covered thereby in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein.
(b) No Material Adverse Change. Since the date of the most recent audited balance
sheet included in the financial statements described in Schedule 3.05, there has been no event or
circumstance that, either individually or in the aggregate, has had or could reasonably be expected to have
a Material Adverse Effect.
SECTION 3.06 Litigation. Except for those matters which have been publicly disclosed in
any SEC filing of the Parent filed prior to the Closing Date, there are no actions, suits, proceedings, claims,
disputes or investigations pending or, to the knowledge of any Credit Party, threatened, at Law, in equity, in
arbitration or before any Governmental Authority, by or against any Credit Party or any of its Subsidiaries
or against any of their properties or revenues that (a) either individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect or (b) purport to affect or pertain to this
Agreement or any other Loan Document or any of the transactions contemplated hereby.
SECTION 3.07 Contractual Obligations; No Default. None of the Credit Parties and their
respective Subsidiaries is in default under or with respect to any Contractual Obligation that, either
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No
Default has occurred and is continuing or would result from the consummation of the transactions
contemplated by this Agreement or any other Loan Document.
SECTION 3.08 Property. Ownership of Properties and Collateral. Each of the Credit
Parties and their respective Subsidiaries has good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for
such defects in title that, either individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Each Credit Party has good title to the Collateral owned by it, free and clear of all
Liens other than Permitted Liens.
SECTION 3.09 Taxes. The Credit Parties and their respective Subsidiaries have filed all
federal, state and other tax returns and reports required to be filed, and have paid all federal, state and other
taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties,
income or assets otherwise due and payable, except (a) Taxes that are being contested in good faith by
appropriate proceedings diligently conducted and for which adequate reserves are being maintained in
accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.10 Disclosure. (a) The Credit Parties and their respective Subsidiaries have
disclosed to the Administrative Agent, the Collateral Agent and the Lenders all agreements, instruments and
corporate or other restrictions to which they are subject, and all other matters known to them, that, either
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Loan
Application Form, reports, financial statements, certificates and other written information (other than
projected or pro forma financial information) furnished by or on behalf of the Credit Parties and their
respective Subsidiaries to any Agent or any Lender in connection with the transactions contemplated hereby
and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (as
modified or supplemented by other information so furnished), taken as a whole, do not contain any material
misstatement of fact or omit to state any material fact necessary to make the statements therein (when taken
as a whole), in the light of the circumstances under which they were made, not misleading; provided that,
with respect to projected or pro forma financial information, the Credit Parties represent only that such
information was prepared in good faith based upon assumptions believed to be reasonable at the time of
preparation and delivery (it being understood that such projected information may vary from actual results
and that such variances may be material) and (b) as of the Closing Date, the information included in the
Beneficial Ownership Certification is true and correct in all respects.
SECTION 3.11 Compliance with Laws. Each of the Credit Parties and their respective
Subsidiaries is in compliance with the requirements of all Laws (including Environmental Laws) and all
orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which
(a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to so comply, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.12 ERISA Compliance.
(a) Except as could not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect, (i) each Plan is in compliance with the applicable provisions
of ERISA, the Code and other federal or state Laws and (ii) each Plan that is intended to be a qualified
plan under Section 401(a) of the Code has received a favorable determination letter, opinion letter or
advisory letter from the IRS to the effect that the form of such Plan is qualified under Section 401(a) of
the Code and the trust related thereto has been determined by the IRS to be exempt from federal income
tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by
the IRS, and, to the knowledge of any Credit Party, nothing has occurred that would prevent or cause the
loss of such tax-qualified status.
(b) There are no pending or, to the knowledge of any Credit Party, threatened or
contemplated claims, actions or lawsuits, or action by any Governmental Authority, with respect to any
Plan that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse
Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan that, either individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect.
(c) No ERISA Event has occurred, and neither any Credit Party nor any ERISA
Affiliate is aware of any fact, event or circumstance that, either individually or in the aggregate, could
reasonably be expected to constitute or result in an ERISA Event that, either individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse Effect.
(d) Except as would not reasonably be expected to have individually or in the
aggregate, a Material Adverse Effect, the present value of all accrued benefits under each Pension Plan
(based on those assumptions used to fund such Pension Plan) did not, as of the last annual valuation date
prior to the date on which this representation is made or deemed made, exceed the value of the assets of
such Pension Plan allocable to such accrued benefits by a material amount.
(e) To the extent applicable, each Foreign Plan has been maintained in compliance
with its terms and with the requirements of any and all applicable requirements of Law and has been
maintained, where required, in good standing with applicable regulatory authorities, except to the extent
that the failure so to comply could not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect. Neither the Parent nor any Subsidiary has incurred any obligation in
connection with the termination of or withdrawal from any Foreign Plan that, either individually or in the
aggregate, would reasonably be expected to have individually or in the aggregate, a Material Adverse
Effect. Except as would not reasonably be expected to have individually or in the aggregate, a Material
Adverse Effect, the present value of the accrued benefit liabilities (whether or not vested) under each
Foreign Plan that is funded, determined as of the end of the most recently ended fiscal year of the Parent
or Subsidiary, as applicable, on the basis of actuarial assumptions, each of which is reasonable, did not
exceed the current value of the property of such Foreign Plan by a material amount, and for each Foreign
Plan that is not funded, the obligations of such Foreign Plan are properly accrued.
SECTION 3.13 Environmental Matters. Except with respect to any matters that, either
individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, none
of the Credit Parties and their respective Subsidiaries (a) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval required under any
Environmental Law, (b) knows of any basis for any permit, license or other approval required under any
Environmental Law to be revoked, canceled, limited, terminated, modified, appealed or otherwise
challenged, (c) has or could reasonably be expected to become subject to any Environmental Liability,
(d) has received notice of any claim, complaint, proceeding, investigation or inquiry with respect to any
Environmental Liability (and no such claim, complaint, proceeding, investigation or inquiry is pending or,
to the knowledge of the Parent, is threatened or contemplated) or (e) knows of any facts, events or
circumstances that could give rise to any basis for any Environmental Liability with respect thereto.
SECTION 3.14 Investment Company Act. None of the Credit Parties is an “investment
company” as defined in, or subject to regulation under, the Investment Company Act of 1940.
SECTION 3.15 Sanctions; Export Controls; Anti-Corruption; AML Laws.
(a) None of the Credit Parties and their respective Subsidiaries and no director,
officer, or affiliate of the foregoing is a Person that is: (i) the subject of any sanctions administered or
enforced by the United States (including, but not limited to, those administered by the U.S. Department of
the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, and the U.S. Department
of Commerce’s Bureau of Industry and Security) (“Sanctions”), (ii) organized or resident in a country or
territory that is the subject of country-wide or region-wide Sanctions (including, currently, Crimea, Cuba,
Iran, North Korea, and Syria) (each a “Sanctioned Country”) or located in a Sanctioned Country except to
the extent authorized under Sanctions or (iii) a Person with whom dealings are restricted or prohibited by
Sanctions as a result of a relationship of ownership or control with a Person listed in (i) or (ii) (each of (i),
(ii) and (iii) is a “Sanctioned Person”).
(b) For the period beginning eight (8) years prior to the date hereof, each of the
Credit Parties and their respective Subsidiaries and their respective directors, officers and employees and,
to the knowledge of the Credit Parties, such respective affiliates, have been, in all material respects, in
compliance with the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”) and any other applicable anti-bribery or anti-corruption laws and regulations
(collectively with the FCPA, the “Anticorruption Laws”) and all applicable Sanctions, Export Control
Laws, and AML Laws.
SECTION 3.16 Solvency. The Borrower and its Subsidiaries are Solvent on a consolidated
basis after giving effect to the borrowing of the Loans.
SECTION 3.17 Subsidiaries. Schedule 3.17 sets forth the name of, and the ownership
interests of the Parent and each of its Subsidiaries and indicates which of such Subsidiaries are Excluded
Subsidiaries as of the date hereof.
SECTION 3.18 Senior Indebtedness. The Loans, the Obligations and the Guaranteed
Obligations constitute “senior indebtedness” (or any other similar or comparable term) under and as defined
in the documentation governing any Indebtedness of the Credit Parties that is subordinated in right of
payment to any other Indebtedness thereof.
SECTION 3.19 Insurance Matters. The properties of the Credit Parties are insured
pursuant to Section 5.06 hereof. Each insurance policy required to be maintained by the Credit Parties
pursuant to Section 5.06 is in full force and effect and all premiums in respect thereof that are due and
payable have been paid.
SECTION 3.20 Labor Matters. Except as would not reasonably be expected to have
individually or in the aggregate, a Material Adverse Effect, (a) there are no strikes, lockouts, slowdowns or
other material labor disputes against any Credit Party or any of its Subsidiary thereof pending or, to the
knowledge of the Credit Parties, threatened, (b) the Credit Parties and their respective Subsidiaries have
complied with all applicable federal, state, local and foreign Laws relating to the employment (or
termination thereof), the hours worked by and payments made to employees of the Parent and its
Subsidiaries comply with the Fair Labor Standards Act and any other applicable federal, state, local or
foreign Law dealing with such matters and (c) all payments due from the Credit Parties and their respective
Subsidiaries, or for which any claim may be made against the Credit Parties and their respective
Subsidiaries, on account of wages and employee health and welfare insurance and other benefits, have been
paid or properly accrued in accordance with GAAP as a liability on the books of the Parent or such
Subsidiary. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair
employment practices charges or any other claims or complaints against the Credit Parties or their
respective Subsidiaries pending or, to the knowledge of the Credit Parties, threatened to be filed with any
Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to
the employment or termination of employment of any employee of the Credit Parties and their respective
Subsidiaries that would, individually or in the aggregate, be reasonably expected to result in a Material
Adverse Effect.
SECTION 3.21 Insolvency Proceedings. None of the Credit Parties has taken, and none of
the Credit Parties is currently evaluating taking, any action to seek relief or commence proceedings under
any Debtor Relief Law in any applicable jurisdiction.
SECTION 3.22 Margin Regulations. The Borrower is not engaged and will not engage,
principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or
extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any
Borrowing hereunder will be used to buy or carry any Margin Stock. Following the application of the
proceeds of each Borrowing, not more than 25% of the value of the assets (either of the Borrower only or of
the Borrower and its Subsidiaries on a consolidated basis) will be Margin Stock.
SECTION 3.23 Liens. There are no Liens of any nature whatsoever on any Collateral other
than Liens permitted under Section SECTION 6.02 hereof.
SECTION 3.24 Perfected Security Interests.
(a) As of the Closing Date (or such later date as permitted under Section 5.14) and as
of the date of each Borrowing, the Security Documents, taken as a whole, are effective to create in favor
of the Collateral Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority
security interest in all of the Collateral to the extent purported to be created thereby.
(b) As of the Closing Date (or such later date as permitted under Section 5.14) and as
of the date of each Borrowing, each Credit Party has or shall have satisfied the Perfection Requirement
with respect to the Collateral.
SECTION 3.25 US Citizenship. The Borrower is a “citizen of the United States” as
defined in Section 40102(a)(15) of Title 49 and as that statutory provision has been interpreted by the DOT
pursuant to its policies.
SECTION 3.26 Air Carrier Status. The Borrower is an “air carrier” within the meaning of
Section 40102 of Title 49, holds a certificate under Section 41102 of Title 49 and, during the time period
from April 1, 2019 to September 30, 2019, derived more than 50% of its air transportation revenue from the
transportation of passengers. The Borrower holds an air carrier operating certificate issued pursuant to
Chapter 447 of Title 49. The Borrower possesses all necessary certificates, franchises, licenses, permits,
rights, designations, authorizations, exemptions, concessions, frequencies and consents which relate to the
operation of the routes flown by it and the conduct of its business and operations as currently conducted,
except where failure to do so, either individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
ARTICLE IV
CONDITIONS
SECTION 4.01 Closing Date and Initial Borrowing. The effectiveness of this Agreement
and the funding of the initial Borrowing hereunder are subject to the satisfaction (or waiver in accordance
with Section 11.02) of the following conditions (and, in the case of each document specified in this Section
to be received by the Initial Lender (and the applicable Agent or Agents), such document shall be in form
and substance satisfactory to the Initial Lender and/or the applicable Agent or Agents):
(a) Executed Counterparts. The Initial Lender and the Agents shall have received
from each party hereto a counterpart of this Agreement, any Security Documents to which it is a
party and the Note, each signed on behalf of such party. Notwithstanding anything herein to the
contrary, delivery of an executed counterpart of a signature page of this Agreement or any
Security Documents by telecopy or other electronic means, or confirmation of the execution of
this Agreement on behalf of a party by an email from an authorized signatory of such party shall
be effective as delivery of a manually executed counterpart of this Agreement.
(b) Certificates. The Initial Lender and any applicable Agent shall have received
such customary certificates of resolutions or other action, incumbency certificates and/or other
certificates of Responsible Officers of the Credit Parties as the Lenders may require evidencing
the identity, authority and capacity of each Responsible Officer thereof authorized to act as a
Responsible Officer in connection with the Loan Documents;
(c) Organizational Documents. The Initial Lender shall have received customary
resolutions or evidence of corporate authorization, secretary’s certificates and such other
documents and certificates (including Organizational Documents and good standing certificates)
as the Initial Lender may request relating to the organization, existence and good standing of each
Credit Party and any other legal matters relating to the Credit Parties, the Loan Documents or the
transactions contemplated thereby.
(d) Opinion of Counsel to Credit Parties. The Initial Lender and the applicable
Agent or Agents shall have received all opinions of counsel (including any additional opinions of
counsel as required under any Security Document) to the Credit Parties that is acceptable to the
Initial Lender, addressed to the Initial Lender and the applicable Agent or Agents and dated the
Closing Date, in form and substance satisfactory to the Initial Lender and the applicable Agent
(and the Parent hereby instructs such counsel to deliver such opinions to such Persons).
(e) Beneficial Ownership Regulation Information. At least five (5) days prior to the
Closing Date, the Borrower shall deliver to the Initial Lender a Beneficial Ownership
Certification.
(f) Expenses. The Borrower shall have paid all reasonable fees, expenses (including
the fees and expenses of legal counsel) and other amounts due to the Initial Lender, the
Administrative Agent and the Collateral Agent (to the extent that statements for such expenses
shall have been delivered to the Borrower on or prior to the Closing Date); provided that such
expenses payable by the Borrower may be offset against the proceeds of the Loans funded on the
Closing Date.
(g) Officer’s Certificate. The Initial Lender shall have received a certificate
executed by a Responsible Officer of the Parent and the Borrower confirming (i) that the
representations and warranties contained in Article III of this Agreement are true and correct on
and as of the Closing Date, (ii) that the information provided in the Loan Application Form
submitted by the Borrower was true and correct on and as of the date of delivery thereof, (iii) the
satisfaction of such condition and (iv) that no Default or Event of Default exists or will result
from the borrowing of the Loans on the Closing Date.
(h) Other Documents. The Initial Lender and the Agents shall have received such
other documents as it may request.
(i) Appraisals. The Initial Lender shall have received Appraisals satisfactory in
form and substance and performed by an Eligible Appraiser dated as of a date no earlier than
thirty (30) days prior to the Closing Date.
(j) Security Interests. Each Credit Party shall have, and caused its Subsidiaries to,
take any action and execute and deliver, or cause to be executed and delivered, any agreement,
document or instrument required in order to create a valid, perfected first priority security interest
in the Collateral in favor of the Collateral Agent for the benefit of the Secured Parties (including
delivery of UCC financing statements in appropriate form for filing under the UCC and entering
into control agreements). Each Credit Party shall have satisfied, and caused its Subsidiaries to
satisfy, the Perfection Requirement with respect to the Collateral. In addition, the Credit Parties
shall have delivered a completed Perfection Certificate (as defined in the Pledge and Security
Agreement).
(k) Consents and Authorizations. Each Credit Party shall have obtained all consents
and authorizations from Governmental Authorities and all consents of other Persons (including
shareholder approvals, if applicable) that are necessary or advisable in connection with this
Agreement, any Loan Document, any of the transactions contemplated hereby or thereby or the
continuing operations of the Credit Parties and each of the foregoing shall be in full force and
effect and in form and substance satisfactory to the Initial Lender.
(l) Lien Searches. The Initial Lender shall have received (i) UCC and other lien
searches conducted in the jurisdictions and offices where liens on material assets of the Credit
Parties are required to be filed or recorded and (ii) to the extent Collateral consists of (x) Aircraft
and Engine Assets (as defined in the Pledge and Security Agreement), aircraft registry lien
searches conducted with the FAA and the International Registry, and (y) Spare Part Assets (as
defined in the Pledge and Security Agreement), registry lien searches conducted with the FAA
(with reference to each Designated Spare Parts Location set forth on Schedule 2.1 of the Pledge
and Security Agreement), in each case, reflecting the absence of Liens on the assets of the Credit
Parties other than Permitted Liens or Liens to be discharged on or prior to the Closing Date
pursuant to documentation satisfactory to the Initial Lender.
(m) Collateral Coverage Ratio. On the Closing Date (and after giving pro forma
effect to any Borrowings on such date), the Collateral Coverage Ratio shall not be less than 2.0 to
1.0.
(n) Solvency Certificate. The Initial Lender shall have received a certificate of the
chief financial officer or treasurer (or other comparable officer) of the Parent certifying that the
Borrower and its Subsidiaries (taken as a whole) are, and will be immediately after giving effect
to any Loans borrowed on the Closing Date, Solvent.
(o) Warrant Agreement. Treasury and the Parent shall have entered into the Warrant
Agreement.
(p) Other Matters. Since June 29, 2020, (i) there has been no event or circumstance
that, either individually or in the aggregate, has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the Credit Parties has made a Disposition of any assets
constituting Collateral had this Agreement been in effect at such time.
SECTION 4.02 Each Borrowing. The funding by the Lenders of each Borrowing
(including the Borrowing to be requested on the Closing Date) is additionally subject to the satisfaction of
the following conditions:
(a) the Administrative Agent shall have received a written Borrowing Request in
accordance with the requirements of Section 2.03(a), with a copy to the Initial Lender (solely to
the extent the Initial Lender is a Lender at the time of such Borrowing);
(b) the representations and warranties of the Credit Parties set forth in this
Agreement and in any other Loan Document shall be true and correct in all material respects (or,
in the case of any such representation or warranty already qualified by materiality, in all respects)
on and as of the date of such Borrowing (or, in the case of any such representation or warranty
expressly stated to have been made as of a specific date, as of such specific date);
(c) no Default shall have occurred and be continuing or would result from such
Borrowing or from the application of proceeds thereof;
(d) on the date of the funding of such Borrowing (and after giving pro forma effect
thereto and the pledge of any Additional Collateral), the Collateral Coverage Ratio shall not be
less than 2.0 to 1.0 as evidenced by a certificate of a Responsible Officer of the Parent;
(e) on the date of such Borrowing, the opinion of the independent public accountants
(after giving effect to any reissuance or revision of such opinion) on the most recent audited
consolidated financial statements delivered by the Parent pursuant to Section 5.01(a) shall not
include a “going concern” qualification under GAAP as in effect on the date of this Agreement
or, if there is a change in the relevant provisions of GAAP thereafter, any like qualification or
exception under GAAP after giving effect to such change; and
(f) on or prior to the date of such Borrowing, each Credit Party shall have satisfied
the Perfection Requirement with respect to the Collateral.
Each Borrowing Request by the Borrower hereunder and each Borrowing shall be deemed to constitute a
representation and warranty by the Borrower on and as of the date of the applicable Borrowing as to the
matters specified in clauses (b)(b) and (c) above in this Section.
ARTICLE V
AFFIRMATIVE COVENANTS
Until all the later of (i) the date on which all of the Obligations shall have been paid in
full and (ii) such later date specified in this Agreement, the Credit Parties covenant and agree with the
Lenders that:
SECTION 5.01 Financial Statements. The Parent will furnish to the Administrative Agent
and each Lender:
(a) as soon as available, and in any event within ninety (90) days after the end of
each fiscal year of the Parent (or, if earlier, five (5) days after the date required to be filed with
the SEC) (commencing with the fiscal year ended prior to the Closing Date), a consolidated
balance sheet of the Parent and its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income or operations, shareholders’ equity and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year,
audited and accompanied by a report and opinion of independent public accountants of nationally
recognized standing, which report and opinion shall be prepared in accordance with generally
accepted auditing standards (and shall not be subject to any “going concern” or like qualification
(other than a qualification solely resulting from (x) the impending maturity of any Indebtedness
or (y) any prospective or actual default under any financial covenant), exception or explanatory
paragraph or any qualification, exception or explanatory paragraph as to the scope of such audit)
to the effect that such consolidated financial statements present fairly in all material respects the
financial condition, results of operations, shareholders’ equity and cash flows of the Parent and its
Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
(b) as soon as available, but in any event within forty-five (45) days after the end of
each of the first three (3) fiscal quarters of each fiscal year of the Parent (or, if earlier, five
(5) days after the date required to be filed with the SEC) (commencing with the first of such fiscal
quarters ended prior to the Closing Date), a consolidated balance sheet of the Parent and its
Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or
operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the
Parent’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the
figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year, certified by a Financial Officer of the Parent as fairly
presenting in all material respects the financial condition, results of operations, shareholders’
equity and cash flows of the Parent and its Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject only to normal year-end audit adjustments and the
absence of notes;
(c) for so long as the Initial Lender is the only Lender, as soon as available, but in
any event no later than seventy-five (75) days after the beginning of each fiscal year of the Parent,
forecasts prepared by management of the Parent and a summary of material assumptions used to
prepare such forecasts, in form satisfactory to the Initial Lender, including projected consolidated
balance sheets and statements of income or operations and cash flows of the Parent and its
Subsidiaries on a quarterly basis for such fiscal year; and
(d) solely at the request of the Appropriate Party (which shall be no more than
quarterly), at a time mutually agreed with the Appropriate Party and the Parent, participate in a
conference call for Lenders to discuss the financial condition and results of operations of the
Parent and its Subsidiaries and any forecasts which have been delivered pursuant to this Section
5.01.
SECTION 5.02 Certificates; Other Information. The Parent will deliver to the
Administrative Agent and each Lender:
(a) [reserved];
(b) concurrently with the delivery of the financial statements referred to in
Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the
Parent certifying as to whether a Default has occurred and, if a Default has occurred, specifying
the details thereof and any action taken or proposed to be taken with respect thereto;
(c) [reserved];
(d) promptly after the furnishing thereof, copies of any notice of default or potential
default or other material written notice received by the Parent or any Subsidiary from, or
furnished by the Parent or any Subsidiary to, any holder of Material Indebtedness of the Parent or
any Subsidiary;
(e) promptly after receipt thereof by any Credit Party or any Subsidiary thereof,
copies of each material notice or other material written correspondence received from the SEC (or
comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or
possible investigation or other inquiry by such agency regarding material financial or other
material operational results of any Credit Party or any Subsidiary thereof;
(f) [reserved];
(g) promptly following any request therefor, (i) such other information regarding the
operations, business, properties, liabilities (actual or contingent), condition (financial or
otherwise) or prospects of any Credit Party or any Subsidiary, or compliance with the terms of the
Loan Documents, as the Administrative Agent, the Initial Lender or any other Lender (acting
through the Administrative Agent) may from time to time request; or (ii) beneficial ownership
information and documentation reasonably requested by the Administrative Agent or any Lender
from time to time for purposes of ensuring compliance with Sanctions and AML Laws. For
purposes of determining whether or not a representation with respect to any indirect ownership is
true or a covenant is being complied with under this Section, the Parent shall not be required to
make any investigation into (i) the ownership of publicly traded stock or other publicly traded
securities or (ii) the ownership of assets by a collective investment fund that holds assets for
employee benefit plans or retirement arrangements; and
(h) concurrently with the delivery of the financial statements referred to in
Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the
Borrower certifying as to its compliance with Article X of this Agreement.
Documents required to be delivered pursuant to Section 5.01(a) or (b) or Section 5.02(c),
(d) or (e) (to the extent any such documents are included in materials otherwise filed with the SEC) may
be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on
which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and
Retrieval system (EDGAR); or (ii) on which such documents are posted on the Parent’s behalf on an
Internet or intranet website, if any, to which each Lender and the Administrative Agent have access
(whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided
that: (A) upon written request by the Administrative Agent, the Parent shall deliver paper copies of such
documents to the Administrative Agent or any Lender upon its request to the Parent to deliver such paper
copies until a written request to cease delivering paper copies is given by the Administrative Agent or
such Lender and (B) the Parent shall notify the Administrative Agent and each Lender (by facsimile or
electronic mail) of the posting of any such documents and provide to the Lenders by electronic mail
electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no
obligation to request the delivery of or to maintain paper copies of the documents referred to above.
SECTION 5.03 Notices. The Parent will promptly notify the Administrative Agent and each
Lender of:
(a) promptly after any Responsible Officer of Parent or any of its Subsidiaries
obtains knowledge thereof, the occurrence of any Default;
(b) the filing or commencement of any action, suit, investigation or proceeding by or
before any arbitrator or Governmental Authority against or affecting the Parent or any Controlled
Affiliate thereof, including pursuant to any applicable Environmental Laws, that could reasonably
be expected to be adversely determined, and, if so determined, could reasonably be expected to
have a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, either individually or together with any
other ERISA Events, could reasonably be expected to have a Material Adverse Effect;
(d) notice of any action arising under any Environmental Law or of any
noncompliance by any Credit Party or any Subsidiary with any Environmental Law or any
permit, approval, license or other authorization required thereunder that, if adversely determined,
could reasonably be expected to have a Material Adverse Effect;
(e) to the extent not publicly disclosed pursuant to an SEC filing of the Parent, any
material change in accounting or financial reporting practices by the Parent, any Credit Party or
any Subsidiary;
(f) any change in the Credit Ratings from a Credit Rating Agency with negative
implications, or the cessation by a Credit Rating Agency of, or its intent to cease, rating the
Borrower’s or the Parent’s debt; and
(g) any matter or development that has had or could reasonably be expected to have
a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a
Responsible Officer of the Parent setting forth the details of the occurrence requiring such notice and
stating what action the Parent has taken and proposes to take with respect thereto.
SECTION 5.04 Preservation of Existence, Etc. Each Credit Party will, and will cause each
of its Subsidiaries to, (a) preserve, renew and maintain in full force and effect its legal existence and good
standing under the Laws of the jurisdiction of its organization except in a transaction permitted by
Section 6.03 or 6.04; (b) take all reasonable action to maintain all rights, licenses, permits, privileges and
franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its
registered patents, trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
SECTION 5.05 Maintenance of Properties. Each Credit Party will, and will cause each of
its Subsidiaries to, (a) maintain, preserve and protect all of its properties and equipment necessary in the
operation of its business in good working order and condition (ordinary wear and tear excepted) and
(b) make all necessary repairs thereto and renewals and replacements thereof, except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.06 Maintenance of Insurance. Subject to any additional requirements under
any Security Document, each Credit Party will maintain with financially sound and reputable insurance
companies, insurance with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business, of such types and in such
amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons
engaged in the same or similar businesses as Parent and its Subsidiaries; provided that, insurance in respect
of Collateral shall be maintained with such third party insurance companies except to the extent expressly
permitted in the Pledge and Security Agreement) as are customarily carried under similar circumstances by
such Persons.
SECTION 5.07 Payment of Obligations. Each Credit Party will pay, discharge or
otherwise satisfy as the same shall become due and payable, all of its obligations and liabilities, including
Tax liabilities, except to the extent (a) the same are being contested in good faith by appropriate
proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by
the Parent or such Credit Party or (b) the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
SECTION 5.08 Compliance with Laws. Each Credit Party will, and will cause each of its
Subsidiaries to, comply with the requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.09 Environmental Matters. Except to the extent that the failure to do so could
not reasonably be expected to have a Material Adverse Effect, each Credit Party will, and will cause each of
its Subsidiaries to, (a) comply with all Environmental Laws, (b) obtain, maintain in full force and effect and
comply with any permits, licenses or approvals required for the facilities or operations of the Parent or any
of its Subsidiaries, and (c) conduct and complete any investigation, study, sampling or testing, and
undertake any corrective, cleanup, removal, response, remedial or other action necessary to identify, report,
remove and clean up all Hazardous Materials present or released at, on, in, under or from any of the
facilities or real properties of the Parent or any of its Subsidiaries.
SECTION 5.10 Books and Records. Each Credit Party will maintain proper books of
record and account, in which full, true and correct entries in conformity with GAAP consistently applied
shall be made of all financial transactions and matters involving the assets and business of the Parent or
such Subsidiary, as the case may be.
SECTION 5.11 Inspection Rights. Each Credit Party will, and, to the extent relevant for
inspections of Collateral will cause each of its Subsidiaries to, permit representatives, agents and
independent contractors of the Administrative Agent, the Initial Lender and the Special Inspector General
for Pandemic Recovery to visit and inspect any of its properties (including all Collateral), to examine its
corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with its directors, officers, and independent public accountants, all at the
reasonable expense of the Parent and at such reasonable times during normal business hours and as often as
may be reasonably requested; provided that, other than with respect to such visits and inspections during the
continuation of an Event of Default or by the Initial Lender or the Special Inspector General for Pandemic
Recovery, (a) only the Administrative Agent (or its representatives, agents and independent contractors) at
the direction of a Lender may exercise rights under this Section and (b) the Administrative Agent (or its
representatives, agents and independent contractors) shall not exercise such rights more often than two (2)
times during any calendar year; provided, further, that when an Event of Default exists the Administrative
Agent, any Lender or the Special Inspector General for Pandemic Recovery (or any of their respective
representatives, agents or independent contractors) may do any of the foregoing under this Section at the
expense of the Parent and at any time during normal business hours and without advance notice.
SECTION 5.12 Sanctions; Export Controls; Anti-Corruption Laws and AML Laws. Each
Credit Party and its Subsidiaries will remain in compliance in all material respects with applicable
Sanctions, Export Control Laws, Anticorruption Laws, and AML Laws. Until all Obligations have been
paid in full, neither any Credit Party; any Subsidiary of a Credit Party; nor any director or officer of any
Credit Party or any Subsidiary of a Credit Party shall become a Sanctioned Person or a Person that is
organized or resident in a Sanctioned Country or located in a Sanctioned Country except to the extent
authorized under Sanctions.
SECTION 5.13 Guarantors; Additional Collateral.
(a) The Guarantors listed on the signature page to this Agreement hereby Guarantee
the Guaranteed Obligations as set forth in ArticleARTICLE IX. If any Subsidiary (other than an
Excluded Subsidiary) is formed or acquired after the Closing Date, if any Subsidiary ceases to be an
Excluded Subsidiary or if required in connection with the addition of Additional Collateral, then the
Parent will cause such Subsidiary, promptly (in any event, within thirty (30) days of such Subsidiary
being formed or acquired or of such Subsidiary ceasing to be an Excluded Subsidiary) (i) to become a
Guarantor of the Loans pursuant to joinder documentation reasonably acceptable to the Appropriate Party
and on the terms and conditions set forth in ArticleARTICLE IX, (ii) to become a party to each applicable
Security Document and all other agreements, instruments or documents that create or purport to create
and perfect a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit
of the Secured Parties in its assets that are of a type that are intended to be included in the Collateral
(other than any Excluded Assets), subject to and in accordance with the terms, conditions and provisions
of the Loan Documents, (iii) to satisfy the Perfection Requirement, (iv) to deliver a secretary’s certificate
of such Subsidiary, in form and substance reasonably acceptable to the Appropriate Party, with
appropriate insertions and attachments, and (v) to deliver legal opinions relating to the matters described
above, which opinions shall be in form and substance, and from counsel, satisfactory to the Appropriate
Party.
(b) If the Parent or any Subsidiary desires, or is required pursuant to the terms of this
Agreement, to add Additional Collateral or, if any Subsidiary acquires any existing Collateral from a
Grantor (as defined in the Pledge and Security Agreement) that it is required pursuant to the terms of this
Agreement to maintain as Collateral, in each case, after the Closing Date, the Parent shall, in each case at
its own expense, promptly (in any event, unless any other time period is specified in this Agreement or
any other Loan Document within thirty (30) days of the relevant date) (i) cause any such Subsidiary to
become a Grantor (to the extent such Subsidiary is not already a Grantor) pursuant to joinder
documentation acceptable to the Appropriate Party and on the terms and conditions set forth in the
relevant Security Documents, (ii) cause any such Subsidiary to become a party to each applicable Security
Document and all other agreements, instruments or documents that create or purport to create and perfect
a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit of the
Secured Parties applicable to such Collateral, in form and substance satisfactory to the Appropriate Party
(it being understood that in the case of any Additional Collateral of a type, or in a jurisdiction, that has not
been theretofore included in the Collateral, such Additional Collateral may be subject to such additional
terms and conditions as requested by the Appropriate Party), (iii) promptly execute and deliver (or cause
such Subsidiary to execute and deliver) to the Collateral Agent such documents and take such actions to
create, grant, establish, preserve and perfect the first priority Liens (subject to Permitted Liens) (including
to obtain any release or termination of Liens not permitted under the definition of “Additional Collateral”
in Section 1.01 or under Section6.02 and to satisfy all Perfection Requirements, including the filing of
UCC financing statements, filings with the FAA and registrations with the International Registry, as
applicable) in favor of the Collateral Agent for the benefit of the Secured Parties on such assets of the
Parent or such Subsidiary, as applicable, to secure the Obligations to the extent required under the
applicable Security Documents or reasonably requested by the Appropriate Party, and to ensure that such
Collateral shall be subject to no other Liens other than Permitted Liens and (iv) if requested by the
Appropriate Party, deliver (or cause such Subsidiary to deliver) legal opinions to the Collateral Agent, for
the benefit of the Secured Parties, relating to the matters described above, which opinions shall be in form
and substance, and from counsel, satisfactory to the Appropriate Party.
SECTION 5.14 Post-Closing Matters. As promptly as practicable, and in any event within
the time periods after the Closing Date specified on Schedule 5.14 or such later date as the Initial Lender
may agree to in writing in its sole discretion, the Parent shall deliver the documents or take the actions
specified on Schedule 5.14 that would have been required to be delivered or taken on the Closing Date.
SECTION 5.15 Further Assurances. In each case subject to the terms, conditions and
limitations in the Loan Documents, (a) each Credit Party shall remain in compliance with the Perfection
Requirement with respect to all Collateral (including any assets, rights and properties that (x) become
Collateral after the Closing Date and (y) any permitted replacement or substitute assets, rights and
properties thereof (including any Additional Collateral) and (b) each Credit Party shall, promptly and at its
expense, execute any and all further documents and instruments and take all further actions, that may be
required or advisable under applicable law or that the Initial Lender, the Administrative Agent or the
Collateral Agent may request, in order to create, grant, establish, preserve, protect, renew or perfect the
validity, perfection or first priority of the Liens and security interests created or intended to be created by
the Security Documents, in each case to the extent required under this Agreement or the Security
Documents (including with respect to any additions to the Collateral (including any Additional Collateral)
or replacements, substitutes or proceeds thereof or with respect to any other property or assets hereafter
acquired by any Credit Party that are of a type that are intended to be included in the Collateral).
SECTION 5.16 Delivery of Appraisals. The Parent shall (1) within ten (10) Business Days
prior to the last Business Day of March and September of each year, beginning with March 31, 2021 and (2)
promptly (but in any event within thirty (30) days) following request by the Administrative Agent (acting at
the direction of the Required Lenders) if an Event of Default has occurred and is occurring, deliver to the
Administrative Agent one or more Appraisals determining the Appraised Value of the Collateral. In
addition, on the date upon which any Additional Collateral is pledged as Collateral to the Collateral Agent
for the benefit of the Secured Parties to secure the Obligations, but only with respect to such Additional
Collateral, the Parent shall deliver to the Administrative Agent one or more Appraisals determining the
Appraised Value of such Additional Collateral.
SECTION 5.17 Ratings. At any time when the Initial Lender is a Lender, the Borrower
shall, upon request by the Initial Lender, use its reasonable best efforts to obtain a public rating (or, if the
Borrower does not have a public family corporate rating at such time, a private rating) in respect of the
Loans by any two of S&P, Moody’s and Fitch in connection with any contemplated assignment of, or
participation in, the Loans.
SECTION 5.18 Regulatory Matters.
(a) US Citizenship. The Borrower will at all times maintain its status as a “citizen of
the United States” as defined in Section 40102(a)(15) of Title 49 and as that statutory provision has been
interpreted by the DOT pursuant to its policies.
(b) Air Carrier Status. The Borrower will at all times maintain its status as an “air
carrier” within the meaning of Section 40102 of Title 49 and holds a certificate under Section 41102 of
Title 49. The Borrower will at all times possess an air carrier operating certificate issued pursuant to
Chapter 447 of Title 49. The Borrower will at all times possess all necessary certificates, franchises,
licenses, permits, rights, designations, authorizations, exemptions, concessions, frequencies and consents
which relate to the operation of the routes flown by it and the conduct of its business and operations as
currently conducted, except where failure to do so, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
ARTICLE VI
NEGATIVE COVENANTS
Until all the later of (i) the date on which all of the Obligations shall have been paid in
full and (ii) such later date specified in this Agreement, the Credit Parties covenant and agree with the
Lenders that:
SECTION 6.01 [Reserved].
SECTION 6.02 Liens. Parent will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any Lien upon any property or assets constituting Collateral, whether now
owned or hereafter acquired, except for Permitted Liens.
SECTION 6.03 Fundamental Changes. Parent will not, and will not permit any of its
Subsidiaries to, merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result
therefrom:
(a) any Subsidiary may merge with (i) the Borrower; provided that the Borrower
shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries; provided
that (x) when any Wholly-Owned Subsidiary is merging with another Subsidiary, a Wholly-
Owned Subsidiary shall be the continuing or surviving Person and (y) when any Subsidiary that is
a Credit Party is merging with another Subsidiary, then such other Subsidiary shall be a Credit
Party;
(b) any Subsidiary may Dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise) to the Parent or to another Subsidiary; provided that (x) if the
transferor in such a transaction is a Wholly-Owned Subsidiary, then the transferee shall either be
the Parent or another Wholly-Owned Subsidiary and (y) if the transferor in such a transaction is a
Credit Party, then the transferee shall be a Credit Party;
(c) the Parent and its Subsidiaries may make Dispositions permitted by Section 6.04;
(d) any Investment permitted by Section 6.06 may be structured as a merger,
consolidation or amalgamation;
(e) any Subsidiary may dissolve, liquidate or wind up its affairs if it owns no
material assets, engages in no business and otherwise has no activities other than activities related
to the maintenance of its existence and good standing; and
(f) any Subsidiary may Dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise); provided that such assets do not constitute all or substantially
all of the consolidated assets of the Parent and its Subsidiaries.
SECTION 6.04 Dispositions. Parent will not, and will not permit any of its Subsidiaries to,
sell or otherwise make any Disposition of Collateral or enter into any agreement to make any sale or other
Disposition of Collateral (in each case, including, without limitation by way of any sale or other Disposition
of any Guarantor), except, subject to Article X and so long as no Default shall have occurred and be continuing
at the time of any action described below, or would result therefrom:
(a) [reserved];
(b) Dispositions of Collateral among the Credit Parties (including any Person that
shall become a Credit Party simultaneous with such Disposition in the manner contemplated by
Section 5.13); provided that:
(i) such Collateral remains at all times subject to a Lien with the same
priority and level of perfection as was the case immediately prior to such Disposition (and
otherwise subject only to Permitted Liens) in favor of the Collateral Agent for the benefit of the
Secured Parties following such Disposition;
(ii) concurrently therewith, the Credit Parties shall execute any documents
and take any actions reasonably required to create, grant, establish, preserve or perfect such Lien
in accordance with the other provisions of this Agreement or the Security Documents;
(iii) if requested by the Appropriate Party, concurrently therewith, the
Appropriate Party shall receive an opinion of counsel to the applicable Credit Party (x) in the case
of Collateral that consists of Route Authorities, Slots and/or Gate Leaseholds, as to the creation
and perfection under Article 9 of the UCC of the Lien of the security agreement or mortgage, as
applicable, and subject to assumptions and qualifications (including as provided in the opinion(s)
delivered on the Closing Date), and (y) in the case of any other Collateral, as to the creation and
perfection of the Lien of such security agreement or mortgage, as applicable, in form and
substance satisfactory to the Appropriate Party; and
(iv) concurrently with any Disposition of Collateral to any Person that shall
become a Credit Party simultaneous with such Disposition in the manner contemplated by
Section 5.13, such Person shall have complied with the requirements of Section 5.13.
(c) to the extent constituting a Disposition of Collateral, the incurrence of Liens that
are permitted to be incurred pursuant to Section 6.02;
(d) Disposition of cash or Cash Equivalents in exchange for other cash or Cash
Equivalents constituting Collateral and having reasonably equivalent value therefor;
(e) the abandonment or Disposition of assets no longer useful or used in the
business; provided that such abandonment or Disposition is (A) in the ordinary course of business
and (B) with respect to assets that are not material to the business of the Parent and the
Subsidiaries taken as a whole;
(f) [reserved];
(g) any Disposition of property resulting from an event of loss with respect to any
aircraft, airframe, engine, spare engine or Spare Parts if the Credit Party is replacing such aircraft,
airframe, engine, spare engine or Spare Parts in accordance with the terms of the Loan
Documents; and
(h) any Disposition of Collateral permitted by any of the Security Documents.
SECTION 6.05 Restricted Payments. Parent will not, and will not permit any of its
Subsidiaries to, declare or make, directly or indirectly, any Restricted Payment, or incur any obligation
(contingent or otherwise) to do so, except, that, subject to additional restrictions set forth in Article X, so
long as no Default shall have occurred and be continuing at the time of any action described below or would
result therefrom:
(a) each Subsidiary may make Restricted Payments to the Parent and any other
Person that owns an Equity Interest in such Subsidiary, ratably according to their respective
holdings of such Equity Interests in respect of which such Restricted Payment is being made;
(b) the Parent and each Subsidiary may declare and make dividend payments or
other distributions payable solely in common Equity Interests of such Person;
(c) the Parent and each Subsidiary may purchase, redeem or otherwise acquire
Equity Interests issued by it with the proceeds received from the substantially concurrent issue of
new common Equity Interests;
(d) the Parent and each Subsidiary may pay withholding or similar taxes payable by
any future, present or former employee, director or officer (or any spouses, former spouses,
successors, executors, administrators, heirs, legatees or distributees of any of the foregoing) in
connection with any repurchases of Equity Interests or the exercise of stock options;
(e) the repurchase of Equity Interests or other securities deemed to occur upon (A)
the exercise of stock options, warrants or other securities convertible or exchangeable into Equity
Interests or any other securities, to the extent such Equity Interests or other securities represent a
portion of the exercise price of those stock options, warrants or other securities convertible or
exchangeable into Equity Interests or any other securities or (B) the withholding of a portion of
Equity Interests issued to employees and other participants under an equity compensation
program of the Parent or its Subsidiaries to cover withholding tax obligations of such persons in
respect of such issuance;
(f) payments of cash, dividends, distributions, advances, common stock or other
Restricted Payments by the Parent or any of its Subsidiaries to allow the payment of cash in lieu
of the issuance of fractional shares upon (A) the exercise of options or warrants, (B) the
conversion or exchange of capital stock of any such Person or (C) the conversion or exchange of
Indebtedness or hybrid securities into capital stock of any such Person;
(g) the Parent may make cash payments in connection with any conversion or
exchange of Convertible Indebtedness in amount equal to the sum of (i) the principal amount of
such Convertible Indebtedness and (ii) the proceeds of any payments received by the Parent or
any of its Subsidiaries pursuant to the exercise, settlement or termination of any related Permitted
Bond Hedge Transaction;
(h) the Parent may make payments in connection with a Permitted Bond Hedge
Transaction (i) by delivery of shares of the Parent’s Equity Interests upon net share settlement
thereof or (ii) by (A) set-off against the related Permitted Bond Hedge Transaction and (B)
payment of an early termination amount thereof in common Equity Interests of the Parent upon
any early termination thereof; and
(i) Restricted Payments not to exceed the amount allowable pursuant to Schedule
6.05(i).
SECTION 6.06 Investments. Parent will not, and will not permit any of its Subsidiaries to,
make any Investments, except:
(a) Investments held by the Parent or such Subsidiary in the form of cash or Cash
Equivalents;
(b) (i) Investments in Subsidiaries in existence on the Closing Date, (ii) other
Investments in existence on the Closing Date and listed in Section I to Schedule 6.06 and (iii)
other Investments described on Section II of Schedule 6.06, and, in each case, any refinancing,
refunding, renewal or extension of any such Investment that does not increase the amount thereof;
(c) advances to officers, directors and employees of the Parent and its Subsidiaries in
an aggregate amount not exceeding, at any time outstanding, an amount that is customary and
consistent with past practice, for travel, entertainment, relocation and similar ordinary business
purposes;
(d) (x) Investments of the Parent in the Borrower or any other Credit Party, (y)
Investments of any Subsidiary in the Parent or any other Credit Party and (z) Investments made
between Subsidiaries that are not Credit Parties; provided that any such Investments made
pursuant to this clause (d) in the form of intercompany indebtedness incurred by a Credit Party
and owed to a Subsidiary that is not a Credit Party shall be subordinated to the Obligations and
the Guaranteed Obligations on customary terms (it being understood and agreed that any
Investments permitted under this clause (d) in the form of intercompany indebtedness that are not
already subordinated on such terms as of the Closing Date shall not be required to be so
subordinated until the date that is thirty (30) days after the Closing Date);
(e) Investments consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the ordinary course of
business, and Investments received in satisfaction or partial satisfaction thereof from financially
troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;
(f) Investments consisting of the indorsement by the Parent or any Subsidiary of
negotiable instruments payable to such Person for deposit or collection in the ordinary course of
business;
(g) to the extent constituting an Investment, transactions otherwise permitted by
Sections 6.03 and 6.05;
(h) any Investments received in compromise or resolution of (i) obligations of trade
creditors or customers that were incurred in the ordinary course of business of Parent or any of its
Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer or (ii) litigation, arbitration or other
disputes;
(i) Investments represented by obligations in respect of Swap Contracts that are not
speculative in nature and that are entered into to hedge or mitigate risks to which the Parent or
any of its Subsidiaries has (or will have) actual exposure (other than those in respect of the Equity
Interests or Indebtedness of the Parent or any of its Subsidiaries);
(j) accounts receivable arising in the ordinary course of business;
(k) any guarantee of Indebtedness of Parent or any Subsidiary of Parent other than
any guarantee of Indebtedness secured by Liens that would not be permitted under Section 6.02;
(l) Investments to the extent that payment for such Investment is made with the
capital stock of the Parent;
(m) Investments having an aggregate fair market value (measured on the date each
such Investment was made and without giving effect to subsequent changes in value other than a
reduction for all returns of principal in cash and capital dividends in cash), when taken together
with all Investments made pursuant to this clause (n) that are at the time outstanding, not to
exceed 30% of the total consolidated assets of the Parent and its Subsidiaries at the time of such
Investment;
(n) Permitted Bond Hedge Transactions to the extent constituting Investments; and
(o) Investments in Finance Entities in the ordinary course of business of the Parent
and its Subsidiaries or that are otherwise customary for airlines based in the United States.
SECTION 6.07 Transactions with Affiliates. Parent will not, and will not permit any of its
Subsidiaries to, enter into any transaction of any kind involving aggregate payments or consideration in
excess of $50,000,000 with any Affiliate of the Parent, whether or not in the ordinary course of business,
other than on fair and reasonable terms substantially as favorable to the Parent or such Subsidiary as would
be obtainable by the Parent or such Subsidiary at the time in a comparable arm’s-length transaction with a
Person other than an Affiliate, subject to delivery of (x) with respect to any transaction or series of related
transactions involving aggregate consideration in excess of $100,000,000, a certificate of a Responsible
Officer of the Parent certifying as to compliance with the foregoing and (y) with respect to any transaction
or series of related transactions involving aggregate consideration in excess of $150,000,000, an opinion as
to the fairness to the Parent or such Subsidiary of such transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing (provided that this clause (y) shall
not apply to any transaction between or among the Parent or any of its Subsidiaries and any Finance
Entities); provided that, subject to Article X, the foregoing restriction shall not apply to:
(a) transactions between or among the Parent and any Wholly-Owned Subsidiaries,
(b) Restricted Payments permitted by Section 6.05,
(c) Investments permitted by Section 6.06(b), or (c) or (d),
(d) transactions described in Schedule 6.07,
(e) any employment agreement, confidentiality agreement, non-competition
agreement, incentive plan, employee stock option agreement, long-term incentive plan, profit sharing
plan, employee benefit plan, officer or director indemnification agreement or any similar arrangement
entered into by the Parent or any of its Subsidiaries in the ordinary course of business and payments
pursuant thereto, and
(f) payment of fees, compensation, reimbursements of expenses (pursuant to
indemnity arrangements or otherwise) and reasonable and customary indemnities provided to or on behalf
of officers, directors, employees or consultants of the Parent or any of its Subsidiaries.
SECTION 6.08 [Reserved].
SECTION 6.09 [Reserved].
SECTION 6.10 Changes in Nature of Business. Parent will not, and will not permit any of
its Subsidiaries to, engage to any material extent in any business other than those businesses conducted by
the Parent and its Subsidiaries on the date hereof or any business reasonably related or incidental thereto or
representing a reasonable expansion thereof.
SECTION 6.11 Sanctions; AML Laws. Parent will not, and will not permit any of its
Subsidiaries to, directly or knowingly indirectly, use the proceeds of the Loans, or lend, contribute or
otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person to fund any
activities or business of or with any Person in a manner that would result in a violation of Sanctions or
AML Laws by any Person.
SECTION 6.12 Amendments to Organizational Documents. Parent will not, and will not
permit any of its Subsidiaries to amend, modify, or grant any waiver or release under or terminate in any
manner, any Organizational Documents in any manner materially adverse to, or which would impair the
rights of, the Lenders.
SECTION 6.13 [Reserved].
SECTION 6.14 Prepayments of Junior Indebtedness. Parent will not, and will not permit
any of its Subsidiaries to, make any principal payment on, or redeem, repurchase, defease or otherwise
acquire or retire for value, in each case prior to any scheduled repayment, sinking fund payment or
maturity, any Indebtedness secured by junior Liens on the Collateral or that is subordinated in right of
payment to the Obligations, in each case other than in connection with a Permitted Refinancing of such
Indebtedness.
SECTION 6.15 Lobbying. Parent will not, and will not permit any of its Subsidiaries to,
directly, or to the Parent or such Subsidiary’s knowledge, indirectly, use the proceeds of the Loans, or lend,
contribute, or otherwise make available such proceeds to any other Person (i) for publicity or propaganda
purposes designated to support or defeat legislation pending before the U.S. Congress or (ii) to fund any
activities that would constitute “lobbying activities” as defined under 2 U.S.C. § 1602. The Parent shall,
and shall cause its subsidiaries to, comply with the provisions of 31 U.S.C. § 1352, as amended, and with
the regulations at 31 CFR Part 21.
SECTION 6.16 Use of Proceeds. Parent will not, and will not permit any of its
Subsidiaries to, use the proceeds of the Loans for any purpose other than for general corporate purposes and
operating expenses (including payroll, rent, utilities, materials and supplies, repair and maintenance, and
scheduled interest payments on other Indebtedness incurred before February 15, 2020), in each case in
compliance with all applicable law to the extent permitted by the CARES Act; provided however that the
proceeds of the Loans shall not be used for any non-operating expenses (including capital expenses,
delinquent taxes and payments of principal on other Indebtedness), unless the Parent can demonstrate, to the
satisfaction of the Initial Lender, that payment of any such non-operating expense is necessary to optimize
the continued operations of the Parent’s business and does not merely constitute a transfer of risk from an
existing creditor or investor to the Federal taxpayer.
SECTION 6.17 Financial Covenants.
(a) Liquidity. The Parent will not permit the aggregate amount of Liquidity at the
close of any Business Day to be less than $400,000,000.
(b) Collateral Coverage Ratio.
(i) Within ten (10) Business Days after (x) the last day of March and
September of each year (beginning with March 2021) or (y) any date on which an Appraisal is
delivered pursuant to clause (2) of Section 5.16 (each such date in clauses (x) and (y), a “CCR
Reference Date” and the tenth Business Day after a CCR Reference Date, a “CCR Certificate
Delivery Date”), the Parent shall deliver to the Administrative Agent a certificate of a
Responsible Officer of the Parent containing a calculation of the Collateral Coverage Ratio (a
“CCR Certificate”).
(ii) If the Collateral Coverage Ratio with respect to any CCR Reference Date
is less than 1.60 to 1.00, the Borrower shall, no later than ten (10) Business Days after the
applicable CCR Certificate Delivery Date, (x) prepay any outstanding Loans such that following
such prepayment, the Collateral Coverage Ratio with respect to such CCR Reference Date,
recalculated by subtracting any such prepaid portion of the Loans, shall be no less than 1.60 to
1.00 and/or (y) designate Additional Collateral as additional Eligible Collateral and comply with
Sections 5.13 and 5.15, collectively, in an amount such that following such designation, the
Collateral Coverage Ratio with respect to such CCR Reference Date, recalculated by adding such
Additional Collateral, shall be no less than 1.60 to 1.00.
(iii) At the Parent’s request, the Lien on any Collateral will be released,
provided, in each case, that the following conditions are satisfied or waived: (a) no Event of
Default shall have occurred and be continuing, (b) either (x) after giving effect to such release,
the Collateral Coverage Ratio is not less than 2.00 to 1.00 (or in the case of a swap or exchange of
existing Additional Collateral with new Additional Collateral, less than 1.60 to 1.00) or (y) the
Parent shall prepay or cause to be prepaid the Loans and/or shall designate Eligible Collateral as
Additional Collateral and comply with Sections 5.13 and 5.15, collectively, in an amount
necessary to cause the Collateral Coverage Ratio to not be less than 2.00 to 1.00 (or in the case of
a swap or exchange of existing Additional Collateral with new Additional Collateral, less than
1.60 to 1.00) and (c) the Parent shall deliver a certificate executed by a Responsible Officer
demonstrating compliance with this Section 6.17(b)(iii).
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 Events of Default. If any of the following events (each, an “Event of
Default”) shall occur:
(a) the Borrower shall fail to pay any principal of any Loan when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan, or any fee or any other
amount (other than an amount referred to in clause (a)(a) of this Section) payable under this
Agreement or under any other Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of two (2) or more Business
Days;
(c) any representation or warranty made or deemed made by or on behalf of any
Credit Party, including those made prior to the Closing Date, in or in connection with this
Agreement, the Loan Application Form or any other Loan Document or any amendment or
modification hereof or thereof, or any waiver hereunder or thereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in connection with this
Agreement, the Loan Application Form or any other Loan Document or any amendment or
modification hereof or thereof, or any waiver hereunder or thereunder, shall prove to have been
incorrect in any material respect (or, in the case of any such representation or warranty under this
Agreement, the Loan Application Form or any other Loan Document already qualified by
materiality, such representation or warranty shall prove to have been incorrect) when made or
deemed made;
(d) any Credit Party shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.03(a), 5.04 (with respect to the Borrower’s existence) or in
Article VI or Article X;
(e) any Credit Party shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement or any other Loan Document (other than those specified
in clause (a), (b) or (d) of this Section) and such failure shall continue unremedied for a period of
thirty (30) or more days after notice thereof by the Administrative Agent or the Initial Lender to
the Parent;
(f) (i) Any Credit Party or any Subsidiary thereof shall fail to make any payment
when due (whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Material Indebtedness (other than Indebtedness under this
Agreement) and such failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument governing such Material Indebtedness; or (ii) any Credit Party or any
Subsidiary thereof shall fail to observe or perform any other agreement or condition relating to
any such Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event occurs, the effect of which default or other event results in the
holder or holders or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) causing such Indebtedness to
become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or
causing an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to
its stated maturity; provided that this clause (f)(ii) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer (or disposition of property as a result of a
casualty or condemnation event) of the property or assets securing such Indebtedness, if such sale
or transfer is permitted hereunder and under the documents providing for such Indebtedness and
such Indebtedness is repaid when required under the documents providing for such Indebtedness;
(g) an involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of any Credit Party or any
Material Subsidiary thereof or its debts, or of a substantial part of its assets, under any Debtor
Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Credit Party or any Material Subsidiary
thereof or for a substantial part of its assets, and, in any such case, such proceeding or petition
shall continue undismissed for a period of sixty (60) or more days or an order or decree approving
or ordering any of the foregoing shall be entered;
(h) any Credit Party or any Material Subsidiary thereof shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization or other relief
under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of
this Section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Parent or any of its Subsidiaries or for a
substantial part of its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the foregoing;
(i) any Credit Party or any Material Subsidiary thereof shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due;
(j) there is entered against any Credit Party or any Material Subsidiary thereof (i) a
final judgment or order for the payment of money in an aggregate amount (as to all such
judgments and orders) exceeding $50,000,000 (to the extent not covered by independent third-
party insurance as to which the insurer has been notified of such judgment or order and has not
denied or failed to acknowledge coverage), or (ii) a non-monetary final judgment or order that,
either individually or in the aggregate, has or could reasonably be expected to have a Material
Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor
upon such judgment or order, or (B) there is a period of thirty (30) consecutive days during which
a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in
effect;
(k) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan
that has resulted or could reasonably be expected to result in liability of any Credit Party under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC that, either individually
or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect;
(l) [reserved];
(m) any material provision of any Loan Document, at any time after its execution and
delivery and for any reason other than as expressly permitted hereunder or thereunder or
satisfaction in full of all Obligations, ceases to be in full force and effect; or any Credit Party or
any other Person who is a party to any Loan Document contests in writing the validity or
enforceability of any provision of any Loan Document; or any Credit Party denies in writing that
it has any or further liability or obligation under any Loan Document, or purports in writing to
revoke, terminate or rescind any Loan Document;
(n) any Lien purported to be created under any Security Document shall cease to be,
or shall be asserted in writing by any Credit Party not to be, a legal, valid and perfected Lien on
any material portion of the Collateral (individually or in the aggregate), with the priority required
by the applicable Security Documents, except (i) as a result of the sale or other Disposition of the
applicable Collateral to a Person that is not a Credit Party in a transaction not prohibited under the
Loan Documents or (ii) as a result of either Agent’s failure to maintain possession of any stock
certificates, promissory notes or other instruments delivered to it under the Security Documents
or (iii) as a result of acts or omissions with respect to possessory collateral held by the Collateral
Agent pursuant to this Agreement; or
(o) any Guarantee of any Obligations by any Credit Party under any Loan Document
shall cease to be in full force in effect (other than in accordance with the terms of the Loan
Documents);
then, and in every such event (other than an event described in clause (g) or (h) of this Section), and at
any time thereafter during the continuance of such event, the Initial Lender may, and the Administrative
Agent may, and at the request of the Required Lenders or the Initial Lender shall, by notice to the
Borrower, take any or all of the following actions, at the same or different times:
(i) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may thereafter be declared
to be due and payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other Obligations of the Credit
Parties accrued hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and
the other Credit Parties; and
(ii) exercise on behalf of itself and the Lenders all rights and remedies
available to it and the Lenders under the Loan Documents and Applicable Law;
provided that, in case of any event described in clause (g) or (h) of this Section, the principal of the Loans
then outstanding, together with accrued interest thereon and all fees and other Obligations accrued
hereunder, shall automatically become due and payable, in each case without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Credit Parties.
SECTION 7.02 Application of Payments. Notwithstanding anything herein to the contrary,
following the occurrence and during the continuance of an Event of Default, and notice thereof to the Initial
Lender and the Administrative Agent by the Borrower or the Required Lenders, all payments received on
account of the Obligations shall be applied by the Administrative Agent as follows:
(i) first, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts (including fees and disbursements and other charges of
counsel payable under Section 11.03 and amounts payable under an Administrative Agency Fee
Letter (if any)) payable to the Administrative Agent and the Collateral Agent in their respective
capacities as such;
(ii) second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the Lenders
(including fees and disbursements and other charges of counsel payable under Section 11.03)
arising under the Loan Documents, ratably among them in proportion to the respective amounts
described in this clause (ii) payable to them;
(iii) third, to payment of that portion of the Obligations constituting accrued
and unpaid interest on the Loans, ratably among the Lenders in proportion to the respective
amounts described in this clause (iii) payable to them;
(iv) fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Loans ratably among the Lenders in proportion to the respective amounts
described in this clause (iv) payable to them;
(v) fifth, to the payment in full of all other Obligations, in each case ratably
among the Administrative Agent and the Lenders based upon the respective aggregate amounts of
all such Obligations owing to them in accordance with the respective amounts thereof then due
and payable; and
(vi) finally, the balance, if any, after all Obligations have been indefeasibly
paid in full, to the Borrower or as otherwise required by Law.
ARTICLE VIII
AGENCY
SECTION 8.01 Appointment and Authority. Each Lender hereby irrevocably appoints The
Bank of New York Mellon to act on its behalf as the Administrative Agent and as the Collateral Agent
hereunder and under the other Loan Documents and authorizes the Agents to take such actions on its behalf
and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together
with such actions and powers as are reasonably incidental or related thereto; provided that notwithstanding
anything in this Article VIII or this Agreement to the contrary, the terms and conditions of the relationship
between the Initial Lender and the Agents shall be governed by a separate agreement between the Initial
Lender and the Agents. The Borrower and the Guarantors acknowledge and agree that the Agents are
Agents of the Lenders and not of the Borrower or the Guarantors. In connection with an assignment of the
Loans by the Initial Lender, upon the Administrative Agent’s request, the Borrower and the Agents shall
enter into an Administrative Agency Fee Letter. The provisions of this Article are solely for the benefit of
the Agents and the Lenders, and the Borrower shall not have rights as a third-party beneficiary of any of
such provisions. Without limiting the generality of the foregoing, the Agents are hereby expressly
authorized to (i) execute any and all documents (including releases) with respect to the Collateral and the
rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions
of this Agreement and the other Loan Documents and (ii) negotiate, enforce or settle any claim, action or
proceeding affecting the Lenders in their capacity as such, at the direction of the Required Lenders, which
negotiation, enforcement or settlement will be binding upon each Lender.
SECTION 8.02 Collateral Matters. Each of the Lenders hereby irrevocably appoints and
authorizes the Collateral Agent to act as the agent of such Lender for purposes of acquiring, holding and
enforcing any and all Liens on Collateral granted by any of the Credit Parties to secure any of the
Obligations, together with such powers and discretion as are reasonably incidental thereto and to enter into
and perform the other Loan Documents.
SECTION 8.03 Removal or Resignation of Administrative Agent. While the Initial Lender
is a Lender, the Administrative Agent may be removed or give notice of its resignation subject to any
conditions as separately agreed between the Initial Lender and the Administrative Agent. Any such
resignation as Administrative Agent pursuant to this Section 8.03 shall also constitute its resignation as the
Collateral Agent; provided that in the case of any collateral security held by the Collateral Agent on behalf
of the Lenders under any of the Loan Documents, the retiring or removed Collateral Agent shall continue to
hold such collateral security until such time as a successor Collateral Agent is appointed. Upon such
removal or receipt of any such notice of resignation, the Initial Lender shall have the right to appoint a
successor. After the Initial Lender is no longer a Lender, either Agent may resign at any time by notifying
the Lenders and the Borrower in writing, and either Agent may be removed at any time with or without
cause by an instrument or concurrent instruments in writing delivered to the Borrower and such Agent and
signed by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right, with the consent of the Borrower (which consent shall not be required during the continuance of
an Event of Default), to appoint a successor. If no successor shall have been so appointed by the Required
Lenders (with the consent of the Borrower (which consent shall not be required during the continuance of
an Event of Default)) and shall have accepted such appointment within 30 days after (i) the retiring Agent
gives notice of its resignation or (ii) the Required Lenders deliver removal instructions, then the retiring or
removed Agent may, on behalf of the Lenders (with the consent of the Borrower (which consent shall not
be required during the continuance of an Event of Default)), appoint a successor Agent which shall be a
bank with an office in New York, New York, or an Affiliate of any such bank. If no successor Agent has
been appointed pursuant to the immediately preceding sentence, such Agent’s resignation or removal shall
become effective and the Required Lenders shall thereafter perform all the duties of such Agent hereunder
and/or under any other Loan Document until such time, if any, as the Required Lenders (with the consent of
the Borrower (which consent shall not be required during the continuance of an Event of Default)) appoint a
successor Administrative Agent and/or Collateral Agent, as the case may be. Upon the acceptance of its
appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all
the rights, powers, privileges and duties of its predecessor Agent, and its predecessor Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor
Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After an Agent’s resignation hereunder, the provisions of this Article and Section 9.03
shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.
SECTION 8.04 Exculpatory Provisions.
(a) The Agents shall not have any duties or obligations except those expressly set
forth herein and in the other Loan Documents or as separately agreed between the Initial Lender and the
Agents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the
foregoing:
(i) neither Agent shall be subject to any fiduciary or other implied duties, regardless
of whether a Default has occurred and is continuing, except that The Bank of New York Mellon shall
always have a fiduciary duty to Treasury while serving as its Agent in accordance with the provisions of
the separate writing between The Bank of New York Mellon and Treasury;
(ii) neither Agent shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the
other Loan Documents that such Agent is required to exercise as directed in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in
the other Loan Documents); and
(iii) except as expressly set forth herein and in the other Loan Documents, neither
Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information
relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank
serving as Administrative Agent and/or Collateral Agent or any of its Affiliates in any capacity.
(b) Neither Agent shall be required to expend or risk its own funds or otherwise
incur liability in the performance of any of its duties hereunder or under any other Loan Document or in
the exercise of any of its rights or powers. Notwithstanding anything in any Loan Document to the
contrary, prior to taking any action under this Agreement or any other Loan Document, each Agent shall
be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses in
connection with taking such action. Neither Agent shall be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Sections 7.01 and 11.02) or in the
absence of its own gross negligence or willful misconduct as determined by the final non-appealable
judgment of a court of competent jurisdiction. Notwithstanding the foregoing, no action nor any omission
to act, taken by either Agent at the direction of the Required Lenders (or such other number of percentage
of Lenders as shall be expressly provided for herein or in the other Loan Documents) shall constitute
gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default
unless and until written notice thereof, conspicuously labeled as a “notice of default” and specifically
describing such Default, is given to an Agent Responsible Officer by the Borrower or a Lender.
(c) Neither Agent shall be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any
Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.
(d) In no event shall either Agent be responsible or liable for any failure or delay in
the performance of its obligations hereunder or under any other Loan Document arising out of or caused
by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages,
epidemics, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural
catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or
computer (software and hardware) services (it being understood that such Agent shall use reasonable
efforts which are consistent with accepted practices in the banking industry to resume performance as
soon as practicable under the circumstances).
(e) Each Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing
believed by it in good faith to be genuine and to have been signed or sent by the proper Person. Each
Agent may also rely upon any statement made to it orally or by telephone and believed by it in good faith
to have been made by the proper Person, and shall not incur any liability for relying thereon. Delivery of
reports, information and documents to an Agent is for informational purposes only and an Agent’s receipt
of the foregoing will not constitute actual or constructive knowledge or notice of any information
contained therein or determinable from information contained therein, including the Borrower’s
compliance with any of its covenants hereunder. Each Agent may consult with legal counsel (who may be
counsel for the Borrower), independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in reliance on the advice of any such counsel, accountants or
experts. Any funds held by an Agent shall, unless otherwise agreed in writing with the Borrower, be held
uninvested in a non-interest bearing account.
(f) Neither Agent shall have any obligation to calculate or confirm the calculation of
any financial covenant contained herein.
(g) Notwithstanding anything to the contrary in any Loan Documents, neither Agent
shall be responsible for the existence, genuineness or value of any of the Collateral; for filing any
financing or continuation statements or recording any documents or instruments in any public office or
otherwise perfecting or maintaining the perfection of any security interest in the Collateral (except, in the
case of possessory Collateral, for the Collateral Agent maintaining possession of any such Collateral
received by it in accordance with the terms of the Loan Documents); for the validity, perfection, priority
or enforceability of the Liens in any of the Collateral; for the validity or sufficiency of the Collateral or
any agreement or assignment contained therein; for the validity of the title of any grantor to the
Collateral; for insuring the Collateral; or for the payment of taxes, charges or assessments on the
Collateral. The Collateral Agent agrees that it will check any possessory Collateral received by it against
any itemized list in the Pledge and Security Agreement of Collateral to be delivered to it in accordance
with the Pledge and Security Agreement.
SECTION 8.05 Reliance by Agents. Each Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate, opinion, consent, statement,
instrument, document or other writing believed by it in good faith to be genuine and to have been signed
or sent by the proper Person. Each Agent may also rely upon any statement made to it orally or by
telephone and believed by it in good faith to have been made by the proper Person, and shall not incur any
liability for relying thereon. Delivery of reports, information and documents to an Agent is for
informational purposes only and an Agent’s receipt of the foregoing will not constitute actual or
constructive knowledge or notice of any information contained therein or determinable from information
contained therein, including the Borrower’s compliance with any of its covenants hereunder. Each Agent
may consult with legal counsel (who may be counsel for the Borrower), independent accountants and
other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance
with the advice of any such counsel, accountants or experts.
SECTION 8.06 Delegation of Duties. Each Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents or attorneys appointed by it and
will not be responsible for the misconduct or negligence of any agent appointed with due care. Each
Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or
through their respective Related Parties.
SECTION 8.07 Non-Reliance on Agents and Other Lenders. Each Lender (other than
the Initial Lender) acknowledges that it has, independently and without reliance upon the Administrative
Agent or any other Lender or any of their Related Parties and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.
Each Lender (other than the Initial Lender) also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on
such documents and information as it shall from time to time deem appropriate, continue to make its own
decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or
any related agreement or any document furnished hereunder or thereunder.
SECTION 8.08 Administrative Agent May File Proofs of Claim. In case of the pendency
of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Credit
Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative
Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated)
by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such
other documents as may be necessary or advisable in order to have the claims of the Lenders and
the Agents (including any claim for the reasonable compensation, expenses, disbursements and
advances of the Lenders and the Agents and their respective agents and counsel and all other
amounts due the Lenders and the Agents under Section 11.03) allowed in such judicial
proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative
Agent and, in the event that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of the Agents and their respective agents and
counsel, and any other amounts due the Agents under the Loan Documents. Nothing contained herein
shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on
behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the
claim of any Lender in any such proceeding.
ARTICLE IX
GUARANTEE
SECTION 9.01 Guarantee of the Obligations. Each Guarantor jointly and severally hereby
irrevocably and unconditionally guarantees to the Secured Parties, the due and punctual payment in full and
performance of all Obligations (or such lesser amount as agreed by the Required Lenders in their sole
discretion with respect to Obligations owed to the Lenders) when the same shall become due or required to
be performed, whether at stated maturity, by required prepayment, declaration, acceleration, performance,
demand or otherwise (including amounts that would become and any performance that would have been
required to be taken due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed Obligations”).
SECTION 9.02 Payment or Performance by a Guarantor. Each Guarantor hereby jointly
and severally agrees, in furtherance of the foregoing and the other terms of this Article IX and not in
limitation of any other right which the Secured Parties may have at law or in equity against any Guarantor
by virtue hereof, that upon the failure of the Borrower to pay or perform any of the Guaranteed Obligations
when and as the same shall become due or required to be performed, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)),
such Guarantor will pay, or cause to be paid, in cash, or perform, or cause to be performed, to the Secured
Parties an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due
as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for
the Borrower’s becoming the subject of a case under the Bankruptcy Code, would have accrued on such
Guaranteed Obligations, whether or not a claim is allowed against the Borrower for such interest in the
related bankruptcy case) and all other Guaranteed Obligations then owed or required to be performed to the
Secured Parties as aforesaid.
SECTION 9.03 Liability of Guarantors Absolute. Each Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by
any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than
payment and performance in full of the Guaranteed Obligations. In furtherance of the foregoing and
without limiting the generality thereof, each Guarantor agrees as follows:
(a) this Guarantee is a guarantee of payment and performance when due and not
merely of collection;
(b) either Agent and any of the other Secured Parties may enforce this Guarantee
upon the occurrence of an Event of Default notwithstanding the existence of any dispute between the
Borrower and the Secured Parties with respect to the existence of such Event of Default;
(c) a separate action or actions may be brought and prosecuted against such
Guarantor whether or not any action is brought against the Borrower or any other Guarantors and whether
or not Borrower or such Guarantors are joined in any such action or actions;
(d) payment or performance by any Guarantor of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge any other Guarantor’s liability for
any portion of the Guaranteed Obligations which has not been paid or performed;
(e) the Required Lenders, upon such terms as they deem appropriate, without notice
or demand and without affecting the validity or enforceability hereof or giving rise to any reduction,
limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time
may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place,
manner or terms of payment or performance of the Guaranteed Obligations; (ii) settle, compromise,
release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the
Guaranteed Obligations or subordinate the payment of the same to the payment of any other obligations;
(iii) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or
modify, with or without consideration, any security for payment or performance of the Guaranteed
Obligations, any other guarantees of the Guaranteed Obligations, or any other obligation of any Person
(including any other Guarantor) with respect to the Guaranteed Obligations; and (iv) enforce its rights and
remedies even though such action may operate to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of any Guarantor against the Borrower or any security for the
Guaranteed Obligations; and
(f) this Guarantee and the obligations of each Guarantor hereunder shall be legal,
valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or
termination for any reason (other than payment or performance in full of the Guaranteed Obligations),
including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to
any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of any of the Guaranteed Obligations, any impossibility in the performance
of any of the Guaranteed Obligations, or otherwise. Without limiting the generality of the foregoing,
except for the payment and performance in full of the Guaranteed Obligations and to the fullest extent
permitted by Applicable Law, the obligations of each Guarantor hereunder shall not be discharged or
impaired or otherwise affected by: (i) any failure, delay or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with
respect to the Guaranteed Obligations, or with respect to any security for the payment and performance of
the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to
departure from, any of the terms or provisions hereof or any other Loan Document; (iii) the Guaranteed
Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect; (iv) the Lender’s consent to the change, reorganization or termination of the
corporate structure or existence of the Borrower or any of its Subsidiaries and to any corresponding
restructuring of the Guaranteed Obligations; (v) the release of, or any impairment of or failure to perfect
or continue perfection of or protect a security interest in, any collateral which secures any of the
Guaranteed Obligations; (vi) any defenses, set-offs or counterclaims which the Borrower or any
Guarantor may allege or assert against either Agent or the Lenders in respect of the Guaranteed
Obligations, including failure of consideration, lack of authority, validity or enforceability, breach of
warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; (vii) any
change in the corporate existence, structure or ownership of any Credit Party, or any insolvency,
bankruptcy, reorganization, examinership or other similar proceeding affecting any Credit Party or its
assets or any resulting release or discharge of any of the Guaranteed Obligations; (viii) the fact that any
Person that, pursuant to the Loan Documents, was required to become a party hereto may not have
executed or is not effectually bound by this Agreement, whether or not this fact is known to the Secured
Parties; (ix) any action permitted or authorized hereunder; (x) any other circumstance, or any existence of
or reliance on any representation by the Agents, any Secured Party or any other Person, that might
otherwise constitute a defense to, or a legal or equitable discharge of, the Borrower, any Guarantor or any
other guarantor or surety; and (xi) any other event or circumstance that might in any manner vary the risk
of any Guarantor as an obligor in respect of the Guaranteed Obligations.
SECTION 9.04 Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of
the Lender: (a) any right to require the Lender, as a condition of payment or performance by such
Guarantor, to (i) proceed against Borrower, any Guarantor or any other Person; (ii) proceed against or
exhaust any security in favor of the Lender; or (iii) pursue any other remedy in the power of the Agents or
Secured Parties whatsoever or (b) presentment to, demand for payment or performance from and protest to
the Borrower or any Guarantor or notice of acceptance; and (c) any defenses or benefits that may be derived
from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may
conflict with the terms hereof. The Agents and the other Secured Parties may, at their election, foreclose on
any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment
of any such security in lieu of foreclosure or exercise any other right or remedy available to them against
the Borrower or any other Credit Party without affecting or impairing in any way the liability of any
Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full. To the fullest
extent permitted by Applicable Law, each Credit Party waives any defense arising out of any such election
even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Credit Party against the Borrower or any
other Credit Party, as the case may be, or any security.
SECTION 9.05 Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed
Obligations shall have been paid in full, each Guarantor hereby waives any claim, right or remedy, direct or
indirect, that such Guarantor now has or may hereafter have against the Borrower or any other Guarantor or
any of its assets in connection with this Guarantee or the performance by such Guarantor of its obligations
hereunder, including without limitation (a) any right of subrogation, reimbursement or indemnification that
such Guarantor now has or may hereafter have against the Borrower with respect to the Guaranteed
Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that the Agents or the
Secured Parties now has or may hereafter have against the Borrower, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by the Agents or the Secured Parties. In
addition, until the Guaranteed Obligations shall have been paid in full, each Guarantor shall withhold
exercise of any right of contribution such Guarantor may have against any other guarantor (including any
other Guarantor) of the Guaranteed Obligations. If any amount shall be paid to any Guarantor on account
of any such subrogation, reimbursement, indemnification or contribution rights at any time when all
Guaranteed Obligations shall not have been finally and paid in full, such amount shall be held in trust for
the Secured Parties and shall forthwith be paid over to the Secured Parties to be credited and applied against
the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.
SECTION 9.06 Subordination. Any Indebtedness of the Borrower or any Guarantor now
or hereafter and all rights of indemnity, contribution or subrogation under Applicable Law or otherwise held
by any Guarantor (the “Obligee Guarantor”) are hereby subordinated in right of payment or performance to
the Guaranteed Obligations until the Guaranteed Obligations is paid and performed in full. Any amount in
respect of such indebtedness or rights collected or received by the Obligee Guarantor after an Event of
Default has occurred and is continuing shall be held in trust for the Secured Parties and shall forthwith be
paid over to the Secured Parties to be credited and applied against the Guaranteed Obligations but without
affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other
provision hereof.
SECTION 9.07 Continuing Guarantee. This Guarantee is a continuing guarantee and shall
remain in effect until all of the Guaranteed Obligations shall have been paid and performed in full. Each
Guarantor hereby irrevocably waives any right to revoke this Guarantee as to future transactions giving rise
to any Guaranteed Obligations.
SECTION 9.08 Financial Condition of the Borrower. The Loans may be made to the
Borrower without notice to or authorization from any Guarantor regardless of the financial or other
condition of the Borrower at the time of such grant. Each Guarantor has adequate means to obtain
information from the Borrower on a continuing basis concerning the financial condition of the Borrower
and its ability to perform its obligations under the Loan Documents, and each Guarantor assumes the
responsibility for being and keeping informed of the financial condition of the Borrower and of all
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations.
SECTION 9.09 Reinstatement. In the event that all or any portion of the Guaranteed
Obligations are paid by the Borrower or any Guarantor, the obligations of any other Guarantor hereunder
shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or
any part of such payment(s) are rescinded or recovered directly or indirectly from the Secured Parties as a
preference, fraudulent transfer or otherwise must be so recovered or returned, and any such payments and
amounts which are so rescinded, recovered or returned shall constitute Guaranteed Obligations for all
purposes hereunder.
SECTION 9.10 Discharge of Guarantees. If, in compliance with the terms and provisions
of the Loan Documents, (x) all of the Equity Interests of any Guarantor that is a Subsidiary of the Parent or
any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or
consolidation) to any Person (other than to the Parent or to any other Subsidiary of Parent), the Guarantee of
such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be
discharged and released without any further action by any beneficiary or any other Person effective as of the
time of such asset sale or (y) a Guarantor becomes an Excluded Subsidiary (other than as a result of a
Guarantor becoming a non-Wholly Owned Subsidiary), the Borrower may request the release of the
Guarantee of such Guarantor, whereupon the Guarantee of such Guarantor shall be discharged and released.
ARTICLE X
CARES ACT REQUIREMENTS
Notwithstanding anything in this Agreement to the contrary, the Credit Parties, on behalf
of themselves and their Affiliates, represent, warrant, and agree with the Lenders that:
SECTION 10.01 CARES Act Compliance. Each Credit Party and its Subsidiaries are in
compliance, and will at all times comply, with all applicable requirements under Title IV of the CARES
Act, including any applicable requirements pertaining to the Borrower’s eligibility to receive the Loans.
The Parent, the Borrower and their Subsidiaries will provide any information requested by the Initial
Lender or Agents to assess the Borrower’s compliance with applicable requirements under Title IV of the
CARES Act, its obligations under this Article X or its eligibility to receive the Loans under the CARES
Act. The Borrower is not a “covered entity” as defined in Section 4019 of the CARES Act.
SECTION 10.02 Dividends and Buybacks
(a) Until the date that is twelve (12) months after the date on which the Loans are no
longer outstanding, neither any Borrower Air Carrier nor any of its Affiliates (other than an Affiliate that
is a natural person) shall, in any transaction, purchase an equity security of any Borrower Air Carrier or of
any direct or indirect parent company of a Borrower Air Carrier or of any Subsidiary of the Parent that, in
each case, is listed on a national securities exchange, except to the extent required under a contractual
obligation in effect as of the date of enactment of the CARES Act.
(b) Until the date that is twelve (12) months after the date on which the Loans are no
longer outstanding, no Borrower Air Carrier shall pay dividends, or make any other capital distributions,
with respect to the common stock of any Borrower Air Carrier.
SECTION 10.03 Maintenance of Employment Levels. Until September 30, 2020, each
Borrower Air Carrier shall maintain its employment levels as of March 24, 2020, to the extent practicable,
and in any case shall not reduce its employment levels by more than ten percent (10%) from the levels on
March 24, 2020.
SECTION 10.04 United States Business. Each Borrower Air Carrier is created or
organized in the United States or under the laws of the United States and has significant operations in and a
majority of its employees based in the United States.
SECTION 10.05 Limitations on Certain Compensation.
(a) Beginning on the Closing Date, and ending on the date that is one (1) year after
the date on which the Loans are no longer outstanding, each Borrower Air Carrier and its Affiliates shall
not pay any of each Borrower Air Carrier’s Corporate Officers or Employees whose Total Compensation
exceeded $425,000 in calendar year 2019 or the Subsequent Reference Period (other than an Employee
whose compensation is determined through an existing collective bargaining agreement entered into
before March 1, 2020):
(i) Total Compensation which exceeds, during any twelve (12) consecutive
months of the period beginning on the Closing Date and ending on the date that is one (1) year
after the date on which the Loans are no longer outstanding, the Total Compensation the
Corporate Officer or Employee received in calendar year 2019 or the Subsequent Reference
Period; or
(ii) Severance Pay or Other Benefits in connection with a termination of
employment with any Borrower Air Carrier which exceed twice the maximum Total
Compensation received by such Corporate Officer or Employee in calendar year 2019 or the
Subsequent Reference Period.
(b) Beginning on the Closing Date, and ending on the date that is one (1) year after
the date on which the Loans are no longer outstanding, each Borrower Air Carrier and its Affiliates shall
not pay any of each Borrower Air Carrier’s Corporate Officers or Employees whose Total Compensation
exceeded $3,000,000 in calendar year 2019 or the Subsequent Reference Period, Total Compensation
which exceeds, during any twelve (12) consecutive months of such period, in excess of the sum of:
(i) $3,000,000; and
(ii) Fifty percent (50%) of the excess over $3,000,000 of the Total
Compensation received by such Corporate Officer or Employee in calendar year 2019 or the
Subsequent Reference Period.
(c) For purposes of determining applicable amounts under this Section with respect
to any Corporate Officer or Employee who was employed by any Borrower Air Carrier or any of their
Affiliates for less than all of calendar year 2019, the amount of Total Compensation in calendar year 2019
shall mean such Corporate Officer’s or Employee’s Total Compensation on an annualized basis.
SECTION 10.06 Continuation of Certain Air Service. Until March 1, 2022, each
Borrower Air Carrier shall comply with any applicable requirement issued by the Secretary of
Transportation under section 4005 of the CARES Act to maintain scheduled air transportation service to
any point served by any Borrower Air Carrier before March 1, 2020. The Borrower acknowledges that
neither Treasury, nor any other actor, department, or agency of the Federal Government, shall condition the
issuance of any loan under this Loan Agreement on the Borrower’s implementation of measures to enter
into negotiations with the certified bargaining representative of a craft or class of employees of the
Borrower Air Carrier under the Railway Labor Act (45 U.S.C. 151 et seq.) or the National Labor Relations
Act (29 U.S.C. 151 et seq.), regarding pay or other terms and conditions of employment.
SECTION 10.07 Treasury Access. Provide Treasury, the Treasury Inspector General, the
Special Inspector General for Pandemic Recovery, and such other entities as authorized by Treasury timely
and unrestricted access to all documents, papers, or other records, including electronic records, of the
Borrower related to the Loans, to enable Treasury, the Treasury Inspector General, and the Special
Inspector General for Pandemic Recovery to make audits, examinations, and otherwise evaluate the
Borrower’s compliance with the terms of this Agreement. This right also includes timely and reasonable
access to the Borrower’s and its Affiliates’ personnel for the purpose of interview and discussion related to
such documents.
SECTION 10.08 Additional Defined Terms. As used in this Article, the following terms
have the meanings specified below:
“Borrower Air Carrier” means, collectively, the Borrower, its Affiliates that are Air
Carriers, and their respective heirs, executors, administrators, successors, and assigns. Notwithstanding
anything to the contrary herein, for purposes of this Article X, an “Affiliate” of the Borrower shall not
include any Person(s) that become affiliated with the Borrower solely by virtue of the consummation of a
Change of Control transaction resulting in repayment of the Loans in full.
“Corporate Officer” means, with respect to any Borrower Air Carrier, its president; any
vice president in charge of a principal business unit, division, or function (such as sales, administration or
finance); any other officer who performs a policy-making function; or any other person who performs
similar policy making functions for the Borrower Air Carrier. Executive officers of subsidiaries or
parents of any Borrower Air Carrier may be deemed Corporate Officers of the Borrower Air Carrier if
they perform such policy-making functions for the Borrower Air Carrier.
“Employee” has the meaning given to the term in section 2 of the National Labor
Relations Act (29 U.S.C. 152 and includes any individual employed by an employer subject to the
Railway Labor Act (45 U.S.C. 151 et seq.), and for the avoidance of doubt includes all individuals who
are employed by the Borrower Air Carrier who are not Corporate Officers.
“Severance Pay or Other Benefits” means any severance payment or other similar
benefits, including cash payments, health care benefits, perquisites, the enhancement or acceleration of
the payment or vesting of any payment or benefit or any other in-kind benefit payable (whether in lump
sum or over time, including after March 24, 2022) by any Borrower Air Carrier or its Affiliates to a
Corporate Officer or Employee in connection with any termination of such Corporate Officer’s or
Employee’s employment (including, without limitation, resignation, severance, retirement, or constructive
termination), which shall be determined and calculated in respect of any Employee or Corporate Officer
of the Borrower Air Carrier in the manner prescribed in 17 CFR 229.402(j) (without regard to its
limitation to the five (5) most highly compensated executives and using the actual date of termination of
employment rather than the last business day of the Borrower Air Carrier’s last completed fiscal year as
the trigger event).
“Subsequent Reference Period” means (i) for a Corporate Officer or Employee whose
employment with the Borrower Air Carrier or an Affiliate started during 2019 or later, the twelve (12)
month period starting from the end of the month in which the officer or employee commenced
employment, if such officer’s or employee’s total compensation exceeds $425,000 (or $3,000,000) during
such period and (ii) for a Corporate Officer or Employee whose Total Compensation first exceeds
$425,000 during a 12-month period ending after 2019, the 12-month period starting from the end of the
month in which the Corporate Officer’s or Employee’s Total Compensation first exceeded $425,000 (or
$3,000,000).
“Total Compensation” means compensation including salary, wages, bonuses, awards of
stock, and any other financial benefits provided by the Borrower Air Carrier or an Affiliate, as applicable,
which shall be determined and calculated for the 2019 calendar year or any applicable twelve (12)-month
period in respect of any Employee or Corporate Officer of the Borrower Air Carrier in the manner
prescribed under paragraph e.5 of the award term in 2 CFR part 170, App. A, but excluding any
Severance Pay or Other Benefits in connection with a termination of employment.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Notices; Public Information.
(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices
and other communications provided for herein shall be in writing in English and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or email as
follows:
(i) if to a Credit Party, to it at 444 South River Road, St. George, Utah
84790, Attention of Chief Financial Officer (Facsimile No. 435-634-3305; [REDACTED];
(ii) if to the Administrative Agent or the Collateral Agent, to The Bank of
New York Mellon at 240 Greenwich Street, 7th Floor, New York, NY 10286, Attention of Joanna
Shapiro, Managing Director (Telephone No. 212-815-4949; Email:
joanna.g.shapiro@bnymellon.com with a copy to UST.Cares.Program@bnymellon.com);
(iii) if to Treasury, as the Initial Lender, to The Department of the Treasury
of the United States at 1500 Pennsylvania Avenue, NW, Washington, D.C. 20220, Attention of
Assistant General Counsel (Banking and Finance) (Telephone No. 202-622-0283; Email:
eric.froman@treasury.gov); and
(iv) if to any other Lender, to it at its address (or facsimile number or email
address) set forth in its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received. Notices delivered through electronic communications, to the
extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).
(b) Electronic Communications. Notices and other communications to the Lenders
hereunder may be delivered or furnished by electronic communication (including e-mail, FpML, and
Internet or intranet websites) pursuant to procedures approved by the Lenders and reasonably acceptable
to the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant
to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices
under such Article by electronic communication. The Administrative Agent, the Collateral Agent, the
Parent or the Borrower may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications.
Unless the Administrative Agent, the Collateral Agent or a Lender otherwise prescribes,
(i) notices and other communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by return e-mail or other
written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as
described in the foregoing clause (i), of notification that such notice or communication is available and
identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice,
email or other communication is not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on the next Business Day for
the recipient.
(c) Change of Address, etc. Any party hereto may change its address or facsimile
number for notices and other communications hereunder by notice to the other parties hereto.
(d) Platform.
(i) The Borrower and the Lenders agree that the Administrative Agent may,
but shall not be obligated to, make the Communications (as defined below) available to the other
Lenders by posting the Communications on the Platform.
(ii) The Platform is provided “as is” and “as available.” The Agent Parties
(as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability
for errors or omissions in the Communications. No warranty of any kind, express, implied or
statutory, including any warranty of merchantability, fitness for a particular purpose, non-
infringement of third-party rights or freedom from viruses or other code defects, is made by any
Agent Party in connection with the Communications or the Platform. In no event shall the
Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any
liability to the Credit Parties, any Lender or any other Person or entity for damages of any kind,
including direct or indirect, special, incidental or consequential damages, losses or expenses
(whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative
Agent’s transmission of communications through the Platform. “Communications” means,
collectively, any notice, demand, communication, information, document or other material
provided by or on behalf of the Credit Parties pursuant to any Loan Document or the transactions
contemplated therein that is distributed to the Administrative Agent or any Lender by means of
electronic communications pursuant to this Section, including through the Platform.
(e) Public Information. The Borrower hereby acknowledges that certain of the
Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public
information with respect to the Borrower or its Affiliates, or the respective securities of any of the
foregoing, and who may be engaged in investment and other market-related activities with respect to such
Persons’ securities. The Borrower hereby agrees that it will use commercially reasonable efforts to
identify that portion of the materials and information provided by or on behalf of the Borrower hereunder
and under the other Loan Documents (collectively, “Borrower Materials”) that may be distributed to the
Public Lenders and that (i) all such Borrower Materials shall be clearly and conspicuously marked
“PUBLIC,” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the
first page thereof; (ii) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have
authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing
any material non-public information with respect to the Borrower or its securities for purposes of U.S.
federal and state securities Laws (provided, however, that to the extent that such Borrower Materials
constitute Information, they shall be subject to Section 11.12); (iii) all Borrower Materials marked
“PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side
Information;” and (iv) the Administrative Agent shall be entitled to treat any Borrower Materials that are
not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated
“Public Side Information”. Each Public Lender will designate one or more representatives that shall be
permitted to receive information that is not designated as being available for Public Lenders.
Notwithstanding the foregoing, financial statements and related documentation, in each case, provided
pursuant to Section 5.01(a) or 5.01(b) shall be deemed to be marked “PUBLIC”, unless the Parent notifies
the Administrative Agent promptly that any such document contains material non-public information.
SECTION 11.02 Waivers; Amendments.
(a) No Waiver; Remedies Cumulative; Enforcement. No failure or delay by the
Administrative Agent, the Collateral Agent or any Lender in exercising any right, remedy, power or
privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, remedy, power or privilege, or any abandonment or
discontinuance of steps to enforce such a right remedy, power or privilege, preclude any other or further
exercise thereof or the exercise of any other right remedy, power or privilege. The rights, remedies,
powers and privileges of the Administrative Agent, the Collateral Agent and the Lenders hereunder and
under the Loan Documents are cumulative and are not exclusive of any rights, remedies, powers or
privileges that any such Person would otherwise have.
Notwithstanding anything to the contrary contained herein or in any other Loan
Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents
against the Credit Parties shall be vested exclusively in, and all actions and proceedings at law in
connection with such enforcement shall be instituted and maintained exclusively by, (i) so long as the
Initial Lender is a Lender, either the Initial Lender or, at the Initial’s Lender’s option, the Administrative
Agent in accordance with Section 7.01 for the benefit of all the Lenders and (ii) if the Initial Lender is no
longer a Lender, the Required Lenders or the Administrative Agent (acting at the direction of the
Required Lenders) in accordance with Section 7.01 for the benefit of all the Lenders; provided that the
foregoing shall not prohibit (i) the Administrative Agent from exercising on its own behalf the rights and
remedies that inure to its benefit (solely in its capacities as Administrative Agent and as Collateral Agent)
hereunder and under the other Loan Documents, (ii) any Lender from exercising setoff rights in
accordance with Section 11.08 (subject to the terms of Section 2.13) or (iii) any Lender from filing proofs
of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative
to a Credit Party under any Debtor Relief Law; provided, further, that if at any time there is no Person
acting as Administrative Agent hereunder and under the other Loan Documents, then (x) the Required
Lenders shall have the rights otherwise provided to the Administrative Agent pursuant to Section 7.01
and (y) in addition to the matters set forth in clauses (ii) and (iii) of the preceding proviso and subject to
Section 2.13, any Lender may, with the consent of the Required Lenders, enforce any rights or remedies
available to it and as authorized by the Required Lenders.
(b) Amendments, Etc. Except as otherwise expressly set forth in this Agreement
(including Section 2.10 and Section 8.01), no amendment or waiver of any provision of this Agreement or
any other Loan Document, and no consent to any departure by the Borrower therefrom, shall be effective
unless in writing executed by the Borrower and the Required Lenders, and acknowledged by the
Administrative Agent, or by the Borrower and the Administrative Agent with the consent of the Required
Lenders, and each such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that no such amendment, waiver or consent shall:
(i) extend or increase any Commitment of any Lender without the written
consent of such Lender;
(ii) reduce the principal of, or rate of interest specified herein on, any Loan,
or any fees or other amounts payable hereunder or under any other Loan Document, without the
written consent of each Lender directly and adversely affected thereby (provided that only the
consent of the Required Lenders shall be necessary (x) to amend the definition of “Default Rate”
or to waive the obligation of the Borrower to pay interest at the Default Rate or (y) to amend any
financial covenant (or any defined term directly or indirectly used therein), even if the effect of
such amendment would be to reduce the rate of interest on any Loan or other Obligation or to
reduce any fee payable hereunder);
(iii) postpone any date scheduled for any payment of principal of, or interest
on, any Loan, or any fees or other amounts payable hereunder or under any other Loan
Document, or reduce the amount of, waive or excuse any such payment, without the written
consent of each Lender directly and adversely affected thereby;
(iv) change Section 2.12(b) or Section 2.13 in a manner that would alter the
pro rata sharing of payments required thereby without the written consent of each Lender directly
and adversely affected thereby;
(v) waive any condition set forth in Section 4.01 without the written consent
of the Initial Lender; or
(vi) change any provision of this Section or the percentage in the definition of
“Required Lenders” or any other provision hereof specifying the number or percentage of
Lenders required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of each Lender;
provided, further, that no such amendment, waiver or consent shall amend, modify or otherwise affect the
rights or duties hereunder or under any other Loan Document of either of the Agents, unless in writing
executed by such Agent, in each case in addition to the Borrower and the Lenders required above.
In addition, notwithstanding anything in this Section to the contrary, (i) if the Borrower
shall have identified an obvious error or any error or omission of a technical nature, in each case, in any
provision of the Loan Documents, then, upon the delivery of a certificate of a Responsible Officer of the
Borrower to the Administrative Agent identifying such error and directing the Administrative Agent to
execute an amendment to correct such error, the Administrative Agent and the Borrower shall be
permitted to amend such provision, and, in each case, such amendment shall become effective without
any further action or consent of any other party to any Loan Document if the same is not objected to in
writing by the Required Lenders to the Administrative Agent within ten (10) Business Days following
receipt of notice thereof and (ii) that any Security Document may be amended, supplemented or otherwise
modified with the consent of the applicable Grantor (as defined in the Pledge and Security Agreement)
and the Administrative Agent to add assets (or categories of assets) to the Collateral covered by such
Security Document, as contemplated by the definition of Additional Collateral, or to remove any assets or
categories of assets (including after-acquired assets of that category) from the Collateral covered by such
Security Document to the extent the release thereof is permitted by Section 6.17(b)(iii).
SECTION 11.03 Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Initial Lender, the Administrative Agent, the Collateral Agent and their
Affiliates (including the reasonable fees, charges and disbursements of any counsel for the Initial Lender,
the Administrative Agent or the Collateral Agent), and shall pay all fees and time charges and
disbursements for attorneys who may be employees of the Administrative Agent or the Collateral Agent,
in connection with the preparation, negotiation, execution, delivery and administration of this Agreement,
the Loan Documents, any other agreements or documents executed in connection herewith or therewith or
any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses
incurred by the Administrative Agent, the Collateral Agent or any Lender (including the fees, charges and
disbursements of any counsel for the Administrative Agent, the Collateral Agent or any Lender), and shall
pay all fees and time charges for attorneys who may be employees of the Administrative Agent, the
Collateral Agent or any Lender, in connection with the enforcement or protection of its rights (A) in
connection with this Agreement and the Loan Documents, any other agreements or documents executed
in connection herewith or therewith, or any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated)
including its rights under this Section, or (B) in connection with the Loans made hereunder, including all
such out-of-pocket expenses incurred during any workout, restructuring, negotiations or enforcement in
respect of this Agreement, the Loan Documents and other agreements or documents executed in
connection herewith or therewith.
(b) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent and Collateral Agent (and any sub-agents thereof) and each Lender, and each
Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against,
and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, obligations,
penalties, fines, settlements, judgments, disbursements and related costs and related expenses (including
the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold
harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be
employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any
Person (including the Parent) arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or
thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or the
use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Parent or any of its Subsidiaries, or any
Environmental Liability related in any way to the Parent or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based
on contract, tort or any other theory, whether brought by a third party or by the Parent, and regardless of
whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee
other than the Initial Lender, be available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment
to have resulted from the gross negligence or willful misconduct of such Indemnitee. This paragraph (b)
shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc.
arising from any non-Tax claim.
(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails
to indefeasibly pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the
Administrative Agent or Collateral Agent (or any sub-agents thereof) or any Related Party of any of the
foregoing, each Lender (other than the Initial Lender) severally agrees to pay to the Administrative Agent
or Collateral Agent (or any such sub-agents) or such Related Party, as the case may be, such Lender’s pro
rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is
sought based on each Lender’s Applicable Percentage at such time) of such unpaid amount (including any
such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred
by or asserted against the Administrative Agent or Collateral Agent (or any such sub-agents), or against
any Related Party of any of the foregoing acting for the Administrative Agent or Collateral Agent (or any
such sub-agents) in connection with such capacity. The obligations of the Lenders under this
paragraph (c) are subject to the provisions of Section 2.12(e).
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
Applicable Law, no Credit Party shall assert, and each hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or
thereby, any Loan, or the use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above
shall be liable for any damages arising from the use by unintended recipients of any information or other
materials distributed by it through telecommunications, electronic or other information transmission
systems in connection with this Agreement or the other Loan Documents or the transactions contemplated
hereby or thereby.
(e) Payments. All amounts due under this Section shall be payable not later than
five (5) days after demand therefor; provided that the terms of this Section shall not apply to the Initial
Lender.
(f) Survival. Each party’s obligations under this Section shall survive the
termination of the Loan Documents and payment of the obligations hereunder and the resignation or
removal of the Administrative Agent or the Collateral Agent.
SECTION 11.04 Successors and Assigns.
(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and
any other attempted assignment or transfer by any party hereto shall be null and void), and no Lender may
assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in
accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance
with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of paragraph (e) of this Section. Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this
Section and, to the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Assignments by Lenders. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of the Loans at the time owing to it); provided that any such assignment by any Lender (other than
the Initial Lender) shall be subject to the following conditions:
(i) Minimum Amounts.
(A) in the case of an assignment of the entire remaining amount of
the assigning Lender’s Loans at the time owing to it or contemporaneous assignments to
and/or by related Approved Funds (determined after giving effect to such assignments)
that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the
aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund, no minimum amount need be assigned; and
(B) in any case not described in paragraph (b)(i)(A) of this Section,
the principal outstanding balance of the Loans of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent or, if “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date) shall not be less than
$5,000,000, unless each of the Administrative Agent and, so long as no Default or Event
of Default has occurred and is continuing, the Borrower otherwise consents (each such
consent not to be unreasonably withheld or delayed).
(ii) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and obligations under this
Agreement with respect to the Loans assigned.
(iii) Required Consents. No consent shall be required for any assignment by
the Initial Lender. The consent of the Borrower (such consent not to be unreasonably withheld,
delayed or conditioned) shall be required for any assignment by any Lender other than the Initial
Lender unless (x) a Default or Event of Default has occurred and is continuing at the time of such
assignment, or (y) such assignment is to a Lender or an Affiliate of a Lender; provided that the
Borrower shall be deemed to have consented to any such assignment unless it shall object thereto
by written notice to the Administrative Agent within five (5) Business Days after having received
notice thereof.
(iv) Assignment and Assumption. The parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole
discretion, elect to waive such processing and recordation fee in the case of any assignment. The
assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.
(v) No Assignment to Certain Persons. No such assignment shall be made
to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.
(vi) No Assignment to Natural Persons. No such assignment shall be made
to a natural person (or a holding company, investment vehicle or trust for, or owned and operated
for the primary benefit of, a natural person).
Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this
Section, from and after the effective date specified in each Assignment and Assumption, the assignee
thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment
and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 11.03
with respect to facts and circumstances occurring prior to the effective date of such assignment. Any
assignment or transfer by a Lender other than the Initial Lender of rights or obligations under this
Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of
this Section.
(c) Register. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to
it and a register for the recordation of the names and addresses of the Lenders, and the principal amounts
(and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time
(the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower,
the Administrative Agent, the Collateral Agent and the Lenders shall treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(d) Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Administrative Agent, sell participations to any Person (other than a Competitor, a
natural person, or a holding company, investment vehicle or trust for, or owned and operated for the
primary benefit of, a natural person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries)
(each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of the Loans owing to it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the
Collateral Agent and Lenders shall continue to deal solely and directly with such Lender in connection
with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender
shall be responsible for the indemnity under Section 11.03(b) with respect to any payments made by such
Lender to its Participant(s).
Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in Section 11.02(b)(i) through (v) that affects such
Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14,
2.15 and 2.16 (subject to the requirements and limitations therein, including the requirements under
Section 2.16(g) (it being understood that the documentation required under Section 2.16(g) shall be
delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees
to be subject to the provisions of Section 2.19 as if it were an assignee under paragraph (b) of this
Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.16, with
respect to any participation, than its participating Lender would have been entitled to receive, except to
the extent such entitlement to receive a greater payment results from a Change in Law that occurs after
the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the
Borrower's request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the
provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender; provided that
such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a
register on which it enters the name and address of each Participant and the principal amounts (and stated
interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the
“Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of
the Participant Register (including the identity of any Participant or any information relating to a
Participant's interest in any loans or its other obligations under any Loan Document) to any Person except
to the extent that such disclosure is necessary to establish that such loan or other obligation is in registered
form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant
Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is
recorded in the Participant Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its
capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(e) Certain Pledges. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee
or assignee for such Lender as a party hereto.
SECTION 11.05 Survival. All covenants, agreements, representations and warranties
made by any Credit Party herein and in any Loan Document or other documents delivered in connection
herewith or therewith or pursuant hereto or thereto shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery hereof and thereof and the making of the
Borrowings hereunder, regardless of any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent, the Collateral Agent or any Lender may have had notice or
knowledge of any Default at the time of any Borrowing, and shall continue in full force and effect as long
as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied and so long as the
Commitments have not expired or been terminated. The provisions of Sections 2.14, 2.15, 11.03, 11.15 and
Article VIII shall survive and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the payment in full of the Obligations, the expiration or termination of
the Commitments or the termination of this Agreement or any provision hereof.
SECTION 11.06 Counterparts; Integration; Effectiveness; Electronic Execution.
(a) Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single contract. This Agreement and the
other Loan Documents, constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it
shall have been executed by the Administrative Agent and when the Administrative Agent shall have
received counterparts hereof that, when taken together, bear the signatures of each of the other parties
hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in
electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of
this Agreement.
(b) Electronic Execution. The words “execution,” “signed,” “signature,” and words
of like import in this Agreement and in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law,
including the Federal Electronic Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act. Notwithstanding anything herein to the contrary, delivery of an executed counterpart of
a signature page of this Agreement by telecopy or other electronic means, or confirmation of the
execution of this Agreement on behalf of a party by an email from an authorized signatory of such party
shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 11.07 Severability. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or
unenforceable provisions with valid provisions the economic effect of which comes as close as possible to
that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender, and each of their respective Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final, in whatever currency) at any time held, and other
obligations (in whatever currency) at any time owing, by such Lender or any such Affiliate, to or for the
credit or the account of the Borrower against any and all of the due and unpaid Obligations of the Borrower
now or hereafter existing under this Agreement or any other Loan Document to such Lender or its
respective Affiliates, irrespective of whether or not such Lender or Affiliate shall have made any demand
under this Agreement or any other Loan Document and although such obligations of the Borrower may be
contingent or unmatured or are owed to a branch office or Affiliate of such Lender different from the
branch office or Affiliate holding such deposit or obligated on such indebtedness. The rights of each
Lender and their respective Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Lender or its respective Affiliates may have. Each Lender (other
than the Initial Lender) agrees to notify the Borrower and the Administrative Agent promptly after any such
setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff
and application.
SECTION 11.09 Governing Law; Jurisdiction; Etc.
(a) Governing Law. This Agreement and the other Loan Documents will be
governed by and construed in accordance with the federal law of the United States if and to the extent
such law is applicable, and otherwise in accordance with the law of the State of New York applicable to
contracts made and to be performed entirely within such State.
(b) Jurisdiction and Venue. Each of the Credit Parties and each Lender agrees (a) to
submit to the exclusive jurisdiction and venue of the United States District Court for the District of
Columbia for any civil action, suit or proceeding arising out of or relating to this Agreement, the Loan
Documents, or the transactions contemplated hereby or thereby.
(c) Service of Process. Each party hereto irrevocably consents to service of process
in the manner provided for notices in Section 11.01. Nothing in this Agreement will affect the right of
any party hereto to serve process in any other manner permitted by Applicable Law.
SECTION 11.10 Waiver of Jury Trial. To the extent permitted by Applicable Law, each
Credit Party and each Lender hereby unconditionally waives trial by jury in any civil legal action or
proceeding relating to this Agreement, the Loan Documents or the transactions contemplated hereby or
thereby.
SECTION 11.11 Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this Agreement.
SECTION 11.12 Treatment of Certain Information; Confidentiality. Each of the Agents
and the Lenders (other than the Initial Lender) agree to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it
being understood that the Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information confidential); (b) to the extent required
or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related
Parties (including any self-regulatory authority, such as the National Association of Insurance
Commissioners); (c) to the extent required by Applicable Laws or by any subpoena or similar legal process;
(d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any
other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document
or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions
substantially the same as (or no less restrictive than) those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this
Agreement, or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other
transaction under which payments are to be made by reference to the Borrower and its obligations, this
Agreement or payments hereunder; provided that, in each case under this clause (f)(ii), such actual or
prospective party is not a Competitor; (g) on a confidential basis to (i) any rating agency in connection with
rating the Borrower or its Subsidiaries or the Loans or (ii) the CUSIP Service Bureau or any similar agency
in connection with the issuance and monitoring of CUSIP numbers with respect to the Loans; (h) with the
consent of the Borrower or (i) to the extent such Information (x) becomes publicly available other than as a
result of a breach of this Section, or (y) becomes available to either Agent, any Lender or any of their
respective Affiliates on a nonconfidential basis from a source other than the Borrower who did not acquire
such information as a result of a breach of this Section.
For purposes of this Section, “Information” means all information received from the
Parent or any of its Subsidiaries relating to the Parent or any of its Subsidiaries or any of their respective
businesses, other than any such information that is available to the Administrative Agent or any Lender
on a nonconfidential basis prior to disclosure by the Parent or any of its Subsidiaries; provided that, in the
case of information received from the Parent or any of its Subsidiaries after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any Person required to maintain
the confidentiality of Information as provided in this Section shall be considered to have complied with
its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality
of such Information as such Person would accord to its own confidential information.
SECTION 11.13 Money Laundering; Sanctions. The Borrower shall provide to the
Administrative Agent, the Collateral Agent, and the Lenders information and documentation that the
Lenders may reasonably request that identifies the Borrower and its Affiliates, which information may
include the name and address of the Borrower and its Affiliates and other information regarding beneficial
ownership of the Borrower and its Affiliates that will allow the Lenders to ensure compliance with
Sanctions and the AML Laws. For purposes of determining whether or not a representation with respect to
any indirect ownership is true or a covenant is being complied with under this Section 11.13, the Borrower
shall not be required to make any investigation into (i) the ownership of publicly traded stock or other
publicly traded securities or (ii) the ownership of assets by a collective investment fund that holds assets for
employee benefit plans or retirement arrangements.
SECTION 11.14 Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other
amounts that are treated as interest on such Loan under Applicable Law (collectively, “charges”), shall
exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with Applicable Law, the rate of
interest payable in respect of such Loan hereunder, together with all charges payable in respect thereof,
shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that would have been
paid in respect of such Loan but were not paid as a result of the operation of this Section shall be cumulated
and the interest and charges payable to such Lender in respect of other Loans or periods shall be increased
(but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate for each day to the date of repayment, shall have
been received by such Lender. Any amount collected by such Lender that exceeds the maximum amount
collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan or
refunded to the Borrower so that at no time shall the interest and charges paid or payable in respect of such
Loan exceed the maximum amount collectible at the Maximum Rate.
SECTION 11.15 Payments Set Aside. To the extent that any payment by or on behalf of
the Borrower is made to the Administrative Agent or any Lender, or any Lender exercises its right of setoff,
and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to
be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the
Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party,
in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each
Lender (other than the Initial Lender) severally agrees to pay to the Administrative Agent upon demand its
applicable share (without duplication) of any amount so recovered from or repaid by the Administrative
Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per
annum equal to the Federal Funds Effective Rate from time to time in effect.
SECTION 11.16 No Advisory or Fiduciary Responsibility. In connection with all aspects
of each transaction contemplated hereby (including in connection with any amendment, waiver or other
modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, and
acknowledges its Affiliates’ understanding, that: (a) (i) no fiduciary, advisory or agency relationship
between any Credit Party and any of their respective Subsidiaries and the Administrative Agent, the
Collateral Agent or any Lender is intended to be or has been created in respect of the transactions
contemplated hereby or by the other Loan Documents, irrespective of whether the Administrative Agent,
the Collateral Agent or any Lender has advised or is advising any Credit Party or any of their respective
Subsidiaries on other matters, (ii) the lending and other services regarding this Agreement provided by the
Administrative Agent, the Collateral Agent and the Lenders are arm’s-length commercial transactions
between Credit Parties and their Affiliates, on the one hand, and the Administrative Agent, the Collateral
Agent and the Lenders, on the other hand, (iii) the Credit Parties have consulted their own legal, accounting,
regulatory and tax advisors to the extent that they has deemed appropriate and (iv) the Credit Parties are
capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents; and (b) (i) the Administrative Agent, the Collateral
Agent and the Lenders each is and has been acting solely as a principal and, except as expressly agreed in
writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary
for the Credit Parties or any of their respective Affiliates, or any other Person; (ii) none of the
Administrative Agent, the Collateral Agent and the Lenders has any obligation to the Credit Parties or any
of their respective Affiliates with respect to the transactions contemplated hereby except those obligations
expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, the
Collateral Agent and the Lenders and their respective Affiliates may be engaged, in a broad range of
transactions that involve interests that differ from those of the Credit Parties and their respective Affiliates,
and none of the Administrative Agent, the Collateral Agent and the Lenders has any obligation to disclose
any of such interests to the Credit Parties or any of their respective Affiliates. To the fullest extent
permitted by Law, the Credit Parties hereby waive and release any claims that they may have against any of
the Administrative Agent, the Collateral Agent and the Lenders with respect to any breach or alleged breach
of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
SECTION 11.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or
understanding among the parties, each party hereto (including each Credit Party) acknowledges that any
liability arising under a Loan Document of any Credit Party that is an Affected Financial Institution, to the
extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable
Resolution Authority, and agrees and consents to, and acknowledges and agrees to be bound by: (a) the
application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such
liabilities arising under any Loan Documents which may be payable to it by any Credit Party that is an
Affected Financial Institution; and (b) the effects of any Bail-In Action on any such liability, including (i) a
reduction in full or in part or cancellation of any such liability, (ii) a conversion of all, or a portion of, such
liability into shares or other instruments of ownership in such Affected Financial Institution, its parent
undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares
or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such
liability under any Loan Document, or (iii) the variation of the terms of such liability in connection with the
exercise of the write-down and conversion powers of the applicable Resolution Authority.
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first above written.
SKYWEST, INC., as Parent
By: ____________________________
Name:
Title:
SKYWEST AIRLINES, INC., as Borrower
By: ____________________________
Name:
Title:
[Signature Page to Loan and Guarantee Agreement – SkyWest]
THE BANK OF NEW YORK MELLON,
as Administrative Agent and Collateral Agent
By_________________________
Name:
Title:
[Signature Page to Loan and Guarantee Agreement – SkyWest]
UNITED STATES DEPARTMENT OF THE
TREASURY, as the Initial Lender
By_________________________
Name:
Title:
[Signature Page to Loan and Guarantee Agreement – SkyWest]
Annex B
Form of Pledge Amendment and Supplement
FORM OF PLEDGE AMENDMENT AND SUPPLEMENT
REDACTED
Execution Version
LOAN AND GUARANTEE AGREEMENT
dated as of
September 29, 2020
among
SKYWEST AIRLINES, INC., as Borrower,
the Guarantors party hereto from time to time,
THE UNITED STATES DEPARTMENT OF THE TREASURY,
and
THE BANK OF NEW YORK MELLON,
as Administrative Agent and Collateral Agent
__________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Defined Terms ............................................................................................................ 1
SECTION 1.02 Terms Generally ....................................................................................................... 28
SECTION 1.03 Accounting Terms; Changes in GAAP .................................................................... 29
SECTION 1.04 Rates ......................................................................................................................... 29
SECTION 1.05 Divisions ................................................................................................................... 29
ARTICLE II
COMMITMENTS AND BORROWINGS
SECTION 2.01 Commitments ........................................................................................................... 30
SECTION 2.02 Loans and Borrowings .............................................................................................. 30
SECTION 2.03 Borrowing Requests ................................................................................................. 30
SECTION 2.04 [Reserved]................................................................................................................. 31
SECTION 2.05 [Reserved]................................................................................................................. 31
SECTION 2.06 Prepayments ............................................................................................................. 31
SECTION 2.07 Reduction and Termination of Commitments .......................................................... 32
SECTION 2.08 Repayment of Loans ................................................................................................. 32
SECTION 2.09 Interest ...................................................................................................................... 32
SECTION 2.10 Benchmark Replacement Setting.............................................................................. 32
SECTION 2.11 Evidence of Debt ...................................................................................................... 34
SECTION 2.12 Payments Generally .................................................................................................. 34
SECTION 2.13 Sharing of Payments ................................................................................................. 35
SECTION 2.14 Compensation for Losses.......................................................................................... 35
SECTION 2.15 Increased Costs ......................................................................................................... 36
SECTION 2.16 Taxes ........................................................................................................................ 37
SECTION 2.17 [Reserved]................................................................................................................. 40
SECTION 2.18 [Reserved]................................................................................................................. 40
SECTION 2.19 Mitigation Obligations; Replacement of Lenders..................................................... 40
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Existence, Qualification and Power.......................................................................... 41
SECTION 3.02 Authorization; No Contravention ............................................................................. 41
SECTION 3.03 Governmental Authorization; Other Consents ......................................................... 41
SECTION 3.04 Execution and Delivery; Binding Effect .................................................................. 42
SECTION 3.05 Financial Statements; No Material Adverse Change ................................................ 42
SECTION 3.06 Litigation .................................................................................................................. 42
SECTION 3.07 Contractual Obligations; No Default ........................................................................ 42
SECTION 3.08 Property .................................................................................................................... 42
SECTION 3.09 Taxes ........................................................................................................................ 42
i
SECTION 3.10 Disclosure ................................................................................................................. 43
SECTION 3.11 Compliance with Laws ............................................................................................. 43
SECTION 3.12 ERISA Compliance .................................................................................................. 43
SECTION 3.13 Environmental Matters ............................................................................................. 44
SECTION 3.14 Investment Company Act ......................................................................................... 44
SECTION 3.15 Sanctions; Export Controls; Anti-Corruption; AML Laws ...................................... 44
SECTION 3.16 Solvency ................................................................................................................... 45
SECTION 3.17 Subsidiaries............................................................................................................... 45
SECTION 3.18 Senior Indebtedness .................................................................................................. 45
SECTION 3.19 Insurance Matters ..................................................................................................... 45
SECTION 3.20 Labor Matters ........................................................................................................... 45
SECTION 3.21 Insolvency Proceedings ............................................................................................ 45
SECTION 3.22 Margin Regulations .................................................................................................. 45
SECTION 3.23 Liens ......................................................................................................................... 46
SECTION 3.24 Perfected Security Interests ...................................................................................... 46
SECTION 3.25 US Citizenship .......................................................................................................... 46
SECTION 3.26 Air Carrier Status ...................................................................................................... 46
ARTICLE IV
CONDITIONS
SECTION 4.01 Closing Date and Initial Borrowing.......................................................................... 46
SECTION 4.02 Each Borrowing ........................................................................................................ 48
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01 Financial Statements ................................................................................................. 49
SECTION 5.02 Certificates; Other Information ................................................................................ 50
SECTION 5.03 Notices ...................................................................................................................... 51
SECTION 5.04 Preservation of Existence, Etc. ................................................................................. 52
SECTION 5.05 Maintenance of Properties ........................................................................................ 52
SECTION 5.06 Maintenance of Insurance......................................................................................... 52
SECTION 5.07 Payment of Obligations ............................................................................................ 52
SECTION 5.08 Compliance with Laws ............................................................................................. 52
SECTION 5.09 Environmental Matters ............................................................................................. 52
SECTION 5.10 Books and Records ................................................................................................... 52
SECTION 5.11 Inspection Rights ...................................................................................................... 53
SECTION 5.12 Sanctions; Export Controls; Anti-Corruption Laws and AML Laws ....................... 53
SECTION 5.13 Guarantors; Additional Collateral ............................................................................ 53
SECTION 5.14 Post-Closing Matters ................................................................................................ 54
SECTION 5.15 Further Assurances ................................................................................................... 54
SECTION 5.16 Delivery of Appraisals .............................................................................................. 54
SECTION 5.17 Ratings ...................................................................................................................... 55
SECTION 5.18 Regulatory Matters ................................................................................................... 55
ii
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01 [Reserved]................................................................................................................. 55
SECTION 6.02 Liens ......................................................................................................................... 55
SECTION 6.03 Fundamental Changes .............................................................................................. 55
SECTION 6.04 Dispositions .............................................................................................................. 56
SECTION 6.05 Restricted Payments ................................................................................................. 57
SECTION 6.06 Investments ............................................................................................................... 58
SECTION 6.07 Transactions with Affiliates...................................................................................... 59
SECTION 6.08 [Reserved]................................................................................................................. 60
SECTION 6.09 [Reserved]................................................................................................................. 60
SECTION 6.10 Changes in Nature of Business ................................................................................. 60
SECTION 6.11 Sanctions; AML Laws .............................................................................................. 60
SECTION 6.12 Amendments to Organizational Documents ............................................................. 60
SECTION 6.13 [Reserved]................................................................................................................. 60
SECTION 6.14 Prepayments of Junior Indebtedness ........................................................................ 60
SECTION 6.15 Lobbying................................................................................................................... 60
SECTION 6.16 Use of Proceeds ........................................................................................................ 60
SECTION 6.17 Financial Covenants ................................................................................................. 61
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 Events of Default ...................................................................................................... 61
SECTION 7.02 Application of Payments .......................................................................................... 64
ARTICLE VIII
AGENCY
SECTION 8.01 Appointment and Authority ...................................................................................... 65
SECTION 8.02 Collateral Matters. .................................................................................................... 65
SECTION 8.03 Removal or Resignation of Administrative Agent ................................................... 65
SECTION 8.04 Exculpatory Provisions ............................................................................................. 66
SECTION 8.05 Reliance by Agent .................................................................................................... 67
SECTION 8.06 Delegation of Duties ................................................................................................. 68
SECTION 8.07 Non-Reliance on Agents and Other Lenders ............................................................ 68
SECTION 8.08 Administrative Agent May File Proofs of Claim ..................................................... 68
ARTICLE IX
GUARANTEE
SECTION 9.01 Guarantee of the Obligations .................................................................................... 69
SECTION 9.02 Payment or Performance by a Guarantor ................................................................. 69
SECTION 9.03 Liability of Guarantors Absolute .............................................................................. 69
SECTION 9.04 Waivers by Guarantors ............................................................................................. 70
SECTION 9.05 Guarantors’ Rights of Subrogation, Contribution, etc. ............................................. 71
iii
SECTION 9.06 Subordination ........................................................................................................... 71
SECTION 9.07 Continuing Guarantee ............................................................................................... 71
SECTION 9.08 Financial Condition of the Borrower ........................................................................ 71
SECTION 9.09 Reinstatement ........................................................................................................... 71
SECTION 9.10 Discharge of Guarantees........................................................................................... 72
ARTICLE X
CARES ACT REQUIREMENTS
SECTION 10.01 CARES Act Compliance .......................................................................................... 72
SECTION 10.02 Dividends and Buybacks .......................................................................................... 72
SECTION 10.03 Maintenance of Employment Levels ........................................................................ 72
SECTION 10.04 United States Business ............................................................................................. 73
SECTION 10.05 Limitations on Certain Compensation ...................................................................... 73
SECTION 10.06 Continuation of Certain Air Service ......................................................................... 73
SECTION 10.07 Treasury Access........................................................................................................ 74
SECTION 10.08 Additional Defined Terms ........................................................................................ 74
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Notices; Public Information...................................................................................... 75
SECTION 11.02 Waivers; Amendments ............................................................................................. 77
SECTION 11.03 Expenses; Indemnity; Damage Waiver .................................................................... 78
SECTION 11.04 Successors and Assigns ............................................................................................ 80
SECTION 11.05 Survival..................................................................................................................... 82
SECTION 11.06 Counterparts; Integration; Effectiveness; Electronic Execution............................... 83
SECTION 11.07 Severability ............................................................................................................... 83
SECTION 11.08 Right of Setoff .......................................................................................................... 83
SECTION 11.09 Governing Law; Jurisdiction; Etc ............................................................................. 84
SECTION 11.10 Waiver of Jury Trial ................................................................................................. 84
SECTION 11.11 Headings ................................................................................................................... 84
SECTION 11.12 Treatment of Certain Information; Confidentiality .................................................. 84
SECTION 11.13 Money Laundering; Sanctions .................................................................................. 85
SECTION 11.14 Interest Rate Limitation ............................................................................................ 85
SECTION 11.15 Payments Set Aside .................................................................................................. 85
SECTION 11.16 No Advisory or Fiduciary Responsibility ................................................................. 86
SECTION 11.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions ............... 86
iv
SCHEDULES
SCHEDULE 3.05 - Financial Statements
SCHEDULE 3.17 - Subsidiaries
SCHEDULE 5.14 - Post-Closing Matters
SCHEDULE 6.05(i) - Restricted Payments
SCHEDULE 6.06 - Investments
SCHEDULE 6.07 - Affiliate Transactions
EXHIBITS
EXHIBIT A - Assignment and Assumption
EXHIBIT B-1 - Form of U.S. Tax Compliance Certificate
EXHIBIT B-2 - Form of U.S. Tax Compliance Certificate
EXHIBIT B-3 - Form of U.S. Tax Compliance Certificate
EXHIBIT B-4 - Form of U.S. Tax Compliance Certificate
EXHIBIT C - Form of Note
EXHIBIT D - Form of Borrowing Request
v
LOAN AND GUARANTEE AGREEMENT dated as of September 29, 2020 (this
“Agreement”), among SKYWEST AIRLINES, INC., a corporation organized under the laws of Utah (the
“Borrower”), SKYWEST, INC., a corporation organized under the laws of Utah (the “Parent”), the
Guarantors party hereto from time to time, the UNITED STATES DEPARTMENT OF THE
TREASURY (“Treasury”) and THE BANK OF NEW YORK MELLON as Administrative Agent and
Collateral Agent.
WHEREAS, the Borrower has requested that the Initial Lender (as defined below) extend
credit as is permissible under the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136
(Mar. 27, 2020), as the same may be amended form time to time (the “CARES Act”) to the Borrower, and
the Initial Lender is willing to do so on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 4003(h)(1) of the CARES Act, for purposes of the Code
(as defined below) the Loans (as defined below) shall be treated as indebtedness and as having been
issued for their aggregate stated principal amount, and the interest payable pursuant to Section 2.09(a)
shall be treated as qualified stated interest.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Defined Terms. As used in this Agreement, the following terms have the
meanings specified below:
“Additional Collateral” shall mean (a) cash and Cash Equivalents pledged to the
Collateral Agent for the benefit of the Secured Parties under the Security Documents (and subject to an
account control agreement in form and substance satisfactory to the Appropriate Party), (b) airframes,
aircraft, engines and Spare Parts, registered, habitually located, or located in a designated location,
respectively, in the United States and that are eligible for the benefits of Section 1110 of the Bankruptcy
Code, 11 U.S.C. § 1110 or otherwise acceptable to the Required Lenders (provided that any airframe must
be less than 20 years old at the time of its designation as Additional Collateral), (c) Route Authorities for
routes with at least one end point located in the United States and all Slots and Gate Leaseholds related
from time to time thereto or otherwise acceptable to the Required Lenders, (d) real property, (e) ground
support equipment, (f) flight simulators and (g) any other assets acceptable to the Required Lenders, and
all of which assets shall (i) (other than Additional Collateral of the type described in clause (a)) be valued
by a new Appraisal at the time the Parent designates such assets as Additional Collateral, (ii) as of any
date of addition of such assets as Collateral, be subject, to the extent purported to be created by the
applicable Security Document, to a perfected first priority Lien and/or mortgage (or comparable Lien), in
favor of the Collateral Agent for the benefit of the Secured Parties and otherwise subject only to
Permitted Liens (excluding those referred to in clause (4) of the definition of “Permitted Lien”), (iii)
pledged to the Collateral Agent for the benefit of the Secured Parties pursuant to security agreement(s) or
mortgage(s), as applicable, in a form satisfactory to the Appropriate Party and (iv) at the time of their
designation as Additional Collateral, be accompanied by a legal opinion in form satisfactory to the
Appropriate Party; provided that, in accordance with Section 8.06, the Collateral Agent may designate a
sub-agent to accept the security interest in any Additional Collateral for the benefit of the Secured Parties;
provided further that, with respect to Additional Collateral of the type described in clause (c), (d) and (g),
the Borrower agrees to notify the Collateral Agent as promptly as practicable of any new categories of
assets which are expected to be designated as Additional Collateral or any new jurisdictions in which any
asset is to be secured or located; provided further that, with respect to Additional Collateral of the type
described in clause (d), (e) or (f), (i) such assets are acceptable to the Required Lenders, (ii) the Borrower
shall have delivered Appraisals acceptable in form and substance to the Required Lenders with respect to
such assets, (iii) such assets are subject to a loan to value framework acceptable to the Required Lenders,
(iv) such assets are pledged pursuant to documentation acceptable in form and substance to the Required
Lenders and (v) the benefits of pledging such assets outweigh the associated cost, burden, difficulty or
other consequences, as determined by the Required Lenders in their sole discretion.
“Adjusted LIBO Rate” means, as to any Borrowing for any Interest Period, an interest
rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for
such Interest Period divided by (b) one minus the Eurodollar Reserve Percentage.
“Administrative Account” means the account opened with the Administrative Agent in
the name of the Initial Lender as notified to the Borrower and the Initial Lender, or such other account as
the Administrative Agent shall advise the Borrower and each Lender from time to time.
“Administrative Agency Fee Letter” means any fee letter entered into between the
Borrower, the Administrative Agent and the Collateral Agent, or with any successor administrative agent
or collateral agent, in its capacity as administrative agent and in its capacity as collateral agent under any
of the Loan Documents.
“Administrative Agent” means The Bank of New York Mellon, in its capacity as
administrative agent under any of the Loan Documents, or any successor administrative agent.
“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by or otherwise acceptable to the Administrative Agent.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK
Financial Institution.
“Affiliate” means any Person that directly or indirectly controls, is controlled by, or is
under common control with, any other Person. For purposes of this definition, “control” of a Person shall
mean having the power, directly or indirectly, to direct or cause the direction of the management and
policies of such Person, whether by ownership of voting equity, by contract, or otherwise.
“Agent Parties” has the meaning specified in Section 11.01(d)(ii).
“Agent Responsible Officer” means, when used with respect to an Agent, any vice
president, assistant vice president, assistant treasurer or trust officer in the corporate trust and agency
administration of the Agent or any other officer of the Agent customarily performing functions similar to
those performed by any of the above-designated officers, and, in each case, who shall have direct
responsibility for the administration of this Agreement and also means, with respect to a particular agency
matter, any other officer to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
“Agents” means any of the Administrative Agent and the Collateral Agent.
“Agreement” has the meaning specified in introductory paragraph hereof.
“Air Carrier” has the meaning such term has under Section 40102 of Title 49, United
States Code.
“Alternate Base Rate” means, for any day, a rate per annum equal to the highest of (a) the
Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50%
and (c) the Adjusted LIBO Rate for a one-month term in effect on such day (taking into account any
LIBO Rate floor under the definition of “Adjusted LIBO Rate”) plus 1.00%. Any change in the Alternate
Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or such Adjusted LIBO
Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal
Funds Effective Rate or such Adjusted LIBO Rate, respectively.
“AML Laws” means (a) the USA Patriot Act of 2001 (Pub. L. No. 107-56), (b) the U.S.
Money Laundering Control Act of 1986, as amended, (c) the Bank Secrecy Act, 31 U.S.C. sections 5301
et seq., (d) Laundering of Monetary Instruments, 18 U.S.C. section 1956, (e) Engaging in Monetary
Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957, (f) the
Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulations (Title 31 Part
103 of the US Code of Federal Regulations), or (g) any other applicable money laundering or financial
recordkeeping Laws.
“Applicable Law” means, as to any Person, all applicable Laws binding upon such
Person or to which such a Person is subject.
“Applicable Percentage” means, with respect to any Lender, the percentage of the total
Outstanding Amount of Loans of all Lenders represented by the aggregate Outstanding Amount of Loans
of such Lender at such time.
“Applicable Rate” means 3.00%.
“Appraisal” means any appraisal specifying a value in Dollars (and not a range of
values), dated as of the delivery thereof, prepared by an Eligible Appraiser that certifies, at the time of
determination, in reasonable detail the Appraised Value of Eligible Collateral; provided that any
methodology, form of presentation, and all assumptions must be acceptable to the Appropriate Party;
provided further that the methodology, form of presentation and assumptions in the Appraisal delivered
on the Closing Date pursuant to Section 4.01(i) shall be satisfactory for any subsequent Appraisal with
respect to the same category and specific type of Eligible Collateral.
“Appraised Value” means, as of any date, (a) the specific value in Dollars (and not a
range of values) of any property constituting Eligible Collateral (other than cash and Cash Equivalents) as
reflected in the most recent Appraisal, (b) with respect to any cash pledged or being pledged at such time
as Collateral, 160% of the face amount and (c) with respect to any Cash Equivalents pledged or being
pledged at such time as Collateral, 100% of the fair market value thereof as determined by the Parent in
accordance with customary financial market practices determined no earlier than 45 days prior to such
date; provided that (i) if no Appraisal relating to such Eligible Collateral has been delivered to the
Collateral Agent prior to such date, the Appraised Value of such Eligible Collateral shall be deemed to be
zero and (ii) in the case of any such property consisting of ground support equipment, the Appraised
Value shall be deemed to be 50% of the value set forth in the most recent Appraisal..
“Appropriate Party” means (i) while the Initial Lender holds any Commitment or Loan,
the Initial Lender and (ii) if the Initial Lender is no longer a Lender, the Administrative Agent (acting at
the direction of the Required Lenders).
“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.
“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is required by
Section 11.04), and accepted by the Administrative Agent, in substantially the form of Exhibit A or any
other form approved by the Administrative Agent.
“Attributable Indebtedness” means, as of any date of determination, (a) in respect of any
Capitalized Lease Obligations of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any
Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant
lease that would appear on a balance sheet of such Person prepared as of such date in accordance with
GAAP if such lease were accounted for as a capital lease.
“Available Tenor” means, as of any date of determination and with respect to the then-
current Benchmark, as applicable, any tenor for such Benchmark or payment period for interest
calculated with reference to such Benchmark, as applicable, that is or may be used for determining
the length of an Interest Period pursuant to this Agreement as of such date and not including, for the
avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of
“Interest Period” pursuant to clause (d) of Section 2.10.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by an
applicable Resolution Authority in respect of any liability of any Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing
Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European
Union, the implementing Law for such EEA Member Country from time to time which is described in the
EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United
Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule
applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms
or other financial institutions or their affiliates (other than through liquidation, administration or other
insolvency proceedings).
“Benchmark” means, initially, USD LIBO Rate; provided that if a Benchmark
Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement
Date have occurred with respect to USD LIBO Rate or the then-current Benchmark, then
“Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark
Replacement has replaced such prior benchmark rate pursuant to Section 2.10(a).
“Benchmark Replacement” means, for any Available Tenor, the first alternative set
forth in the order below that can be determined by the Required Lenders for the applicable
Benchmark Replacement Date:
(1) the sum of: (a) Term SOFR and (b) the related Benchmark Replacement Adjustment;
(2) the sum of: (a) Daily Simple SOFR and (b) the related Benchmark
Replacement Adjustment;
(3) the sum of: (a) the alternate benchmark rate that has been selected by (y) so long as the
Initial Lender is a Lender, the Initial Lender and (z) otherwise, the Required Lenders
and the Borrower, in each case, as the replacement for the then-current Benchmark for
the applicable Corresponding Tenor giving due consideration to (i) any selection or
recommendation of a replacement benchmark rate or the mechanism for determining
such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing
market convention for determining a benchmark rate as a replacement for the then-
current Benchmark for U.S. dollar-denominated syndicated credit facilities at such time
and (b) the related Benchmark Replacement Adjustment;
provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a
screen or other information service that publishes such rate from time to time as selected by the
Required Lenders in their reasonable discretion and such screen is administratively acceptable as
determined by the Administrative Agent in its reasonable discretion. If the Benchmark
Replacement as determined pursuant to clause (1), (2) or (3) above would be less than the Floor, the
Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the
other Loan Documents; provided further that any such Benchmark Replacement shall be
administratively feasible as determined by the Administrative Agent in its reasonable discretion.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the
then- current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest
Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:
(1) for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the
first alternative set forth in the order below that can be determined by the Required
Lenders:
(a) the spread adjustment, or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero) as of the
Reference Time such Benchmark Replacement is first set for such Interest Period
that has been selected or recommended by the Relevant Governmental Body for
the replacement of such Benchmark with the applicable Unadjusted Benchmark
Replacement for the applicable Corresponding Tenor;
(b) the spread adjustment (which may be a positive or negative value or zero) as of
the Reference Time such Benchmark Replacement is first set for such Interest
Period that would apply to the fallback rate for a derivative transaction
referencing the ISDA Definitions to be effective upon an index cessation event
with respect to such Benchmark for the applicable Corresponding Tenor; and
(2) for purposes of clause (3) of the definition of “Benchmark Replacement,” the spread
adjustment, or method for calculating or determining such spread adjustment, (which may be a
positive or negative value or zero) that has been selected by (y) so long as the Initial Lender is
a Lender, the Initial Lender and (z) otherwise, the Required Lenders and the Borrower, in
each case, for the applicable Corresponding Tenor giving due consideration to (i) any
selection or recommendation of a spread adjustment, or method for calculating or determining
such spread adjustment, for the replacement of such Benchmark with the applicable
Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable
Benchmark Replacement Date or (ii) any evolving or then-prevailing market convention for
determining a spread adjustment, or method for calculating or determining such spread
adjustment, for the replacement of such Benchmark with the applicable Unadjusted
Benchmark Replacement for U.S. dollar- denominated syndicated credit facilities;
provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other
information service that publishes such Benchmark Replacement Adjustment from time to time
as selected by the Required Lenders in their reasonable discretion and such screen is
administratively acceptable as determined by the Administrative Agent in its reasonable
discretion; provided that, any such Benchmark Replacement Adjustment shall be
administratively feasible as determined by the Administrative Agent in its reasonable
discretion.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark
Replacement, any technical, administrative or operational changes (including changes to the definition
of “Alternate Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing
and frequency of determining rates and making payments of interest, timing of borrowing requests or
prepayment, conversion or continuation notices, length of lookback periods, the applicability of
breakage provisions, and other technical, administrative or operational matters) that the Administrative
Agent (after consultation with the Required Lenders) decides may be appropriate to reflect the
adoption and implementation of such Benchmark Replacement and to permit the administration thereof
by the Administrative Agent in a manner substantially consistent with market practice (or, if the
Administrative Agent (after consultation with the Required Lenders) decides that adoption of any
portion of such market practice is not administratively feasible or if the Administrative Agent (after
consultation with the Required Lenders) determines that no market practice for the administration of
such Benchmark Replacement exists, in such other manner of administration as the Administrative
Agent (after consultation with the Required Lenders) decides is reasonably necessary in connection
with the administration of this Agreement and the other Loan Documents). The Required Lenders
shall cooperate in good faith with the Administrative Agent so that the Administrative Agent may
determine such Benchmark Replacement Conforming Changes.
“Benchmark Replacement Date” means the earliest to occur of the following events with
respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of
(a) the date of the public statement or publication of information referenced therein and (b)
the date on which the administrator of such Benchmark (or the published component used in
the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of
such Benchmark (or such component thereof);
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the
public statement or publication of information referenced therein; or
(3) in the case of an Early Opt-in Election, (y) so long as the Initial Lender is a Lender, the sixth
(6th) Business Day after the date notice of such Early Opt-in Election is provided to the
Administrative Agent and (z) otherwise, the sixth (6th) Business Day after the date notice of
such Early Opt-in Election is provided to the Administrative Agent, so long as the
Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th)
Business Day after the date notice of such Early Opt-in Election is provided to the Lenders,
written notice of objection to such Early Opt-in Election from Lenders comprising the
Required Lenders.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on
the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark
Replacement Date will be deemed to have occurred prior to the Reference Time for such
determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the
case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or
events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the
published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following
events with respect to the then-current Benchmark:
(1) a public statement or publication of information by or on behalf of the administrator of
such Benchmark (or the published component used in the calculation thereof) announcing
that such administrator has ceased or will cease to provide all Available Tenors of such
Benchmark (or such component thereof), permanently or indefinitely, provided that, at the
time of such statement or publication, there is no successor administrator that will continue
to provide any Available Tenor of such Benchmark (or such component thereof);
(2) a public statement or publication of information by the regulatory supervisor for the
administrator of such Benchmark (or the published component used in the calculation
thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency
official with jurisdiction over the administrator for such Benchmark (or such component), a
resolution authority with jurisdiction over the administrator for such Benchmark (or such
component) or a court or an entity with similar insolvency or resolution authority over the
administrator for such Benchmark (or such component), which states that the administrator of
such Benchmark (or such component) has ceased or will cease to provide all Available Tenors
of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at
the time of such statement or publication, there is no successor administrator that will
continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(3) a public statement or publication of information by the regulatory supervisor for the
administrator of such Benchmark (or the published component used in the calculation
thereof) announcing that all Available Tenors of such Benchmark (or such component
thereof) are no longer representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with
respect to any Benchmark if a public statement or publication of information set forth above has
occurred with respect to each then-current Available Tenor of such Benchmark (or the published
component used in the calculation thereof).
“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time
that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at
such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes
hereunder and under any Loan Document in accordance with Section 2.10 and (y) ending at the time
that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder
and under any Loan Document in accordance with Section 2.10.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-
5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person”
(as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have
beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise
of other securities, whether such right is currently exercisable or is exercisable only after the passage of
time.
“Beneficial Ownership Certification” means a certification regarding beneficial
ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Borrower” has the meaning specified in introductory paragraph hereof.
“Borrower Materials” has the meaning specified in Section 11.01(e).
“Borrowing” means a borrowing of Loans.
“Borrowing Request” means a request for a Borrowing in substantially the form of
Exhibit D or any other form approved by the Administrative Agent.
“Business Day” means any day on which Treasury and the Federal Reserve Bank of New
York are both open for business that is not a Saturday, Sunday or other day that is a legal holiday under
the laws of the State of New York or is a day on which banking institutions in such state are authorized or
required by Law to close; provided that, when used in connection with a Loan, the term “Business Day”
means any such day that is also a day on which dealings in Dollar deposits are conducted by and between
banks in the London interbank market.
“Capital Markets Offering” means any offering of “securities” (as defined under the
Securities Act and, including, for the avoidance of doubt, any offering of pass-through certificates by any
pass-through trust established by the Parent or any of its Subsidiaries) in (a) a public offering registered
under the Securities Act, or (b) an offering not required to be registered under the Securities Act
(including, without limitation, a private placement under Section 4(a)(2) of the Securities Act, an exempt
offering pursuant to Rule 144A and/or Regulation S of the Securities Act and an offering of exempt
securities).
“Capitalized Lease Obligations” means, at the time any determination thereof is to be
made, the amount of the liability in respect of a Capitalized Lease that would at such time be required to
be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in
accordance with GAAP; provided that all leases of such Person that are or would have been treated as
operating leases for purposes of GAAP prior to the issuance of the ASU shall continue to be accounted
for as operating leases for purposes of all financial definitions and calculations for purposes of this
Agreement (whether or not such operating lease obligations were in effect on such date) notwithstanding
the fact that such obligations are required in accordance with the ASU (on a prospective or retroactive
basis or otherwise) to be treated as capitalized lease obligations for other purposes.
“Capitalized Leases” means all leases that have been or should be, in accordance with
GAAP as in effect on the Closing Date, recorded as capitalized leases; provided that for all purposes
hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted
for as a liability in accordance with GAAP; provided, further, that all leases of such Person that are or
would have been treated as operating leases for purposes of GAAP prior to the issuance of the ASU shall
continue to be accounted for as operating leases for purposes of all financial definitions and calculations
for purposes of this Agreement (whether or not such operating lease obligations were in effect on such
date) notwithstanding the fact that such obligations are required in accordance with the ASU (on a
prospective or retroactive basis or otherwise) to be treated as capitalized lease obligations for other
purposes.
“CARES Act” has the meaning specified in the preamble to this Agreement.
“Cash Equivalents” means:
(a) direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the United States of America), in each case maturing
within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within one year from the date of
acquisition thereof and having, at such date of acquisition, a rating of at least A-2 from S&P or at least P-
2 from Moody’s;
(c) investments in certificates of deposit, banker’s acceptances and time deposits
maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State thereof that has a combined capital
and surplus and undivided profits of not less than $250,000,000;
(d) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7
under the Investment Company Act of 1940, (ii) are rated AAA and Aaa (or equivalent rating) by at least
two (2) Credit Rating Agencies and (iii) have portfolio assets of at least $5,000,000,000;
(e) deposits available for withdrawal on demand with commercial banks organized
in the United States having capital and surplus in excess of $100,000,000; and
(f) other short-term liquid investments held by the Parent and the Subsidiaries as of
the Closing Date in accordance with their normal investment policies and practices for cash management.
“CCR Certificate” has the meaning specified in Section 6.17(b).
“CCR Certificate Delivery Date” has the meaning specified in Section 6.17(b).
“CCR Reference Date” has the meaning specified in Section 6.17(b).
“CFC” means a controlled foreign corporation within the meaning of Section 957 of the
Code.
“CFC Holdco” means any Domestic Subsidiary that has no material assets other than
Equity Interests of one or more Foreign Subsidiaries that are CFCs.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any
law, rule, regulation or treaty or in the administration, interpretation, implementation or application
thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or
directive (whether or not having the force of law) by any Governmental Authority; provided that
notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the
United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be
deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Change of Control” means the occurrence of any of the following: (a) the sale, lease,
transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the properties or assets of the Borrower and its
Subsidiaries, or if the Borrower is a direct or indirect Subsidiary of the Parent, the Parent and its
Subsidiaries, taken as a whole to any Person (including any “person” (as that term is used in Section
13(d)(3) of the Exchange Act)); (b) the consummation of any transaction (including, without limitation,
any merger or consolidation), the result of which is that any Person (including any “person” (as defined
above)) becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of
the Borrower or the Parent, as applicable, (measured by voting power rather than number of shares), other
than (i) any such transaction where the Voting Stock of the Borrower or the Parent, as applicable,
(measured by voting power rather than number of shares) outstanding immediately prior to such
transaction constitutes or is converted into or exchanged for at least a majority of the outstanding shares
of the Voting Stock of such Beneficial Owner (measured by voting power rather than number of shares),
or (ii) the consummation of any merger or consolidation of the Borrower or the Parent, as applicable, with
or into any Person (including any “person” (as defined above)) which owns or operates (directly or
indirectly through a contractual arrangement) a Permitted Business (a “Permitted Person”) or a Subsidiary
of a Permitted Person, in each case, if immediately after such transaction no Person (including any
“person” (as defined above)) is the Beneficial Owner, directly or indirectly, of more than 50% of the total
Voting Stock of such Permitted Person (measured by voting power rather than number of shares); (c) if
the Borrower is a direct or indirect Subsidiary of the Parent, the Parent ceasing to own, directly or
indirectly, 100% of the Equity Interests of the Borrower; (d) the adoption of a plan relating to the
liquidation or dissolution of the Borrower or the Parent or (e) the occurrence of a “change of control”,
“change in control” or similar event under any Material Indebtedness of the Borrower, the Parent or any
parent entity of the foregoing.
“Closing Date” means the first date all the conditions precedent in Section 4.01 are
satisfied.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Collateral Agent” means The Bank of New York Mellon, in its capacity as collateral
agent under any of the Loan Documents, or any successor collateral agent.
“Collateral Coverage Ratio” means, as of any date of determination, the ratio of (i) the
Appraised Value of the Eligible Collateral as of the date of the Appraisal most recently delivered pursuant
to Section 5.16 (or in the case of cash and Cash Equivalents, as of such date of determination) to (ii) the
aggregate principal amount of all Loans and Commitments outstanding as of such date; provided that for
the purposes of calculating clause (i) above, (x) no more than 25% of the Appraised Value of the Eligible
Collateral may correspond to ground support equipment and (y) any amounts held in the Collateral
Proceeds Account shall not be included.
“Collateral Proceeds Account” means a deposit account in the name of the Borrower that
is subject to an agreement, in form and substance satisfactory to the Appropriate Party, establishing
Control (as defined in the Pledge and Security Agreement) of such account by the Collateral Agent.
“Commitment” means the commitment of the Initial Lender to make Loans in the amount
of $573,000,000, as such commitment may be reduced or terminated pursuant to Section 2.07.
“Communications” has the meaning specified in Section 11.01(d)(ii).
“Competitor” means (i) any Person operating an Air Carrier or a commercial passenger
air carrier business and (ii) any Affiliate of any Person described in clause (i) (other than any Affiliate of
such Person as a result of common control by a Governmental Authority or instrumentality thereof and
any Affiliate of such Person under common control with such Person which Affiliate is not actively
involved in the management and/or operations of such Person).
“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Contractual Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound.
“Control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability to exercise voting power,
by contract or otherwise. “Controlling” and “Controlled” have meanings analogous thereto.
“Convertible Indebtedness” means Indebtedness of the Parent that is convertible into
common Equity Interests of the Parent (and cash in lieu of fractional shares) and/or cash (in an amount
determined by reference to the price of such common Equity Interests).
“Corresponding Tenor” with respect to any Available Tenor means, as applicable,
either a tenor (including overnight) or an interest payment period having approximately the same
length (disregarding business day adjustment) as such Available Tenor.
“Credit Parties” means the Borrower and the Guarantors.
“Credit Rating” means a rating as determined by a Credit Rating Agency of the Parent’s
non-credit-enhanced, senior unsecured long-term indebtedness.
“Credit Rating Agency” means a nationally recognized credit rating agency that evaluates
the financial condition of issuers of debt instruments and then assigns a rating that reflects its assessment
of the issuer’s ability to make debt payments.
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate
(which will include a lookback) being established by the Required Lenders in accordance with the
conventions for this rate selected or recommended by the Relevant Governmental Body for determining
“Daily Simple SOFR” for business loans; provided, that if the Administrative Agent decides that any
such convention is not administratively feasible for the Administrative Agent, then the Required
Lenders may establish another convention in its reasonable discretion, subject to the determination by
the Administrative Agent of the administrative feasibility of such convention.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and
all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States
or other applicable jurisdictions from time to time in effect.
“Default” means any event or condition that constitutes an Event of Default or that, with
the giving of any notice, the passage of time, or both, would be an Event of Default.
“Default Rate” means an interest rate (before as well as after judgment) equal to the
applicable interest rate plus 2.00% per annum.
“Disposition” or “Dispose” means the sale, transfer (including through a plan of
division), license, lease or other disposition of any property by any Person (including (i) any sale and
leaseback transaction, any issuance of Equity Interests by a Subsidiary of such Person and (ii) with
respect to Intellectual Property, any covenant not to sue, release, abandonment, lapse, forfeiture,
dedication to the public or other similar disposition of Intellectual Property ), including any sale,
assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or
any rights and claims associated therewith.
“Disqualified Equity Interest” means any Equity Interest that, by its terms (or the terms
of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or
upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely
for Equity Interests that are not Disqualified Equity Interests), pursuant to a sinking fund obligation or
otherwise (except as a result of a change of control or asset sale so long as any rights of the holders
thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior
repayment in full of the Loans and all other Obligations that are accrued and payable and the termination
of the Commitments), (b) is redeemable at the option of the holder thereof, in whole or in part,
(c) provides for scheduled payments of dividends in cash, or (d) is or becomes convertible into or
exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity
Interests, in each case, prior to the date that is ninety-one (91) days after the Maturity Date; provided that
if such Equity Interests are issued pursuant to a plan for the benefit of employees of the Parent or any
Subsidiary or by any such plan to such employees, such Equity Interests shall not constitute Disqualified
Equity Interests solely because they may be required to be repurchased by the Parent or its Subsidiaries in
order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s
termination, death or disability.
“Dollar” and “$” mean lawful money of the United States.
“Domestic Subsidiary” means any Subsidiary that is organized under the Laws of the
United States of America, any state thereof, or the District of Columbia.
“DOT” means the U.S. Department of Transportation.
“Early Opt-in Election” means, if the then-current Benchmark is USD LIBO Rate, the
occurrence of:
(1) (x) so long as the Initial Lender is a Lender, the Initial Lender and (y) otherwise, the Required
Lenders, in each case notifying to the Administrative Agent that the Initial Lender or the
Required Lenders have determined that at least five currently outstanding U.S. dollar-
denominated syndicated credit facilities at such time contain (as a result of amendment or as
originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based
upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such
notice and are publicly available for review), and
(2) (x) so long as the Initial Lender is a Lender, the election by the Initial Lender and (y) otherwise,
the joint election by the Required Lenders and the Borrower to trigger a fallback from USD
LIBO Rate and, in each case, the provision to the Administrative Agent and the other Lenders
of written notice of such election.
“EEA Financial Institution” means (a) any credit institution or investment firm
established in any EEA Member Country that is subject to the supervision of an EEA Resolution
Authority, (b) any entity established in an EEA Member Country that is a parent of an institution
described in clause (a) of this definition, or (c) any financial institution established in an EEA Member
Country that is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject
to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union,
Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person
entrusted with public administrative authority of any EEA Member Country (including any delegee)
having responsibility for the resolution of any EEA Financial Institution.
“Eligible Appraiser” means (a) with respect to aircraft or engines: Morten Beyer &
Agnew, International Bureau of Aviation, Ascend Worldwide Group, ICF International Inc., BK
Associates, Inc., Aircraft Information Services Inc., AVITAS, Inc., PAC Appraisal Inc., Aviation
Specialists Group, Aviation Asset Management Inc. or IBA Group Ltd., (b) with respect to slots, gates or
routes: Morten Beyer & Agnew, ICF International Inc., PAC Appraisal Inc. or BK Associates, Inc., (c)
with respect to parts, Morten Beyer & Agnew, ICF International Inc., Sage-Popovich, Inc., PAC
Appraisal Inc., Aviation Asset Management Inc. or Alton Aviation Consultancy LLC, (d) with respect to
any other type of property, Deloitte & Touche LLP, Andersen Tax LLC, BBC Aviation Enterprises
Aviation Advisors Group, LLC, PricewaterhouseCoopers, CBRE Group Inc. and Jones Lang LaSalle
Incorporated, and (e) any independent appraisal firm appointed by the Borrower and acceptable to the
Appropriate Party.
“Eligible Assignee” means any Person that meets the requirements to be an assignee
under Section 11.04(b)(iii), 11.04(b)(v) and 11.04(b)(vi) (subject to such consents, if any, as may be
required under Section 11.04(b)(iii)); provided that no Competitor shall be an Eligible Assignee.
“Eligible Collateral” means, as of any date, all Collateral on which the Collateral Agent
has, as of such date, to the extent purported to be created by the applicable Security Document, a valid
and perfected first priority Lien and/or mortgage (or comparable Lien) for the benefit of the Secured
Parties and which is otherwise subject only to Permitted Liens and satisfies the requirements set out in the
Loan Documents for such type of Collateral.
“Environmental Laws” means any and all federal, state, local, and foreign statutes, Laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or governmental restrictions, including all common law, relating to pollution or the
protection of health, safety or the environment or the release of any materials into the environment,
including those related to Hazardous Materials, air emissions, discharges to waste or public systems and
health and safety matters.
“Environmental Liability” means any liability or obligation, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines, penalties or indemnities),
directly or indirectly, resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment, disposal or permitting or arranging for the
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials or (e) any contract, agreement or other consensual
arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Equity Interests” means, as to any Person, all of the shares of capital stock of (or other
ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase
or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other
ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition
from such Person of such shares (or such other interests), and all of the other ownership or profit interests
in such Person (including partnership, member or trust interests therein), whether voting or nonvoting,
and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of
determination (other than Convertible Indebtedness or any other debt security that is convertible into or
exchangeable for Equity Interests of such Person and the Warrants).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under
common control with any Credit Party within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code or
Section 302 of ERISA).
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the
failure by any Credit Party or any ERISA Affiliate to meet all applicable requirements under the Pension
Funding Rules or the filing of an application for the waiver of the minimum funding standards under the
Pension Funding Rules; (c) the incurrence by any Credit Party or any ERISA Affiliate of any liability
pursuant to Section 4063 or 4064 of ERISA or a cessation of operations with respect to a Pension Plan
within the meaning of Section 4062(e) of ERISA; (d) a complete or partial withdrawal by any Credit
Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization or insolvent (within the meaning of Title IV of ERISA); (e) the filing of a notice of intent
to terminate a Pension Plan under, or the treatment of a Pension Plan amendment as a termination under,
Section 4041 of ERISA; (f) the institution by the PBGC of proceedings to terminate a Pension Plan;
(g) any event or condition that constitutes grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan; (h) the determination that any Pension
Plan is in at-risk status (within the meaning of Section 430 of the Code or Section 303 of ERISA) or that a
Multiemployer Plan is in endangered or critical status (within the meaning of Section 432 of the Code or
Section 305 of ERISA); (i) the imposition or incurrence of any liability under Title IV of ERISA, other
than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Credit Party or
any ERISA Affiliate; (j) the engagement by any Credit Party or any ERISA Affiliate in a transaction that
could be subject to Section 4069 or Section 4212(c) of ERISA; (k) the imposition of a lien upon any
Credit Party pursuant to Section 430(k) of the Code or Section 303(k) of ERISA; or (l) the making of an
amendment to a Pension Plan that could result in the posting of bond or security under Section 436(f)(1)
of the Code.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published
by the Loan Market Association (or any successor person), as in effect from time to time.
“Eurodollar Reserve Percentage” means, for any day during any Interest Period, the
reserve percentage in effect on such day, whether or not applicable to any Lender, under regulations
issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, special, supplemental or other marginal reserve requirement) with respect to
eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D). The Adjusted
LIBO Rate for each outstanding Loan shall be adjusted automatically as of the effective date of any
change in the Eurodollar Reserve Percentage.
“Event of Default” has the meaning specified in Article VII.
“Excluded Assets” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Excluded Subsidiary” means any Subsidiary of the Parent (other than the Borrower) that
(i) is not wholly-owned, directly or indirectly, by the Parent, (ii) is a captive insurance company, (iii) is an
Immaterial Subsidiary, (iv) is a Receivables Subsidiary or (v) is a Foreign Subsidiary or a CFC Holdco
existing on the Closing Date; provided that, notwithstanding the foregoing, (1) a Subsidiary will not be an
Excluded Subsidiary if it (x) owns assets that are intended to be included in the Collateral, (y) owns
individually, or in the aggregate with other Subsidiaries (including any Subsidiary that would otherwise
qualify as an Excluded Subsidiary), a majority of the Equity Interests of any Subsidiary that owns any
assets that are intended to be included in the Collateral or (z) guarantees Material Indebtedness of the
Parent or any of its Subsidiaries (other than any acquired Subsidiary that guarantees assumed
Indebtedness of a Person acquired pursuant to an acquisition permitted under this Agreement that is
existing at the time of such acquisition or investment; provided that such Indebtedness was not created in
contemplation of or in connection with such acquisition and the amount of such Indebtedness is not
increased), and (2) SkyWest Leasing, Inc. and SkyWest Insurance Company, Inc. shall be Excluded
Subsidiaries.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a
Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or
measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case,
(i) imposed as a result of such Recipient being organized under the laws of, or having its principal office
or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax
(or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender,
U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with
respect to an applicable interest in a Loan pursuant to a law in effect on the date on which (i) such Lender
acquires such interest in the Loans (other than pursuant to an assignment request by the Borrower under
Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that,
pursuant to Section 2.16, amounts with respect to such Taxes were payable either to such Lender's
assignor immediately before such Lender became a party hereto or to such Lender immediately before it
changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with
Section 2.16(g) and (d) any withholding Taxes imposed under FATCA.
“Export Control Laws” means any applicable export control Laws including the
International Traffic in Arms Regulations (22 C.F.R. 120 et seq.) and the Export Administration
Regulations (15 C.F.R. 730 et seq.).
“FAA” means the United States Federal Aviation Administration and any successor
thereto.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable and not materially
more onerous to comply with), any current or future regulations or official interpretations thereof, any
agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory
legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention
among Governmental Authorities and implementing such Sections of the Code.
“FCPA” has the meaning specified in Section 3.15(b).
“Federal Funds Effective Rate” means, for any day, the greater of (a) the rate calculated
by the Federal Reserve Bank of New York based on such day’s Federal funds transactions by depositary
institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its
public website from time to time) and published on the next succeeding Business Day by the Federal
Reserve Bank of New York as the Federal funds effective rate and (b) 0%.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System
of the United States.
“Finance Entity” means any Person created or formed by or at the direction of the Parent
or any of its Subsidiaries for the purpose of financing aircraft and aircraft related assets and related pre-
delivery payment obligations of Parent or such Subsidiaries that; provided, that, such (i) Person holds no
material assets other than the aircraft or aircraft related assets to be financed or assets pursuant to which
related pre-delivery payment obligations arise, (ii) financing is in the ordinary course of business of the
Parent and its Subsidiaries or otherwise customary for airlines based in the United States and (iii) Person
holds no assets constituting, or otherwise intended to be included in, Collateral.
“Financial Officer” means, as to any Person, the chief financial officer, principal
accounting officer, treasurer or controller of such Person.
“Fitch” means Fitch Ratings and any successor to its rating agency business.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as
of the execution of this Agreement, the modification, amendment or renewal of this Agreement or
otherwise) with respect to USD LIBO Rate. As of the Closing Date, the Floor shall be 0%.
“Foreign Lender” means any Lender that is not a U.S. Person.
“Foreign Plan” means any employee pension benefit plan, program, policy, arrangement
or agreement maintained or contributed to by the Parent or any Subsidiary with respect to employees
employed outside the United States (other than any governmental arrangement).
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of
credit in the ordinary course of its activities.
“GAAP” means, subject to Section 1.03, United States generally accepted accounting
principles as in effect from time to time; provided that if at any time any change in GAAP would affect
the computation of any financial ratio or financial requirement, or compliance with any covenant, set
forth in any Loan Document, the Required Lenders and the Borrower will negotiate in good faith to
amend such ratio, requirement or covenant to preserve the original intent thereof in light of such change
in GAAP (subject to the approval of the Required Lenders); provided that until so amended, (a) such
ratio, requirement or covenant will continue to be computed in accordance with GAAP prior to such
change therein and (b) the Borrower will provide to the Administrative Agent and the Lenders
reconciliation statements to the extent requested.
“Gate Leasehold” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Governmental Authority” means the government of the United States of America or any
other nation, or of any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or pertaining to government
(including any supra-national bodies such as the European Union or the European Central Bank).
“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such
Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation
payable or performable by another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to
purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such
Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation,
(iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or
level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (iv) entered into for the purpose of assuring in any other manner the
obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part) or (b) any Lien on any assets of
such Person securing any Indebtedness or other obligation of any other Person, whether or not such
Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any
holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not
include endorsements for collection or deposit in the ordinary course of business. The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.
“Guaranteed Obligations” has the meaning specified in Section 9.01.
“Guarantor” means the Parent and each other Guarantor listed on the signature page to
this Agreement and any other Person that Guarantees the Obligations under this Agreement and any other
Loan Document.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates,
asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical
wastes, and other substances or wastes of any nature regulated under or with respect to which liability or
standards of conduct are imposed pursuant to any Environmental Law.
“Immaterial Subsidiaries” means one or more Subsidiaries, for which (a) the assets of all
such Subsidiaries constitute, in the aggregate, no more than 7.50% of the total assets of the Parent and its
Subsidiaries on a consolidated basis (determined as of the last day of the most recent fiscal quarter of
Parent for which financial statements are available), and (b) the revenues of all such Subsidiaries account
for, in the aggregate, no more than 7.50% of the total revenues of the Parent and its Subsidiaries on a
consolidated basis for the four (4) fiscal quarter period ending on the last day of the most recent fiscal
quarter of Parent for which financial statements are available; provided that (x) a Subsidiary will not be
an Immaterial Subsidiary if it (i) directly or indirectly guarantees, or pledges any property or assets to
secure, any Obligations, (ii) owns any assets that are intended to be included in the Collateral or is party to
any agreements that constitute (or would constitute) Collateral or (iii) owns a majority of the Equity
Interests of any Subsidiary that owns any assets that are intended to be included in the Collateral and (y)
the Borrower shall not be an Immaterial Subsidiary.
“Indebtedness” means, as to any Person at a particular time, without duplication, all of
the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) all direct or contingent obligations of such Person arising under (i) letters of
credit (including standby and commercial), bankers’ acceptances and bank guaranties and (ii) surety
bonds, performance bonds and similar instruments issued or created by or for the account of such Person;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property
owned or being purchased by such Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have been assumed by such Person or
is limited in recourse;
(f) all Attributable Indebtedness;
(g) all obligations of such Person in respect of Disqualified Equity Interests; and
(h) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership
or joint venture (other than a joint venture that is itself a corporation or limited liability company) in
which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date
shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any
Indebtedness of any Person for purposes of clause (e) that is expressly made non-recourse or limited-
recourse (limited solely to the assets securing such Indebtedness) to such Person shall be deemed to be
equal to the lesser of (i) the aggregate principal amount of such Indebtedness and (ii) the fair market value
of the property encumbered thereby as determined by such Person in good faith.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with
respect to any payment made by or on account of any obligation of the Borrower under any Loan
Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Indemnitee” has the meaning specified in Section 11.03(b).
“Information” has the meaning specified in Section 11.12.
“Initial Lender” means Treasury or its designees (but, for the avoidance of doubt,
excluding any assignee of the Loans).
“Intellectual Property” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Interest Payment Date” means the first Business Day following the 14th day of each
March, June, September and December (beginning with September 15, 2021), and the Maturity Date.
“Interest Period” means, as to any Borrowing, (a) for the initial Interest Period, the period
commencing on the date of such Borrowing and ending on the next succeeding Interest Payment Date and
(b) for each Interest Period thereafter, the period commencing on the last day of the next preceding
Interest Period and ending on the next succeeding Interest Payment Date.
“International Registry” has the meaning assigned to such term in the Pledge and
Security Agreement.
“Interpolated Rate” means, at any time, the rate per annum determined by the
Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be
equal to the rate that results from interpolating on a linear basis between: (a) the rate as displayed on the
Bloomberg “LIBOR01” screen page (or any successor or replacement screen on such service; in each
case the “Screen Rate”) for the longest period (for which that Screen Rate is available) that is shorter than
three (3) months and (b) the Screen Rate for the shortest period (for which that Screen Rate is available)
that is equal to or exceeds three (3) months, in each case, at approximately 11:00 a.m., London time, two
(2) Business Days prior to the commencement of such Interest Period.
“Investment” means, as to any Person, any direct or indirect acquisition or investment by
such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other
securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of
debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another
Person, including any partnership or joint venture interest in such other Person and any arrangement
pursuant to which the investor incurs Indebtedness of the type referred to in clause (h) of the definition of
“Indebtedness” in respect of such other Person, or (c) the purchase or other acquisition (in one transaction
or a series of transactions) of all or substantially all of the property and assets or business of another
Person or assets constituting a business unit, line of business or division of such Person. For purposes of
covenant compliance, the amount of any Investment shall be the amount actually invested, without
adjustment for subsequent increases or decreases in the value of such Investment but giving effect to any
returns or distributions of capital or repayment of principal actually received in case by such Person with
respect thereto.
“IRS” means the United States Internal Revenue Service.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International
Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time
to time, or any successor definitional booklet for interest rate derivatives published from time to time by
the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Laws” means, collectively, all international, foreign, federal, state and local statutes,
treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or
authorities, including the interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all applicable administrative orders,
directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental
Authority, in each case whether or not having the force of law.
“Lenders” means the Initial Lender and any other Person that shall have become party
hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Assumption.
“LIBO Rate” means, the greater of (a) the rate appearing on the Bloomberg “LIBOR01”
screen page (or any successor or replacement screen on such service) at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity of three (3) months; provided that (i) if such rate is not available at such
time for any reason, then the “LIBO Rate” shall be the Interpolated Rate, and (ii) if the Interpolated Rate
is not available (except as set forth in Section 2.10), the “LIBO Rate” shall be the LIBO Rate for the
immediately preceding Interest Period, two (2) Business Days prior to the commencement of such Interest
Period and (b) 0%.
“Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, any option or other agreement to sell or give
a security interest in an asset, or preference, priority, or other security interest or preferential arrangement
of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any
easement, right of way or other encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).
“Liquidity” means the sum of (i) all unrestricted cash and Cash Equivalents of Parent and
its Subsidiaries, (ii) cash or Cash Equivalents of the Parent and its Subsidiaries restricted in favor of the
Obligations or in connection with the Payroll Support Program Agreement (other than any amounts held
in the Collateral Proceeds Account), (iii) the aggregate principal amount committed and available to be
drawn by the Parent and its Subsidiaries (taking into account all borrowing base limitations or other
restrictions) under all revolving credit facilities of the Parent and its Subsidiaries, (iv) any remaining
aggregate principal amount committed and available to be drawn (taking into account any applicable
restrictions) by the Parent and its Subsidiaries in respect of the Loans and (v) the scheduled net proceeds
(after giving effect to any expected repayment of existing Indebtedness using such proceeds) of any
Capital Markets Offering of the Parent or any of its Subsidiaries that has priced but has not yet closed
(until the earliest of the closing thereof, the termination thereof without closing or the date that falls five
(5) Business Days after the initial scheduled closing date thereof).
“Loan” means a loan made by a Lender to the Borrower pursuant to this Agreement.
“Loan Application Form” means the application form and any related materials submitted
by the Borrower to the Initial Lender in connection with an application for the Loans under Division A,
Title IV, Subtitle A of the CARES Act.
“Loan Documents” means, collectively, this Agreement, any Security Document, any
promissory notes issued pursuant to Section 2.11(b) and any other documents entered into in connection
herewith (including an Administrative Agency Fee Letter, if any).
“Margin Stock” means margin stock within the meaning of Regulations T, U and X.
“Material Adverse Effect” means (a) a material adverse change in, or a material adverse
effect on, the operations, business, properties, liabilities (actual or contingent), condition (financial or
otherwise) or prospects of the Parent and its Subsidiaries taken as a whole; or (b) a material adverse effect
on (i) the ability of the Borrower or any Credit Party to perform its Obligations, (ii) the legality, validity,
binding effect or enforceability against the Borrower or any Credit Party of any Loan Document to which
it is a party or the validity, perfection and first priority of the Liens on the Collateral in favor of the
Collateral Agent taken as a whole or with respect to a substantial portion of the Collateral, or (iii) the
rights, remedies and benefits available to, or conferred upon, the Lenders or the Agents under any Loan
Documents; provided that the impacts of the COVID-19 disease outbreak will be disregarded for purposes
of clauses (a) of this definition to the extent (i) publicly disclosed in any SEC filing of the Parent or
otherwise provided to the Initial Lender prior to the Closing Date and (ii) the scope of such adverse effect
is no greater than that which has been disclosed as of the Closing Date.
“Material Indebtedness” means Indebtedness of the Parent or any of its Subsidiaries
(other than the Loans) outstanding under the same agreement in a principal amount exceeding
$50,000,000.
“Material Subsidiary” means any Subsidiary that is not an Immaterial Subsidiary.
“Maturity Date” means the date that is five (5) years after the Closing Date (except that,
if such date is not a Business Day, the Maturity Date shall be the preceding Business Day).
“Maximum Rate” has the meaning specified in Section 11.14.
“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency
business.
“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which any Credit Party or any ERISA Affiliate makes or is obligated to
make contributions, during the preceding five (5) plan years has made or been obligated to make
contributions, or has any liability.
“Multiple Employer Plan” means a Plan with respect to which any Credit Party or any
ERISA Affiliate is a contributing sponsor, and that has two (2) or more contributing sponsors at least two
(2) of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
“Net Proceeds” means in connection with any Disposition or Recovery Event, the
aggregate cash and Cash Equivalents received by the Parent or any of its Subsidiaries in respect of a
Disposition of Collateral (including, without limitation, any cash or Cash Equivalents received in respect
of or upon the Disposition of any non-cash consideration received in any such Disposition of Collateral)
or Recovery Event, net of the direct costs and expenses relating to such Disposition and incurred by the
Parent or a Subsidiary (including the sale or disposition of such non-cash consideration) or any such
Recovery Event, including, without limitation, legal, accounting and investment banking fees, and sales
commissions, and any relocation expenses incurred as a result of the Disposition or Recovery Event, taxes
paid or reasonably estimated to be payable as a result of the Disposition or Recovery Event, in each case,
after taking into account any available tax credits or deductions and any tax sharing arrangements.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver
or amendment that (a) requires the approval of all or all affected Lenders in accordance with the terms of
Section 11.02 and (b) has been approved by the Required Lenders.
“Note” means the promissory note executed by the Borrower pursuant to Section 2.11(b).
“Obligations” means all advances to, and debts, liabilities, obligations, covenants and
duties of, each Credit Party arising under any Loan Document or otherwise with respect to any Loan,
whether direct or indirect (including those acquired by assumption), absolute or contingent, due or
required to be performed, or to become due or to be performed, now existing or hereafter arising and
including interest and fees that accrue after the commencement by or against any Credit Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
Without limiting the foregoing, the Obligations include (a) the obligation to pay principal, interest,
charges, expenses, fees, indemnities and other amounts payable by the Borrower or any other Credit Party
under any Loan Document, (b) the obligation of any Credit Party to reimburse any amount in respect of
any of the foregoing that the Lenders, in each case in their sole discretion, may elect to pay or advance on
behalf of any Credit Party and (c) the obligation of any Credit Party or any of its Subsidiaries to take any
action or refrain from taking any action as required by the covenants and other provisions contained in
this Agreement and any other Loan Document.
“Obligee Guarantor” has the meaning specified in Section 9.06.
“Organizational Documents” means (a) as to any corporation, the charter or certificate or
articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect
to any non-U.S. jurisdiction), (b) as to any limited liability company, the certificate or articles of
formation or organization and operating or limited liability agreement and (c) as to any partnership, joint
venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement
of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in
connection with its formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or
organization of such entity.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a
result of a present or former connection between such Recipient and the jurisdiction imposing such Tax
(other than connections arising from such Recipient having executed, delivered, become a party to,
performed its obligations under, received payments under, received or perfected a security interest under,
engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an
interest in the Loans or Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible,
recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery,
performance, enforcement or registration of, from the receipt or perfection of a security interest under, or
otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes
imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19(b)).
“Outstanding Amount” means, with respect to Loans on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowings and prepayments or
repayments of Loans occurring on such date.
“Parent” has the meaning specified in introductory paragraph hereof.
“Participant” has the meaning specified in Section 11.04(d).
“Participant Register” has the meaning specified in Section 11.04(d).
“Payroll Support Program Agreement” means that certain Payroll Support Program
Agreement dated as of April 23, 2020, between the Borrower and Treasury.
“PBGC” means the Pension Benefit Guaranty Corporation.
“Pension Act” means the Pension Protection Act of 2006.
“Pension Funding Rules” means the rules of the Code and ERISA (as modified by the
CARES Act) regarding minimum funding standards and minimum required contributions (including any
installment payment thereof) to Pension Plans and Multiemployer Plans and set forth in, with respect to
plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302
of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436
of the Code and Sections 302, 303, 304 and 305 of ERISA.
“Pension Plan” means any employee pension benefit plan (including a Multiple
Employer Plan, but excluding a Multiemployer Plan) that is maintained or is contributed to by any Credit
Party or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum
funding standards under Section 412 of the Code.
“Perfection Requirement” has the meaning specified in the Pledge and Security
Agreement.
“Permitted Bond Hedge Transaction” means any call or capped call option (or
substantively equivalent derivative transaction) on the Parent’s common Equity Interests purchased by the
Parent in connection with the issuance of any Convertible Indebtedness; provided that the purchase price
for such Permitted Bond Hedge Transaction does not exceed the net proceeds received by the Parent from
the sale of such Convertible Indebtedness issued in connection with the Permitted Bond Hedge
Transaction.
“Permitted Business” means any business that is the same as, or reasonably related,
ancillary, supportive or complementary to, the business in which the Parent and its Subsidiaries are
engaged on the date of this Agreement.
“Permitted Liens” means:
(1) Liens created for the benefit of (or to secure the payment and performance of) the
Obligations or any Guaranteed Obligations;
(2) Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other appropriate provision as is required in conformity
with GAAP has been made therefor;
(3) Liens imposed by law, including carriers’, vendors’, materialmen’s,
warehousemen’s, landlord’s, mechanics’, repairmen’s, employees’ or other like Liens, in each case,
incurred in the ordinary course of business;
(4) Liens arising by operation of law in connection with judgments, attachments or
awards which do not constitute an Event of Default hereunder;
(5) Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods in the ordinary course of
business;
(6) [Reserved];
(7) to the extent applicable, salvage or similar rights of insurers, in each case as it
relates to Collateral; and
(8) Liens expressly permitted by the Pledge and Security Agreement.
“Permitted Refinancing” means with respect to any Person, any refinancings, renewals,
or extensions of any Indebtedness of such Person so long as: (a) such refinancings, renewals, or
extensions do not result in an increase in the principal amount of the Indebtedness so refinanced, renewed,
or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in
connection therewith and by the amount of unfunded commitments with respect thereto; (b) such
refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity
(measured as of the refinancing, renewal, or extension) of the Indebtedness so refinanced, renewed, or
extended, nor are they on terms or conditions that, taken as a whole, are or could reasonably be expected
to be materially adverse to the interests of the Lenders; (c) if the Indebtedness that is refinanced, renewed,
or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension must include subordination terms and conditions that are at least as
favorable to the Lenders as those that were applicable to the refinanced, renewed, or extended
Indebtedness; (d) the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person
that is liable on account of the Obligations other than those Persons which were obligated with respect to
the Indebtedness that was refinanced, renewed, or extended and (e) to the extent the Indebtedness that is
refinanced, renewed, or extended is unsecured, the Indebtedness resulting from such refinancing, renewal
or extension must be unsecured.
“Person” means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, Governmental Authority or other entity.
“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA,
maintained for employees of the Parent or any Subsidiary, or any such plan to which the Parent or any
Subsidiary is required to contribute on behalf of any of its employees or with respect to which any Credit
Party has any liability.
“Platform” means Debt Domain, Intralinks, Syndtrak, DebtX or a substantially similar
electronic transmission system.
“Pledge and Security Agreement” means the Pledge and Security Agreement executed
and delivered by the Borrower and each Guarantor on the Closing Date in form and substance acceptable
to the Initial Lender and the Collateral Agent, as it may be amended, supplemented, restated or otherwise
modified from time to time. For the avoidance of doubt, the terms of the “Pledge and Security
Agreement” shall include the terms of all Applicable Annexes (as defined in the Pledge and Security
Agreement).
“Prepayment Notice” means a notice by the Borrower to prepay Loans, which shall be in
such form as the Appropriate Party may approve.
“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal
as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per
annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15
(519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein,
any similar rate quoted therein (as determined by the Required Lenders) or any similar release by the
Federal Reserve Board (as determined by the Required Lenders). Any change in the Prime Rate shall
take effect at the opening of business on the day such change is publicly announced or quoted as being
effective.
“Proceeds” means “proceeds,” as defined in Article 9 of the UCC.
“PSP Warrant Agreement” means that certain warrant agreement, dated as of April 23,
2020 between the Parent and Treasury.
“Public Lender” has the meaning specified in Section 11.01(e).
“Receivables Subsidiary” means (x) a Wholly-Owned Subsidiary of the Parent formed
for the purpose of and which engages in no activities other than in connection with the financing or
securitization of accounts receivables (a) no portion of the Indebtedness or any other obligations
(contingent or otherwise) of which (1) is guaranteed by the Parent by any Subsidiary of the Parent, and
excluding any guarantees of obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings, (2) is recourse to or obligates the Parent or any
Subsidiary of the Parent in any way other than pursuant to Standard Securitization Undertakings or (3)
subjects any property or asset of the Parent or any Subsidiary of the Parent (other than accounts
receivable and related assets) or any property or asset of the type that is intended to be include in the
Collateral, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant
to Standard Securitization Undertakings, (b) with which neither the Parent nor any Subsidiary of the
Parent (other than another Receivables Subsidiary) has any material contract, agreement, arrangement or
understanding (other than pursuant to the related financing of accounts receivable) other than on terms no
less favorable to the Parent or such Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Parent and (c) with which neither the Parent nor any Subsidiary of the Parent
has any obligation to maintain or preserve such Subsidiary’s financial condition, other than a minimum
capitalization in customary amounts, or to cause such Subsidiary to achieve certain levels of operating
results or (y) any Subsidiary of a Receivables Subsidiary. For the avoidance of doubt, the Parent and any
Subsidiary of the Parent may enter into Standard Securitization Undertakings for the benefit of a
Receivables Subsidiary..
“Recipient” means (a) the Administrative Agent, (b) the Collateral Agent or (c) any
Lender, as applicable.
“Recovery Event” means any settlement of or payment in respect of any property or
casualty insurance claim or any condemnation proceeding relating to any Collateral or any Event of Loss
(as defined in the Pledge and Security Agreement).
“Reference Time” with respect to any setting of the then-current Benchmark means (1) if
such Benchmark is USD LIBO Rate, 11:00 a.m. (London time) on the day that is two London banking
days preceding the date of such setting, and (2) if such Benchmark is not USD LIBO Rate, the time
determined by the Required Lenders in their reasonable discretion, provided that such time is determined
to be administratively feasible by the Administrative Agent.
“Register” has the meaning specified in Section 11.04(c).
“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time
to time and all official rulings and interpretations thereunder or thereof.
“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time
to time and all official rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time
to time and all official rulings and interpretations thereunder or thereof.
“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time
to time and all official rulings and interpretations thereunder or thereof.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the
partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and
representatives of such Person and of such Person’s Affiliates.
“Relevant Governmental Body” means the Federal Reserve Board or the Federal
Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve
Board or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other
than events for which the thirty (30)-day notice period has been waived.
“Required Lenders” means, at any time, Lenders having Loans representing more than
50% of the aggregate Outstanding Amount of Loans of all Lenders at such time.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK
Financial Institution, a UK Resolution Authority.
“Responsible Officer” means (a) the chief executive officer, president, executive vice
president or a Financial Officer of the Borrower or such Credit Party, as applicable, (b) solely for
purposes of the delivery of incumbency certificates and certified Organizational Documents and
resolutions pursuant to Section 4.01, any vice president, secretary or assistant secretary of the Borrower or
such Credit Party and (c) solely for purposes of Borrowing Requests, prepayment notices and notices for
Commitment terminations or reductions given pursuant to Article II, any other officer or employee of the
Borrower so designated from time to time by one of the officers described in clause (a) in a notice to the
Administrative Agent (together with evidence of the authority and capacity of each such Person to so act
in form and substance satisfactory to the Administrative Agent). Any document delivered hereunder that
is signed by a Responsible Officer of the a Credit Party shall be conclusively presumed to have been
authorized by all necessary corporate, partnership or other action on the part of such Credit Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of such Credit Party.
“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interest of any Person, or any payment (whether in
cash, securities or other property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interest, or
on account of any return of capital to such Person’s shareholders, partners or members (or the equivalent
Persons thereof).
“Route Authority” has the meaning assigned to such term in the Pledge and Security
Agreement. “S&P” means S&P Global Ratings, and any successor to its rating agency business.
“Sanctioned Country” has the meaning specified in Section 3.15(a).
“Sanctioned Person” has the meaning specified in Section 3.15(a).
“Sanctions” has the meaning specified in Section 3.15(a).
“Screen Rate” has the meaning specified in the definition of the term “Interpolated Rate”.
“SEC” means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.
“Secured Parties” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Securities Act” means the Securities Act of 1933, as amended.
“Security Document” means the Pledge and Security Agreement and any security or
pledge agreement, mortgage, hypothecation or other agreement, instrument or document relating to
collateral for the Loans (including any short form agreements, supplements, control agreements, collateral
access agreements and registrations executed or made) that may exist at any time and from time to time,
as amended from time to time.
“Slot” has the meaning assigned to such term in the Pledge and Security Agreement.
“SOFR” means, with respect to any Business Day, a rate per annum equal to the secured
overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR
Administrator’s Website at approximately 8:00 a.m. (New York City time) on the immediately
succeeding Business Day.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor
administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New
York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight
financing rate identified as such by the SOFR Administrator from time to time.
“Solvent” means, as to any Person as of any date of determination, that on such date
(a) the fair value of the property of such Person is greater than the total amount of liabilities, including
contingent liabilities, of such Person, (b) the present fair saleable value of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such
Person is not engaged in a business or a transaction, and is not about to engage in a business or a
transaction, for which such Person’s property would constitute an unreasonably small capital. The
amount of any contingent liability at any time shall be computed as the amount that, in light of all of the
facts and circumstances existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability. For the avoidance of doubt, a Person shall not fail to be Solvent on
any date solely as a result of such person’s audit having a “going concern” or like qualification, exception
or explanatory paragraph or any qualification, exception or explanatory paragraph as to the scope of such
audit solely due to the COVID-19 disease outbreak.
“Spare Parts” has the meaning assigned to such term in the Pledge and Security
Agreement.
“Standard Securitization Undertakings” means all representations, warranties, covenants,
indemnities, performance Guarantees and servicing obligations entered into by the Parent or any
Subsidiary (other than a Receivables Subsidiary), which are customary in connection with any financing
of accounts receivable.
“Subsidiary” of a Person means a corporation, partnership, limited liability company,
association or joint venture or other business entity of which a majority of the Equity Interests having
ordinary voting power for the election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency) are at the time owned or
the management of which is controlled, directly, or indirectly through one or more intermediaries, by such
Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer
to a Subsidiary or Subsidiaries of the Parent.
“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or
options or forward bond or forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency
swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other
similar transactions or any combination of any of the foregoing (including any options to enter into any of
the foregoing), whether or not any such transaction is governed by or subject to any master agreement,
and (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms
and conditions of, or governed by, any form of master agreement published by the International Swaps
and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other
master agreement (any such master agreement, together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any Master Agreement.
“Swap Termination Value” means, as to any one or more Swap Contracts, after taking
into account the effect of any legally enforceable netting agreement relating to such Swap Contracts,
(a) for any date on or after the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any date prior to the date
referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap
Contracts, as determined based upon one or more mid-market or other readily available quotations
provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate
of a Lender).
“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-
called synthetic, off-balance sheet or tax retention lease or (b) an agreement for the use or possession of
property creating obligations that do not appear on the balance sheet of such Person but, upon the
insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person
(without regard to accounting treatment).
“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term SOFR” means, for the applicable Corresponding Tenor as of the applicable
Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by
the Relevant Governmental Body.
“Trade Date” means the date on which an assigning Lender enters into a binding
agreement to sell and assign all or a portion of its rights and obligations under this Agreement to another
Person.
“Treasury” has the meaning specified in the preamble to this Agreement.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under
the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential
Regulation Authority) or any Person falling within IFPRU 11.6 of the FCA Handbook (as amended from
time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain
credit institutions and investment firms, and certain affiliates of such credit institutions or investment
firms.
“UK Resolution Authority” means the Bank of England or any other public
administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement
excluding the related Benchmark Replacement Adjustment.
“Uniform Commercial Code” and “UCC” means the Uniform Commercial Code as in
effect from time to time in the State of New York or, when the context implies, the Uniform Commercial
Code as in effect from time to time in any other applicable jurisdiction.
“United States” and “U.S.” mean the United States of America.
“USD LIBO Rate” means the LIBO Rate for U.S. dollars.
“U.S. Person” means any Person that is a “United States Person” as defined in
Section 7701(a)(30) of the Code.
“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.16(g).
“Voting Stock” of any specified Person as of any date means the equity interests of such
Person that is at the time entitled to vote in the election of the board of directors of such Person.
“Warrant Agreement” means the warrant agreement, dated as of the date hereof between
the Parent and Treasury, pursuant to which the Parent agrees to issue Warrants to Treasury upon each
Borrowing.
“Warrants” means, collectively, those certain warrants issued to Treasury under the
Warrant Agreement or the PSP Warrant Agreement.
“Wholly-Owned” means, as to a Subsidiary of a Person, a Subsidiary of such Person all
of the outstanding Equity Interests of which (other than (a) director’s qualifying shares and (b) shares
issued to foreign nationals to the extent required by Applicable Law) are owned by such Person and/or by
one or more Wholly-Owned Subsidiaries of such Person.
“Withholding Agent” means the Borrower and the Administrative Agent or other person
making or transferring to any Lender any payment on behalf of the Borrower.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution
Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time
under the Bail-In Legislation for the applicable EEA Member Country, which powers are described in the
EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the
applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the
form of a liability of any UK Financial Institution or any contract or instrument under which that liability
arises, to convert all or part of that liability into shares, securities or obligations of such Person or any
other Person, to provide that any such contract or instrument is to have effect as if a right had been
exercised under it or to suspend any obligation in respect of that liability or any of the powers under that
Bail-In Legislation that are related to or ancillary to any of those power .
SECTION 1.02 Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be
construed to have the same meaning and effect as the word “shall.” The word “or” is not exclusive. The
word “year” shall refer (i) in the case of a leap year, to a year of three hundred sixty-six (366) days, and (ii)
otherwise, to a year of three hundred sixty-five (365) days. Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed
to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein
to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless
otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to
time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and
to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.03 Accounting Terms; Changes in GAAP.
(a) Accounting Terms. Except as otherwise expressly provided herein, all accounting
terms not otherwise defined herein shall be construed in conformity with GAAP. Financial statements
and other information required to be delivered by the Parent to the Lenders pursuant to Sections 5.01(a)
and 5.01(b) shall be prepared in accordance with GAAP as in effect at the time of such preparation.
Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the
computation of any financial covenant) contained herein, Indebtedness of the Parent and its Subsidiaries
shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of
FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.
(b) Changes in GAAP. If the Borrower notifies the Administrative Agent (who will
forward such notification to the Lenders) that the Borrower requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the
Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether
any such notice is given before or after such change in GAAP or in the application thereof, then such
provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such
change shall have become effective until such notice shall have been withdrawn, the Required Lenders
shall have notified the Borrower (with a copy to the Administrative Agent) of their objection to such
amendment or such provision shall have been amended in accordance herewith.
SECTION 1.04 Rates. The Administrative Agent does not warrant or accept responsibility
for, and shall not have any liability with respect to, the administration, submission or any other matter
related to the rates in the definition of “LIBO Rate” or with respect to any comparable or successor rate
thereto.
SECTION 1.05 Divisions. For all purposes under the Loan Documents, in connection with
any division or plan of division under Delaware law (or any comparable event under a different
jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right,
obligation or liability of a different Person, then it shall be deemed to have been transferred from the
original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person
shall be deemed to have been organized on the first date of its existence by the holders of its Equity
Interests at such time.
ARTICLE II
COMMITMENTS AND BORROWINGS
SECTION 2.01 Commitments. Subject to the terms and conditions set forth herein, the
Initial Lender agrees to make the Loans to the Borrower in one or more installments on or after the Closing
Date in an aggregate principal amount not to exceed the Initial Lender’s Commitment. Amounts borrowed
under this Section 2.01 and repaid or prepaid may not be reborrowed.
SECTION 2.02 Loans and Borrowings.
(a) Borrowings. The Borrower shall request the initial Borrowing of the Loans on
the Closing Date and may request one or more subsequent Borrowings of the Loans; provided that the
Borrower shall request no more than three (3) total Borrowings.
(b) Minimum Amounts. Each Borrowing shall be in an aggregate amount of
$60,000,000 or a larger multiple of $5,000,000; provided that, the final Borrowing may be in an amount
equal to the aggregate remaining outstanding Commitment available to the Borrower under the terms and
conditions of this Agreement.
(c) Funding of Borrowings. Each Lender shall make the amount of each Borrowing
to be made by it hereunder available to the Administrative Agent by wire transfer of immediately
available funds to the Administrative Account not later than 12:00 noon (New York City time) on the
proposed date thereof. The Administrative Agent will make all such funds so received available to the
Borrower in like funds, by wire transfer of such funds in accordance with the instructions provided in the
applicable Borrowing Request; provided that if all such requested funds are not received by the
Administrative Agent by 12:00 noon (New York City time) on the proposed date for such Borrowing, the
Administrative Agent shall distribute such funds on the next succeeding Business Day.
SECTION 2.03 Borrowing Requests.
(a) Notice by Borrower. In order to request a Borrowing, the Borrower shall notify
the Administrative Agent of such request in writing not later than 11:00 a.m. (New York City time) (i)
with respect to the initial Borrowing under this Agreement, three (3) Business Days prior to the date of
the requested Borrowing and (ii) for each subsequent Borrowing, five (5) Business Days before such
Borrowing. Each such notice shall be irrevocable and shall be in the form of a written Borrowing
Request, appropriately completed and signed by a Responsible Officer of the Borrower. The
Administrative Agent shall promptly advise the applicable Lenders of any Borrowing Request given
pursuant to this Section 2.03(a) (and the contents thereof), and of each Lender’s portion of the requested
Borrowing.
(b) Content of Borrowing Requests. Each Borrowing Request for a Borrowing
pursuant to this Section shall specify the following information in compliance with Section 2.02: (i) the
aggregate amount of the requested Borrowing; (ii) the date of such Borrowing (which shall be a Business
Day); and (iii) the location and number of the Borrower’s account to which funds are to be disbursed.
SECTION 2.04 [Reserved].
SECTION 2.05 [Reserved].
SECTION 2.06 Prepayments.
(a) Optional Prepayments. The Borrower may, upon written notice to the
Administrative Agent, at any time and from time to time prepay the Loans in whole or in part without
premium or penalty, subject to the requirements of this Section. Partial prepayments of the Loans shall be
in a minimum aggregate principal amount of $1,000,000 or a whole multiple of $100,000 in excess
thereof. Notwithstanding anything herein to the contrary, the Borrower may at any time elect to prepay
the loans with funds contained in the Collateral Proceeds Account.
(b) Mandatory Prepayments.
(i) Dispositions of Collateral. Within three (3) Business Days of the receipt
by the Parent or any of its Subsidiaries of any Net Proceeds from a Disposition of Collateral not
permitted by Section 6.04, the Borrower shall prepay the Loans in an amount equal to 100% of
such Net Proceeds.
(ii) Recovery Events. Within three (3) Business Days of the receipt by the
Parent or any of its Subsidiaries of any Net Proceeds from a Recovery Event in respect of
Collateral, the Borrower shall either (x) prepay the Loans in an amount equal to 100% of such
Net Proceeds or (y) deposit such Net Proceeds into the Collateral Proceeds Account for such
purpose and thereafter such Net Proceeds shall be applied (to the extent not otherwise applied
pursuant to the immediately succeeding proviso) to prepay the Loans; provided that (I) the
Borrower may use such Net Proceeds to (A) replace the assets which are the subject of such
Recovery Event with assets that are of the same type of Collateral, or (B) repair the assets which
are the subject of such Recovery Event, in each case, within 270 days after such deposit is made,
(II) all such Net Proceeds amount may, at the option of the Borrower at any time, be applied to
repay the Loans, and (III) upon the occurrence of an Event of Default, the amount of any such
deposit may be applied by the Administrative Agent to repay the Loans.
(iii) Certain Debt Issuances. Immediately upon receipt by the Parent or any
of its Subsidiaries of any proceeds from the incurrence of any Indebtedness that is secured by
Liens on the Collateral (other than Permitted Liens), the Borrower shall prepay the Loans in an
amount equal to 100% of any such proceeds from any such Indebtedness.
(iv) Change of Control. Immediately upon the occurrence of a Change of
Control, the Borrower shall prepay the Loans in an amount equal to 100% of the aggregate
outstanding principal amount of Loans.
(c) Notices. Each such notice pursuant to this Section shall be in the form of a
written Prepayment Notice, appropriately completed and signed by a Responsible Officer of the
Borrower, and must be received by the Administrative Agent not later than 11:00 a.m. (New York City
time) three (3) Business Days before the date of prepayment (which delivery may initially be by
electronic communication including fax or email and shall be followed by an original authentic
counterpart thereof) . Each Prepayment Notice shall specify (x) the prepayment date and (y) the principal
amount of the Loans or portion thereof to be prepaid. Each Prepayment Notice shall be irrevocable.
(d) Payments. Any prepayment of the Loans pursuant to this Section 2.06 shall be
accompanied by accrued interest on the principal amount prepaid as set forth in Section 2.09(c).
SECTION 2.07 Reduction and Termination of Commitments. The Initial Lender’s
Commitment shall (x) automatically and permanently be reduced by the amount of any Borrowing of a Loan
and (y) automatically and permanently terminate on March 26, 2021. The Borrower may, upon not less than
three (3) Business Days’ notice to the Initial Lender and the Administrative Agent, terminate the Commitment
or, from time to time, reduce the Commitment. Any such reduction in the Commitment shall be in an amount
equal to $1,000,000 or a whole multiple thereof, and shall permanently reduce the Commitment.
SECTION 2.08 Repayment of Loans. The Borrower shall repay to the Administrative Agent
for the ratable account of the Lenders the aggregate principal amount of all Loans outstanding on the Maturity
Date.
SECTION 2.09 Interest.
(a) Interest Rates. Subject to paragraph (b) of this Section, the Loans shall bear
interest at a rate per annum equal to the Adjusted LIBO Rate plus the Applicable Rate.
(b) Default Interest. If any amount payable by the Borrower under this Agreement
or any other Loan Document (including principal of any Loan, interest, fees and other amount) is not paid
when due, whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear
interest at a rate per annum equal to the applicable Default Rate. Upon the request of the Required
Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all
Loans outstanding hereunder at a rate per annum equal to the applicable Default Rate.
(c) Payment Dates. Accrued interest on each Loan shall be payable in arrears on or
before 12:00 noon (New York City time) on each Interest Payment Date applicable thereto and at such
other times as may be specified herein; provided that (i) interest accrued pursuant to paragraph (b) of this
Section shall be payable on demand and (ii) in the event of any repayment or prepayment of any Loan
(including mandatory prepayments under Section 2.06(b)), accrued interest on the principal amount
repaid or prepaid shall be payable on the date of such repayment or prepayment.
(d) Interest Computation. All interest hereunder shall be computed on the basis of a
year of three hundred sixty (360) days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The Adjusted LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.10 Benchmark Replacement Setting.
(a) Benchmark Replacement. Notwithstanding anything to the contrary herein or in
any other Loan Document, if a Benchmark Transition Event or an Early Opt-in Election, as applicable,
and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any
setting of the then-current Benchmark, as notified by the Required Lenders to the Administrative Agent in
writing, then (x) if a Benchmark Replacement is determined in accordance with clause (1) or (2) of the
definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark
Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in
respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or
further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a
Benchmark Replacement is determined in accordance with clause (3) of the definition of “Benchmark
Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such
Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark
setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of
such Benchmark Replacement is provided to the Lenders and the Administrative Agent by the Required
Lenders without any amendment to, or further action or consent of any other party to, this Agreement or
any other Loan Document so long as the Administrative Agent has not received, by such time, written
notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders.
(b) Benchmark Replacement Conforming Changes. In connection with the
implementation of a Benchmark Replacement, the Administrative Agent (after consultation with the
Required Lenders) will have the right to make Benchmark Replacement Conforming Changes from time
to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any
amendments implementing such Benchmark Replacement Conforming Changes will become effective
without any further action or consent of any other party to this Agreement or any other Loan Document.
(c) Notices; Standards for Decisions and Determinations. The Initial Lender or the
Required Lenders, as the case may be, will promptly notify the Administrative Agent, which will then
promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or
an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (ii) the
implementation of any Benchmark Replacement, (iii) the removal or reinstatement of any tenor of a
Benchmark pursuant to clause (d) below and (iv) the commencement or conclusion of any Benchmark
Unavailability Period. The Administrative Agent will promptly notify the Borrower and the Lenders of
the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or
election that may be made by any Lender (or group of Lenders) or the Administrative Agent, if
applicable, pursuant to this Section 2.10, including any determination with respect to a tenor, rate or
adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to
take or refrain from taking any action or any selection, will be conclusive and binding absent manifest
error and may be made in its or their sole discretion and without consent from any other party to this
Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this
Section 2.10. Notwithstanding anything in this Agreement to the contrary, the Administrative Agent does
not warrant or accept any responsibility for, and shall not have any liability with respect to, any
determination made by it in connection with the adoption of Benchmark Replacement Conforming
Changes or for the impact of such Benchmark Replacement Conforming Changes, nor for the failure to
adopt any Benchmark Replacement Conforming Changes due to the failure of the Required Lenders to
cooperate in good faith in connection with the determination of any Benchmark Replacement Conforming
Changes.
(d) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary
herein or in any other Loan Document, at any time (including in connection with the implementation of a
Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or USD
LIBO Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other
information service that publishes such rate from time to time as selected by the Administrative Agent in
its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has
provided a public statement or publication of information announcing that any tenor for such Benchmark
is or will be no longer representative, then the definition of “Interest Period” may be modified for any
Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if
a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or
information service for a Benchmark (including a Benchmark Replacement) used by the Administrative
Agent or (B) is not, or is no longer, subject to an announcement that it is or will no longer be
representative for a Benchmark (including a Benchmark Replacement), then the definition of “Interest
Period” may be modified for all Benchmark settings at or after such time to reinstate such previously
removed tenor.
(e) Benchmark Unavailability Period. During any Benchmark Unavailability Period,
all calculations of interest by reference to a LIBO Rate hereunder shall instead be made by reference to
the Alternate Base Rate.
SECTION 2.11 Evidence of Debt.
(a) Maintenance of Records. The Administrative Agent shall maintain the Register
in accordance with Section 11.04(c). The entries made in the records maintained pursuant to this
paragraph (a) shall be prima facie evidence absent manifest error of the existence and amounts of the
obligations recorded therein. Any failure of the Administrative Agent to maintain such records or make
any entry therein or any error therein shall not in any manner affect the obligations of the Borrower under
this Agreement and the other Loan Documents.
(b) Promissory Notes. The Borrower shall prepare, execute and deliver to such
Lender a promissory note of the Borrower payable to such Lender (or, if requested by such Lender, to
such Lender and its registered assigns) and a form attached as Exhibit C hereto, which shall evidence such
Lender’s Loan.
SECTION 2.12 Payments Generally.
(a) Payments by Borrower. All payments to be made by the Borrower hereunder and
the other Loan Documents shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff. Except as otherwise expressly provided herein, all such payments shall be made to
the Administrative Agent, for the account of the respective Lenders to which such payment is owed, to
the Administrative Account in immediately available funds not later than 12:00 noon (New York City
time) on the date specified herein. All amounts received by a Lender or the Administrative Agent after
such time on any date shall be deemed to have been received on the next succeeding Business Day and
any applicable interest or fees shall continue to accrue. The Administrative Agent will promptly
distribute to each Lender its ratable share (or other applicable share as provided herein) of such payment
in like funds as received by wire transfer to such Lender’s applicable lending office (or otherwise
distribute such payment in like funds as received to the Person or Persons entitled thereto as provided
herein). If any payment to be made by the Borrower shall fall due on a day that is not a Business Day,
payment shall be made on the next succeeding Business Day and such extension of time shall be reflected
in computing interest or fees, as the case may be; provided that, if such next succeeding Business Day
would fall after the Maturity Date, payment shall be made on the immediately preceding Business Day.
Except as otherwise expressly provided herein, all payments hereunder or under any other Loan
Document shall be made in Dollars.
(b) Application of Insufficient Payments. Subject to Section 7.02, if at any time
insufficient funds are received by and available to the Lenders or the Administrative Agent to pay fully all
amounts of principal, interest, fees and other amounts then due hereunder, such funds shall be applied
(i) first, to pay interest, fees and other amounts then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest, fees and other amounts then due to such parties, and
(ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance
with the amounts of principal then due to such parties.
(c) Presumptions by Administrative Agent. Unless the Administrative Agent shall
have received notice from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such
payment, the Administrative Agent may assume that the Borrower has made such payment on such date
in accordance herewith and may, in reliance upon such assumption, but shall not be obligated to distribute
to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then
each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender, with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater
of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation. Notwithstanding the foregoing, the
Administrative Agent is not required to make any payment to the Lenders until it is in possession of
cleared funds from the Borrower.
(d) Deductions by Administrative Agent. If any Lender (other than the Initial
Lender) shall fail to make any payment required to be made by it pursuant to Section 2.13 or 11.03(c),
then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof,
(i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender for
the benefit of the Administrative Agent to satisfy such Lender’s obligations to the Administrative Agent
until all such unsatisfied obligations are fully paid or (ii) hold any such amounts in a segregated account
as cash collateral for, and for application to, any future funding obligations of such Lender under any such
Section, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative
Agent in its discretion.
(e) Several Obligations of Lenders. The obligations of the Lenders hereunder to
make Loans and to make payments pursuant to Section 11.03(c) are several and not joint. The failure of
any Lender to make any Loan or to make any such payment on any date required hereunder shall not
relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Loan or to make its payment under
Section 11.03(c).
SECTION 2.13 Sharing of Payments. If any Lender shall, by exercising any right of setoff
or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or
other obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate
amount of its Loans and accrued interest thereon or other such obligations greater than its pro rata share
thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the
Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and
such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and other amounts owing them; provided that:
(i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest; and
(ii) the provisions of this paragraph shall not be construed to apply to (x) any
payment made by the Borrower pursuant to and in accordance with the express terms of this
Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans to any assignee or participant, other than to the
Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under
Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully
as if such Lender were a direct creditor of the Borrower in the amount of such participation.
SECTION 2.14 Compensation for Losses. In the event of (a) the payment of any principal
of the Loans other than on the last day of an Interest Period (including as a result of an Event of Default),
(b) the failure to borrow or prepay the Loans (or any portion thereof) on the date specified in any notice
delivered pursuant hereto, or (c) the assignment of the Loans (or any portion thereof) other than on the last
day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.19(b), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an
amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have
accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that
would have been applicable to such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow, for the date that would have been
the applicable Interest Period), over (ii) the amount of interest that would accrue on such principal amount
for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and period from other banks in the London interbank
eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is
entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate
promptly after receipt thereof.
SECTION 2.15 Increased Costs.
(a) Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except any reserve
requirement reflected in the Adjusted LIBO Rate);
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes,
(B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and
(C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or
other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii) impose on any Lender or the London interbank market any other
condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such
Lender;
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient
of making or maintaining any Loan or to reduce the amount of any sum received or receivable by such
Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon
request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the
case may be, such additional amount or amounts as will compensate such Lender or other Recipient, as
the case may be, for such additional costs incurred or reduction suffered.
(b) [Reserved].
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as
specified in paragraph (a) of this Section and delivered to the Borrower, shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate
within ten (10) days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such
compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this
Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date
that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or
reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Change in
Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to
above shall be extended to include the period of retroactive effect thereof).
SECTION 2.16 Taxes.
(a) Defined Terms. For purposes of this Section, the term “Applicable Law”
includes FATCA.
(b) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower under any Loan Document shall be made without deduction or withholding for
any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith
discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from
any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to
make such deduction or withholding and shall timely pay the full amount deducted or withheld to the
relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified
Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or
withholding has been made (including such deductions and withholdings applicable to additional sums
payable under this Section) the applicable Recipient receives an amount equal to the sum it would have
received had no such deduction or withholding been made. Borrower acknowledges and agrees that,
absent a Change in Law, Borrower is not required to withhold or deduct from any such payments to the
Initial Lender on account of any U.S. federal withholding taxes or Taxes imposed pursuant to FATCA.
(c) Payment of Other Taxes by Borrower. The Borrower shall timely pay to the
relevant Governmental Authority in accordance with Applicable Law, or at the option of the Initial
Lender, the Required Lenders or the Administrative Agent timely reimburse it for the payment of, any
Other Taxes.
(d) Indemnification by Borrower. The Borrower shall indemnify each Recipient,
within thirty (30) days after demand therefor, for the full amount of any Indemnified Taxes (including
Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable
or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and
any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes
were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the
Administrative Agent if such Lender is not the Initial Lender), or by the Administrative Agent on its own
behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(e) Indemnification by the Lenders. Each Lender (other than the Initial Lender) shall
severally indemnify the Administrative Agent, within thirty (30) days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already
indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of
the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions
of Section 11.04(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes
attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in
connection with any Loan Document, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or liability delivered to any such
Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender (other than
the Initial Lender) hereby authorizes the Administrative Agent to set off and apply any and all amounts at
any time owing to such Lender under any Loan Document or otherwise payable by the Administrative
Agent to such Lender from any other source against any amount due to the Administrative Agent under
this paragraph (e).
(f) Evidence of Payments. As soon as practicable after any payment of Taxes by the
Borrower to a Governmental Authority pursuant to this Section, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(g) Status of Lenders. (i) Any Lender (other than the Initial Lender) that is entitled
to an exemption from or reduction of withholding Tax with respect to payments made under any Loan
Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably
requested by the Borrower or the Administrative Agent, such properly completed and executed
documentation reasonably requested by the Borrower (or, if such Lender is not the Initial Lender, the
Administrative Agent) as will permit such payments to be made without withholding or at a reduced rate
of withholding. In addition, any Lender (other than the Initial Lender), if reasonably requested by the
Borrower (or the Administrative Agent), shall deliver such other documentation prescribed by Applicable
Law or reasonably requested by the Borrower (or the Administrative Agent) as will enable the Borrower
(or the Administrative Agent) to determine whether or not such Lender is subject to backup withholding
or information reporting requirements. Notwithstanding anything to the contrary in the preceding two
sentences, the completion, execution and submission of such documentation (other than such
documentation set forth in paragraphs (g)(ii)(A), (ii)(B) and (ii)(D) of this Section) shall not be required if
in the Lender’s reasonable judgment such completion, execution or submission would subject such
Lender to any material unreimbursed cost or expense or would materially prejudice the legal or
commercial position of such Lender.
(ii) Without limiting the generality of the foregoing,
(A) any Lender (other than the Initial Lender) that is a U.S. Person
shall deliver to the Borrower and the Administrative Agent on or about the date on which
such Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the reasonable request of the Borrower or the Administrative Agent), executed
copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup
withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do
so, deliver to the Borrower and the Administrative Agent (in such number of copies as
shall be requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), whichever of the
following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of
an income tax treaty to which the United States is a party (x) with respect to
payments of interest under any Loan Document, executed copies of IRS
Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “interest” article of
such tax treaty and (y) with respect to any other applicable payments under any
Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E establishing an
exemption from, or reduction of, U.S. federal withholding Tax pursuant to the
“business profits” or “other income” article of such tax treaty;
(2) executed copies of IRS Form W-8ECI (or any successor
forms) and, in the case of an Agent, a withholding certificate that satisfies the
requirements of Treasury Regulation Sections 1.1441-1(b)(2)(iv) and 1.1441-
1(e)(3)(v) as applicable to a U.S. branch that has agreed to be treated as a U.S.
Person for withholding tax purposes;
(3) in the case of a Foreign Lender claiming the benefits of
the exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate substantially in the form of Exhibit B-1 to the effect that such Foreign
Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a
“10 percent shareholder” of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, or a “controlled foreign corporation” related to
the Borrower as described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or IRS
Form W-8BEN-E; or
(4) to the extent a Foreign Lender is not the beneficial
owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-
8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance
Certificate substantially in the form of Exhibit B-2 or Exhibit B-3, IRS Form W-
9, and/or other certification documents from each beneficial owner, as applicable;
provided that if the Foreign Lender is a partnership and one or more direct or
indirect partners of such Foreign Lender are claiming the portfolio interest
exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate
substantially in the form of Exhibit B-4 on behalf of each such direct and indirect
partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do
so, deliver to the Borrower and the Administrative Agent (in such number of copies as
shall be requested by the recipient) on or about the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), executed copies of any
other form prescribed by Applicable Law as a basis for claiming exemption from or a
reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by Applicable Law to permit the
Borrower or the Administrative Agent to determine the withholding or deduction
required to be made; and
(D) if a payment made to a Lender (other than the Initial Lender)
under any Loan Document would be subject to U.S. federal withholding Tax imposed by
FATCA if such Lender were to fail to comply with the applicable reporting requirements
of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as
applicable), such Lender shall deliver to the Borrower and the Administrative Agent at
the time or times prescribed by law and at such time or times reasonably requested by the
Borrower or the Administrative Agent such documentation prescribed by Applicable Law
(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower or the Administrative Agent as may
be necessary for the Borrower and the Administrative Agent to comply with their
obligations under FATCA and to determine that such Lender has complied with such
Lender’s obligations under FATCA or to determine the amount, if any, to deduct and
withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall
include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or
becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify
the Borrower and the Administrative Agent in writing of its legal inability to do so. Notwithstanding
anything to the contrary in this Agreement, the Initial Lender shall be entitled to the benefits of this
Section 2.16 and all related provisions under this Agreement without regard to whether it provides any
documentation described in Section 2.16(g).
(h) Treatment of Certain Refunds. If any party determines, in its sole discretion
exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified
pursuant to this Section (including by the payment of additional amounts pursuant to this Section), it shall
pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity
payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-
pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party,
upon the request of such indemnified party, shall repay to such indemnified party the amount paid over
pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) in the event that such indemnified party is required to repay such refund to such
Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will
the indemnified party be required to pay any amount to an indemnifying party pursuant to this
paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the Tax subject to indemnification and giving
rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification
payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not
be construed to require any indemnified party to make available its Tax returns (or any other information
relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(i) Survival. Each party’s obligations under this Section shall survive the
resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement
of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all
obligations under any Loan Document.
SECTION 2.17 [Reserved].
SECTION 2.18 [Reserved].
SECTION 2.19 Mitigation Obligations; Replacement of Lenders.
(a) Designation of a Different Lending Office. If any Lender requests compensation
under Section 2.15, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any
Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such
Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office
for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of
its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.16, as the case may be, in the
future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs
and expenses incurred by any Lender in connection with any such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under
Section 2.15, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any
Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16 and, in
each case, such Lender has declined or is unable to designate a different lending office in accordance with
paragraph (a) of this Section, or if any Lender is a Non-Consenting Lender, then the Borrower may, at its
sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 11.04), all of its interests, rights (other than its existing rights to payments
pursuant to Section 2.15 or Section 2.16) and obligations under this Agreement and the related Loan
Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that:
(i) the Borrower shall have paid to the Administrative Agent the assignment
fee (if any) specified in Section 11.04;
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any amounts under
Section 2.14) from the assignee (to the extent of such outstanding principal and accrued interest
and fees) or the Borrower (in the case of all other amounts);
(iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.15 or payments required to be made pursuant to Section 2.16, such
assignment will result in a reduction in such compensation or payments thereafter;
(iv) such assignment does not conflict with Applicable Law; and
(v) in the case of any assignment resulting from a Lender becoming a Non-
Consenting Lender, the applicable assignee shall have consented to the applicable amendment,
waiver or consent.
A Lender shall not be required to make any such assignment or delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to
require such assignment and delegation cease to apply.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Credit Parties represent and warrant to the Administrative Agent, the Collateral
Agent and the Lenders on the Closing Date and on the date of each Borrowing that:
SECTION 3.01 Existence, Qualification and Power. Each of the Credit Parties and their
respective Material Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good
standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power
and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or
lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan
Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good
standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license, except, in each case referred to in clause (a)
(other than with respect to any Credit Party), (b)(i) or (c), to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.02 Authorization; No Contravention. The execution, delivery and
performance by each Credit Party of each Loan Document to which it is party have been duly authorized by
all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of its
Organizational Documents, (b) conflict with or result in any breach or contravention of, or the creation of
any Lien under, or require any payment to be made under (i) any material Contractual Obligation to which
each Credit Party is a party or affecting each Credit Party or the material properties of any Credit Party or
(ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to
which any Credit Party or its property is subject or (c) violate any Law, except to the extent such violation
could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.03 Governmental Authorization; Other Consents. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any
other Person is necessary or required in connection with the execution, delivery or performance by, or
enforcement against, each Credit Party of this Agreement or any other Loan Document, except for (i) such
approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained, taken or
made and in full force and effect, and (ii) filings and consents contemplated by the Security Documents or
Section 5.14.
SECTION 3.04 Execution and Delivery; Binding Effect. This Agreement has been, and
each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each
Credit Party. This Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of each Credit Party, enforceable against each Credit Party
in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other Laws affecting creditors’ rights generally and by general
principles of equity.
SECTION 3.05 Financial Statements; No Material Adverse Change.
(a) Financial Statements. The financial statements described in Schedule 3.05 were
prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, and fairly present in all material respects the financial condition of the
Parent and its Subsidiaries as of the date thereof and their results of operations and cash flows for the
period covered thereby in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein.
(b) No Material Adverse Change. Since the date of the most recent audited balance
sheet included in the financial statements described in Schedule 3.05, there has been no event or
circumstance that, either individually or in the aggregate, has had or could reasonably be expected to have
a Material Adverse Effect.
SECTION 3.06 Litigation. Except for those matters which have been publicly disclosed in
any SEC filing of the Parent filed prior to the Closing Date, there are no actions, suits, proceedings, claims,
disputes or investigations pending or, to the knowledge of any Credit Party, threatened, at Law, in equity, in
arbitration or before any Governmental Authority, by or against any Credit Party or any of its Subsidiaries
or against any of their properties or revenues that (a) either individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect or (b) purport to affect or pertain to this
Agreement or any other Loan Document or any of the transactions contemplated hereby.
SECTION 3.07 Contractual Obligations; No Default. None of the Credit Parties and their
respective Subsidiaries is in default under or with respect to any Contractual Obligation that, either
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No
Default has occurred and is continuing or would result from the consummation of the transactions
contemplated by this Agreement or any other Loan Document.
SECTION 3.08 Property. Ownership of Properties and Collateral. Each of the Credit
Parties and their respective Subsidiaries has good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for
such defects in title that, either individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Each Credit Party has good title to the Collateral owned by it, free and clear of all
Liens other than Permitted Liens.
SECTION 3.09 Taxes. The Credit Parties and their respective Subsidiaries have filed all
federal, state and other tax returns and reports required to be filed, and have paid all federal, state and other
taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties,
income or assets otherwise due and payable, except (a) Taxes that are being contested in good faith by
appropriate proceedings diligently conducted and for which adequate reserves are being maintained in
accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.10 Disclosure. (a) The Credit Parties and their respective Subsidiaries have
disclosed to the Administrative Agent, the Collateral Agent and the Lenders all agreements, instruments and
corporate or other restrictions to which they are subject, and all other matters known to them, that, either
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Loan
Application Form, reports, financial statements, certificates and other written information (other than
projected or pro forma financial information) furnished by or on behalf of the Credit Parties and their
respective Subsidiaries to any Agent or any Lender in connection with the transactions contemplated hereby
and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (as
modified or supplemented by other information so furnished), taken as a whole, do not contain any material
misstatement of fact or omit to state any material fact necessary to make the statements therein (when taken
as a whole), in the light of the circumstances under which they were made, not misleading; provided that,
with respect to projected or pro forma financial information, the Credit Parties represent only that such
information was prepared in good faith based upon assumptions believed to be reasonable at the time of
preparation and delivery (it being understood that such projected information may vary from actual results
and that such variances may be material) and (b) as of the Closing Date, the information included in the
Beneficial Ownership Certification is true and correct in all respects.
SECTION 3.11 Compliance with Laws. Each of the Credit Parties and their respective
Subsidiaries is in compliance with the requirements of all Laws (including Environmental Laws) and all
orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which
(a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to so comply, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.12 ERISA Compliance.
(a) Except as could not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect, (i) each Plan is in compliance with the applicable provisions
of ERISA, the Code and other federal or state Laws and (ii) each Plan that is intended to be a qualified
plan under Section 401(a) of the Code has received a favorable determination letter, opinion letter or
advisory letter from the IRS to the effect that the form of such Plan is qualified under Section 401(a) of
the Code and the trust related thereto has been determined by the IRS to be exempt from federal income
tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by
the IRS, and, to the knowledge of any Credit Party, nothing has occurred that would prevent or cause the
loss of such tax-qualified status.
(b) There are no pending or, to the knowledge of any Credit Party, threatened or
contemplated claims, actions or lawsuits, or action by any Governmental Authority, with respect to any
Plan that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse
Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan that, either individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect.
(c) No ERISA Event has occurred, and neither any Credit Party nor any ERISA
Affiliate is aware of any fact, event or circumstance that, either individually or in the aggregate, could
reasonably be expected to constitute or result in an ERISA Event that, either individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse Effect.
(d) Except as would not reasonably be expected to have individually or in the
aggregate, a Material Adverse Effect, the present value of all accrued benefits under each Pension Plan
(based on those assumptions used to fund such Pension Plan) did not, as of the last annual valuation date
prior to the date on which this representation is made or deemed made, exceed the value of the assets of
such Pension Plan allocable to such accrued benefits by a material amount.
(e) To the extent applicable, each Foreign Plan has been maintained in compliance
with its terms and with the requirements of any and all applicable requirements of Law and has been
maintained, where required, in good standing with applicable regulatory authorities, except to the extent
that the failure so to comply could not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect. Neither the Parent nor any Subsidiary has incurred any obligation in
connection with the termination of or withdrawal from any Foreign Plan that, either individually or in the
aggregate, would reasonably be expected to have individually or in the aggregate, a Material Adverse
Effect. Except as would not reasonably be expected to have individually or in the aggregate, a Material
Adverse Effect, the present value of the accrued benefit liabilities (whether or not vested) under each
Foreign Plan that is funded, determined as of the end of the most recently ended fiscal year of the Parent
or Subsidiary, as applicable, on the basis of actuarial assumptions, each of which is reasonable, did not
exceed the current value of the property of such Foreign Plan by a material amount, and for each Foreign
Plan that is not funded, the obligations of such Foreign Plan are properly accrued.
SECTION 3.13 Environmental Matters. Except with respect to any matters that, either
individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, none
of the Credit Parties and their respective Subsidiaries (a) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval required under any
Environmental Law, (b) knows of any basis for any permit, license or other approval required under any
Environmental Law to be revoked, canceled, limited, terminated, modified, appealed or otherwise
challenged, (c) has or could reasonably be expected to become subject to any Environmental Liability,
(d) has received notice of any claim, complaint, proceeding, investigation or inquiry with respect to any
Environmental Liability (and no such claim, complaint, proceeding, investigation or inquiry is pending or,
to the knowledge of the Parent, is threatened or contemplated) or (e) knows of any facts, events or
circumstances that could give rise to any basis for any Environmental Liability with respect thereto.
SECTION 3.14 Investment Company Act. None of the Credit Parties is an “investment
company” as defined in, or subject to regulation under, the Investment Company Act of 1940.
SECTION 3.15 Sanctions; Export Controls; Anti-Corruption; AML Laws.
(a) None of the Credit Parties and their respective Subsidiaries and no director,
officer, or affiliate of the foregoing is a Person that is: (i) the subject of any sanctions administered or
enforced by the United States (including, but not limited to, those administered by the U.S. Department of
the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, and the U.S. Department
of Commerce’s Bureau of Industry and Security) (“Sanctions”), (ii) organized or resident in a country or
territory that is the subject of country-wide or region-wide Sanctions (including, currently, Crimea, Cuba,
Iran, North Korea, and Syria) (each a “Sanctioned Country”) or located in a Sanctioned Country except to
the extent authorized under Sanctions or (iii) a Person with whom dealings are restricted or prohibited by
Sanctions as a result of a relationship of ownership or control with a Person listed in (i) or (ii) (each of (i),
(ii) and (iii) is a “Sanctioned Person”).
(b) For the period beginning eight (8) years prior to the date hereof, each of the
Credit Parties and their respective Subsidiaries and their respective directors, officers and employees and,
to the knowledge of the Credit Parties, such respective affiliates, have been, in all material respects, in
compliance with the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”) and any other applicable anti-bribery or anti-corruption laws and regulations
(collectively with the FCPA, the “Anticorruption Laws”) and all applicable Sanctions, Export Control
Laws, and AML Laws.
SECTION 3.16 Solvency. The Borrower and its Subsidiaries are Solvent on a consolidated
basis after giving effect to the borrowing of the Loans.
SECTION 3.17 Subsidiaries. Schedule 3.17 sets forth the name of, and the ownership
interests of the Parent and each of its Subsidiaries and indicates which of such Subsidiaries are Excluded
Subsidiaries as of the date hereof.
SECTION 3.18 Senior Indebtedness. The Loans, the Obligations and the Guaranteed
Obligations constitute “senior indebtedness” (or any other similar or comparable term) under and as defined
in the documentation governing any Indebtedness of the Credit Parties that is subordinated in right of
payment to any other Indebtedness thereof.
SECTION 3.19 Insurance Matters. The properties of the Credit Parties are insured
pursuant to Section 5.06 hereof. Each insurance policy required to be maintained by the Credit Parties
pursuant to Section 5.06 is in full force and effect and all premiums in respect thereof that are due and
payable have been paid.
SECTION 3.20 Labor Matters. Except as would not reasonably be expected to have
individually or in the aggregate, a Material Adverse Effect, (a) there are no strikes, lockouts, slowdowns or
other material labor disputes against any Credit Party or any of its Subsidiary thereof pending or, to the
knowledge of the Credit Parties, threatened, (b) the Credit Parties and their respective Subsidiaries have
complied with all applicable federal, state, local and foreign Laws relating to the employment (or
termination thereof), the hours worked by and payments made to employees of the Parent and its
Subsidiaries comply with the Fair Labor Standards Act and any other applicable federal, state, local or
foreign Law dealing with such matters and (c) all payments due from the Credit Parties and their respective
Subsidiaries, or for which any claim may be made against the Credit Parties and their respective
Subsidiaries, on account of wages and employee health and welfare insurance and other benefits, have been
paid or properly accrued in accordance with GAAP as a liability on the books of the Parent or such
Subsidiary. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair
employment practices charges or any other claims or complaints against the Credit Parties or their
respective Subsidiaries pending or, to the knowledge of the Credit Parties, threatened to be filed with any
Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to
the employment or termination of employment of any employee of the Credit Parties and their respective
Subsidiaries that would, individually or in the aggregate, be reasonably expected to result in a Material
Adverse Effect.
SECTION 3.21 Insolvency Proceedings. None of the Credit Parties has taken, and none of
the Credit Parties is currently evaluating taking, any action to seek relief or commence proceedings under
any Debtor Relief Law in any applicable jurisdiction.
SECTION 3.22 Margin Regulations. The Borrower is not engaged and will not engage,
principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or
extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any
Borrowing hereunder will be used to buy or carry any Margin Stock. Following the application of the
proceeds of each Borrowing, not more than 25% of the value of the assets (either of the Borrower only or of
the Borrower and its Subsidiaries on a consolidated basis) will be Margin Stock.
SECTION 3.23 Liens. There are no Liens of any nature whatsoever on any Collateral other
than Liens permitted under Section SECTION 6.02 hereof.
SECTION 3.24 Perfected Security Interests.
(a) As of the Closing Date (or such later date as permitted under Section 5.14) and as
of the date of each Borrowing, the Security Documents, taken as a whole, are effective to create in favor
of the Collateral Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority
security interest in all of the Collateral to the extent purported to be created thereby.
(b) As of the Closing Date (or such later date as permitted under Section 5.14) and as
of the date of each Borrowing, each Credit Party has or shall have satisfied the Perfection Requirement
with respect to the Collateral.
SECTION 3.25 US Citizenship. The Borrower is a “citizen of the United States” as
defined in Section 40102(a)(15) of Title 49 and as that statutory provision has been interpreted by the DOT
pursuant to its policies.
SECTION 3.26 Air Carrier Status. The Borrower is an “air carrier” within the meaning of
Section 40102 of Title 49, holds a certificate under Section 41102 of Title 49 and, during the time period
from April 1, 2019 to September 30, 2019, derived more than 50% of its air transportation revenue from the
transportation of passengers. The Borrower holds an air carrier operating certificate issued pursuant to
Chapter 447 of Title 49. The Borrower possesses all necessary certificates, franchises, licenses, permits,
rights, designations, authorizations, exemptions, concessions, frequencies and consents which relate to the
operation of the routes flown by it and the conduct of its business and operations as currently conducted,
except where failure to do so, either individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
ARTICLE IV
CONDITIONS
SECTION 4.01 Closing Date and Initial Borrowing. The effectiveness of this Agreement
and the funding of the initial Borrowing hereunder are subject to the satisfaction (or waiver in accordance
with Section 11.02) of the following conditions (and, in the case of each document specified in this Section
to be received by the Initial Lender (and the applicable Agent or Agents), such document shall be in form
and substance satisfactory to the Initial Lender and/or the applicable Agent or Agents):
(a) Executed Counterparts. The Initial Lender and the Agents shall have received
from each party hereto a counterpart of this Agreement, any Security Documents to which it is a
party and the Note, each signed on behalf of such party. Notwithstanding anything herein to the
contrary, delivery of an executed counterpart of a signature page of this Agreement or any
Security Documents by telecopy or other electronic means, or confirmation of the execution of
this Agreement on behalf of a party by an email from an authorized signatory of such party shall
be effective as delivery of a manually executed counterpart of this Agreement.
(b) Certificates. The Initial Lender and any applicable Agent shall have received
such customary certificates of resolutions or other action, incumbency certificates and/or other
certificates of Responsible Officers of the Credit Parties as the Lenders may require evidencing
the identity, authority and capacity of each Responsible Officer thereof authorized to act as a
Responsible Officer in connection with the Loan Documents;
(c) Organizational Documents. The Initial Lender shall have received customary
resolutions or evidence of corporate authorization, secretary’s certificates and such other
documents and certificates (including Organizational Documents and good standing certificates)
as the Initial Lender may request relating to the organization, existence and good standing of each
Credit Party and any other legal matters relating to the Credit Parties, the Loan Documents or the
transactions contemplated thereby.
(d) Opinion of Counsel to Credit Parties. The Initial Lender and the applicable
Agent or Agents shall have received all opinions of counsel (including any additional opinions of
counsel as required under any Security Document) to the Credit Parties that is acceptable to the
Initial Lender, addressed to the Initial Lender and the applicable Agent or Agents and dated the
Closing Date, in form and substance satisfactory to the Initial Lender and the applicable Agent
(and the Parent hereby instructs such counsel to deliver such opinions to such Persons).
(e) Beneficial Ownership Regulation Information. At least five (5) days prior to the
Closing Date, the Borrower shall deliver to the Initial Lender a Beneficial Ownership
Certification.
(f) Expenses. The Borrower shall have paid all reasonable fees, expenses (including
the fees and expenses of legal counsel) and other amounts due to the Initial Lender, the
Administrative Agent and the Collateral Agent (to the extent that statements for such expenses
shall have been delivered to the Borrower on or prior to the Closing Date); provided that such
expenses payable by the Borrower may be offset against the proceeds of the Loans funded on the
Closing Date.
(g) Officer’s Certificate. The Initial Lender shall have received a certificate
executed by a Responsible Officer of the Parent and the Borrower confirming (i) that the
representations and warranties contained in Article III of this Agreement are true and correct on
and as of the Closing Date, (ii) that the information provided in the Loan Application Form
submitted by the Borrower was true and correct on and as of the date of delivery thereof, (iii) the
satisfaction of such condition and (iv) that no Default or Event of Default exists or will result
from the borrowing of the Loans on the Closing Date.
(h) Other Documents. The Initial Lender and the Agents shall have received such
other documents as it may request.
(i) Appraisals. The Initial Lender shall have received Appraisals satisfactory in
form and substance and performed by an Eligible Appraiser dated as of a date no earlier than
thirty (30) days prior to the Closing Date.
(j) Security Interests. Each Credit Party shall have, and caused its Subsidiaries to,
take any action and execute and deliver, or cause to be executed and delivered, any agreement,
document or instrument required in order to create a valid, perfected first priority security interest
in the Collateral in favor of the Collateral Agent for the benefit of the Secured Parties (including
delivery of UCC financing statements in appropriate form for filing under the UCC and entering
into control agreements). Each Credit Party shall have satisfied, and caused its Subsidiaries to
satisfy, the Perfection Requirement with respect to the Collateral. In addition, the Credit Parties
shall have delivered a completed Perfection Certificate (as defined in the Pledge and Security
Agreement).
(k) Consents and Authorizations. Each Credit Party shall have obtained all consents
and authorizations from Governmental Authorities and all consents of other Persons (including
shareholder approvals, if applicable) that are necessary or advisable in connection with this
Agreement, any Loan Document, any of the transactions contemplated hereby or thereby or the
continuing operations of the Credit Parties and each of the foregoing shall be in full force and
effect and in form and substance satisfactory to the Initial Lender.
(l) Lien Searches. The Initial Lender shall have received (i) UCC and other lien
searches conducted in the jurisdictions and offices where liens on material assets of the Credit
Parties are required to be filed or recorded and (ii) to the extent Collateral consists of (x) Aircraft
and Engine Assets (as defined in the Pledge and Security Agreement), aircraft registry lien
searches conducted with the FAA and the International Registry, and (y) Spare Part Assets (as
defined in the Pledge and Security Agreement), registry lien searches conducted with the FAA
(with reference to each Designated Spare Parts Location set forth on Schedule 2.1 of the Pledge
and Security Agreement), in each case, reflecting the absence of Liens on the assets of the Credit
Parties other than Permitted Liens or Liens to be discharged on or prior to the Closing Date
pursuant to documentation satisfactory to the Initial Lender.
(m) Collateral Coverage Ratio. On the Closing Date (and after giving pro forma
effect to any Borrowings on such date), the Collateral Coverage Ratio shall not be less than 2.0 to
1.0.
(n) Solvency Certificate. The Initial Lender shall have received a certificate of the
chief financial officer or treasurer (or other comparable officer) of the Parent certifying that the
Borrower and its Subsidiaries (taken as a whole) are, and will be immediately after giving effect
to any Loans borrowed on the Closing Date, Solvent.
(o) Warrant Agreement. Treasury and the Parent shall have entered into the Warrant
Agreement.
(p) Other Matters. Since June 29, 2020, (i) there has been no event or circumstance
that, either individually or in the aggregate, has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the Credit Parties has made a Disposition of any assets
constituting Collateral had this Agreement been in effect at such time.
SECTION 4.02 Each Borrowing. The funding by the Lenders of each Borrowing
(including the Borrowing to be requested on the Closing Date) is additionally subject to the satisfaction of
the following conditions:
(a) the Administrative Agent shall have received a written Borrowing Request in
accordance with the requirements of Section 2.03(a), with a copy to the Initial Lender (solely to
the extent the Initial Lender is a Lender at the time of such Borrowing);
(b) the representations and warranties of the Credit Parties set forth in this
Agreement and in any other Loan Document shall be true and correct in all material respects (or,
in the case of any such representation or warranty already qualified by materiality, in all respects)
on and as of the date of such Borrowing (or, in the case of any such representation or warranty
expressly stated to have been made as of a specific date, as of such specific date);
(c) no Default shall have occurred and be continuing or would result from such
Borrowing or from the application of proceeds thereof;
(d) on the date of the funding of such Borrowing (and after giving pro forma effect
thereto and the pledge of any Additional Collateral), the Collateral Coverage Ratio shall not be
less than 2.0 to 1.0 as evidenced by a certificate of a Responsible Officer of the Parent;
(e) on the date of such Borrowing, the opinion of the independent public accountants
(after giving effect to any reissuance or revision of such opinion) on the most recent audited
consolidated financial statements delivered by the Parent pursuant to Section 5.01(a) shall not
include a “going concern” qualification under GAAP as in effect on the date of this Agreement
or, if there is a change in the relevant provisions of GAAP thereafter, any like qualification or
exception under GAAP after giving effect to such change; and
(f) on or prior to the date of such Borrowing, each Credit Party shall have satisfied
the Perfection Requirement with respect to the Collateral.
Each Borrowing Request by the Borrower hereunder and each Borrowing shall be deemed to constitute a
representation and warranty by the Borrower on and as of the date of the applicable Borrowing as to the
matters specified in clauses (b) and (c) above in this Section.
ARTICLE V
AFFIRMATIVE COVENANTS
Until all the later of (i) the date on which all of the Obligations shall have been paid in
full and (ii) such later date specified in this Agreement, the Credit Parties covenant and agree with the
Lenders that:
SECTION 5.01 Financial Statements. The Parent will furnish to the Administrative Agent
and each Lender:
(a) as soon as available, and in any event within ninety (90) days after the end of
each fiscal year of the Parent (or, if earlier, five (5) days after the date required to be filed with
the SEC) (commencing with the fiscal year ended prior to the Closing Date), a consolidated
balance sheet of the Parent and its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income or operations, shareholders’ equity and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year,
audited and accompanied by a report and opinion of independent public accountants of nationally
recognized standing, which report and opinion shall be prepared in accordance with generally
accepted auditing standards (and shall not be subject to any “going concern” or like qualification
(other than a qualification solely resulting from (x) the impending maturity of any Indebtedness
or (y) any prospective or actual default under any financial covenant), exception or explanatory
paragraph or any qualification, exception or explanatory paragraph as to the scope of such audit)
to the effect that such consolidated financial statements present fairly in all material respects the
financial condition, results of operations, shareholders’ equity and cash flows of the Parent and its
Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
(b) as soon as available, but in any event within forty-five (45) days after the end of
each of the first three (3) fiscal quarters of each fiscal year of the Parent (or, if earlier, five
(5) days after the date required to be filed with the SEC) (commencing with the first of such fiscal
quarters ended prior to the Closing Date), a consolidated balance sheet of the Parent and its
Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or
operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the
Parent’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the
figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year, certified by a Financial Officer of the Parent as fairly
presenting in all material respects the financial condition, results of operations, shareholders’
equity and cash flows of the Parent and its Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject only to normal year-end audit adjustments and the
absence of notes;
(c) for so long as the Initial Lender is the only Lender, as soon as available, but in
any event no later than seventy-five (75) days after the beginning of each fiscal year of the Parent,
forecasts prepared by management of the Parent and a summary of material assumptions used to
prepare such forecasts, in form satisfactory to the Initial Lender, including projected consolidated
balance sheets and statements of income or operations and cash flows of the Parent and its
Subsidiaries on a quarterly basis for such fiscal year; and
(d) solely at the request of the Appropriate Party (which shall be no more than
quarterly), at a time mutually agreed with the Appropriate Party and the Parent, participate in a
conference call for Lenders to discuss the financial condition and results of operations of the
Parent and its Subsidiaries and any forecasts which have been delivered pursuant to this Section
5.01.
SECTION 5.02 Certificates; Other Information. The Parent will deliver to the
Administrative Agent and each Lender:
(a) [reserved];
(b) concurrently with the delivery of the financial statements referred to in
Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the
Parent certifying as to whether a Default has occurred and, if a Default has occurred, specifying
the details thereof and any action taken or proposed to be taken with respect thereto;
(c) [reserved];
(d) promptly after the furnishing thereof, copies of any notice of default or potential
default or other material written notice received by the Parent or any Subsidiary from, or
furnished by the Parent or any Subsidiary to, any holder of Material Indebtedness of the Parent or
any Subsidiary;
(e) promptly after receipt thereof by any Credit Party or any Subsidiary thereof,
copies of each material notice or other material written correspondence received from the SEC (or
comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or
possible investigation or other inquiry by such agency regarding material financial or other
material operational results of any Credit Party or any Subsidiary thereof;
(f) [reserved];
(g) promptly following any request therefor, (i) such other information regarding the
operations, business, properties, liabilities (actual or contingent), condition (financial or
otherwise) or prospects of any Credit Party or any Subsidiary, or compliance with the terms of the
Loan Documents, as the Administrative Agent, the Initial Lender or any other Lender (acting
through the Administrative Agent) may from time to time request; or (ii) beneficial ownership
information and documentation reasonably requested by the Administrative Agent or any Lender
from time to time for purposes of ensuring compliance with Sanctions and AML Laws. For
purposes of determining whether or not a representation with respect to any indirect ownership is
true or a covenant is being complied with under this Section, the Parent shall not be required to
make any investigation into (i) the ownership of publicly traded stock or other publicly traded
securities or (ii) the ownership of assets by a collective investment fund that holds assets for
employee benefit plans or retirement arrangements; and
(h) concurrently with the delivery of the financial statements referred to in
Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the
Borrower certifying as to its compliance with Article X of this Agreement.
Documents required to be delivered pursuant to Section 5.01(a) or (b) or Section 5.02(c),
(d) or (e) (to the extent any such documents are included in materials otherwise filed with the SEC) may
be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on
which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and
Retrieval system (EDGAR); or (ii) on which such documents are posted on the Parent’s behalf on an
Internet or intranet website, if any, to which each Lender and the Administrative Agent have access
(whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided
that: (A) upon written request by the Administrative Agent, the Parent shall deliver paper copies of such
documents to the Administrative Agent or any Lender upon its request to the Parent to deliver such paper
copies until a written request to cease delivering paper copies is given by the Administrative Agent or
such Lender and (B) the Parent shall notify the Administrative Agent and each Lender (by facsimile or
electronic mail) of the posting of any such documents and provide to the Lenders by electronic mail
electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no
obligation to request the delivery of or to maintain paper copies of the documents referred to above.
SECTION 5.03 Notices. The Parent will promptly notify the Administrative Agent and each
Lender of:
(a) promptly after any Responsible Officer of Parent or any of its Subsidiaries
obtains knowledge thereof, the occurrence of any Default;
(b) the filing or commencement of any action, suit, investigation or proceeding by or
before any arbitrator or Governmental Authority against or affecting the Parent or any Controlled
Affiliate thereof, including pursuant to any applicable Environmental Laws, that could reasonably
be expected to be adversely determined, and, if so determined, could reasonably be expected to
have a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, either individually or together with any
other ERISA Events, could reasonably be expected to have a Material Adverse Effect;
(d) notice of any action arising under any Environmental Law or of any
noncompliance by any Credit Party or any Subsidiary with any Environmental Law or any
permit, approval, license or other authorization required thereunder that, if adversely determined,
could reasonably be expected to have a Material Adverse Effect;
(e) to the extent not publicly disclosed pursuant to an SEC filing of the Parent, any
material change in accounting or financial reporting practices by the Parent, any Credit Party or
any Subsidiary;
(f) any change in the Credit Ratings from a Credit Rating Agency with negative
implications, or the cessation by a Credit Rating Agency of, or its intent to cease, rating the
Borrower’s or the Parent’s debt; and
(g) any matter or development that has had or could reasonably be expected to have
a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a
Responsible Officer of the Parent setting forth the details of the occurrence requiring such notice and
stating what action the Parent has taken and proposes to take with respect thereto.
SECTION 5.04 Preservation of Existence, Etc. Each Credit Party will, and will cause each
of its Subsidiaries to, (a) preserve, renew and maintain in full force and effect its legal existence and good
standing under the Laws of the jurisdiction of its organization except in a transaction permitted by
Section 6.03 or 6.04; (b) take all reasonable action to maintain all rights, licenses, permits, privileges and
franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its
registered patents, trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
SECTION 5.05 Maintenance of Properties. Each Credit Party will, and will cause each of
its Subsidiaries to, (a) maintain, preserve and protect all of its properties and equipment necessary in the
operation of its business in good working order and condition (ordinary wear and tear excepted) and
(b) make all necessary repairs thereto and renewals and replacements thereof, except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.06 Maintenance of Insurance. Subject to any additional requirements under
any Security Document, each Credit Party will maintain with financially sound and reputable insurance
companies, insurance with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business, of such types and in such
amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons
engaged in the same or similar businesses as Parent and its Subsidiaries; provided that, insurance in respect
of Collateral shall be maintained with such third party insurance companies except to the extent expressly
permitted in the Pledge and Security Agreement) as are customarily carried under similar circumstances by
such Persons.
SECTION 5.07 Payment of Obligations. Each Credit Party will pay, discharge or
otherwise satisfy as the same shall become due and payable, all of its obligations and liabilities, including
Tax liabilities, except to the extent (a) the same are being contested in good faith by appropriate
proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by
the Parent or such Credit Party or (b) the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
SECTION 5.08 Compliance with Laws. Each Credit Party will, and will cause each of its
Subsidiaries to, comply with the requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except to the extent that the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.09 Environmental Matters. Except to the extent that the failure to do so could
not reasonably be expected to have a Material Adverse Effect, each Credit Party will, and will cause each of
its Subsidiaries to, (a) comply with all Environmental Laws, (b) obtain, maintain in full force and effect and
comply with any permits, licenses or approvals required for the facilities or operations of the Parent or any
of its Subsidiaries, and (c) conduct and complete any investigation, study, sampling or testing, and
undertake any corrective, cleanup, removal, response, remedial or other action necessary to identify, report,
remove and clean up all Hazardous Materials present or released at, on, in, under or from any of the
facilities or real properties of the Parent or any of its Subsidiaries.
SECTION 5.10 Books and Records. Each Credit Party will maintain proper books of
record and account, in which full, true and correct entries in conformity with GAAP consistently applied
shall be made of all financial transactions and matters involving the assets and business of the Parent or
such Subsidiary, as the case may be.
SECTION 5.11 Inspection Rights. Each Credit Party will, and, to the extent relevant for
inspections of Collateral will cause each of its Subsidiaries to, permit representatives, agents and
independent contractors of the Administrative Agent, the Initial Lender and the Special Inspector General
for Pandemic Recovery to visit and inspect any of its properties (including all Collateral), to examine its
corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with its directors, officers, and independent public accountants, all at the
reasonable expense of the Parent and at such reasonable times during normal business hours and as often as
may be reasonably requested; provided that, other than with respect to such visits and inspections during the
continuation of an Event of Default or by the Initial Lender or the Special Inspector General for Pandemic
Recovery, (a) only the Administrative Agent (or its representatives, agents and independent contractors) at
the direction of a Lender may exercise rights under this Section and (b) the Administrative Agent (or its
representatives, agents and independent contractors) shall not exercise such rights more often than two (2)
times during any calendar year; provided, further, that when an Event of Default exists the Administrative
Agent, any Lender or the Special Inspector General for Pandemic Recovery (or any of their respective
representatives, agents or independent contractors) may do any of the foregoing under this Section at the
expense of the Parent and at any time during normal business hours and without advance notice.
SECTION 5.12 Sanctions; Export Controls; Anti-Corruption Laws and AML Laws. Each
Credit Party and its Subsidiaries will remain in compliance in all material respects with applicable
Sanctions, Export Control Laws, Anticorruption Laws, and AML Laws. Until all Obligations have been
paid in full, neither any Credit Party; any Subsidiary of a Credit Party; nor any director or officer of any
Credit Party or any Subsidiary of a Credit Party shall become a Sanctioned Person or a Person that is
organized or resident in a Sanctioned Country or located in a Sanctioned Country except to the extent
authorized under Sanctions.
SECTION 5.13 Guarantors; Additional Collateral.
(a) The Guarantors listed on the signature page to this Agreement hereby Guarantee
the Guaranteed Obligations as set forth in ArticleARTICLE IX. If any Subsidiary (other than an
Excluded Subsidiary) is formed or acquired after the Closing Date, if any Subsidiary ceases to be an
Excluded Subsidiary or if required in connection with the addition of Additional Collateral, then the
Parent will cause such Subsidiary, promptly (in any event, within thirty (30) days of such Subsidiary
being formed or acquired or of such Subsidiary ceasing to be an Excluded Subsidiary) (i) to become a
Guarantor of the Loans pursuant to joinder documentation reasonably acceptable to the Appropriate Party
and on the terms and conditions set forth in ArticleARTICLE IX, (ii) to become a party to each applicable
Security Document and all other agreements, instruments or documents that create or purport to create
and perfect a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit
of the Secured Parties in its assets that are of a type that are intended to be included in the Collateral
(other than any Excluded Assets), subject to and in accordance with the terms, conditions and provisions
of the Loan Documents, (iii) to satisfy the Perfection Requirement, (iv) to deliver a secretary’s certificate
of such Subsidiary, in form and substance reasonably acceptable to the Appropriate Party, with
appropriate insertions and attachments, and (v) to deliver legal opinions relating to the matters described
above, which opinions shall be in form and substance, and from counsel, satisfactory to the Appropriate
Party.
(b) If the Parent or any Subsidiary desires, or is required pursuant to the terms of this
Agreement, to add Additional Collateral or, if any Subsidiary acquires any existing Collateral from a
Grantor (as defined in the Pledge and Security Agreement) that it is required pursuant to the terms of this
Agreement to maintain as Collateral, in each case, after the Closing Date, the Parent shall, in each case at
its own expense, promptly (in any event, unless any other time period is specified in this Agreement or
any other Loan Document within thirty (30) days of the relevant date) (i) cause any such Subsidiary to
become a Grantor (to the extent such Subsidiary is not already a Grantor) pursuant to joinder
documentation acceptable to the Appropriate Party and on the terms and conditions set forth in the
relevant Security Documents, (ii) cause any such Subsidiary to become a party to each applicable Security
Document and all other agreements, instruments or documents that create or purport to create and perfect
a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit of the
Secured Parties applicable to such Collateral, in form and substance satisfactory to the Appropriate Party
(it being understood that in the case of any Additional Collateral of a type, or in a jurisdiction, that has not
been theretofore included in the Collateral, such Additional Collateral may be subject to such additional
terms and conditions as requested by the Appropriate Party), (iii) promptly execute and deliver (or cause
such Subsidiary to execute and deliver) to the Collateral Agent such documents and take such actions to
create, grant, establish, preserve and perfect the first priority Liens (subject to Permitted Liens) (including
to obtain any release or termination of Liens not permitted under the definition of “Additional Collateral”
in Section 1.01 or under Section6.02 and to satisfy all Perfection Requirements, including the filing of
UCC financing statements, filings with the FAA and registrations with the International Registry, as
applicable) in favor of the Collateral Agent for the benefit of the Secured Parties on such assets of the
Parent or such Subsidiary, as applicable, to secure the Obligations to the extent required under the
applicable Security Documents or reasonably requested by the Appropriate Party, and to ensure that such
Collateral shall be subject to no other Liens other than Permitted Liens and (iv) if requested by the
Appropriate Party, deliver (or cause such Subsidiary to deliver) legal opinions to the Collateral Agent, for
the benefit of the Secured Parties, relating to the matters described above, which opinions shall be in form
and substance, and from counsel, satisfactory to the Appropriate Party.
SECTION 5.14 Post-Closing Matters. As promptly as practicable, and in any event within
the time periods after the Closing Date specified on Schedule 5.14 or such later date as the Initial Lender
may agree to in writing in its sole discretion, the Parent shall deliver the documents or take the actions
specified on Schedule 5.14 that would have been required to be delivered or taken on the Closing Date.
SECTION 5.15 Further Assurances. In each case subject to the terms, conditions and
limitations in the Loan Documents, (a) each Credit Party shall remain in compliance with the Perfection
Requirement with respect to all Collateral (including any assets, rights and properties that (x) become
Collateral after the Closing Date and (y) any permitted replacement or substitute assets, rights and
properties thereof (including any Additional Collateral) and (b) each Credit Party shall, promptly and at its
expense, execute any and all further documents and instruments and take all further actions, that may be
required or advisable under applicable law or that the Initial Lender, the Administrative Agent or the
Collateral Agent may request, in order to create, grant, establish, preserve, protect, renew or perfect the
validity, perfection or first priority of the Liens and security interests created or intended to be created by
the Security Documents, in each case to the extent required under this Agreement or the Security
Documents (including with respect to any additions to the Collateral (including any Additional Collateral)
or replacements, substitutes or proceeds thereof or with respect to any other property or assets hereafter
acquired by any Credit Party that are of a type that are intended to be included in the Collateral).
SECTION 5.16 Delivery of Appraisals. The Parent shall (1) within ten (10) Business Days
prior to the last Business Day of March and September of each year, beginning with March 31, 2021 and (2)
promptly (but in any event within thirty (30) days) following request by the Administrative Agent (acting at
the direction of the Required Lenders) if an Event of Default has occurred and is occurring, deliver to the
Administrative Agent one or more Appraisals determining the Appraised Value of the Collateral. In
addition, on the date upon which any Additional Collateral is pledged as Collateral to the Collateral Agent
for the benefit of the Secured Parties to secure the Obligations, but only with respect to such Additional
Collateral, the Parent shall deliver to the Administrative Agent one or more Appraisals determining the
Appraised Value of such Additional Collateral.
SECTION 5.17 Ratings. At any time when the Initial Lender is a Lender, the Borrower
shall, upon request by the Initial Lender, use its reasonable best efforts to obtain a public rating (or, if the
Borrower does not have a public family corporate rating at such time, a private rating) in respect of the
Loans by any two of S&P, Moody’s and Fitch in connection with any contemplated assignment of, or
participation in, the Loans.
SECTION 5.18 Regulatory Matters.
(a) US Citizenship. The Borrower will at all times maintain its status as a “citizen of
the United States” as defined in Section 40102(a)(15) of Title 49 and as that statutory provision has been
interpreted by the DOT pursuant to its policies.
(b) Air Carrier Status. The Borrower will at all times maintain its status as an “air
carrier” within the meaning of Section 40102 of Title 49 and holds a certificate under Section 41102 of
Title 49. The Borrower will at all times possess an air carrier operating certificate issued pursuant to
Chapter 447 of Title 49. The Borrower will at all times possess all necessary certificates, franchises,
licenses, permits, rights, designations, authorizations, exemptions, concessions, frequencies and consents
which relate to the operation of the routes flown by it and the conduct of its business and operations as
currently conducted, except where failure to do so, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
ARTICLE VI
NEGATIVE COVENANTS
Until all the later of (i) the date on which all of the Obligations shall have been paid in
full and (ii) such later date specified in this Agreement, the Credit Parties covenant and agree with the
Lenders that:
SECTION 6.01 [Reserved].
SECTION 6.02 Liens. Parent will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist any Lien upon any property or assets constituting Collateral, whether now
owned or hereafter acquired, except for Permitted Liens.
SECTION 6.03 Fundamental Changes. Parent will not, and will not permit any of its
Subsidiaries to, merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in
one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result
therefrom:
(a) any Subsidiary may merge with (i) the Borrower; provided that the Borrower
shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries; provided
that (x) when any Wholly-Owned Subsidiary is merging with another Subsidiary, a Wholly-
Owned Subsidiary shall be the continuing or surviving Person and (y) when any Subsidiary that is
a Credit Party is merging with another Subsidiary, then such other Subsidiary shall be a Credit
Party;
(b) any Subsidiary may Dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise) to the Parent or to another Subsidiary; provided that (x) if the
transferor in such a transaction is a Wholly-Owned Subsidiary, then the transferee shall either be
the Parent or another Wholly-Owned Subsidiary and (y) if the transferor in such a transaction is a
Credit Party, then the transferee shall be a Credit Party;
(c) the Parent and its Subsidiaries may make Dispositions permitted by Section 6.04;
(d) any Investment permitted by Section 6.06 may be structured as a merger,
consolidation or amalgamation;
(e) any Subsidiary may dissolve, liquidate or wind up its affairs if it owns no
material assets, engages in no business and otherwise has no activities other than activities related
to the maintenance of its existence and good standing; and
(f) any Subsidiary may Dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise), provided that such assets do not constitute all or substantially
all of the consolidated assets of the Parent and its Subsidiaries.
SECTION 6.04 Dispositions. Parent will not, and will not permit any of its Subsidiaries to,
sell or otherwise make any Disposition of Collateral or enter into any agreement to make any sale or other
Disposition of Collateral (in each case, including, without limitation by way of any sale or other Disposition
of any Guarantor), except, subject to Article X and so long as no Default shall have occurred and be continuing
at the time of any action described below, or would result therefrom:
(a) [reserved];
(b) Dispositions of Collateral among the Credit Parties (including any Person that
shall become a Credit Party simultaneous with such Disposition in the manner contemplated by
Section 5.13); provided that:
(i) such Collateral remains at all times subject to a Lien with the same
priority and level of perfection as was the case immediately prior to such Disposition (and
otherwise subject only to Permitted Liens) in favor of the Collateral Agent for the benefit of the
Secured Parties following such Disposition;
(ii) concurrently therewith, the Credit Parties shall execute any documents
and take any actions reasonably required to create, grant, establish, preserve or perfect such Lien
in accordance with the other provisions of this Agreement or the Security Documents;
(iii) if requested by the Appropriate Party, concurrently therewith, the
Appropriate Party shall receive an opinion of counsel to the applicable Credit Party (x) in the case
of Collateral that consists of Route Authorities, Slots and/or Gate Leaseholds, as to the creation
and perfection under Article 9 of the UCC of the Lien of the security agreement or mortgage, as
applicable, and subject to assumptions and qualifications (including as provided in the opinion(s)
delivered on the Closing Date), and (y) in the case of any other Collateral, as to the creation and
perfection of the Lien of such security agreement or mortgage, as applicable, in form and
substance satisfactory to the Appropriate Party; and
(iv) concurrently with any Disposition of Collateral to any Person that shall
become a Credit Party simultaneous with such Disposition in the manner contemplated by
Section 5.13, such Person shall have complied with the requirements of Section 5.13.
(c) to the extent constituting a Disposition of Collateral, the incurrence of Liens that
are permitted to be incurred pursuant to Section 6.02;
(d) Disposition of cash or Cash Equivalents in exchange for other cash or Cash
Equivalents constituting Collateral and having reasonably equivalent value therefor;
(e) the abandonment or Disposition of assets no longer useful or used in the
business; provided that such abandonment or Disposition is (A) in the ordinary course of business
and (B) with respect to assets that are not material to the business of the Parent and the
Subsidiaries taken as a whole;
(f) [reserved];
(g) any Disposition of property resulting from an event of loss with respect to any
aircraft, airframe, engine, spare engine or Spare Parts if the Credit Party is replacing such aircraft,
airframe, engine, spare engine or Spare Parts in accordance with the terms of the Loan
Documents; and
(h) any Disposition of Collateral permitted by any of the Security Documents.
SECTION 6.05 Restricted Payments. Parent will not, and will not permit any of its
Subsidiaries to, declare or make, directly or indirectly, any Restricted Payment, or incur any obligation
(contingent or otherwise) to do so, except, that, subject to additional restrictions set forth in Article X, so
long as no Default shall have occurred and be continuing at the time of any action described below or would
result therefrom:
(a) each Subsidiary may make Restricted Payments to the Parent and any other
Person that owns an Equity Interest in such Subsidiary, ratably according to their respective
holdings of such Equity Interests in respect of which such Restricted Payment is being made;
(b) the Parent and each Subsidiary may declare and make dividend payments or
other distributions payable solely in common Equity Interests of such Person;
(c) the Parent and each Subsidiary may purchase, redeem or otherwise acquire
Equity Interests issued by it with the proceeds received from the substantially concurrent issue of
new common Equity Interests;
(d) the Parent and each Subsidiary may pay withholding or similar taxes payable by
any future, present or former employee, director or officer (or any spouses, former spouses,
successors, executors, administrators, heirs, legatees or distributees of any of the foregoing) in
connection with any repurchases of Equity Interests or the exercise of stock options;
(e) the repurchase of Equity Interests or other securities deemed to occur upon (A)
the exercise of stock options, warrants or other securities convertible or exchangeable into Equity
Interests or any other securities, to the extent such Equity Interests or other securities represent a
portion of the exercise price of those stock options, warrants or other securities convertible or
exchangeable into Equity Interests or any other securities or (B) the withholding of a portion of
Equity Interests issued to employees and other participants under an equity compensation
program of the Parent or its Subsidiaries to cover withholding tax obligations of such persons in
respect of such issuance;
(f) payments of cash, dividends, distributions, advances, common stock or other
Restricted Payments by the Parent or any of its Subsidiaries to allow the payment of cash in lieu
of the issuance of fractional shares upon (A) the exercise of options or warrants, (B) the
conversion or exchange of capital stock of any such Person or (C) the conversion or exchange of
Indebtedness or hybrid securities into capital stock of any such Person;
(g) the Parent may make cash payments in connection with any conversion or
exchange of Convertible Indebtedness in amount equal to the sum of (i) the principal amount of
such Convertible Indebtedness and (ii) the proceeds of any payments received by the Parent or
any of its Subsidiaries pursuant to the exercise, settlement or termination of any related Permitted
Bond Hedge Transaction;
(h) the Parent may make payments in connection with a Permitted Bond Hedge
Transaction (i) by delivery of shares of the Parent’s Equity Interests upon net share settlement
thereof or (ii) by (A) set-off against the related Permitted Bond Hedge Transaction and (B)
payment of an early termination amount thereof in common Equity Interests of the Parent upon
any early termination thereof; and
(i) Restricted Payments not to exceed the amount allowable pursuant to Schedule
6.05(i).
SECTION 6.06 Investments. Parent will not, and will not permit any of its Subsidiaries to,
make any Investments, except:
(a) Investments held by the Parent or such Subsidiary in the form of cash or Cash
Equivalents;
(b) (i) Investments in Subsidiaries in existence on the Closing Date, (ii) other
Investments in existence on the Closing Date and listed in Section I to Schedule 6.06 and (iii)
other Investments described on Section II of Schedule 6.06, and, in each case, any refinancing,
refunding, renewal or extension of any such Investment that does not increase the amount thereof;
(c) advances to officers, directors and employees of the Parent and its Subsidiaries in
an aggregate amount not exceeding, at any time outstanding, an amount that is customary and
consistent with past practice, for travel, entertainment, relocation and similar ordinary business
purposes;
(d) (x) Investments of the Parent in the Borrower or any other Credit Party, (y)
Investments of any Subsidiary in the Parent or any other Credit Party and (z) Investments made
between Subsidiaries that are not Credit Parties; provided that any such Investments made
pursuant to this clause (d) in the form of intercompany indebtedness incurred by a Credit Party
and owed to a Subsidiary that is not a Credit Party shall be subordinated to the Obligations and
the Guaranteed Obligations on customary terms (it being understood and agreed that any
Investments permitted under this clause (d) in the form of intercompany indebtedness that are not
already subordinated on such terms as of the Closing Date shall not be required to be so
subordinated until the date that is thirty (30) days after the Closing Date);
(e) Investments consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the ordinary course of
business, and Investments received in satisfaction or partial satisfaction thereof from financially
troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;
(f) Investments consisting of the indorsement by the Parent or any Subsidiary of
negotiable instruments payable to such Person for deposit or collection in the ordinary course of
business;
(g) to the extent constituting an Investment, transactions otherwise permitted by
Sections 6.03 and 6.05;
(h) any Investments received in compromise or resolution of (i) obligations of trade
creditors or customers that were incurred in the ordinary course of business of Parent or any of its
Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer or (ii) litigation, arbitration or other
disputes;
(i) Investments represented by obligations in respect of Swap Contracts that are not
speculative in nature and that are entered into to hedge or mitigate risks to which the Parent or
any of its Subsidiaries has (or will have) actual exposure (other than those in respect of the Equity
Interests or Indebtedness of the Parent or any of its Subsidiaries);
(j) accounts receivable arising in the ordinary course of business;
(k) any guarantee of Indebtedness of Parent or any Subsidiary of Parent other than
any guarantee of Indebtedness secured by Liens that would not be permitted under Section 6.02;
(l) Investments to the extent that payment for such Investment is made with the
capital stock of the Parent;
(m) Investments having an aggregate fair market value (measured on the date each
such Investment was made and without giving effect to subsequent changes in value other than a
reduction for all returns of principal in cash and capital dividends in cash), when taken together
with all Investments made pursuant to this clause (n) that are at the time outstanding, not to
exceed 30% of the total consolidated assets of the Parent and its Subsidiaries at the time of such
Investment;
(n) Permitted Bond Hedge Transactions to the extent constituting Investments; and
(o) Investments in Finance Entities in the ordinary course of business of the Parent
and its Subsidiaries or that are otherwise customary for airlines based in the United States.
SECTION 6.07 Transactions with Affiliates. Parent will not, and will not permit any of its
Subsidiaries to, enter into any transaction of any kind involving aggregate payments or consideration in
excess of $50,000,000 with any Affiliate of the Parent, whether or not in the ordinary course of business,
other than on fair and reasonable terms substantially as favorable to the Parent or such Subsidiary as would
be obtainable by the Parent or such Subsidiary at the time in a comparable arm’s-length transaction with a
Person other than an Affiliate, subject to delivery of (x) with respect to any transaction or series of related
transactions involving aggregate consideration in excess of $100,000,000, a certificate of a Responsible
Officer of the Parent certifying as to compliance with the foregoing and (y) with respect to any transaction
or series of related transactions involving aggregate consideration in excess of $150,000,000, an opinion as
to the fairness to the Parent or such Subsidiary of such transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing (provided that this clause (y) shall
not apply to any transaction between or among the Parent or any of its Subsidiaries and any Finance
Entities); provided that, subject to Article X, the foregoing restriction shall not apply to:
(a) transactions between or among the Parent and any Wholly-Owned Subsidiaries,
(b) Restricted Payments permitted by Section 6.05,
(c) Investments permitted by Section 6.06(b), or (c) or (d),
(d) transactions described in Schedule 6.07,
(e) any employment agreement, confidentiality agreement, non-competition
agreement, incentive plan, employee stock option agreement, long-term incentive plan, profit sharing
plan, employee benefit plan, officer or director indemnification agreement or any similar arrangement
entered into by the Parent or any of its Subsidiaries in the ordinary course of business and payments
pursuant thereto, and
(f) payment of fees, compensation, reimbursements of expenses (pursuant to
indemnity arrangements or otherwise) and reasonable and customary indemnities provided to or on behalf
of officers, directors, employees or consultants of the Parent or any of its Subsidiaries.
SECTION 6.08 [Reserved].
SECTION 6.09 [Reserved].
SECTION 6.10 Changes in Nature of Business. Parent will not, and will not permit any of
its Subsidiaries to, engage to any material extent in any business other than those businesses conducted by
the Parent and its Subsidiaries on the date hereof or any business reasonably related or incidental thereto or
representing a reasonable expansion thereof.
SECTION 6.11 Sanctions; AML Laws. Parent will not, and will not permit any of its
Subsidiaries to, directly or knowingly indirectly, use the proceeds of the Loans, or lend, contribute or
otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person to fund any
activities or business of or with any Person in a manner that would result in a violation of Sanctions or
AML Laws by any Person.
SECTION 6.12 Amendments to Organizational Documents. Parent will not, and will not
permit any of its Subsidiaries to amend, modify, or grant any waiver or release under or terminate in any
manner, any Organizational Documents in any manner materially adverse to, or which would impair the
rights of, the Lenders.
SECTION 6.13 [Reserved].
SECTION 6.14 Prepayments of Junior Indebtedness. Parent will not, and will not permit
any of its Subsidiaries to, make any principal payment on, or redeem, repurchase, defease or otherwise
acquire or retire for value, in each case prior to any scheduled repayment, sinking fund payment or
maturity, any Indebtedness secured by junior Liens on the Collateral or that is subordinated in right of
payment to the Obligations, in each case other than in connection with a Permitted Refinancing of such
Indebtedness.
SECTION 6.15 Lobbying. Parent will not, and will not permit any of its Subsidiaries to,
directly, or to the Parent or such Subsidiary’s knowledge, indirectly, use the proceeds of the Loans, or lend,
contribute, or otherwise make available such proceeds to any other Person (i) for publicity or propaganda
purposes designated to support or defeat legislation pending before the U.S. Congress or (ii) to fund any
activities that would constitute “lobbying activities” as defined under 2 U.S.C. § 1602. The Parent shall,
and shall cause its subsidiaries to, comply with the provisions of 31 U.S.C. § 1352, as amended, and with
the regulations at 31 CFR Part 21.
SECTION 6.16 Use of Proceeds. Parent will not, and will not permit any of its
Subsidiaries to, use the proceeds of the Loans for any purpose other than for general corporate purposes and
operating expenses (including payroll, rent, utilities, materials and supplies, repair and maintenance, and
scheduled interest payments on other Indebtedness incurred before February 15, 2020), in each case in
compliance with all applicable law to the extent permitted by the CARES Act; provided however that the
proceeds of the Loans shall not be used for any non-operating expenses (including capital expenses,
delinquent taxes and payments of principal on other Indebtedness), unless the Parent can demonstrate, to the
satisfaction of the Initial Lender, that payment of any such non-operating expense is necessary to optimize
the continued operations of the Parent’s business and does not merely constitute a transfer of risk from an
existing creditor or investor to the Federal taxpayer.
SECTION 6.17 Financial Covenants.
(a) Liquidity. The Parent will not permit the aggregate amount of Liquidity at the
close of any Business Day to be less than $400,000,000.
(b) Collateral Coverage Ratio.
(i) Within ten (10) Business Days after (x) the last day of March and
September of each year (beginning with March 2021) or (y) any date on which an Appraisal is
delivered pursuant to clause (2) of Section 5.16 (each such date in clauses (x) and (y), a “CCR
Reference Date” and the tenth Business Day after a CCR Reference Date, a “CCR Certificate
Delivery Date”), the Parent shall deliver to the Administrative Agent a certificate of a
Responsible Officer of the Parent containing a calculation of the Collateral Coverage Ratio (a
“CCR Certificate”).
(ii) If the Collateral Coverage Ratio with respect to any CCR Reference Date
is less than 1.60 to 1.00, the Borrower shall, no later than ten (10) Business Days after the
applicable CCR Certificate Delivery Date, (x) prepay any outstanding Loans such that following
such prepayment, the Collateral Coverage Ratio with respect to such CCR Reference Date,
recalculated by subtracting any such prepaid portion of the Loans, shall be no less than 1.60 to
1.00 and/or (y) designate Additional Collateral as additional Eligible Collateral and comply with
Sections 5.13 and 5.15, collectively, in an amount such that following such designation, the
Collateral Coverage Ratio with respect to such CCR Reference Date, recalculated by adding such
Additional Collateral, shall be no less than 1.60 to 1.00.
(iii) At the Parent’s request, the Lien on any Collateral will be released,
provided, in each case, that the following conditions are satisfied or waived: (a) no Event of
Default shall have occurred and be continuing, (b) either (x) after giving effect to such release,
the Collateral Coverage Ratio is not less than 2.00 to 1.00 (or in the case of a swap or exchange of
existing Additional Collateral with new Additional Collateral, less than 1.60 to 1.00) or (y) the
Parent shall prepay or cause to be prepaid the Loans and/or shall designate Eligible Collateral as
Additional Collateral and comply with Sections 5.13 and 5.15, collectively, in an amount
necessary to cause the Collateral Coverage Ratio to not be less than 2.00 to 1.00 (or in the case of
a swap or exchange of existing Additional Collateral with new Additional Collateral, less than
1.60 to 1.00) and (c) the Parent shall deliver a certificate executed by a Responsible Officer
demonstrating compliance with this Section 6.17(b)(iii).
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 Events of Default. If any of the following events (each, an “Event of
Default”) shall occur:
(a) the Borrower shall fail to pay any principal of any Loan when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan, or any fee or any other
amount (other than an amount referred to in clause (a) of this Section) payable under this
Agreement or under any other Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of two (2) or more Business
Days;
(c) any representation or warranty made or deemed made by or on behalf of any
Credit Party, including those made prior to the Closing Date, in or in connection with this
Agreement, the Loan Application Form or any other Loan Document or any amendment or
modification hereof or thereof, or any waiver hereunder or thereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in connection with this
Agreement, the Loan Application Form or any other Loan Document or any amendment or
modification hereof or thereof, or any waiver hereunder or thereunder, shall prove to have been
incorrect in any material respect (or, in the case of any such representation or warranty under this
Agreement, the Loan Application Form or any other Loan Document already qualified by
materiality, such representation or warranty shall prove to have been incorrect) when made or
deemed made;
(d) any Credit Party shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.03(a), 5.04 (with respect to the Borrower’s existence) or in
Article VI or Article X;
(e) any Credit Party shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement or any other Loan Document (other than those specified
in clause (a), (b) or (d) of this Section) and such failure shall continue unremedied for a period of
thirty (30) or more days after notice thereof by the Administrative Agent or the Initial Lender to
the Parent;
(f) (i) Any Credit Party or any Subsidiary thereof shall fail to make any payment
when due (whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Material Indebtedness (other than Indebtedness under this
Agreement) and such failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument governing such Material Indebtedness; or (ii) any Credit Party or any
Subsidiary thereof shall fail to observe or perform any other agreement or condition relating to
any such Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event occurs, the effect of which default or other event results in the
holder or holders or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) causing such Indebtedness to
become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or
causing an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to
its stated maturity; provided that this clause (f)(ii) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer (or disposition of property as a result of a
casualty or condemnation event) of the property or assets securing such Indebtedness, if such sale
or transfer is permitted hereunder and under the documents providing for such Indebtedness and
such Indebtedness is repaid when required under the documents providing for such Indebtedness;
(g) an involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of any Credit Party or any
Material Subsidiary thereof or its debts, or of a substantial part of its assets, under any Debtor
Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Credit Party or any Material Subsidiary
thereof or for a substantial part of its assets, and, in any such case, such proceeding or petition
shall continue undismissed for a period of sixty (60) or more days or an order or decree approving
or ordering any of the foregoing shall be entered;
(h) any Credit Party or any Material Subsidiary thereof shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization or other relief
under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of
this Section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Parent or any of its Subsidiaries or for a
substantial part of its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the foregoing;
(i) any Credit Party or any Material Subsidiary thereof shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due;
(j) there is entered against any Credit Party or any Material Subsidiary thereof (i) a
final judgment or order for the payment of money in an aggregate amount (as to all such
judgments and orders) exceeding $50,000,000 (to the extent not covered by independent third-
party insurance as to which the insurer has been notified of such judgment or order and has not
denied or failed to acknowledge coverage), or (ii) a non-monetary final judgment or order that,
either individually or in the aggregate, has or could reasonably be expected to have a Material
Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor
upon such judgment or order, or (B) there is a period of thirty (30) consecutive days during which
a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in
effect;
(k) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan
that has resulted or could reasonably be expected to result in liability of any Credit Party under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC that, either individually
or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect;
(l) [reserved];
(m) any material provision of any Loan Document, at any time after its execution and
delivery and for any reason other than as expressly permitted hereunder or thereunder or
satisfaction in full of all Obligations, ceases to be in full force and effect; or any Credit Party or
any other Person who is a party to any Loan Document contests in writing the validity or
enforceability of any provision of any Loan Document; or any Credit Party denies in writing that
it has any or further liability or obligation under any Loan Document, or purports in writing to
revoke, terminate or rescind any Loan Document;
(n) any Lien purported to be created under any Security Document shall cease to be,
or shall be asserted in writing by any Credit Party not to be, a legal, valid and perfected Lien on
any material portion of the Collateral (individually or in the aggregate), with the priority required
by the applicable Security Documents, except (i) as a result of the sale or other Disposition of the
applicable Collateral to a Person that is not a Credit Party in a transaction not prohibited under the
Loan Documents or (ii) as a result of either Agent’s failure to maintain possession of any stock
certificates, promissory notes or other instruments delivered to it under the Security Documents
or (iii) as a result of acts or omissions with respect to possessory collateral held by the Collateral
Agent pursuant to this Agreement; or
(o) any Guarantee of any Obligations by any Credit Party under any Loan Document
shall cease to be in full force in effect (other than in accordance with the terms of the Loan
Documents);
then, and in every such event (other than an event described in clause (g) or (h) of this Section), and at
any time thereafter during the continuance of such event, the Initial Lender may, and the Administrative
Agent may, and at the request of the Required Lenders or the Initial Lender shall, by notice to the
Borrower, take any or all of the following actions, at the same or different times:
(i) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may thereafter be declared
to be due and payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other Obligations of the Credit
Parties accrued hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and
the other Credit Parties; and
(ii) exercise on behalf of itself and the Lenders all rights and remedies
available to it and the Lenders under the Loan Documents and Applicable Law;
provided that, in case of any event described in clause (g) or (h) of this Section, the principal of the Loans
then outstanding, together with accrued interest thereon and all fees and other Obligations accrued
hereunder, shall automatically become due and payable, in each case without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Credit Parties.
SECTION 7.02 Application of Payments. Notwithstanding anything herein to the contrary,
following the occurrence and during the continuance of an Event of Default, and notice thereof to the Initial
Lender and the Administrative Agent by the Borrower or the Required Lenders, all payments received on
account of the Obligations shall be applied by the Administrative Agent as follows:
(i) first, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts (including fees and disbursements and other charges of
counsel payable under Section 11.03 and amounts payable under an Administrative Agency Fee
Letter (if any)) payable to the Administrative Agent and the Collateral Agent in their respective
capacities as such;
(ii) second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the Lenders
(including fees and disbursements and other charges of counsel payable under Section 11.03)
arising under the Loan Documents, ratably among them in proportion to the respective amounts
described in this clause (ii) payable to them;
(iii) third, to payment of that portion of the Obligations constituting accrued
and unpaid interest on the Loans, ratably among the Lenders in proportion to the respective
amounts described in this clause (iii) payable to them;
(iv) fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Loans ratably among the Lenders in proportion to the respective amounts
described in this clause (iv) payable to them;
(v) fifth, to the payment in full of all other Obligations, in each case ratably
among the Administrative Agent and the Lenders based upon the respective aggregate amounts of
all such Obligations owing to them in accordance with the respective amounts thereof then due
and payable; and
(vi) finally, the balance, if any, after all Obligations have been indefeasibly
paid in full, to the Borrower or as otherwise required by Law.
ARTICLE VIII
AGENCY
SECTION 8.01 Appointment and Authority. Each Lender hereby irrevocably appoints The
Bank of New York Mellon to act on its behalf as the Administrative Agent and as the Collateral Agent
hereunder and under the other Loan Documents and authorizes the Agents to take such actions on its behalf
and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together
with such actions and powers as are reasonably incidental or related thereto; provided that notwithstanding
anything in this Article VIII or this Agreement to the contrary, the terms and conditions of the relationship
between the Initial Lender and the Agents shall be governed by a separate agreement between the Initial
Lender and the Agents. The Borrower and the Guarantors acknowledge and agree that the Agents are
Agents of the Lenders and not of the Borrower or the Guarantors. In connection with an assignment of the
Loans by the Initial Lender, upon the Administrative Agent’s request, the Borrower and the Agents shall
enter into an Administrative Agency Fee Letter. The provisions of this Article are solely for the benefit of
the Agents and the Lenders, and the Borrower shall not have rights as a third-party beneficiary of any of
such provisions. Without limiting the generality of the foregoing, the Agents are hereby expressly
authorized to (i) execute any and all documents (including releases) with respect to the Collateral and the
rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions
of this Agreement and the other Loan Documents and (ii) negotiate, enforce or settle any claim, action or
proceeding affecting the Lenders in their capacity as such, at the direction of the Required Lenders, which
negotiation, enforcement or settlement will be binding upon each Lender.
SECTION 8.02 Collateral Matters. Each of the Lenders hereby irrevocably appoints and
authorizes the Collateral Agent to act as the agent of such Lender for purposes of acquiring, holding and
enforcing any and all Liens on Collateral granted by any of the Credit Parties to secure any of the
Obligations, together with such powers and discretion as are reasonably incidental thereto and to enter into
and perform the other Loan Documents.
SECTION 8.03 Removal or Resignation of Administrative Agent. While the Initial Lender
is a Lender, the Administrative Agent may be removed or give notice of its resignation subject to any
conditions as separately agreed between the Initial Lender and the Administrative Agent. Any such
resignation as Administrative Agent pursuant to this Section 8.03 shall also constitute its resignation as the
Collateral Agent; provided that in the case of any collateral security held by the Collateral Agent on behalf
of the Lenders under any of the Loan Documents, the retiring or removed Collateral Agent shall continue to
hold such collateral security until such time as a successor Collateral Agent is appointed. Upon such
removal or receipt of any such notice of resignation, the Initial Lender shall have the right to appoint a
successor. After the Initial Lender is no longer a Lender, either Agent may resign at any time by notifying
the Lenders and the Borrower in writing, and either Agent may be removed at any time with or without
cause by an instrument or concurrent instruments in writing delivered to the Borrower and such Agent and
signed by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right, with the consent of the Borrower (which consent shall not be required during the continuance of
an Event of Default), to appoint a successor. If no successor shall have been so appointed by the Required
Lenders (with the consent of the Borrower (which consent shall not be required during the continuance of
an Event of Default)) and shall have accepted such appointment within 30 days after (i) the retiring Agent
gives notice of its resignation or (ii) the Required Lenders deliver removal instructions, then the retiring or
removed Agent may, on behalf of the Lenders (with the consent of the Borrower (which consent shall not
be required during the continuance of an Event of Default)), appoint a successor Agent which shall be a
bank with an office in New York, New York, or an Affiliate of any such bank. If no successor Agent has
been appointed pursuant to the immediately preceding sentence, such Agent’s resignation or removal shall
become effective and the Required Lenders shall thereafter perform all the duties of such Agent hereunder
and/or under any other Loan Document until such time, if any, as the Required Lenders (with the consent of
the Borrower (which consent shall not be required during the continuance of an Event of Default)) appoint a
successor Administrative Agent and/or Collateral Agent, as the case may be. Upon the acceptance of its
appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all
the rights, powers, privileges and duties of its predecessor Agent, and its predecessor Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor
Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After an Agent’s resignation hereunder, the provisions of this Article and Section 9.03
shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.
SECTION 8.04 Exculpatory Provisions.
(a) The Agents shall not have any duties or obligations except those expressly set
forth herein and in the other Loan Documents or as separately agreed between the Initial Lender and the
Agents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the
foregoing:
(i) neither Agent shall be subject to any fiduciary or other implied duties, regardless
of whether a Default has occurred and is continuing, except that The Bank of New York Mellon shall
always have a fiduciary duty to Treasury while serving as its Agent in accordance with the provisions of
the separate writing between The Bank of New York Mellon and Treasury;
(ii) neither Agent shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the
other Loan Documents that such Agent is required to exercise as directed in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in
the other Loan Documents); and
(iii) except as expressly set forth herein and in the other Loan Documents, neither
Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information
relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank
serving as Administrative Agent and/or Collateral Agent or any of its Affiliates in any capacity.
(b) Neither Agent shall be required to expend or risk its own funds or otherwise
incur liability in the performance of any of its duties hereunder or under any other Loan Document or in
the exercise of any of its rights or powers. Notwithstanding anything in any Loan Document to the
contrary, prior to taking any action under this Agreement or any other Loan Document, each Agent shall
be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses in
connection with taking such action. Neither Agent shall be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Sections 7.01 and 11.02) or in the
absence of its own gross negligence or willful misconduct as determined by the final non-appealable
judgment of a court of competent jurisdiction. Notwithstanding the foregoing, no action nor any omission
to act, taken by either Agent at the direction of the Required Lenders (or such other number of percentage
of Lenders as shall be expressly provided for herein or in the other Loan Documents) shall constitute
gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default
unless and until written notice thereof, conspicuously labeled as a “notice of default” and specifically
describing such Default, is given to an Agent Responsible Officer by the Borrower or a Lender.
(c) Neither Agent shall be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any
Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.
(d) In no event shall either Agent be responsible or liable for any failure or delay in
the performance of its obligations hereunder or under any other Loan Document arising out of or caused
by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages,
epidemics, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural
catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or
computer (software and hardware) services (it being understood that such Agent shall use reasonable
efforts which are consistent with accepted practices in the banking industry to resume performance as
soon as practicable under the circumstances).
(e) Each Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing
believed by it in good faith to be genuine and to have been signed or sent by the proper Person. Each
Agent may also rely upon any statement made to it orally or by telephone and believed by it in good faith
to have been made by the proper Person, and shall not incur any liability for relying thereon. Delivery of
reports, information and documents to an Agent is for informational purposes only and an Agent’s receipt
of the foregoing will not constitute actual or constructive knowledge or notice of any information
contained therein or determinable from information contained therein, including the Borrower’s
compliance with any of its covenants hereunder. Each Agent may consult with legal counsel (who may be
counsel for the Borrower), independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in reliance on the advice of any such counsel, accountants or
experts. Any funds held by an Agent shall, unless otherwise agreed in writing with the Borrower, be held
uninvested in a non-interest bearing account.
(f) Neither Agent shall have any obligation to calculate or confirm the calculation of
any financial covenant contained herein.
(g) Notwithstanding anything to the contrary in any Loan Documents, neither Agent
shall be responsible for the existence, genuineness or value of any of the Collateral; for filing any
financing or continuation statements or recording any documents or instruments in any public office or
otherwise perfecting or maintaining the perfection of any security interest in the Collateral (except, in the
case of possessory Collateral, for the Collateral Agent maintaining possession of any such Collateral
received by it in accordance with the terms of the Loan Documents); for the validity, perfection, priority
or enforceability of the Liens in any of the Collateral; for the validity or sufficiency of the Collateral or
any agreement or assignment contained therein; for the validity of the title of any grantor to the
Collateral; for insuring the Collateral; or for the payment of taxes, charges or assessments on the
Collateral. The Collateral Agent agrees that it will check any possessory Collateral received by it against
any itemized list in the Pledge and Security Agreement of Collateral to be delivered to it in accordance
with the Pledge and Security Agreement.
SECTION 8.05 Reliance by Agents. Each Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate, opinion, consent, statement,
instrument, document or other writing believed by it in good faith to be genuine and to have been signed
or sent by the proper Person. Each Agent may also rely upon any statement made to it orally or by
telephone and believed by it in good faith to have been made by the proper Person, and shall not incur any
liability for relying thereon. Delivery of reports, information and documents to an Agent is for
informational purposes only and an Agent’s receipt of the foregoing will not constitute actual or
constructive knowledge or notice of any information contained therein or determinable from information
contained therein, including the Borrower’s compliance with any of its covenants hereunder. Each Agent
may consult with legal counsel (who may be counsel for the Borrower), independent accountants and
other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance
with the advice of any such counsel, accountants or experts.
SECTION 8.06 Delegation of Duties. Each Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents or attorneys appointed by it and
will not be responsible for the misconduct or negligence of any agent appointed with due care. Each
Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or
through their respective Related Parties.
SECTION 8.07 Non-Reliance on Agents and Other Lenders. Each Lender (other than
the Initial Lender) acknowledges that it has, independently and without reliance upon the Administrative
Agent or any other Lender or any of their Related Parties and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.
Each Lender (other than the Initial Lender) also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on
such documents and information as it shall from time to time deem appropriate, continue to make its own
decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or
any related agreement or any document furnished hereunder or thereunder.
SECTION 8.08 Administrative Agent May File Proofs of Claim. In case of the pendency
of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Credit
Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative
Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated)
by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such
other documents as may be necessary or advisable in order to have the claims of the Lenders and
the Agents (including any claim for the reasonable compensation, expenses, disbursements and
advances of the Lenders and the Agents and their respective agents and counsel and all other
amounts due the Lenders and the Agents under Section 11.03) allowed in such judicial
proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative
Agent and, in the event that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable
compensation, expenses, disbursements and advances of the Agents and their respective agents and
counsel, and any other amounts due the Agents under the Loan Documents. Nothing contained herein
shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on
behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the
claim of any Lender in any such proceeding.
ARTICLE IX
GUARANTEE
SECTION 9.01 Guarantee of the Obligations. Each Guarantor jointly and severally hereby
irrevocably and unconditionally guarantees to the Secured Parties, the due and punctual payment in full and
performance of all Obligations (or such lesser amount as agreed by the Required Lenders in their sole
discretion with respect to Obligations owed to the Lenders) when the same shall become due or required to
be performed, whether at stated maturity, by required prepayment, declaration, acceleration, performance,
demand or otherwise (including amounts that would become and any performance that would have been
required to be taken due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed Obligations”).
SECTION 9.02 Payment or Performance by a Guarantor. Each Guarantor hereby jointly
and severally agrees, in furtherance of the foregoing and the other terms of this Article IX and not in
limitation of any other right which the Secured Parties may have at law or in equity against any Guarantor
by virtue hereof, that upon the failure of the Borrower to pay or perform any of the Guaranteed Obligations
when and as the same shall become due or required to be performed, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)),
such Guarantor will pay, or cause to be paid, in cash, or perform, or cause to be performed, to the Secured
Parties an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due
as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for
the Borrower’s becoming the subject of a case under the Bankruptcy Code, would have accrued on such
Guaranteed Obligations, whether or not a claim is allowed against the Borrower for such interest in the
related bankruptcy case) and all other Guaranteed Obligations then owed or required to be performed to the
Secured Parties as aforesaid.
SECTION 9.03 Liability of Guarantors Absolute. Each Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by
any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than
payment and performance in full of the Guaranteed Obligations. In furtherance of the foregoing and
without limiting the generality thereof, each Guarantor agrees as follows:
(a) this Guarantee is a guarantee of payment and performance when due and not
merely of collection;
(b) either Agent and any of the other Secured Parties may enforce this Guarantee
upon the occurrence of an Event of Default notwithstanding the existence of any dispute between the
Borrower and the Secured Parties with respect to the existence of such Event of Default;
(c) a separate action or actions may be brought and prosecuted against such
Guarantor whether or not any action is brought against the Borrower or any other Guarantors and whether
or not Borrower or such Guarantors are joined in any such action or actions;
(d) payment or performance by any Guarantor of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge any other Guarantor’s liability for
any portion of the Guaranteed Obligations which has not been paid or performed;
(e) the Required Lenders, upon such terms as they deem appropriate, without notice
or demand and without affecting the validity or enforceability hereof or giving rise to any reduction,
limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time
may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place,
manner or terms of payment or performance of the Guaranteed Obligations; (ii) settle, compromise,
release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the
Guaranteed Obligations or subordinate the payment of the same to the payment of any other obligations;
(iii) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or
modify, with or without consideration, any security for payment or performance of the Guaranteed
Obligations, any other guarantees of the Guaranteed Obligations, or any other obligation of any Person
(including any other Guarantor) with respect to the Guaranteed Obligations; and (iv) enforce its rights and
remedies even though such action may operate to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of any Guarantor against the Borrower or any security for the
Guaranteed Obligations; and
(f) this Guarantee and the obligations of each Guarantor hereunder shall be legal,
valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or
termination for any reason (other than payment or performance in full of the Guaranteed Obligations),
including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to
any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of any of the Guaranteed Obligations, any impossibility in the performance
of any of the Guaranteed Obligations, or otherwise. Without limiting the generality of the foregoing,
except for the payment and performance in full of the Guaranteed Obligations and to the fullest extent
permitted by Applicable Law, the obligations of each Guarantor hereunder shall not be discharged or
impaired or otherwise affected by: (i) any failure, delay or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with
respect to the Guaranteed Obligations, or with respect to any security for the payment and performance of
the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to
departure from, any of the terms or provisions hereof or any other Loan Document; (iii) the Guaranteed
Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect; (iv) the Lender’s consent to the change, reorganization or termination of the
corporate structure or existence of the Borrower or any of its Subsidiaries and to any corresponding
restructuring of the Guaranteed Obligations; (v) the release of, or any impairment of or failure to perfect
or continue perfection of or protect a security interest in, any collateral which secures any of the
Guaranteed Obligations; (vi) any defenses, set-offs or counterclaims which the Borrower or any
Guarantor may allege or assert against either Agent or the Lenders in respect of the Guaranteed
Obligations, including failure of consideration, lack of authority, validity or enforceability, breach of
warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; (vii) any
change in the corporate existence, structure or ownership of any Credit Party, or any insolvency,
bankruptcy, reorganization, examinership or other similar proceeding affecting any Credit Party or its
assets or any resulting release or discharge of any of the Guaranteed Obligations; (viii) the fact that any
Person that, pursuant to the Loan Documents, was required to become a party hereto may not have
executed or is not effectually bound by this Agreement, whether or not this fact is known to the Secured
Parties; (ix) any action permitted or authorized hereunder; (x) any other circumstance, or any existence of
or reliance on any representation by the Agents, any Secured Party or any other Person, that might
otherwise constitute a defense to, or a legal or equitable discharge of, the Borrower, any Guarantor or any
other guarantor or surety; and (xi) any other event or circumstance that might in any manner vary the risk
of any Guarantor as an obligor in respect of the Guaranteed Obligations.
SECTION 9.04 Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of
the Lender: (a) any right to require the Lender, as a condition of payment or performance by such
Guarantor, to (i) proceed against Borrower, any Guarantor or any other Person; (ii) proceed against or
exhaust any security in favor of the Lender; or (iii) pursue any other remedy in the power of the Agents or
Secured Parties whatsoever or (b) presentment to, demand for payment or performance from and protest to
the Borrower or any Guarantor or notice of acceptance; and (c) any defenses or benefits that may be derived
from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may
conflict with the terms hereof. The Agents and the other Secured Parties may, at their election, foreclose on
any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment
of any such security in lieu of foreclosure or exercise any other right or remedy available to them against
the Borrower or any other Credit Party without affecting or impairing in any way the liability of any
Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full. To the fullest
extent permitted by Applicable Law, each Credit Party waives any defense arising out of any such election
even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Credit Party against the Borrower or any
other Credit Party, as the case may be, or any security.
SECTION 9.05 Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed
Obligations shall have been paid in full, each Guarantor hereby waives any claim, right or remedy, direct or
indirect, that such Guarantor now has or may hereafter have against the Borrower or any other Guarantor or
any of its assets in connection with this Guarantee or the performance by such Guarantor of its obligations
hereunder, including without limitation (a) any right of subrogation, reimbursement or indemnification that
such Guarantor now has or may hereafter have against the Borrower with respect to the Guaranteed
Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that the Agents or the
Secured Parties now has or may hereafter have against the Borrower, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by the Agents or the Secured Parties. In
addition, until the Guaranteed Obligations shall have been paid in full, each Guarantor shall withhold
exercise of any right of contribution such Guarantor may have against any other guarantor (including any
other Guarantor) of the Guaranteed Obligations. If any amount shall be paid to any Guarantor on account
of any such subrogation, reimbursement, indemnification or contribution rights at any time when all
Guaranteed Obligations shall not have been finally and paid in full, such amount shall be held in trust for
the Secured Parties and shall forthwith be paid over to the Secured Parties to be credited and applied against
the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.
SECTION 9.06 Subordination. Any Indebtedness of the Borrower or any Guarantor now
or hereafter and all rights of indemnity, contribution or subrogation under Applicable Law or otherwise held
by any Guarantor (the “Obligee Guarantor”) are hereby subordinated in right of payment or performance to
the Guaranteed Obligations until the Guaranteed Obligations is paid and performed in full. Any amount in
respect of such indebtedness or rights collected or received by the Obligee Guarantor after an Event of
Default has occurred and is continuing shall be held in trust for the Secured Parties and shall forthwith be
paid over to the Secured Parties to be credited and applied against the Guaranteed Obligations but without
affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other
provision hereof.
SECTION 9.07 Continuing Guarantee. This Guarantee is a continuing guarantee and shall
remain in effect until all of the Guaranteed Obligations shall have been paid and performed in full. Each
Guarantor hereby irrevocably waives any right to revoke this Guarantee as to future transactions giving rise
to any Guaranteed Obligations.
SECTION 9.08 Financial Condition of the Borrower. The Loans may be made to the
Borrower without notice to or authorization from any Guarantor regardless of the financial or other
condition of the Borrower at the time of such grant. Each Guarantor has adequate means to obtain
information from the Borrower on a continuing basis concerning the financial condition of the Borrower
and its ability to perform its obligations under the Loan Documents, and each Guarantor assumes the
responsibility for being and keeping informed of the financial condition of the Borrower and of all
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations.
SECTION 9.09 Reinstatement. In the event that all or any portion of the Guaranteed
Obligations are paid by the Borrower or any Guarantor, the obligations of any other Guarantor hereunder
shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or
any part of such payment(s) are rescinded or recovered directly or indirectly from the Secured Parties as a
preference, fraudulent transfer or otherwise must be so recovered or returned, and any such payments and
amounts which are so rescinded, recovered or returned shall constitute Guaranteed Obligations for all
purposes hereunder.
SECTION 9.10 Discharge of Guarantees. If, in compliance with the terms and provisions
of the Loan Documents, (x) all of the Equity Interests of any Guarantor that is a Subsidiary of the Parent or
any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or
consolidation) to any Person (other than to the Parent or to any other Subsidiary of Parent), the Guarantee of
such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be
discharged and released without any further action by any beneficiary or any other Person effective as of the
time of such asset sale or (y) a Guarantor becomes an Excluded Subsidiary (other than as a result of a
Guarantor becoming a non-Wholly Owned Subsidiary), the Borrower may request the release of the
Guarantee of such Guarantor, whereupon the Guarantee of such Guarantor shall be discharged and released.
ARTICLE X
CARES ACT REQUIREMENTS
Notwithstanding anything in this Agreement to the contrary, the Credit Parties, on behalf
of themselves and their Affiliates, represent, warrant, and agree with the Lenders that:
SECTION 10.01 CARES Act Compliance. Each Credit Party and its Subsidiaries are in
compliance, and will at all times comply, with all applicable requirements under Title IV of the CARES
Act, including any applicable requirements pertaining to the Borrower’s eligibility to receive the Loans.
The Parent, the Borrower and their Subsidiaries will provide any information requested by the Initial
Lender or Agents to assess the Borrower’s compliance with applicable requirements under Title IV of the
CARES Act, its obligations under this Article X or its eligibility to receive the Loans under the CARES
Act. The Borrower is not a “covered entity” as defined in Section 4019 of the CARES Act.
SECTION 10.02 Dividends and Buybacks
(a) Until the date that is twelve (12) months after the date on which the Loans are no
longer outstanding, neither any Borrower Air Carrier nor any of its Affiliates (other than an Affiliate that
is a natural person) shall, in any transaction, purchase an equity security of any Borrower Air Carrier or of
any direct or indirect parent company of a Borrower Air Carrier or of any Subsidiary of the Parent that, in
each case, is listed on a national securities exchange, except to the extent required under a contractual
obligation in effect as of the date of enactment of the CARES Act.
(b) Until the date that is twelve (12) months after the date on which the Loans are no
longer outstanding, no Borrower Air Carrier shall pay dividends, or make any other capital distributions,
with respect to the common stock of any Borrower Air Carrier.
SECTION 10.03 Maintenance of Employment Levels. Until September 30, 2020, each
Borrower Air Carrier shall maintain its employment levels as of March 24, 2020, to the extent practicable,
and in any case shall not reduce its employment levels by more than ten percent (10%) from the levels on
March 24, 2020.
SECTION 10.04 United States Business. Each Borrower Air Carrier is created or
organized in the United States or under the laws of the United States and has significant operations in and a
majority of its employees based in the United States.
SECTION 10.05 Limitations on Certain Compensation.
(a) Beginning on the Closing Date, and ending on the date that is one (1) year after
the date on which the Loans are no longer outstanding, each Borrower Air Carrier and its Affiliates shall
not pay any of each Borrower Air Carrier’s Corporate Officers or Employees whose Total Compensation
exceeded $425,000 in calendar year 2019 or the Subsequent Reference Period (other than an Employee
whose compensation is determined through an existing collective bargaining agreement entered into
before March 1, 2020):
(i) Total Compensation which exceeds, during any twelve (12) consecutive
months of the period beginning on the Closing Date and ending on the date that is one (1) year
after the date on which the Loans are no longer outstanding, the Total Compensation the
Corporate Officer or Employee received in calendar year 2019 or the Subsequent Reference
Period; or
(ii) Severance Pay or Other Benefits in connection with a termination of
employment with any Borrower Air Carrier which exceed twice the maximum Total
Compensation received by such Corporate Officer or Employee in calendar year 2019 or the
Subsequent Reference Period.
(b) Beginning on the Closing Date, and ending on the date that is one (1) year after
the date on which the Loans are no longer outstanding, each Borrower Air Carrier and its Affiliates shall
not pay any of each Borrower Air Carrier’s Corporate Officers or Employees whose Total Compensation
exceeded $3,000,000 in calendar year 2019 or the Subsequent Reference Period, Total Compensation
which exceeds, during any twelve (12) consecutive months of such period, in excess of the sum of:
(i) $3,000,000; and
(ii) Fifty percent (50%) of the excess over $3,000,000 of the Total
Compensation received by such Corporate Officer or Employee in calendar year 2019 or the
Subsequent Reference Period.
(c) For purposes of determining applicable amounts under this Section with respect
to any Corporate Officer or Employee who was employed by any Borrower Air Carrier or any of their
Affiliates for less than all of calendar year 2019, the amount of Total Compensation in calendar year 2019
shall mean such Corporate Officer’s or Employee’s Total Compensation on an annualized basis.
SECTION 10.06 Continuation of Certain Air Service. Until March 1, 2022, each
Borrower Air Carrier shall comply with any applicable requirement issued by the Secretary of
Transportation under section 4005 of the CARES Act to maintain scheduled air transportation service to
any point served by any Borrower Air Carrier before March 1, 2020. The Borrower acknowledges that
neither Treasury, nor any other actor, department, or agency of the Federal Government, shall condition the
issuance of any loan under this Loan Agreement on the Borrower’s implementation of measures to enter
into negotiations with the certified bargaining representative of a craft or class of employees of the
Borrower Air Carrier under the Railway Labor Act (45 U.S.C. 151 et seq.) or the National Labor Relations
Act (29 U.S.C. 151 et seq.), regarding pay or other terms and conditions of employment.
SECTION 10.07 Treasury Access. Provide Treasury, the Treasury Inspector General, the
Special Inspector General for Pandemic Recovery, and such other entities as authorized by Treasury timely
and unrestricted access to all documents, papers, or other records, including electronic records, of the
Borrower related to the Loans, to enable Treasury, the Treasury Inspector General, and the Special
Inspector General for Pandemic Recovery to make audits, examinations, and otherwise evaluate the
Borrower’s compliance with the terms of this Agreement. This right also includes timely and reasonable
access to the Borrower’s and its Affiliates’ personnel for the purpose of interview and discussion related to
such documents.
SECTION 10.08 Additional Defined Terms. As used in this Article, the following terms
have the meanings specified below:
“Borrower Air Carrier” means, collectively, the Borrower, its Affiliates that are Air
Carriers, and their respective heirs, executors, administrators, successors, and assigns. Notwithstanding
anything to the contrary herein, for purposes of this Article X, an “Affiliate” of the Borrower shall not
include any Person(s) that become affiliated with the Borrower solely by virtue of the consummation of a
Change of Control transaction resulting in repayment of the Loans in full.
“Corporate Officer” means, with respect to any Borrower Air Carrier, its president; any
vice president in charge of a principal business unit, division, or function (such as sales, administration or
finance); any other officer who performs a policy-making function; or any other person who performs
similar policy making functions for the Borrower Air Carrier. Executive officers of subsidiaries or
parents of any Borrower Air Carrier may be deemed Corporate Officers of the Borrower Air Carrier if
they perform such policy-making functions for the Borrower Air Carrier.
“Employee” has the meaning given to the term in section 2 of the National Labor
Relations Act (29 U.S.C. 152 and includes any individual employed by an employer subject to the
Railway Labor Act (45 U.S.C. 151 et seq.), and for the avoidance of doubt includes all individuals who
are employed by the Borrower Air Carrier who are not Corporate Officers.
“Severance Pay or Other Benefits” means any severance payment or other similar
benefits, including cash payments, health care benefits, perquisites, the enhancement or acceleration of
the payment or vesting of any payment or benefit or any other in-kind benefit payable (whether in lump
sum or over time, including after March 24, 2022) by any Borrower Air Carrier or its Affiliates to a
Corporate Officer or Employee in connection with any termination of such Corporate Officer’s or
Employee’s employment (including, without limitation, resignation, severance, retirement, or constructive
termination), which shall be determined and calculated in respect of any Employee or Corporate Officer
of the Borrower Air Carrier in the manner prescribed in 17 CFR 229.402(j) (without regard to its
limitation to the five (5) most highly compensated executives and using the actual date of termination of
employment rather than the last business day of the Borrower Air Carrier’s last completed fiscal year as
the trigger event).
“Subsequent Reference Period” means (i) for a Corporate Officer or Employee whose
employment with the Borrower Air Carrier or an Affiliate started during 2019 or later, the twelve (12)
month period starting from the end of the month in which the officer or employee commenced
employment, if such officer’s or employee’s total compensation exceeds $425,000 (or $3,000,000) during
such period and (ii) for a Corporate Officer or Employee whose Total Compensation first exceeds
$425,000 during a 12-month period ending after 2019, the 12-month period starting from the end of the
month in which the Corporate Officer’s or Employee’s Total Compensation first exceeded $425,000 (or
$3,000,000).
“Total Compensation” means compensation including salary, wages, bonuses, awards of
stock, and any other financial benefits provided by the Borrower Air Carrier or an Affiliate, as applicable,
which shall be determined and calculated for the 2019 calendar year or any applicable twelve (12)-month
period in respect of any Employee or Corporate Officer of the Borrower Air Carrier in the manner
prescribed under paragraph e.5 of the award term in 2 CFR part 170, App. A, but excluding any
Severance Pay or Other Benefits in connection with a termination of employment.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Notices; Public Information.
(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices
and other communications provided for herein shall be in writing in English and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or email as
follows:
(i) if to a Credit Party, to it at 444 South River Road, St. George, Utah
84790, Attention of Chief Financial Officer (Facsimile No. 435-634-3305; [REDACTED];
(ii) if to the Administrative Agent or the Collateral Agent, to The Bank of
New York Mellon at 240 Greenwich Street, 7th Floor, New York, NY 10286, Attention of Joanna
Shapiro, Managing Director (Telephone No. 212-815-4949; Email:
joanna.g.shapiro@bnymellon.com with a copy to UST.Cares.Program@bnymellon.com);
(iii) if to Treasury, as the Initial Lender, to The Department of the Treasury
of the United States at 1500 Pennsylvania Avenue, NW, Washington, D.C. 20220, Attention of
Assistant General Counsel (Banking and Finance) (Telephone No. 202-622-0283; Email:
eric.froman@treasury.gov); and
(iv) if to any other Lender, to it at its address (or facsimile number or email
address) set forth in its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received. Notices delivered through electronic communications, to the
extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).
(b) Electronic Communications. Notices and other communications to the Lenders
hereunder may be delivered or furnished by electronic communication (including e-mail, FpML, and
Internet or intranet websites) pursuant to procedures approved by the Lenders and reasonably acceptable
to the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant
to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices
under such Article by electronic communication. The Administrative Agent, the Collateral Agent, the
Parent or the Borrower may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications.
Unless the Administrative Agent, the Collateral Agent or a Lender otherwise prescribes,
(i) notices and other communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by return e-mail or other
written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as
described in the foregoing clause (i), of notification that such notice or communication is available and
identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice,
email or other communication is not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on the next Business Day for
the recipient.
(c) Change of Address, etc. Any party hereto may change its address or facsimile
number for notices and other communications hereunder by notice to the other parties hereto.
(d) Platform.
(i) The Borrower and the Lenders agree that the Administrative Agent may,
but shall not be obligated to, make the Communications (as defined below) available to the other
Lenders by posting the Communications on the Platform.
(ii) The Platform is provided “as is” and “as available.” The Agent Parties
(as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability
for errors or omissions in the Communications. No warranty of any kind, express, implied or
statutory, including any warranty of merchantability, fitness for a particular purpose, non-
infringement of third-party rights or freedom from viruses or other code defects, is made by any
Agent Party in connection with the Communications or the Platform. In no event shall the
Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any
liability to the Credit Parties, any Lender or any other Person or entity for damages of any kind,
including direct or indirect, special, incidental or consequential damages, losses or expenses
(whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative
Agent’s transmission of communications through the Platform. “Communications” means,
collectively, any notice, demand, communication, information, document or other material
provided by or on behalf of the Credit Parties pursuant to any Loan Document or the transactions
contemplated therein that is distributed to the Administrative Agent or any Lender by means of
electronic communications pursuant to this Section, including through the Platform.
(e) Public Information. The Borrower hereby acknowledges that certain of the
Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public
information with respect to the Borrower or its Affiliates, or the respective securities of any of the
foregoing, and who may be engaged in investment and other market-related activities with respect to such
Persons’ securities. The Borrower hereby agrees that it will use commercially reasonable efforts to
identify that portion of the materials and information provided by or on behalf of the Borrower hereunder
and under the other Loan Documents (collectively, “Borrower Materials”) that may be distributed to the
Public Lenders and that (i) all such Borrower Materials shall be clearly and conspicuously marked
“PUBLIC,” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the
first page thereof; (ii) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have
authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing
any material non-public information with respect to the Borrower or its securities for purposes of U.S.
federal and state securities Laws (provided, however, that to the extent that such Borrower Materials
constitute Information, they shall be subject to Section 11.12); (iii) all Borrower Materials marked
“PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side
Information;” and (iv) the Administrative Agent shall be entitled to treat any Borrower Materials that are
not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated
“Public Side Information”. Each Public Lender will designate one or more representatives that shall be
permitted to receive information that is not designated as being available for Public Lenders.
Notwithstanding the foregoing, financial statements and related documentation, in each case, provided
pursuant to Section 5.01(a) or 5.01(b) shall be deemed to be marked “PUBLIC”, unless the Parent notifies
the Administrative Agent promptly that any such document contains material non-public information.
SECTION 11.02 Waivers; Amendments.
(a) No Waiver; Remedies Cumulative; Enforcement. No failure or delay by the
Administrative Agent, the Collateral Agent or any Lender in exercising any right, remedy, power or
privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, remedy, power or privilege, or any abandonment or
discontinuance of steps to enforce such a right remedy, power or privilege, preclude any other or further
exercise thereof or the exercise of any other right remedy, power or privilege. The rights, remedies,
powers and privileges of the Administrative Agent, the Collateral Agent and the Lenders hereunder and
under the Loan Documents are cumulative and are not exclusive of any rights, remedies, powers or
privileges that any such Person would otherwise have.
Notwithstanding anything to the contrary contained herein or in any other Loan
Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents
against the Credit Parties shall be vested exclusively in, and all actions and proceedings at law in
connection with such enforcement shall be instituted and maintained exclusively by, (i) so long as the
Initial Lender is a Lender, either the Initial Lender or, at the Initial’s Lender’s option, the Administrative
Agent in accordance with Section 7.01 for the benefit of all the Lenders and (ii) if the Initial Lender is no
longer a Lender, the Required Lenders or the Administrative Agent (acting at the direction of the
Required Lenders) in accordance with Section 7.01 for the benefit of all the Lenders; provided that the
foregoing shall not prohibit (i) the Administrative Agent from exercising on its own behalf the rights and
remedies that inure to its benefit (solely in its capacities as Administrative Agent and as Collateral Agent)
hereunder and under the other Loan Documents, (ii) any Lender from exercising setoff rights in
accordance with Section 11.08 (subject to the terms of Section 2.13) or (iii) any Lender from filing proofs
of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative
to a Credit Party under any Debtor Relief Law; provided, further, that if at any time there is no Person
acting as Administrative Agent hereunder and under the other Loan Documents, then (x) the Required
Lenders shall have the rights otherwise provided to the Administrative Agent pursuant to Section 7.01
and (y) in addition to the matters set forth in clauses (ii) and (iii) of the preceding proviso and subject to
Section 2.13, any Lender may, with the consent of the Required Lenders, enforce any rights or remedies
available to it and as authorized by the Required Lenders.
(b) Amendments, Etc. Except as otherwise expressly set forth in this Agreement
(including Section 2.10 and Section 8.01), no amendment or waiver of any provision of this Agreement or
any other Loan Document, and no consent to any departure by the Borrower therefrom, shall be effective
unless in writing executed by the Borrower and the Required Lenders, and acknowledged by the
Administrative Agent, or by the Borrower and the Administrative Agent with the consent of the Required
Lenders, and each such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that no such amendment, waiver or consent shall:
(i) extend or increase any Commitment of any Lender without the written
consent of such Lender;
(ii) reduce the principal of, or rate of interest specified herein on, any Loan,
or any fees or other amounts payable hereunder or under any other Loan Document, without the
written consent of each Lender directly and adversely affected thereby (provided that only the
consent of the Required Lenders shall be necessary (x) to amend the definition of “Default Rate”
or to waive the obligation of the Borrower to pay interest at the Default Rate or (y) to amend any
financial covenant (or any defined term directly or indirectly used therein), even if the effect of
such amendment would be to reduce the rate of interest on any Loan or other Obligation or to
reduce any fee payable hereunder);
(iii) postpone any date scheduled for any payment of principal of, or interest
on, any Loan, or any fees or other amounts payable hereunder or under any other Loan
Document, or reduce the amount of, waive or excuse any such payment, without the written
consent of each Lender directly and adversely affected thereby;
(iv) change Section 2.12(b) or Section 2.13 in a manner that would alter the
pro rata sharing of payments required thereby without the written consent of each Lender directly
and adversely affected thereby;
(v) waive any condition set forth in Section 4.01 without the written consent
of the Initial Lender; or
(vi) change any provision of this Section or the percentage in the definition of
“Required Lenders” or any other provision hereof specifying the number or percentage of
Lenders required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of each Lender;
provided, further, that no such amendment, waiver or consent shall amend, modify or otherwise affect the
rights or duties hereunder or under any other Loan Document of either of the Agents, unless in writing
executed by such Agent, in each case in addition to the Borrower and the Lenders required above.
In addition, notwithstanding anything in this Section to the contrary, (i) if the Borrower
shall have identified an obvious error or any error or omission of a technical nature, in each case, in any
provision of the Loan Documents, then, upon the delivery of a certificate of a Responsible Officer of the
Borrower to the Administrative Agent identifying such error and directing the Administrative Agent to
execute an amendment to correct such error, the Administrative Agent and the Borrower shall be
permitted to amend such provision, and, in each case, such amendment shall become effective without
any further action or consent of any other party to any Loan Document if the same is not objected to in
writing by the Required Lenders to the Administrative Agent within ten (10) Business Days following
receipt of notice thereof and (ii) that any Security Document may be amended, supplemented or otherwise
modified with the consent of the applicable Grantor (as defined in the Pledge and Security Agreement)
and the Administrative Agent to add assets (or categories of assets) to the Collateral covered by such
Security Document, as contemplated by the definition of Additional Collateral, or to remove any assets or
categories of assets (including after-acquired assets of that category) from the Collateral covered by such
Security Document to the extent the release thereof is permitted by Section 6.17(b)(iii).
SECTION 11.03 Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Initial Lender, the Administrative Agent, the Collateral Agent and their
Affiliates (including the reasonable fees, charges and disbursements of any counsel for the Initial Lender,
the Administrative Agent or the Collateral Agent), and shall pay all fees and time charges and
disbursements for attorneys who may be employees of the Administrative Agent or the Collateral Agent,
in connection with the preparation, negotiation, execution, delivery and administration of this Agreement,
the Loan Documents, any other agreements or documents executed in connection herewith or therewith or
any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses
incurred by the Administrative Agent, the Collateral Agent or any Lender (including the fees, charges and
disbursements of any counsel for the Administrative Agent, the Collateral Agent or any Lender), and shall
pay all fees and time charges for attorneys who may be employees of the Administrative Agent, the
Collateral Agent or any Lender, in connection with the enforcement or protection of its rights (A) in
connection with this Agreement and the Loan Documents, any other agreements or documents executed
in connection herewith or therewith, or any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated)
including its rights under this Section, or (B) in connection with the Loans made hereunder, including all
such out-of-pocket expenses incurred during any workout, restructuring, negotiations or enforcement in
respect of this Agreement, the Loan Documents and other agreements or documents executed in
connection herewith or therewith.
(b) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent and Collateral Agent (and any sub-agents thereof) and each Lender, and each
Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against,
and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, obligations,
penalties, fines, settlements, judgments, disbursements and related costs and related expenses (including
the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold
harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be
employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any
Person (including the Parent) arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or
thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or the
use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Parent or any of its Subsidiaries, or any
Environmental Liability related in any way to the Parent or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based
on contract, tort or any other theory, whether brought by a third party or by the Parent, and regardless of
whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee
other than the Initial Lender, be available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment
to have resulted from the gross negligence or willful misconduct of such Indemnitee. This paragraph (b)
shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc.
arising from any non-Tax claim.
(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails
to indefeasibly pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the
Administrative Agent or Collateral Agent (or any sub-agents thereof) or any Related Party of any of the
foregoing, each Lender (other than the Initial Lender) severally agrees to pay to the Administrative Agent
or Collateral Agent (or any such sub-agents) or such Related Party, as the case may be, such Lender’s pro
rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is
sought based on each Lender’s Applicable Percentage at such time) of such unpaid amount (including any
such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred
by or asserted against the Administrative Agent or Collateral Agent (or any such sub-agents), or against
any Related Party of any of the foregoing acting for the Administrative Agent or Collateral Agent (or any
such sub-agents) in connection with such capacity. The obligations of the Lenders under this
paragraph (c) are subject to the provisions of Section 2.12(e).
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
Applicable Law, no Credit Party shall assert, and each hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or
thereby, any Loan, or the use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above
shall be liable for any damages arising from the use by unintended recipients of any information or other
materials distributed by it through telecommunications, electronic or other information transmission
systems in connection with this Agreement or the other Loan Documents or the transactions contemplated
hereby or thereby.
(e) Payments. All amounts due under this Section shall be payable not later than
five (5) days after demand therefor; provided that the terms of this Section shall not apply to the Initial
Lender.
(f) Survival. Each party’s obligations under this Section shall survive the
termination of the Loan Documents and payment of the obligations hereunder and the resignation or
removal of the Administrative Agent or the Collateral Agent.
SECTION 11.04 Successors and Assigns.
(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and
any other attempted assignment or transfer by any party hereto shall be null and void), and no Lender may
assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in
accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance
with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of paragraph (e) of this Section. Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this
Section and, to the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Assignments by Lenders. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of the Loans at the time owing to it); provided that any such assignment by any Lender (other than
the Initial Lender) shall be subject to the following conditions:
(i) Minimum Amounts.
(A) in the case of an assignment of the entire remaining amount of
the assigning Lender’s Loans at the time owing to it or contemporaneous assignments to
and/or by related Approved Funds (determined after giving effect to such assignments)
that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the
aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund, no minimum amount need be assigned; and
(B) in any case not described in paragraph (b)(i)(A) of this Section,
the principal outstanding balance of the Loans of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent or, if “Trade Date” is
specified in the Assignment and Assumption, as of the Trade Date) shall not be less than
$5,000,000, unless each of the Administrative Agent and, so long as no Default or Event
of Default has occurred and is continuing, the Borrower otherwise consents (each such
consent not to be unreasonably withheld or delayed).
(ii) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and obligations under this
Agreement with respect to the Loans assigned.
(iii) Required Consents. No consent shall be required for any assignment by
the Initial Lender. The consent of the Borrower (such consent not to be unreasonably withheld,
delayed or conditioned) shall be required for any assignment by any Lender other than the Initial
Lender unless (x) a Default or Event of Default has occurred and is continuing at the time of such
assignment, or (y) such assignment is to a Lender or an Affiliate of a Lender; provided that the
Borrower shall be deemed to have consented to any such assignment unless it shall object thereto
by written notice to the Administrative Agent within five (5) Business Days after having received
notice thereof.
(iv) Assignment and Assumption. The parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole
discretion, elect to waive such processing and recordation fee in the case of any assignment. The
assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.
(v) No Assignment to Certain Persons. No such assignment shall be made
to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.
(vi) No Assignment to Natural Persons. No such assignment shall be made
to a natural person (or a holding company, investment vehicle or trust for, or owned and operated
for the primary benefit of, a natural person).
Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this
Section, from and after the effective date specified in each Assignment and Assumption, the assignee
thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment
and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 11.03
with respect to facts and circumstances occurring prior to the effective date of such assignment. Any
assignment or transfer by a Lender other than the Initial Lender of rights or obligations under this
Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of
this Section.
(c) Register. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to
it and a register for the recordation of the names and addresses of the Lenders, and the principal amounts
(and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time
(the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower,
the Administrative Agent, the Collateral Agent and the Lenders shall treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(d) Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Administrative Agent, sell participations to any Person (other than a Competitor, a
natural person, or a holding company, investment vehicle or trust for, or owned and operated for the
primary benefit of, a natural person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries)
(each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of the Loans owing to it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the
Collateral Agent and Lenders shall continue to deal solely and directly with such Lender in connection
with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender
shall be responsible for the indemnity under Section 11.03(b) with respect to any payments made by such
Lender to its Participant(s).
Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in Section 11.02(b)(i) through (v) that affects such
Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14,
2.15 and 2.16 (subject to the requirements and limitations therein, including the requirements under
Section 2.16(g) (it being understood that the documentation required under Section 2.16(g) shall be
delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees
to be subject to the provisions of Section 2.19 as if it were an assignee under paragraph (b) of this
Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.16, with
respect to any participation, than its participating Lender would have been entitled to receive, except to
the extent such entitlement to receive a greater payment results from a Change in Law that occurs after
the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the
Borrower's request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the
provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender; provided that
such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a
register on which it enters the name and address of each Participant and the principal amounts (and stated
interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the
“Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of
the Participant Register (including the identity of any Participant or any information relating to a
Participant's interest in any loans or its other obligations under any Loan Document) to any Person except
to the extent that such disclosure is necessary to establish that such loan or other obligation is in registered
form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant
Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is
recorded in the Participant Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its
capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(e) Certain Pledges. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee
or assignee for such Lender as a party hereto.
SECTION 11.05 Survival. All covenants, agreements, representations and warranties
made by any Credit Party herein and in any Loan Document or other documents delivered in connection
herewith or therewith or pursuant hereto or thereto shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery hereof and thereof and the making of the
Borrowings hereunder, regardless of any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent, the Collateral Agent or any Lender may have had notice or
knowledge of any Default at the time of any Borrowing, and shall continue in full force and effect as long
as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied and so long as the
Commitments have not expired or been terminated. The provisions of Sections 2.14, 2.15, 11.03, 11.15 and
Article VIII shall survive and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the payment in full of the Obligations, the expiration or termination of
the Commitments or the termination of this Agreement or any provision hereof.
SECTION 11.06 Counterparts; Integration; Effectiveness; Electronic Execution.
(a) Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single contract. This Agreement and the
other Loan Documents, constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it
shall have been executed by the Administrative Agent and when the Administrative Agent shall have
received counterparts hereof that, when taken together, bear the signatures of each of the other parties
hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in
electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of
this Agreement.
(b) Electronic Execution. The words “execution,” “signed,” “signature,” and words
of like import in this Agreement and in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law,
including the Federal Electronic Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act. Notwithstanding anything herein to the contrary, delivery of an executed counterpart of
a signature page of this Agreement by telecopy or other electronic means, or confirmation of the
execution of this Agreement on behalf of a party by an email from an authorized signatory of such party
shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 11.07 Severability. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or
unenforceable provisions with valid provisions the economic effect of which comes as close as possible to
that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender, and each of their respective Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final, in whatever currency) at any time held, and other
obligations (in whatever currency) at any time owing, by such Lender or any such Affiliate, to or for the
credit or the account of the Borrower against any and all of the due and unpaid Obligations of the Borrower
now or hereafter existing under this Agreement or any other Loan Document to such Lender or its
respective Affiliates, irrespective of whether or not such Lender or Affiliate shall have made any demand
under this Agreement or any other Loan Document and although such obligations of the Borrower may be
contingent or unmatured or are owed to a branch office or Affiliate of such Lender different from the
branch office or Affiliate holding such deposit or obligated on such indebtedness. The rights of each
Lender and their respective Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Lender or its respective Affiliates may have. Each Lender (other
than the Initial Lender) agrees to notify the Borrower and the Administrative Agent promptly after any such
setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff
and application.
SECTION 11.09 Governing Law; Jurisdiction; Etc.
(a) Governing Law. This Agreement and the other Loan Documents will be
governed by and construed in accordance with the federal law of the United States if and to the extent
such law is applicable, and otherwise in accordance with the law of the State of New York applicable to
contracts made and to be performed entirely within such State.
(b) Jurisdiction and Venue. Each of the Credit Parties and each Lender agrees (a) to
submit to the exclusive jurisdiction and venue of the United States District Court for the District of
Columbia for any civil action, suit or proceeding arising out of or relating to this Agreement, the Loan
Documents, or the transactions contemplated hereby or thereby.
(c) Service of Process. Each party hereto irrevocably consents to service of process
in the manner provided for notices in Section 11.01. Nothing in this Agreement will affect the right of
any party hereto to serve process in any other manner permitted by Applicable Law.
SECTION 11.10 Waiver of Jury Trial. To the extent permitted by Applicable Law, each
Credit Party and each Lender hereby unconditionally waives trial by jury in any civil legal action or
proceeding relating to this Agreement, the Loan Documents or the transactions contemplated hereby or
thereby.
SECTION 11.11 Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this Agreement.
SECTION 11.12 Treatment of Certain Information; Confidentiality. Each of the Agents
and the Lenders (other than the Initial Lender) agree to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it
being understood that the Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information confidential); (b) to the extent required
or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related
Parties (including any self-regulatory authority, such as the National Association of Insurance
Commissioners); (c) to the extent required by Applicable Laws or by any subpoena or similar legal process;
(d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any
other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document
or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions
substantially the same as (or no less restrictive than) those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this
Agreement, or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other
transaction under which payments are to be made by reference to the Borrower and its obligations, this
Agreement or payments hereunder; provided that, in each case under this clause (f)(ii), such actual or
prospective party is not a Competitor; (g) on a confidential basis to (i) any rating agency in connection with
rating the Borrower or its Subsidiaries or the Loans or (ii) the CUSIP Service Bureau or any similar agency
in connection with the issuance and monitoring of CUSIP numbers with respect to the Loans; (h) with the
consent of the Borrower or (i) to the extent such Information (x) becomes publicly available other than as a
result of a breach of this Section, or (y) becomes available to either Agent, any Lender or any of their
respective Affiliates on a nonconfidential basis from a source other than the Borrower who did not acquire
such information as a result of a breach of this Section.
For purposes of this Section, “Information” means all information received from the
Parent or any of its Subsidiaries relating to the Parent or any of its Subsidiaries or any of their respective
businesses, other than any such information that is available to the Administrative Agent or any Lender
on a nonconfidential basis prior to disclosure by the Parent or any of its Subsidiaries; provided that, in the
case of information received from the Parent or any of its Subsidiaries after the date hereof, such
information is clearly identified at the time of delivery as confidential. Any Person required to maintain
the confidentiality of Information as provided in this Section shall be considered to have complied with
its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality
of such Information as such Person would accord to its own confidential information.
SECTION 11.13 Money Laundering; Sanctions. The Borrower shall provide to the
Administrative Agent, the Collateral Agent, and the Lenders information and documentation that the
Lenders may reasonably request that identifies the Borrower and its Affiliates, which information may
include the name and address of the Borrower and its Affiliates and other information regarding beneficial
ownership of the Borrower and its Affiliates that will allow the Lenders to ensure compliance with
Sanctions and the AML Laws. For purposes of determining whether or not a representation with respect to
any indirect ownership is true or a covenant is being complied with under this Section 11.13, the Borrower
shall not be required to make any investigation into (i) the ownership of publicly traded stock or other
publicly traded securities or (ii) the ownership of assets by a collective investment fund that holds assets for
employee benefit plans or retirement arrangements.
SECTION 11.14 Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other
amounts that are treated as interest on such Loan under Applicable Law (collectively, “charges”), shall
exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with Applicable Law, the rate of
interest payable in respect of such Loan hereunder, together with all charges payable in respect thereof,
shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that would have been
paid in respect of such Loan but were not paid as a result of the operation of this Section shall be cumulated
and the interest and charges payable to such Lender in respect of other Loans or periods shall be increased
(but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate for each day to the date of repayment, shall have
been received by such Lender. Any amount collected by such Lender that exceeds the maximum amount
collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan or
refunded to the Borrower so that at no time shall the interest and charges paid or payable in respect of such
Loan exceed the maximum amount collectible at the Maximum Rate.
SECTION 11.15 Payments Set Aside. To the extent that any payment by or on behalf of
the Borrower is made to the Administrative Agent or any Lender, or any Lender exercises its right of setoff,
and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to
be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the
Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party,
in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each
Lender (other than the Initial Lender) severally agrees to pay to the Administrative Agent upon demand its
applicable share (without duplication) of any amount so recovered from or repaid by the Administrative
Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per
annum equal to the Federal Funds Effective Rate from time to time in effect.
SECTION 11.16 No Advisory or Fiduciary Responsibility. In connection with all aspects
of each transaction contemplated hereby (including in connection with any amendment, waiver or other
modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, and
acknowledges its Affiliates’ understanding, that: (a) (i) no fiduciary, advisory or agency relationship
between any Credit Party and any of their respective Subsidiaries and the Administrative Agent, the
Collateral Agent or any Lender is intended to be or has been created in respect of the transactions
contemplated hereby or by the other Loan Documents, irrespective of whether the Administrative Agent,
the Collateral Agent or any Lender has advised or is advising any Credit Party or any of their respective
Subsidiaries on other matters, (ii) the lending and other services regarding this Agreement provided by the
Administrative Agent, the Collateral Agent and the Lenders are arm’s-length commercial transactions
between Credit Parties and their Affiliates, on the one hand, and the Administrative Agent, the Collateral
Agent and the Lenders, on the other hand, (iii) the Credit Parties have consulted their own legal, accounting,
regulatory and tax advisors to the extent that they has deemed appropriate and (iv) the Credit Parties are
capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents; and (b) (i) the Administrative Agent, the Collateral
Agent and the Lenders each is and has been acting solely as a principal and, except as expressly agreed in
writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary
for the Credit Parties or any of their respective Affiliates, or any other Person; (ii) none of the
Administrative Agent, the Collateral Agent and the Lenders has any obligation to the Credit Parties or any
of their respective Affiliates with respect to the transactions contemplated hereby except those obligations
expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, the
Collateral Agent and the Lenders and their respective Affiliates may be engaged, in a broad range of
transactions that involve interests that differ from those of the Credit Parties and their respective Affiliates,
and none of the Administrative Agent, the Collateral Agent and the Lenders has any obligation to disclose
any of such interests to the Credit Parties or any of their respective Affiliates. To the fullest extent
permitted by Law, the Credit Parties hereby waive and release any claims that they may have against any of
the Administrative Agent, the Collateral Agent and the Lenders with respect to any breach or alleged breach
of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
SECTION 11.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions.
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or
understanding among the parties, each party hereto (including each Credit Party) acknowledges that any
liability arising under a Loan Document of any Credit Party that is an Affected Financial Institution, to the
extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable
Resolution Authority, and agrees and consents to, and acknowledges and agrees to be bound by: (a) the
application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such
liabilities arising under any Loan Documents which may be payable to it by any Credit Party that is an
Affected Financial Institution; and (b) the effects of any Bail-In Action on any such liability, including (i) a
reduction in full or in part or cancellation of any such liability, (ii) a conversion of all, or a portion of, such
liability into shares or other instruments of ownership in such Affected Financial Institution, its parent
undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares
or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such
liability under any Loan Document, or (iii) the variation of the terms of such liability in connection with the
exercise of the write-down and conversion powers of the applicable Resolution Authority.
[Signature pages follow]
THE BANK OF NEW YORK MELLON,
as Administrative Agent
By_________________________
Name: Bret S. Derman
Title: Vice President
THE BANK OF NEW YORK MELLON,
as Collateral Agent
By_________________________
Name: Bret S. Derman
Title: Vice President
[Signature Page to Loan and Guarantee Agreement – SkyWest]
SCHEDULE 3.05
Financial Statements
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-14719
SKYWEST, INC.
Incorporated under the laws of Utah 87-0292166
(I.R.S. Employer ID No.)
444 South River Road
St. George, Utah 84790
(435) 634-3000
(Address of principal executive offices and telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on which Registered
Common Stock, No Par Value SKYW The Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest
practicable date.
Class Outstanding at July 31, 2020
Common stock, no par value 50,181,350
SKYWEST, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets 3
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Stockholders Equity 6
Condensed Consolidated Statements of Cash Flows 8
Notes to Condensed Consolidated Financial Statements 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 41
Item 4. Controls and Procedures 41
PART II OTHER INFORMATION
Item 1. Legal Proceedings 41
Item 1A. Risk Factors 42
Item 6. Exhibits 45
Signature 46
Exhibit 31.1 Certification of Chief Executive Officer
Exhibit 31.2 Certification of Chief Financial Officer
Exhibit 32.1 Certification of Chief Executive Officer
Exhibit 32.2 Certification of Chief Financial Officer
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
June 30, December 31,
2020 2019
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 452,247 $ 87,206
Marketable securities 309,823 432,966
Income tax receivable 18,915 11,141
Receivables, net 42,498 82,977
Inventories, net 97,782 110,503
Other current assets 24,584 35,553
Total current assets 945,849 760,346
PROPERTY AND EQUIPMENT:
Aircraft and rotable spares 7,273,577 7,078,801
Deposits on aircraft 40,263 48,858
Buildings and ground equipment 246,131 265,398
7,559,971 7,393,057
Less-accumulated depreciation and amortization (2,233,275) (1,998,376)
Total property and equipment, net 5,326,696 5,394,681
OTHER ASSETS:
Operating lease right-of-use assets 310,016 336,009
Other assets 190,822 166,093
Total other assets 500,838 502,102
Total assets $ 6,773,383 $ 6,657,129
See accompanying notes to condensed consolidated financial statements.
3
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
June 30, December 31,
2020 2019
(unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 309,159 $ 364,126
Accounts payable 322,460 284,473
Accrued salaries, wages and benefits 108,929 133,856
Current maturities of operating lease liabilities 87,415 94,806
Taxes other than income taxes 20,221 15,004
Other current liabilities 138,003 32,411
Total current liabilities 986,187 924,676
LONG-TERM DEBT, net of current maturities 2,664,122 2,628,989
DEFERRED INCOME TAXES PAYABLE 625,504 623,580
NONCURRENT OPERATING LEASE LIABILITIES 238,572 259,237
OTHER LONG-TERM LIABILITIES 116,036 45,633
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS’ EQUITY:
Preferred stock, 5,000,000 shares authorized; none issued — —
Common stock, no par value, 120,000,000 shares authorized; 82,053,807 and
81,742,937 shares issued, as of June 30, 2020 and December 31, 2019,
respectively 694,997 686,806
Retained earnings 2,064,794 2,079,179
Treasury stock, at cost, 31,913,635 and 31,420,179 shares issued, as of June 30,
2020 and December 31, 2019, respectively (617,136) (590,971)
Unrealized appreciation on securities 307 —
Total stockholders’ equity 2,142,962 2,175,014
Total liabilities and stockholders’ equity $ 6,773,383 $ 6,657,129
See accompanying notes to condensed consolidated financial statements.
4
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars and Shares in Thousands, Except per Share Amounts)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2020 2019 2020 2019
OPERATING REVENUES:
Flying agreements $ 336,370 $ 725,335 $ 1,045,864 $ 1,425,336
Lease, airport services and other 13,669 19,048 34,111 42,741
Total operating revenues 350,039 744,383 1,079,975 1,468,077
OPERATING EXPENSES:
Salaries, wages and benefits 170,218 243,766 419,379 501,354
Aircraft maintenance, materials and repairs 121,289 124,789 281,505 243,051
Depreciation and amortization 131,638 90,148 243,346 180,134
Airport-related expenses 21,550 30,782 52,190 61,429
Aircraft fuel 6,821 30,851 32,234 56,507
Aircraft rentals 16,697 18,006 33,752 38,164
CARES Act payroll support grant (151,938) — (151,938) —
Special items — — — 21,869
Other operating expenses 38,167 61,948 107,589 125,057
Total operating expenses 354,442 600,290 1,018,057 1,227,565
OPERATING INCOME (LOSS) (4,403) 144,093 61,918 240,512
OTHER INCOME (EXPENSE):
Interest income 1,685 3,731 4,249 7,538
Interest expense (30,926) (32,770) (61,130) (65,278)
Other income (expense), net 402 281 800 47,006
Total other income (expense), net (28,839) (28,758) (56,081) (10,734)
INCOME (LOSS) BEFORE INCOME TAXES (33,242) 115,335 5,837 229,778
PROVISION (BENEFIT) FOR INCOME TAXES (7,527) 27,283 1,564 53,545
NET INCOME (LOSS) $ (25,715) $ 88,052 $ 4,273 $ 176,233
BASIC EARNINGS (LOSS) PER SHARE $ (0.51) $ 1.72 $ 0.09 $ 3.44
DILUTED EARNINGS (LOSS) PER SHARE $ (0.51) $ 1.71 $ 0.08 $ 3.40
Weighted average common shares:
Basic 50,140 51,145 50,208 51,293
Diluted 50,140 51,477 50,357 51,787
COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ (25,715) $ 88,052 $ 4,273 $ 176,233
Net unrealized depreciation on debt securities, net of taxes 307 — 307 32
TOTAL COMPREHENSIVE INCOME (LOSS) $ (25,408) $ 88,052 $ 4,580 $ 176,265
See accompanying notes to condensed consolidated financial statements
5
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(UNAUDITED)
(In Thousands)
Accumulated
Other
Common Stock Retained Treasury Stock Comprehensive
Shares Amount Earnings Shares Amount Income Total
Balance at December 31, 2019 81,743 $ 686,806 $ 2,079,179 (31,420) $ (590,971) $ — $ 2,175,014
Change in accounting principle and other
(see Note 1) — (11,639) — — — (11,639)
Balance at December 31, 2019, as adjusted 81,743 686,806 2,067,540 (31,420) (590,971) — 2,163,375
Net income — — 29,988 — — — 29,988
Exercise of common stock options and stock
issued under equity award plan 287 38 — — — — 38
Sale of common stock under employee stock
purchase plan 24 1,494 — — — — 1,494
Stock-based compensation expense
associated with equity awards, net of
forfeitures — 1,727 — — — — 1,727
Treasury shares acquired from vested
employee stock awards for income tax
withholdings — — — (108) (6,165) — (6,165)
Treasury stock purchases — — — (386) (20,000) — (20,000)
Cash dividends declared ($0.14 per share) — — (7,019) — — — (7,019)
Balance at March 31, 2020 82,054 $ 690,065 $ 2,090,509 (31,914) $ (617,136) $ — $ 2,163,438
Net loss — — (25,715) — — — (25,715)
Net unrealized appreciation on marketable
securities, net of tax of $99 — — — — — 307 307
Stock-based compensation expense
associated with equity awards, net of
forfeitures — 2,087 — — — — 2,087
CARES Act warrant issuance — 2,845 — — — — 2,845
Balance at June 30, 2020 82,054 $ 694,997 $ 2,064,794 (31,914) $ (617,136) $ 307 $ 2,142,962
See accompanying notes to condensed consolidated financial statements.
6
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(UNAUDITED)
(In Thousands)
Accumulated
Other
Common Stock Retained Treasury Stock Comprehensive
Shares Amount Earnings Shares Amount Income (Loss) Total
Balance at December 31, 2018 81,239 $ 690,910 $ 1,776,585 (29,851) $ (503,182) $ (32) $ 1,964,281
Change in accounting principle and other
(see Note 7) — (13,141) — — — (13,141)
Balance at December 31, 2018, as adjusted 81,239 690,910 1,763,444 (29,851) (503,182) (32) 1,951,140
Net income — — 88,181 — — — 88,181
Net unrealized appreciation on marketable
securities, net of tax of $10 — — — — — 32 32
Exercise of common stock options and stock
issued under equity award plan 521 641 — — — — 641
Sale of common stock under employee stock
purchase plan 39 1,620 — — — — 1,620
Stock-based compensation expense
(forfeiture credit) associated with equity
awards, net — (578) — — — — (578)
Treasury shares acquired from vested
employee stock awards for income tax
withholdings — — — (173) (9,311) — (9,311)
Treasury stock purchases — — — (476) (25,000) — (25,000)
Cash dividends declared ($0.12 per share) — — (6,158) — — — (6,158)
Balance at March 31, 2019 81,799 $ 692,593 $ 1,845,467 (30,500) $ (537,493) $ — $ 2,000,567
Net income — — 88,052 — — — 88,052
Exercise of common stock options and stock
issued under equity award plan 172 2,279 — — — — 2,279
Stock-based compensation expense
associated with equity awards, net of
forfeitures — 2,075 — — — — 2,075
Treasury stock purchases — — — (311) (18,476) — (18,476)
Common stock purchased and cancelled (268) (16,145) — — — — (16,145)
Cash dividends declared ($0.12 per share) — — (6,107) — — — (6,107)
Balance at June 30, 2019 81,703 $ 680,802 $ 1,927,412 (30,811) $ (555,969) $ — $ 2,052,245
See accompanying notes to condensed consolidated financial statements.
7
SKYWEST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
Six months ended
June 30,
2020 2019
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 492,283 $ 362,123
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (475,156) (896,326)
Sales of marketable securities 598,606 961,403
Proceeds from the sale of aircraft, property and equipment 1,366 21,065
Acquisition of property and equipment:
Aircraft and rotable spare parts (161,167) (325,969)
Buildings and ground equipment (8,695) (55,865)
Deposits on aircraft (625) (31,817)
Aircraft deposits applied towards acquired aircraft 9,220 23,298
Net cash received from sale of ExpressJet subsidiary — 53,200
Decrease (increase) in other assets (34,172) 1,962
NET CASH USED IN INVESTING ACTIVITIES (70,623) (249,049)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 98,059 99,914
Principal payments on long-term debt (115,189) (211,200)
Net proceeds from issuance of common stock 1,532 4,540
Purchase of treasury and common stock and employee income tax paid on equity awards (26,165) (68,932)
Increase in debt issuance and lessor initial direct costs (1,797) (820)
Payment of cash dividends (13,059) (11,299)
NET CASH PROVIDED USED IN FINANCING ACTIVITIES (56,619) (187,797)
Increase (decrease) in cash and cash equivalents 365,041 (74,723)
Cash and cash equivalents at beginning of period 87,206 328,384
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 452,247 $ 253,661
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing activities:
Acquisition of rotable spare parts $ 13,522 $ 3,244
Debt assumed on aircraft acquired under operating leases $ — $ 14,475
Engines contributed to joint venture $ — $ 22,313
Non-cash assets used to acquire aircraft under operating leases $ — $ 150,688
Lease liability arising from the recognition of right-of-use asset $ — $ 456,472
CARES Act warrant issuance $ 2,845 $ —
Cash paid during the period for:
Interest, net of capitalized amounts $ 41,881 $ 67,778
Income taxes $ 303 $ 1,713
SUPPLEMENTAL DISCLOSURE OF SALE OF SUBSIDIARY:
Decrease in carrying amount of assets $ — $ (101,448)
Decrease in carrying amount of liabilities — 68,341
Cash received from buyers — 79,632
Gain on sale of subsidiary $ — $ 46,525
See accompanying notes to condensed consolidated financial statements.
8
SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Condensed Consolidated Financial Statements
Basis of Presentation
The condensed consolidated financial statements of SkyWest, Inc. (“SkyWest” or the “Company”) and its
operating subsidiary SkyWest Airlines, Inc. (“SkyWest Airlines”) and its leasing subsidiary SkyWest Leasing, Inc.
(“SkyWest Leasing”) included herein have been prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the “SEC”). On January 22, 2019, the Company completed the sale of its former
wholly owned subsidiary, ExpressJet Airlines, Inc. (“ExpressJet”). The Company’s financial and operating results
presented in this Report include the financial results of ExpressJet for the period of time ExpressJet was operating as a
subsidiary of the Company. Certain information and disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been
condensed or omitted pursuant to such rules and regulations, although the Company believes that the following
disclosures are adequate to make the information presented not misleading. These condensed consolidated financial
statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of
operations for the interim periods presented. All adjustments are of a normal recurring nature, unless otherwise
disclosed. These condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019. Due in part to the severe affects from the global COVID-19 (coronavirus) pandemic, in addition to
other factors, the results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2020.
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results will likely differ, and may differ materially, from those estimates and assumptions.
Recent Accounting Pronouncements
Recently Adopted Standards
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update
(“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Instruments” (“Topic 326”), which requires measurement and recognition of expected credit losses for financial assets
held and requires enhanced disclosure regarding significant estimates and judgments used in estimating credit losses.
Topic 326 is effective for the Company beginning January 1, 2020. The Company adopted Topic 326 on January 1,
2020. The Company’s primary financial assets as of December 31, 2019 included trade receivables from its flying
agreements, a note receivable from the sale of ExpressJet, and receivables from aircraft manufacturers and other third
parties in the airline industry. The Company recorded a credit loss of $11.6 million net of income tax in conjunction with
the adoption of Topic 326. The Company recorded this credit loss as a January 1, 2020 beginning balance sheet entry to
retained earnings (net of income tax). Due to the COVID-19 pandemic, the Company recorded additional reserves
against certain of the Company’s outstanding financial instruments during the six months ended June 30, 2020. See Note
3, “Flying Agreements Revenue and Lease, Airport Services and Other Revenues,” for more information.
Note 2 — Impact of the COVID-19 Pandemic
COVID-19, which was declared a global health pandemic by the World Health Organization in March 2020,
has surfaced in nearly all regions of the world and driven the implementation of significant, government-imposed
measures to prevent or reduce its spread, including travel restrictions, closing of borders, “shelter in place” orders and
business closures. Consequently, the Company and its major airline partners (as defined in Note 3 below), have
9
experienced an unprecedented decline in the demand for air travel, which has materially and adversely affected the
Company’s revenues, particularly under its prorate agreements (as defined in Note 3 below). The spread of the virus and
the resulting global pandemic has affected the majority of the domestic and international networks of the Company’s
major airline partners for whom it conducts flight operations and relies on to set its flight schedules. While the length and
severity of the reduction in demand due to COVID-19 are uncertain, the Company presently expects a continued
significant negative impact on its results of operations for the remainder of 2020 and into 2021.
In response to these developments, the Company has implemented measures to focus on the personal safety of
its passengers and employees, while at the same time seeking to mitigate the impact on the Company’s financial position
and operations. These measures include, but are not limited to, the following:
Focus on the Personal Safety of Passengers and Employees. The safety and well-being of the Company’s
passengers and employees are the Company’s priorities in every decision it makes. As the COVID-19 pandemic has
developed, the Company has taken numerous steps to help passengers and employees take appropriate safety measures
on the ground and in the air in keeping with current Centers for Disease Control and Prevention recommendations,
including:
• Working with the Company’s major airline partners to enhance its aircraft cleaning procedures.
• Working with the Company’s major airline partners to provide masks for crewmembers and ensuring that all
fleet service personnel have the necessary personal protective equipment for disinfecting the aircraft.
• Providing a number of options to employees who are diagnosed with COVID-19, including pay protection and
extended leave options.
• Implementing workforce social distancing and protection measures, enhanced cleaning of the Company’s
facilities, including training facilities, using methods and products similar to what the Company is using on its
aircraft.
Capacity Reductions. Beginning in March 2020, the Company and its major airline partners experienced an
unprecedented decrease in demand for air travel and expect this decline from 2019 levels to continue throughout 2020.
The Company depends on its major airline partners to contract with the Company to schedule flights. Therefore, in
response to this decreased demand, the Company has significantly reduced its capacity. Prior to the COVID-19
pandemic, the Company anticipated operating approximately 2,500 to 2,600 daily departures in the month of July 2020.
However, in July 2020 it typically operated between approximately 1,200 to 1,400 daily departures as a result of
COVID-19-related schedule reductions. The Company also anticipates similar schedule reductions will likely continue
throughout the remainder of 2020 and into 2021. The number of daily flights operated by the Company may not return to
pre-COVID-19 levels for the foreseeable future. The Company will continue to work with its major airline partners
regarding future schedules and make further demand-driven adjustments to its capacity as needed. The Company
anticipates certain aircraft with scheduled contract expirations in 2020 will not be extended as a result of decreased
demand including 36 Canadair CRJ200 regional aircraft (“CRJ200”) operating under the SkyWest Airlines Delta
Connection Agreement as of June 30, 2020. The Company additionally terminated its American Prorate Agreement on
seven CRJ200 aircraft in the second quarter of 2020 and the Company may have further reductions in the number of
CRJ200 aircraft operating under its other prorate agreements. The Company may receive requests by its major airline
partners to defer deliveries of new or used aircraft that were previously scheduled for 2020, 2021 and 2022.
Cost Reductions. With the reduction in revenue, the Company has, and will continue to implement, cost saving
initiatives, including:
• Reducing employee-related costs including by:
o Offering voluntary unpaid leave to employees.
o Suspending all non-scale pay increases.
o Instituting a company-wide hiring freeze.
• Delaying non-essential maintenance projects and reducing or suspending other discretionary spending.
Liquidity. At June 30, 2020, the Company had $828.3 million in total available liquidity, consisting of $762.1
million in cash and marketable securities and $66.2 million available under SkyWest Airlines’ line of credit.
10
CARES Act. On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security
Act (“CARES Act”) into law. The CARES Act is a relief package intended to assist many aspects of the U.S. economy,
including providing the airline industry with up to $25 billion in grants to be used for employee wages, salaries and
benefits.
In April 2020, SkyWest Airlines entered into an agreement with the U.S. Department of the Treasury
(“Treasury”) to receive $438.0 million in emergency relief through the CARES Act payroll support program to be paid
in installments from April to July 2020. The relief payments are conditioned on the Company’s agreement to, among
other things, refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other
conditions include bans on share repurchases and dividends through September 30, 2021, continuing essential air service
as directed by the U.S. Department of Transportation and certain limitations on executive compensation. The relief
payments include $336.6 million in a grant and $101.4 million in an unsecured 10-year low interest loan. The loan bears
interest at an annual rate of 1.00% for the first five years (through April 2025) and the Secured Overnight Financing Rate
("SOFR") plus 2.00% in the final five years. In return, we agreed to issue to Treasury warrants to purchase 357,317
shares of the Company’s common stock. These warrants have an exercise price of $28.38 per share and a five-year term
from the date of issuance.
The relative fair value of the warrants is recorded within stockholder's equity and as a discount reducing the
carrying value of the loan, which will be amortized as interest expense in the Company’s income statement over the term
of the loan. The proceeds of the grant are recorded in cash and cash equivalents when received and will be recognized as
a reduction in expense in CARES Act payroll support grant in our income statement over the periods that the funds are
intended to compensate.
In the three months ended June 30, 2020, the Company received $306.6 million under the CARES Act payroll
support program, which consisted of $244.6 million in a grant and $62.0 million in an unsecured loan. The remaining
amount was received in July 2020. As of June 30, 2020, the Company recognized $151.9 million of the grant as a
reduction in expense with the remaining $92.7 million recorded as a deferred reduction in expense in other current
liabilities on our balance sheet. We expect to recognize the remainder of the grant proceeds from the CARES Act payroll
support program as a reduction in expense by the end of 2020. See Note 9, "Long-Term Debt," for further discussion of
the unsecured loans and warrants to acquire the Company’s shares issued under the CARES Act payroll support
program.
The CARES Act also provides for up to $25 billion in secured loans to the airline industry. The Company has entered
into a non-binding letter of intent with Treasury for approximately $497.0 million under the secured loan program. The
Company is evaluating the timing and level of its of participation, and the Company has until September 30, 2020 to
decide whether to participate in this program.
Note 3 — Flying Agreements Revenue and Lease, Airport Services and Other Revenues
The Company recognizes flying agreements revenue and lease, airport services and other revenues when the
service is provided under its code-share agreements. Under the Company’s fixed-fee arrangements (referred to as
“capacity purchase agreements”) with Delta Air Lines, Inc. (“Delta”), United Airlines, Inc. (“United”), American
Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major airline partner”), the major airline
partner generally pays the Company a fixed-fee for each departure, flight hour (measured from takeoff to landing,
excluding taxi time) or block hour (measured from takeoff to landing, including taxi time) incurred, and an amount per
aircraft in service each month with additional incentives based on flight completion and on-time performance. The major
airline partner also directly pays for or reimburses the Company for certain direct expenses incurred under the capacity
purchase agreement, such as fuel, airport landing fees and airport rents. Under the capacity purchase agreements, the
Company’s performance obligation is met when each flight is completed and is reflected in flying agreements revenue.
The transaction price for the capacity purchase agreements is determined from the fixed-fee consideration, incentive
consideration and directly reimbursed expenses earned as flights are completed over the agreement term. For the six
months ended June 30, 2020, capacity purchase agreements represented approximately 86.9% of the Company’s flying
agreements revenue.
11
Under the Company’s revenue-sharing arrangements (referred to as a “revenue-sharing” or “prorate”
arrangement), the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which
the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a
Company airline and the other portion of their trip on the major airline partner. Under the Company’s prorate flying
agreements, the performance obligation is met and revenue is recognized when each flight is completed based upon the
portion of the prorate passenger fare the Company anticipates that it will receive for each completed flight. The
transaction price for the prorate agreements is determined from the proration formula derived from each passenger ticket
amount on each completed flight over the agreement term. For the six months ended June 30, 2020, prorate flying
arrangements represented approximately 13.1% of the Company’s flying agreements revenue.
Lease, airport services and other revenues primarily consist of revenue generated from aircraft and spare
engines leased to third parties. Of the Company’s $5.3 billion of property and equipment, net as of June 30, 2020, $132.5
million of regional jet aircraft and spare engines was leased to third parties under operating leases as of June 30, 2020.
The Company mitigates the residual asset risks of these assets by leasing aircraft and engine types that can be operated
by the Company in the event of a default. Additionally, the operating leases typically have specified lease return
condition requirements paid by the lessee to the Company and the Company typically maintains inspection rights under
the leases. The following table summarizes future minimum rental income under operating leases primarily related to
leased aircraft that had remaining non-cancelable lease terms as of June 30, 2020 (in thousands):
July 2020 through December 2020 $ 11,974
2021 22,508
2022 22,196
2023 21,643
2024 21,336
Thereafter 70,938
$ 170,595
Additionally, lease, airport services and other revenues includes airport agent services, such as gate and ramp
agent services at applicable airports where the Company provides such services. The transaction price for airport
customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of
flights handled by the Company over the agreement term. The following represents the Company’s lease, airport services
and other revenue for the three and six months ended June 30, 2020 and 2019 (in thousands):
For the three months ended June 30, For the six months ended June 30,
2020 2019 2020 2019
Operating lease revenue $ 9,485 $ 9,016 $ 20,026 $ 18,038
Airport customer service and other revenue 4,184 10,032 14,086 24,703
Lease, airport services and other $ 13,669 $ 19,048 $ 34,112 $ 42,741
Other ancillary revenues commonly associated with airlines, such as baggage fee revenue, ticket change fee
revenue and the marketing component of the sale of mileage credits, are retained by the Company’s major airline
partners on flights that the Company operates under its code-share agreements.
12
The following table represents the Company’s flying agreements revenue by type for the three and six month
periods ended June 30, 2020 and 2019 (in thousands):
For the three months ended June 30, For the six months ended June 30,
2020 2019 2020 2019
Capacity purchase agreements revenue: flight operations $ 132,061 $ 383,732 $ 498,469 $ 770,278
Capacity purchase agreements revenue: aircraft lease and
fixed revenue 168,103 206,678 410,838 414,059
Prorate agreements revenue 36,206 134,925 136,557 240,999
Flying agreements revenue $ 336,370 $ 725,335 $ 1,045,864 $ 1,425,336
A portion of the Company’s compensation under its capacity purchase agreements is designed to reimburse the
Company for certain aircraft ownership costs. The consideration for aircraft ownership costs varies by agreement but is
intended to cover either the Company’s aircraft principal and interest debt service costs, its aircraft depreciation and
interest expense or its aircraft lease expense costs while the aircraft is under contract. The consideration received for the
use of the aircraft under the Company’s capacity purchase agreements is reflected as lease revenue, inasmuch as the
agreements identify the “right of use” of a specific type and number of aircraft over a stated period of time. The lease
revenue associated with the Company’s capacity purchase agreements is accounted for as an operating lease and is
reflected as flying agreements revenue on the Company’s consolidated statements of comprehensive income. The
Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statement of
comprehensive income since the use of the aircraft is not a separate activity of the total service provided.
Under the Company’s capacity purchase agreements, the Company is paid a fixed amount per aircraft each
month over the contract term. The Company recognizes revenue related to the fixed amount per aircraft per month
proportionately to completed flights, which is the Company’s performance obligation. The Company operated a
materially lower number of flights during the three months ended June 30, 2020 from previous levels due to a reduction
in flight schedules resulting from the COVID-19 pandemic. The Company’s completed departures decreased 62% and
completed block hours decreased 66% during the three months ended June 30, 2020 compared to the three months ended
June 30, 2019. Due to the lower number of flights operated during the three months ended June 30, 2020, the amount of
cash collected for the fixed amount per aircraft exceeded the revenue recognized based on flights completed.
Accordingly, the Company deferred $69.1 million of revenue attributed to the fixed amount per month per aircraft
received during the three months ended June 30, 2020. The Company anticipates the future monthly flight levels will
increase over the remaining applicable contract terms compared to the three months ended June 30, 2020. The
Company’s deferred revenue balance will be recognized based on the Company’s completed flight levels each period
relative to the anticipated flight levels over the remaining contract term.
The Company’s capacity purchase and prorate agreements include weekly provisional cash payments from the
respective major airline partner based on a projected level of flying each month. The Company and each major airline
partner subsequently reconcile these payments to the actual completed flight activity on a monthly or quarterly basis. In
the event a flying agreement includes a mid-term rate reset to adjust rates prospectively and the contractual rates under
the Company’s flying agreements have not been finalized at quarterly or annual financial statement dates, the Company
applies the variable constraint guidance under ASU No. 2014-09, “Revenue from Contracts with Customers, (Topic
606)” (“Topic 606”), where the Company records revenue to the extent it believes that it is probable that a significant
reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable
consideration is subsequently resolved.
In several of the Company’s agreements, the Company is eligible to receive incentive compensation upon the
achievement of certain performance criteria. The incentives are defined in the agreements and are measured and
determined on a monthly or quarterly basis. At the end of each period during the term of an agreement, the Company
calculates the incentives achieved during that period and recognizes revenue attributable to that agreement accordingly,
subject to the variable constraint guidance under Topic 606.
The following table summarizes the significant provisions of each code-share agreement SkyWest Airlines has
with each major airline partner:
13
Delta Connection Agreements
Number of Term / Termination
Agreement Aircraft type Aircraft Dates
Delta Connection Agreement • CRJ 200 36 • Individual aircraft have scheduled
(capacity purchase agreement) • CRJ 700 6 removal dates from 2020 to 2029
• CRJ 900 43
• E175 67
Delta Connection Prorate Agreement • CRJ 200 21 • Terminable with 30-day notice
(prorate arrangement)
United Express Agreements
Number of Term / Termination
Agreement Aircraft type Aircraft Dates
United Express Agreements • CRJ 200 70 • Individual aircraft have scheduled
(capacity purchase agreement) • CRJ 700 19 removal dates from 2022 to 2029
• E175 90
United Express Prorate Agreement • CRJ 200 26 • Terminable with 120-day notice
(prorate arrangement)
American Agreements
Number of Term / Termination
Agreement Aircraft type Aircraft Dates
American Agreement • CRJ 700 61 • Individual aircraft have scheduled
(capacity purchase agreement) removal dates from 2022 to 2025
Alaska Capacity Purchase Agreement
Number of Term / Termination
Agreement Aircraft type Aircraft Dates
Alaska Agreement • E175 32 • Individual aircraft have scheduled
(capacity purchase agreement) removal dates from 2027 to 2030
In addition to the contractual arrangements described above, SkyWest Airlines has entered into capacity
purchase agreements with Delta and American to place additional new and used Embraer E175 dual-class regional jet
aircraft (“E175”) into service. The Company is coordinating with its major airline partners on the timing of upcoming
fleet deliveries under previously announced deals in response to COVID-19 schedule reductions. The anticipated future
delivery dates summarized below are subject to change.
As of June 30, 2020, the Company was scheduled to acquire and place into service four new E175 aircraft in
connection with its agreement with Delta. The delivery dates for these four new E175 aircraft are currently scheduled to
be completed during 2020. Additionally, the Company is scheduled to place one Canadair CRJ900 regional jet aircraft
(“CRJ900”) that is financed by Delta under a nine-year capacity purchase agreement in 2020.
As of June 30, 2020, the Company was scheduled to acquire and place into service 20 new E175 aircraft in
connection with its agreement with American. The delivery dates for the new E175 aircraft are scheduled to occur from
the end of 2021 to mid-2022. Additionally, SkyWest Airlines has a flying contract with American to operate a total of 70
used Canadair CRJ700 regional jet aircraft (“CRJ700s”), of which 61 aircraft were under contract at June 30, 2020. The
Company is also coordinating with American on in-service dates for the remaining nine aircraft and anticipates the
aircraft will be in service by mid-2021. During the three months ended June 30, 2020, the Company terminated its
American Prorate Agreement on seven CRJ200 aircraft as a result of COVID-19 related passenger demand restrictions.
As of June 30, 2020, the Company’s capacity purchase agreement with Delta included 36 CRJ200 aircraft that
are scheduled to expire in increments during the remainder of 2020 and are not expected to be extended as a result of the
decreased demand caused by the COVID-19 pandemic. The Company owns the 36 CRJ200 aircraft and anticipates
parking such aircraft following removal from service. The Company has no outstanding financing obligations on
the 36 owned CRJ200 aircraft. During the three months ended June 30, 2020, the Company returned 19 leased CRJ200
14
aircraft previously used for the Company’s capacity purchase agreement with Delta to the lessor, which leases were not
extended by the Company as a result of the decreased demand caused by the COVID-19 pandemic.
Due to the uncertainty of obtaining future contract extensions from its major airline partners for the Company’s
CRJ200 aircraft as a result of the COVID-19 pandemic and considering the average age of the Company’s CRJ200 fleet
is 18 years, the Company reduced the estimated useful lives of its CRJ200 aircraft to align with each aircraft’s
anticipated contract removal dates, which resulted in approximately $30.8 million of incremental depreciation expense
during the three months ended June 30, 2020. The Company anticipates it will incur $22.3 million of additional
depreciation expense from July to December 2020 resulting from the shorter estimated useful lives of its owned CRJ200
aircraft.
When an aircraft is scheduled to be removed from a capacity purchase agreement, the Company may, as
practical under the circumstances, negotiate an extension with the respective major airline partner, negotiate the
placement of the aircraft with another major airline partner, return the aircraft to the lessor if the aircraft is leased and the
lease is expiring, place owned aircraft for sale, or pursue other uses for the aircraft. Other uses for the aircraft may
include placing the aircraft in a prorate arrangement, leasing the aircraft to a third party, using aircraft parts and engines
as spare inventory or leasing spare engines to a third party. In the event practical alternative uses for the aircraft removed
from service are not available, the Company may park and store the aircraft.
The Company’s operating revenues could be impacted by a number of factors, including the impact of the
COVID-19 pandemic on the demand for air travel and associated reduction in flight schedules, changes to the
Company’s code-share agreements with its major airline partners, contract modifications resulting from contract
renegotiations, the Company’s ability to earn incentive payments contemplated under the Company’s code-share
agreements and settlement of reimbursement disputes with the Company’s major airline partners.
Allowance for credit losses
The Company monitors publicly available credit ratings for entities for which the Company has a significant
receivable balance. As of June 30, 2020, the Company had gross receivables of $47.6 million in current assets and gross
receivables of $73.4 million in other long-term assets. The Company has established credit loss reserves based on
publicly available historic default rates issued by a third party for companies with similar credit ratings, factoring in the
term of the respective accounts receivable or note receivable. During the six months ended June 30, 2020, the credit
ratings were lowered on certain entities for which the Company has outstanding accounts receivable or notes receivable,
which was the primary driver for the increase in the Company’s credit loss reserve when benchmarked against historic
default rates of similarly rated companies during the six months ended June 30, 2020.
The following table summarizes the changes in allowance for credit losses:
Allowance for
Credit Losses
Balance at January 1, 2020 $ 15,388
Additions to credit loss reserve 4,308
Write-offs charged against the allowance —
Balance at June 30, 2020 $ 19,696
Note 4 — Share-Based Compensation and Stock Repurchases
During the six months ended June 30, 2020, the Company granted 82,505 restricted stock units and 69,132
performance shares to certain employees of the Company and its subsidiaries under the SkyWest, Inc. 2019 Long-Term
Incentive Plan. Both the restricted stock units and performance shares have a three-year vesting period, during which the
recipient must remain employed with the Company or one of the Company’s subsidiaries. The number of performance
shares awardable from the 2020 grants can range from 0% to 200% of the original amount granted depending on the
Company’s performance over the three-year vesting period against the pre-established targets. Upon vesting, each
restricted stock unit and performance share will be replaced with one share of common stock. The fair value of these
restricted stock units and performance shares on their date of grant was $61.45 per share. During the six months ended
15
June 30, 2020, the Company did not grant any options to purchase shares of common stock. Additionally, during the six
months ended June 30, 2020, the Company granted 14,643 fully vested shares of common stock to the Company’s
directors at a grant date fair value of $61.45.
The Company accounts for forfeitures of restricted stock units and performance share grants when forfeitures
occur. The estimated fair value of the restricted stock units and performance shares is amortized over the applicable
vesting periods. During the six months ended June 30, 2020 and 2019, the Company recorded pre-tax share-based
compensation expense of $3.8 million and $7.6 million, respectively. Additionally, the Company incurred $7.9 million
of employee severance related costs associated with the sale of ExpressJet, partially offset by a forfeiture credit of $4.5
million, primarily resulting from stock-based compensation awards that terminated upon the sale of ExpressJet during
the six months ended June 30, 2019.
During the six months ended June 30, 2020, the Company repurchased 385,606 shares of its common stock for
$20.0 million and paid $6.2 million for the income tax obligation on vested employee equity awards and issued the net,
after-tax shares to employees. The Company did not repurchase any shares of its common stock or pay cash for the
income tax obligation on vested employee equity awards during the three months ended June 30, 2020. During the six
months ended June 30, 2019, the Company repurchased 1,055,355 shares of its common stock for $59.6 million and paid
$9.3 million for the income tax obligation on vested employee equity awards and issued the net, after-tax shares to
employees.
In connection with the Company’s receipt of financial support under the Payroll Support Program in April
2020, the Company agreed not to repurchase shares of or make dividend payments in respect of its common stock
through September 30, 2021.
Note 5 — Net Income Per Common Share
Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income
by the weighted average number of common shares outstanding during the period. Diluted net income per common share
(“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue common stock
were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or
conversion of securities that would have an anti-dilutive effect on net income per common share. During the six months
ended June 30, 2020, 219,000 performance shares (at target performance) were excluded from the computation of
Diluted EPS since the Company had not achieved the minimum target thresholds as of June 30, 2020. During the six
months ended June 30, 2019, 165,000 performance shares (at target performance) were excluded from the computation
of Diluted EPS since the Company had not achieved the minimum target thresholds as of June 30, 2019.
The calculation of the weighted average number of shares of common stock outstanding for Basic EPS and
Diluted EPS for the periods indicated (in thousands, except per share data) is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Numerator:
Net Income (loss) $ (25,715) $ 88,052 $ 4,273 $ 176,233
Denominator:
Weighted average number of common shares outstanding 50,140 51,145 50,208 51,293
Effect of outstanding share-based awards — 332 149 494
Weighted average number of shares for diluted net
income per common share 50,140 51,477 50,357 51,787
Basic earnings per share $ (0.51) $ 1.72 $ 0.09 $ 3.44
Diluted earnings per share $ (0.51) $ 1.71 $ 0.08 $ 3.40
16
Note 6 — Segment Reporting
Prior to the Company’s sale of ExpressJet on January 22, 2019, the Company’s three reporting segments
consisted of the operations of SkyWest Airlines, ExpressJet and SkyWest Leasing activities. The segment information
presented for ExpressJet reflects the period of time prior to the sale, when ExpressJet was operating as a subsidiary of the
Company. The Company concluded that the sale of ExpressJet did not meet the criteria for a discontinued operation.
The Company’s chief operating decision maker analyzes the profitability of operating new aircraft financed
through the issuance of debt, including the Company’s E175 fleet, separately from the profitability of the Company’s
capital deployed for ownership and financing of such aircraft. The SkyWest Airlines segment includes revenue earned
under the applicable capacity purchase agreements attributed to operating such aircraft and the respective operating
costs. The SkyWest Leasing segment includes applicable revenue earned under the applicable capacity purchase
agreements attributed to the ownership of new aircraft acquired through the issuance of debt and the respective
depreciation and interest expense of such aircraft. The SkyWest Leasing segment also includes the activity of leasing
regional jet aircraft and spare engines to third parties. The SkyWest Leasing segment’s total assets and capital
expenditures include new aircraft acquired through the issuance of debt and assets leased to third parties.
The following represents the Company’s segment data for the three-month periods ended June 30, 2020 and
2019 (in thousands):
Three months ended June 30, 2020
SkyWest SkyWest
Airlines Leasing Consolidated
Operating revenues (1) $ 227,808 $ 122,231 $ 350,039
Operating expense 275,869 78,573 354,442
Depreciation and amortization expense 59,421 72,217 131,638
Interest expense 3,438 27,488 30,926
Segment profit (loss) (2) (51,499) 16,170 (35,329)
Total assets (as of June 30, 2020) 2,789,321 3,984,062 6,773,383
Capital expenditures (including non-cash) 29,247 43,013 72,260
Three months ended June 30, 2019
SkyWest SkyWest
Airlines Leasing Consolidated
Operating revenues (1) $ 627,088 $ 117,295 $ 744,383
Operating expense 545,419 54,871 600,290
Depreciation and amortization expense 40,641 49,507 90,148
Interest expense 3,716 29,054 32,770
Segment profit (2) 77,953 33,370 111,323
Total assets (as of June 30, 2019) 2,738,868 3,841,151 6,580,019
Capital expenditures (including non-cash) 47,975 87,687 135,662
(1) Prorate revenue and airport customer service revenue are primarily reflected in the SkyWest Airlines segment.
(2) Segment profit (loss) is equal to operating income less interest expense.
17
The following represents the Company’s segment data for the six-month periods ended June 30, 2020 and 2019
(in thousands):
Six months ended June 30, 2020
SkyWest SkyWest
Airlines Leasing Consolidated
Operating revenues (1) $ 834,650 $ 245,325 $ 1,079,975
Operating expense 870,010 148,047 1,018,057
Depreciation and amortization expense 111,197 132,149 243,346
Interest expense 5,979 55,151 61,130
Segment profit (loss) (2) (41,339) 42,127 788
Total assets (as of June 30, 2020) 2,789,321 3,984,062 6,773,383
Capital expenditures (including non-cash) 68,126 115,258 183,384
Six months ended June 30, 2019
SkyWest SkyWest
Airlines ExpressJet Leasing Consolidated
Operating revenues (1) $ 1,212,856 $ 24,050 $ 231,171 $ 1,468,077
Operating expense 1,091,320 28,690 107,555 1,227,565
Depreciation and amortization expense 80,694 971 98,469 180,134
Special Items 18,508 3,361 — 21,869
Interest expense 7,534 — 57,744 65,278
Segment profit (loss) (2) 114,002 (4,640) 65,872 175,234
Total assets (as of June 30, 2019) 2,738,868 — 3,841,151 6,580,019
Capital expenditures (including non-cash) 116,625 — 433,616 550,241
(1) Prorate revenue and airport customer service revenue are primarily reflected in the SkyWest Airlines segment.
(2) Segment profit (loss) is equal to operating income less interest expense.
Note 7 — Leases, Commitments and Contingencies
Effective January 1, 2019, the Company adopted Topic 842. The Company leases property and equipment
under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating
lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company
used its incremental borrowing rate to discount the lease payments based on information available at lease
commencement.
Aircraft
As of June 30, 2020, the Company had 107 aircraft under operating leases with remaining terms ranging from
less than one year to ten years.
With the adoption of Topic 842 on January 1, 2019, the Company evaluated whether leased aircraft asset groups
within the Company’s fleet were impaired. Under the transition guidance for Topic 842, a company is permitted to
recognize a previously unrecognized impairment related to a right-of-use asset in the period prior to the adoption date of
Topic 842 if the event giving rise to the impairment occurred before the adoption date. In 2016, the Company recorded
an impairment on certain of its long-lived assets, which included the Company’s CRJ200 aircraft. In 2016, the market
lease rate was less than the contractual lease rate on the Company’s CRJ200 leased aircraft. The Company recorded an
impairment of $13.1 million (net of tax) as an adjustment to the Company’s January 1, 2019 retained earnings related to
the previously unrecognized impairment of these leased CRJ200s.
18
Airport facilities
The Company has operating leases for facility space including airport terminals, office space, cargo warehouses
and maintenance facilities. The Company generally leases this space from government agencies that control the use of
the various airports. The remaining lease terms for facility space vary from one month to 36 years. The Company’s
operating leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable
factors are excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting
guidance.
Leases
As of June 30, 2020, the Company’s right-of-use assets were $310.0 million, the Company’s current maturities
of operating lease liabilities were $87.4 million, and the Company’s noncurrent lease liabilities were $238.6 million.
During the six months ended June 30, 2020, the Company paid $41.3 million in operating leases reflected as a reduction
from operating cash flows.
The table below presents lease related terms and discount rates as of June 30, 2020.
June 30, 2020
Weighted-average remaining lease term for operating leases 6.7 years
Weighted-average discount rate for operating leases 6.1%
The Company’s lease costs for the three and six months ended June 30, 2020 and 2019 included the following
components (in thousands):
For the three months For the six months
ended June 30, ended June 30,
2020 2019 2020 2019
Operating lease cost $ 24,140 $ 27,647 $ 49,158 $ 54,868
Variable and short-term lease cost 1,207 1,346 2,551 2,821
Sublease income (1,560) — (3,131) —
Total lease cost $ 23,787 $ 28,993 $ 48,578 $ 57,689
As of June 30, 2020, the Company leased aircraft, airport facilities, office space, and other property and
equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to
which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased
property. The Company expects that, in the normal course of business, such operating leases that expire will be renewed
or replaced by other leases, or the property may be purchased rather than leased. The following table summarizes future
minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining
non-cancelable lease terms as of June 30, 2020 (in thousands):
July 2020 through December 2020 $ 49,498
2021 85,084
2022 76,132
2023 69,394
2024 28,091
Thereafter 98,424
$ 406,623
The Company is coordinating with its major airline partners on the timing of upcoming fleet deliveries under
previously announced deals in response to COVID-19-related schedule reductions. The anticipated future delivery dates
are subject to change. As of June 30, 2020, the Company had a firm purchase commitment for 24 E175 aircraft from
Embraer, S.A. (“Embraer”) with anticipated delivery dates through 2022.
19
The following table summarizes the Company’s commitments and obligations as noted for each of the next five
years and thereafter (in thousands):
Total Jul - Dec 2020 2021 2022 2023 2024 Thereafter
Operating lease payments for
aircraft and facility obligations $ 406,623 $ 49,498 $ 85,084 $ 76,132 $ 69,394 $ 28,091 $ 98,424
Firm aircraft and spare engine
commitments 661,406 110,007 159,719 391,680 — — —
Interest commitments (1) 570,669 81,103 111,231 96,260 79,076 63,594 139,405
Principal maturities on long-term
debt 2,996,869 120,956 388,638 389,593 399,472 353,106 1,345,104
Total commitments and
obligations $ 4,635,567 $ 361,564 $ 744,672 $ 953,665 $ 547,942 $ 444,791 $ 1,582,933
(1) At June 30, 2020, all of the Company’s total long-term debt had fixed interest rates.
Note 8 — Fair Value Measurements
The Company holds certain assets that are required to be measured at fair value in accordance with GAAP. The
Company determined the fair value of these assets based on the following three levels of inputs:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable
or can be corroborated by observable market data for substantially the full term of the
assets or liabilities. Some of the Company’s marketable securities primarily utilize broker
quotes in a non-active market for valuation of these securities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities, therefore requiring an entity to
develop its own assumptions.
As of June 30, 2020, and December 31, 2019, the Company held certain assets that are required to be measured
at fair value on a recurring basis. Assets measured at fair value on a recurring basis are summarized below (in
thousands):
Fair Value Measurements as of June 30, 2020
Total Level 1 Level 2 Level 3
Cash and cash equivalents $ 452,247 $ 452,247 $ — $ —
Marketable securities
Bonds and bond funds $ 137,183 $ — $ 137,183 $ —
Commercial paper 172,640 — 172,640 —
309,823 — 309,823 —
Total assets measured at fair value $ 762,070 $ 452,247 $ 309,823 $ —
Fair Value Measurements as of December 31, 2019
Total Level 1 Level 2 Level 3
Cash and cash equivalents $ 87,206 $ 87,206 $ — $ —
Marketable securities
Bonds and bond funds $ 267,243 $ — $ 267,243 $ —
Commercial paper 165,723 — 165,723 —
432,966 — 432,966 —
Total assets measured at fair value $ 520,172 $ 87,206 $ 432,966 $ —
The Company’s “marketable securities” classified as Level 2 securities primarily utilize broker quotes in a non-
active market for valuation of these securities.
20
The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during
the six months ended June 30, 2020. The Company’s policy regarding the recording of transfers between levels is to
record any such transfers at the end of the reporting period.
As of June 30, 2020, and December 31, 2019, the Company classified $309.8 million and $433.0 million of
marketable securities, respectively, as short-term since it had the intent to maintain a liquid portfolio and the ability to
redeem the securities within one year. As of June 30, 2020, and December 31, 2019, the cost of the Company’s total
cash and cash equivalents and available for sale securities was $761.7 million and $520.2 million, respectively.
The fair value of the Company’s long-term debt classified as Level 2 debt was estimated using discounted cash
flow analyses, based on the Company’s current estimated incremental borrowing rates for similar types of borrowing
arrangements. The fair value of the Company’s long-term debt is estimated based on current rates offered to the
Company for similar debt and was estimated to be $3.1 billion as of June 30, 2020 and $3.0 billion as of December 31,
2019, as compared to the carrying amount of $3.0 billion as of June 30, 2020 and $3.0 billion as of December 31, 2019.
Note 9 — Long-Term Debt
Long-term debt consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):
June 30, 2020 December 31, 2019
Current portion of long-term debt $ 312,538 $ 367,954
Current portion of unamortized debt issue cost, net (3,379) (3,828)
Current portion of long-term debt, net of debt issue costs $ 309,159 $ 364,126
Long-term debt, net of current maturities $ 2,684,331 $ 2,649,569
Long-term portion of unamortized debt issue cost, net (20,209) (20,580)
Long-term debt, net of current maturities and debt issue costs $ 2,664,122 $ 2,628,989
Total long-term debt (including current portion) $ 2,996,869 $ 3,017,523
Total unamortized debt issue cost, net (23,588) (24,408)
Total long-term debt, net of debt issue costs $ 2,973,281 $ 2,993,115
During the six months ended June 30, 2020, the Company took delivery of two new E175 aircraft that the
Company financed through $36.1 million of long-term debt. The debt associated with the two E175 aircraft has a 12-year
term, is due in quarterly installments with fixed annual interest rates ranging from 2.3% and is secured by the E175
aircraft.
During the six months ended June 30, 2020, in connection with the CARES Act payroll support program, the
Company issued to Treasury a promissory note for an aggregate principal amount of $62.0 million and issued warrants to
purchase 218,409 shares of the Company’s common stock. The Company has recorded the value of the promissory note
and warrants on a relative fair value basis as $62.0 million of long-term debt and $2.9 million in common stock,
respectively. The Company issued the final $39.4 million installment of the promissory note and issue the remaining
138,908 warrants to purchase shares of the Company’s common stock in July 2020 in connection with receipt of the final
payments under the payroll support program. These warrants have an exercise price of $28.38 per share and a five-year
term from the date of issuance. See Note 2, “Impact of the COVID-19 Pandemic,” for further discussion of the terms of
the payroll support program loan and warrants.
As of June 30, 2020, and December 31, 2019, the Company had $61.8 million and $61.7 million, respectively,
in letters of credit and surety bonds outstanding with various banks and surety institutions.
As of June 30, 2020, SkyWest Airlines had a $75 million line of credit. The line of credit includes minimum
liquidity and profitability covenants and is secured by certain assets. As of June 30, 2020, the Company was in
compliance with the line of credit covenants. As of June 30, 2020, SkyWest Airlines had no amount outstanding under
the facility. However, at June 30, 2020 SkyWest Airlines had $8.8 million in letters of credit issued under the facility,
21
which reduced the amount available under the facility to $66.2 million. The Company obtained a waiver under the line of
credit to allow the Company to receive funding under the CARES Act.
Note 10 — Gain on Sale of ExpressJet
On January 22, 2019, the Company completed the sale of its former wholly owned subsidiary ExpressJet. The
Company recorded a gain of $46.5 million before income tax from the sale of ExpressJet. The closing of the transaction
was completed in two parts, through an asset sale and stock sale, as further described below.
Asset Sale
On January 11, 2019, pursuant to the terms and conditions of the Asset Purchase Agreement, dated as of
December 17, 2018, by and among the Company, ExpressJet and United, United acquired certain specified assets and
liabilities of ExpressJet, including, among other things, aircraft engines, auxiliary power units, rotable spare parts, ground
support equipment and flight training equipment for $60.8 million in cash, subject to certain purchase price adjustments
(the “Asset Sale”). Certain assets and liabilities of ExpressJet were expressly excluded from the Asset Sale.
Stock Sale
Additionally, on January 22, 2019, pursuant to the terms and conditions of the Stock Purchase Agreement, dated
as of December 17, 2018, by and among the Company and ManaAir, LLC, a company in which United owns a minority
interest (the “Buyer”), the Buyer acquired all of the outstanding shares of capital stock of ExpressJet from the Company
for $18.8 million in cash, subject to certain purchase price adjustments (the “Stock Sale,”). To facilitate payment of the
purchase price for the Stock Sale, at the closing of the Stock Sale, the Company loaned $26 million to Kair Enterprises,
Inc. (the “Borrower”), the majority owner of the Buyer. Such loan accrues interest at the rate of 6.85% per annum, matures
on the last business day of the last month immediately preceding the two-year anniversary of the closing of the Stock Sale
and is secured by, among other things, the Borrower’s ownership interests in the Buyer.
Note 11 — Special Items
During the six months ended June 30, 2019, the Company terminated an agreement with an aircraft
manufacturer that obligated the Company to future aircraft lease return conditions on aircraft the Company leased. In
conjunction with the terminated agreement, the aircraft manufacturer released the Company from the future aircraft lease
return obligations and the Company agreed to terminate aircraft part credits previously issued by the manufacturer to the
Company. As a result of the terminated agreement, the Company recorded a non-cash expense of $18.5 million (pre-tax)
during the six months ended June 30, 2019 to write-off the terminated aircraft part credits, which was reflected as a
special items operating expense in the consolidated statement of comprehensive income.
Additionally, during the six months ended June 30, 2019, the Company incurred $3.4 million of employee
severance related costs associated with the sale of ExpressJet that are also reflected in special items. The Company had
no special expense items for the six months ended June 30, 2020.
Note 12 — Investment in Other Companies
During 2019, the Company created a joint venture with Regional One, Inc. (“Regional One”) by investing $22.3
million for a 75% ownership interest in Aero Engines, LLC. (“Aero Engines”). The primary purpose of Aero Engines is
to lease engines to third parties. Aero Engines requires unanimous approval from the Company and Regional One for its
engine purchases, dispositions, lease agreements with third parties and all other material transactions. The Company
determined Aero Engines is a variable interest entity as the Company has a 75% ownership interest in Aero Engines and
all material decisions require unanimous approval from the Company and Regional One, resulting in disproportionate
ownership rights relative to voting rights. As unanimous approval is required for all Aero Engines’ material activities.
Aero Engines has no primary beneficiary. The Company accounts for its investment in Aero Engines under the equity
method. The Company’s exposure in its investment in Aero Engines primarily consists of the Company’s portion of
income or loss from Aero Engines’ engine lease agreements with third parties and the Company’s ownership percentage
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in Aero Engines’ engines book value. The Company purchased 15 spare engines and sold the 15 spare engines to Aero
Engines at net book value during 2019. Aero Engines had no debt outstanding as of June 30, 2020. As of June 30, 2020,
the Company’s investment balance in Aero Engines was $24.7 million. The Company’s investment in Aero Engines has
been recorded in “Other Assets” on the Company’s consolidated balance sheet. The Company’s portion of the income
generated by Aero Engines for the six months ended June 30, 2020 was $0.8 million, which is recorded in “Other
Income” on the Company’s consolidated statements of comprehensive income.
Note 13 — Income Taxes
The Company’s effective tax rate for the three months ended June 30, 2020 was 22.6% The Company’s
effective tax rate for the three months ended June 30, 2020 varied from the federal statutory rate of 21.0% primarily due
to the provision for state income taxes and the impact of non-deductible expenses.
The Company’s effective tax rate for the six months ended June 30, 2020 was 26.8%. The Company’s effective
tax rate for the six months ended June 30, 2020 varied from the federal statutory rate of 21.0% primarily due to the
provision for state income taxes and the impact of non-deductible expenses, partially offset by a $1.4 million discrete tax
benefit from excess tax deductions generated from employee equity transactions that occurred during the six months
ended June 30, 2020.
The Company’s effective tax rate for the three months ended June 30, 2019 was 23.7%. The Company’s
effective tax rate for the three months ended June 30, 2019 varied from the federal statutory rate of 21.0% primarily due
to the provision for state income taxes and the impact of non-deductible expenses, partially offset by a $1.3 million
discrete tax benefit from excess tax deductions generated from employee equity transactions that occurred during the
three months ended June 30, 2019.
The Company’s effective tax rate for the six months ended June 30, 2019 was 23.3%. The Company’s effective
tax rate for the six months ended June 30, 2019 varied from the federal statutory rate of 21.0% primarily due to the
provision for state income taxes and the impact of non-deductible expenses, partially offset by a $3.5 million discrete tax
benefit from excess tax deductions generated from employee equity transactions that occurred during the six months
ended June 30, 2019.
Note 14 — Legal Matters
The Company is subject to certain legal actions which it considers routine to its business activities. As of June
30, 2020, the Company’s management believed, after consultation with legal counsel, that the ultimate outcome of such
legal matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of
operations.
Note 15 — Subsequent Events
Subsequent to June 30, 2020, in connection with the CARES Act payroll support program, the Company
received $92.0 million in payroll grants and increased the Company’s borrowings under the promissory note to Treasury
in the amount of $39.4 million. The Company additionally issued warrants to purchase 138,908 shares of the Company’s
common stock. See Note 2, “Impact of the COVID-19 Pandemic.” for further discussion of the terms of the payroll
support program loan and warrants.
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis presents factors that had a material effect on the results of operations of
SkyWest, Inc. (“SkyWest” “we” or “us”) during the three- and six-month periods ended June 30, 2020 and 2019. Also
discussed is our financial condition as of June 30, 2020 and December 31, 2019. You should read this discussion in
conjunction with our condensed consolidated financial statements for the three and six months ended June 30, 2020,
including the notes thereto, appearing elsewhere in this Report. This discussion and analysis contains forward-looking
statements. Please refer to the section of this Report entitled “Cautionary Statement Concerning Forward-Looking
Statements” for discussion of uncertainties, risks and assumptions associated with these statements.
On January 22, 2019, we completed the sale of our former wholly owned subsidiary ExpressJet Airlines, Inc.
(“ExpressJet”). Our financial and operating results for the period ended June 30, 2019, contained in this Report, include
the financial results of ExpressJet for the respective period, as we concluded that the sale of ExpressJet did not meet the
criteria for presentation of discontinued operations.
Cautionary Statement Concerning Forward-Looking Statements
Certain of the statements contained in this Report should be considered “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by
words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,”
“should,” “hope,” “likely,” and “continue” and similar terms used in connection with statements regarding our outlook,
anticipated operations, the revenue environment, our contractual relationships, and our anticipated financial performance.
These statements include, but are not limited to, statements regarding the impact of the COVID-19 pandemic on our
business, results of operations and financial condition and the impact of any measures, including travel restrictions, taken
to mitigate the effect of the pandemic, our future growth and development plans, including our future financial and
operating results, our plans, objectives, expectations and intentions and other statements that are not historical facts.
Readers should keep in mind that all forward-looking statements are based on our existing beliefs about present and
future events outside of our control and on assumptions that may prove to be incorrect. If one or more risks identified in
this Report materializes, or any other underlying assumption proves incorrect, our actual results will vary, and may vary
materially, from those anticipated, estimated, projected, or intended for a number of reasons, including but not limited to:
the consequences of the COVID-19 pandemic to global economic conditions, the travel industry and our major airline
partners in general and our financial condition and results of operations in particular; the challenges of competing
successfully in a highly competitive and rapidly changing industry; developments associated with fluctuations in the
economy and the demand for air travel, including as a result of the COVID-19 pandemic; the financial stability of United
Airlines, Inc. (“United”), Delta Air Lines, Inc. (“Delta”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc.
(“Alaska”) (each, a “major airline partner”) and any potential impact of their financial condition on our operations;
fluctuations in flight schedules, which are determined by the major airline partners for whom SkyWest conducts flight
operations; variations in market and economic conditions; significant aircraft lease and debt commitments; realization of
manufacturer residual value guarantees on applicable SkyWest aircraft; residual aircraft values and related impairment
charges; the impact of global instability; labor relations and costs; potential fluctuations in fuel costs, and potential fuel
shortages; the impact of weather-related or other natural disasters on air travel and airline costs; new aircraft deliveries;
and the ability to attract and retain qualified pilots, as well as other factors identified under the heading “Risk Factors” in
Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, under the heading “Risk
Factors” in Part II, Item 1A of this Report, elsewhere in this Report, in our other filings with the Securities and Exchange
Commission (the “SEC”) and other unanticipated factors. Additionally, the risks, uncertainties and other factors set forth
above or otherwise referred to in the reports that we have filed with the SEC may be further amplified by the global
impact of the COVID-19 pandemic.
There may be other factors that may affect matters discussed in forward-looking statements set forth in this
Report, which factors may also cause actual results to differ materially from those discussed. We assume no obligation to
publicly update any forward-looking statement to reflect actual results, changes in assumptions or changes in other
factors affecting these statements other than as required by applicable law.
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Impact of the COVID-19 Pandemic
COVID-19, which was declared a global health pandemic by the World Health Organization in March 2020,
has surfaced in nearly all regions of the world and driven the implementation of significant, government-imposed
measures to prevent or reduce its spread, including travel restrictions, closing of borders, “shelter in place” orders and
business closures. Consequently, we and our major airline partners, have experienced an unprecedented decline in the
demand for air travel, which has materially and adversely affected our revenues, particularly under our prorate
agreements (as defined below). The spread of the virus and the resulting global pandemic has affected the majority of the
domestic and international networks of our major airline partners for whom we conduct flight operations and rely on to
set our flight schedules. While the length and severity of the reduction in demand due to COVID-19 is uncertain, we
presently expect a continued negative impact on our results of operations for the remainder of 2020 and into 2021.
In response to these developments, we have implemented measures to focus on the personal safety of our
passengers and employees, while at the same time seeking to mitigate the impact on our financial position and
operations. These measures include, but are not limited to, the following:
Focus on the Personal Safety of Passengers and Employees. The safety and well-being of our passengers and
employees are our priorities in every decision we make. As the COVID-19 pandemic has developed, we have taken
numerous steps to help passengers and employees take appropriate safety measures on the ground and in the air in
keeping with current Centers for Disease Control and Prevention recommendations, including:
• Working with our major airline partners to enhance our aircraft cleaning procedures.
• Working with our major airline partners to provide masks for crewmembers and ensuring that all fleet service
personnel have the necessary personal protective equipment for disinfecting the aircraft.
• Providing a number of options to employees who are diagnosed with COVID-19, including pay protection and
extended leave options.
• Implementing workforce social distancing and protection measures, enhanced cleaning of our facilities,
including training facilities, using methods and products similar to what we are using on our aircraft.
Capacity Reductions. Beginning in March 2020, we and our major airline partners experienced an
unprecedented decrease in demand for air travel and expect this decline from 2019 to continue throughout 2020. We
depend on our major airline partners to contract with us to schedule flights. Therefore, in response to this decreased
demand, we have significantly reduced our capacity. Prior to the COVID-19 pandemic, we anticipated operating
approximately 2,500 to 2,600 daily departures in the month of July 2020; however, in July 2020 we typically operated
between approximately 1,200 to 1,400 daily departures as a result of COVID-19-related schedule reductions. We also
anticipate similar schedule reductions will likely continue throughout the remainder of 2020 and into 2021. The number
of daily flights operated by us may not return to pre-COVID-19 levels for the foreseeable future. We will continue to
work with our major airline partners regarding future schedules and make further demand-driven adjustments to our
capacity as needed. We anticipate certain aircraft with scheduled contract expirations in 2020 will not be extended as a
result of decreased demand including 36 Canadair CRJ200 regional aircraft (“CRJ200”) operating under the SkyWest
Airlines Delta Connection Agreement as of June 30, 2020. We also terminated our American Prorate Agreement on
seven CRJ200 aircraft in the second quarter of 2020 and we may have further reductions in the number of CRJ200
aircraft operating under our prorate agreements. We may receive requests by our major airline partners to defer deliveries
of new or used aircraft that were previously scheduled for 2020, 2021 and 2022.
Cost Reductions. With the reduction in revenue, we have, and will continue to implement, cost saving
initiatives, including:
• Reducing employee-related costs including by:
o Offering voluntary unpaid leave to employees.
o Suspending all non-scale pay increases.
o Instituting a company-wide hiring freeze.
• Delaying non-essential maintenance projects and reducing or suspending other discretionary spending.
Liquidity. At June 30, 2020, we had $828.3 million in total available liquidity, consisting of $762.1 million in
cash and marketable securities and $66.2 million available under SkyWest Airlines’ line of credit. On April 23, 2020,
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SkyWest Airlines entered into a Payroll Support Program Agreement (the “PSP Agreement”) with the U.S. Department
of Treasury (“Treasury”) with respect to the grant program (the “Payroll Support Program”) under the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES Act”), pursuant to which it expects to receive approximately $438.0
million in the aggregate, 50% of which was received in April 2020. See Note 2 “Impact of the COVID-19 Pandemic,” to
the condensed consolidated financial statements for more information on the Payroll Support Program. The CARES Act
also provides for up to $25 billion in secured loans to the airline industry, and we have applied for and have entered into
a non-binding letter of intent with Treasury for approximately $497.0 million under the loan program and we are
currently evaluating the timing and our level of participation.
Overview
We have the largest regional airline operations in the United States through our operating subsidiary SkyWest
Airlines, Inc. (“SkyWest Airlines”). As of June 30, 2020, SkyWest Airlines offered scheduled passenger service with
approximately 900 total daily departures under COVID-19 related reduced schedules to destinations in the United States,
Canada, Mexico and the Caribbean. Our fleet of Embraer E175 regional jet aircraft (“E175”), Canadair CRJ900 regional
jet aircraft (“CRJ900”) and Canadair CRJ700 regional jet aircraft (“CRJ700”) have a multiple-class seat configuration,
whereas our CRJ200 aircraft have a single-class seat configuration. As of June 30, 2020, SkyWest Airlines had a total
fleet of 581 aircraft, of which 471 were in scheduled service, summarized as follows:
CRJ200 CRJ700 CRJ900 E175 Total
Delta 57 6 43 67 173
United 96 19 — 90 205
American — 61 — — 61
Alaska — — — 32 32
Aircraft in scheduled service 153 86 43 189 471
Subleased to an un-affiliated entity 4 13 5 — 22
Other* 55 33 — — 88
Total 212 132 48 189 581
*As of June 30, 2020, these aircraft have been removed from service and are in the process of being placed under a
leasing arrangement with a third party, are aircraft transitioning between code-share agreements with our major airline
partners and being used as supplemental spare aircraft, or are in the process of being parted out.
As of June 30, 2020, approximately 37% of our aircraft in scheduled service was operated for Delta,
approximately 43% was operated for United, approximately 13% was operated for American and approximately 7% was
operated for Alaska.
Our business model is based on providing scheduled regional airline service under code-share agreements
(commercial agreements, typically in the form of capacity purchase agreements or prorate arrangements, each as defined
below, between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its
flights) with our major airline partners. Our success is principally dependent on our ability to meet the needs of our
major airline partners through providing a reliable and safe operation at attractive economics. From June 30, 2019 to
June 30, 2020, we added seven new E175 aircraft, one new CRJ900 aircraft and 31 used E175 aircraft to our fleet.
Additionally, we removed thirteen CRJ700 aircraft and 37 CRJ200 aircraft from scheduled service with 19 of the
CRJ200 aircraft returned to the lessor while the other aircraft were temporarily removed from service in response to the
COVID-19 schedule reductions, or in transition period between flying contracts with our major partners, or were placed
under a lease with a third party.
We are coordinating with our major airline partners on the timing of upcoming fleet deliveries under previously
announced deals in response to COVID-19 schedule reductions. The anticipated future delivery dates summarized below
are subject to change. As of June 30, 2020, we are scheduled to add four new E175 to our capacity purchase agreement
with Delta during 2020. We also anticipate adding 20 new E175 aircraft with American under a capacity purchase
agreement with delivery dates starting in late 2021 and ending in 2022.
26
As of June 30, 2020, our capacity purchase agreement with Delta included 36 CRJ200 aircraft that are
scheduled to expire in increments during the remainder of 2020 which we are not expecting to be extended as a result of
the decreased demand caused by the COVID-19 pandemic. We own the 36 CRJ200 aircraft and anticipate parking
the 36 CRJ200 aircraft following removal from service. We have no outstanding financing obligations on the 36 owned
CRJ200 aircraft.
Due to the uncertainty of obtaining future contract extensions for our CRJ200 aircraft as a result of the COVID-
19 pandemic and considering the average age of our CRJ200 fleet is 18 years, we reduced the estimated useful lives of
our CRJ200 aircraft to align with each aircraft’s anticipated contract removal dates, which resulted in approximately
$30.8 million of incremental depreciation expense during the three months ended June 30, 2020. We anticipate we will
incur $22.3 million of additional depreciation expense from July to December 2020 resulting from the shorter estimated
useful lives of our owned CRJ200 aircraft.
Historically, multiple contractual relationships with major airlines have enabled us to reduce our reliance on any
single major airline code and to enhance and stabilize operating results through a mix of fixed-fee arrangements (referred
to as “capacity purchase agreements”) and revenue-sharing arrangements (referred to as “prorate” arrangements). For the
six months ended June 30, 2020, capacity purchase revenue and prorate revenue represented approximately 86.9% and
13.1%, respectively, of our total flying agreements revenue. On contract routes, the major airline partner controls
scheduling, ticketing, pricing and seat inventories and we are compensated by the major airline partner at contracted
rates based on completed block hours (measured from takeoff to landing, including taxi time), flight departures and other
operating measures. On prorate routes, our revenue and profitability may fluctuate based on ticket prices and passenger
loads and we are responsible for all costs to operate the flight, including fuel.
Second Quarter Summary
Our total operating revenues of $350.0 million for the three months ended June 30, 2020 decreased 53.0%
compared to total operating revenues of $744.4 million for the three months ended June 30, 2019. We had a net loss of
$25.7 million, or $0.51 per diluted share, for the three months ended June 30, 2020, compared to net income of $88.1
million, or $1.71 per diluted share, for the three months ended June 30, 2019.
Significant items affecting our financial performance during the three months ended June 30, 2020 are outlined
below.
Revenue
The number of aircraft we have in scheduled service and the number of block hours we generate on our flights
are primary drivers to our flying agreements revenue under our capacity purchase agreements. The number of flights we
operate and the corresponding number of passengers we carry are the primary drivers to our revenue under our prorate
flying agreements. From June 30, 2019 to June 30, 2020, we decreased the number of aircraft in scheduled service from
482 aircraft to 471 aircraft, by removing thirteen CRJ700 aircraft and 37 CRJ200 aircraft and adding 38 E175 aircraft
and one CRJ900 aircraft. Our completed block hours decreased 66.0% over the same period of 2019 primarily due to a
significant reduction in the number of flights we were scheduled to operate under our flying contracts as a result of the
COVID-19 pandemic.
Our total revenues decreased $394.3 million for the three months ended June 30, 2020 compared to the three
months ended June 30, 2019, primarily due to the effects of the COVID-19 pandemic. Additionally, we deferred
recognizing revenue on $69.1 million of fixed monthly payments received under our capacity purchase agreements
during the three months ended June 30, 2020, as further described under “Results of Operations—Three Months Ended
June 20, 2020 and 2019—Operating Revenues.” Since March 2020, the COVID-19 pandemic has had a negative impact
on our revenues, especially under our prorate agreements. The number of aircraft operating under our prorate agreements
decreased from 64 aircraft as of June 30, 2019 to 47 aircraft as of June 30, 2020, or 26.6%. Additionally, our prorate
revenue decreased from $134.9 million for the three months ended June 30, 2019 to $36.2 million for the three months
ended June 30, 2020, or 73.2%. The negative impact to our revenues as a result of the COVID-19 pandemic and its
27
associated effects on the travel industry is anticipated to continue throughout the remainder of 2020 and may continue
through 2021 and subsequent periods.
Operating Expenses
Our total operating expenses decreased $245.8 million for the three months ended June 30, 2020, compared to
the three months ended June 30, 2019. This decrease was primarily due to a significant reduction in the number of
flights we operated as a result of the COVID-19 pandemic. Additional details regarding the increase in our operating
expenses are described in the section of this Report entitled “Results of Operations.”
Fleet activity
The following table summarizes our fleet scheduled for service as of:
Aircraft in Service June 30, 2020 December 31, 2019 June 30, 2019
CRJ200s 153 190 190
CRJ700s 86 94 99
CRJ900s 43 43 42
E175s 189 156 151
Total 471 483 482
Critical Accounting Policies
Our significant accounting policies are summarized in Note 1 to our consolidated financial statements for the
year ended December 31, 2019, which are presented in our Annual Report on Form 10-K for the year ended
December 31, 2019. Critical accounting policies are those policies that are most important to the preparation of our
consolidated financial statements and require management’s subjective and complex judgments due to the need to make
estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to revenue
recognition, aircraft leases, long-lived assets, self-insurance and income tax. The application of these accounting policies
involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results will
likely differ, and may differ materially, from such estimates.
Recent Accounting Pronouncements
See Note 1 to the condensed consolidated financial statements for a description of recent accounting
pronouncements.
28
Results of Operations
Three Months Ended June 30, 2020 and 2019
Operational Statistics. The following table sets forth our major operational statistics and the associated
percentage changes for the periods identified below:
For the three months ended June 30,
Block hours by aircraft type: 2020 2019 % Change
E175s 61,455 133,247 (53.9)%
CRJ900s 3,433 31,428 (89.1)%
CRJ700s 30,666 77,068 (60.2)%
CRJ200s 30,472 129,039 (76.4)%
Total block hours 126,026 370,782 (66.0)%
Departures 80,755 215,052 (62.4)%
Passengers carried 1,802,327 11,383,187 (84.2)%
Passenger load factor 34.4 % 83.9 % (49.5)pts
Average passenger trip length (miles) 487 496 (1.8)%
Operating Revenues
The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):
For the three months ended June 30,
2020 2019 $ Change % Change
Flying agreements $ 336,370 $ 725,335 $ (388,965) (53.6)%
Lease, airport services and other 13,669 19,048 (5,379) (28.2)%
Total operating revenues $ 350,039 $ 744,383 $ (394,344) (53.0)%
Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity
purchase agreements and prorate agreements with our major airline partners. Lease, airport services and other revenues
consist of revenue earned from providing airport counter, gate and ramp services, and revenue from leasing regional jet
aircraft and spare engines to third parties. Changes in our flying agreements revenue are summarized below (dollar
amounts in thousands).
For the three months ended June 30,
2020 2019 $ Change % Change
Capacity purchase agreements revenue: flight operations $ 132,061 $ 383,732 $ (251,671) (65.6)%
Capacity purchase agreements revenue: aircraft lease and fixed
revenue 168,103 206,678 (38,575) (18.7)%
Prorate agreements revenue 36,206 134,925 (98,719) (73.2)%
Flying agreements revenue $ 336,370 $ 725,335 $ (388,965) (53.6)%
The decrease in “Capacity purchase agreements revenue: flight operations” of $251.7 million was primarily due
to schedule reductions experienced in 2020 resulting from the COVID-19 pandemic. Our completed departures
decreased 62% and completed block hours decreased 66% during the three months ended June 30, 2020 compared to the
three months ended June 30, 2019.
The decrease in “Capacity purchase agreements revenue: aircraft lease and fixed revenue” of $38.6 million was
primarily due to the deferral of $69.1 million in fixed amount per aircraft revenue. Under our capacity purchase
agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the fixed amount per
aircraft per month proportionately to completed flights, which is our performance obligation. We operated a materially
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lower number of flights during the three months ended June 30, 2020 from previous levels due to a reduction in flight
schedules resulting from the COVID-19 pandemic. We anticipate the future monthly flight levels will increase over the
remaining applicable contract terms compared to the three months ended June 30, 2020. Due to the materially reduced
flight activity during the three months ended June 30, 2020, and based on an anticipated increase in future monthly flight
volumes over the remaining contract terms, we determined the fixed amount per month per aircraft received during the
three months ended June 30, 2020 was disproportionately high relative to the volume of flights operated during the three
months ended June 30, 2020. Accordingly, we deferred revenue attributed to the fixed amount per month per aircraft
received during the three months ended June 30, 2020. Our deferred revenue balance will adjust over the remaining
contract terms based on our completed flight levels each period relative to the anticipated average monthly flight levels
over the remaining contract terms. This decrease in “Capacity purchase agreement revenue: aircraft lease revenue” was
partially offset by the incremental lease revenue generated from seven new E175 aircraft added to our fleet and economic
improvements made to certain existing capacity purchase agreements since June 30, 2019.
The decrease in prorate agreements revenue of $98.7 million was primarily due to the impact of COVID-19 and
the corresponding decrease in prorate passengers during the three months ended June 30, 2020 compared to the three
months ended June 30, 2019.
The $5.4 million decrease in lease, airport services and other revenues was primarily related to a decrease in the
number of flights at locations where we were contracted to provide airport customer service during the three months
ended June 30, 2020 compared to the three months ended June 30, 2019.
Operating Expenses
The following table summarizes our operating expenses and interest expense, (collectively, “Total airline
expenses") for the periods indicated (dollar amounts in thousands):
For the three months ended June 30,
2020 2019 $ Change % Change
Salaries, wages and benefits $ 170,218 $ 243,766 $ (73,548) (30.2)%
Aircraft maintenance, materials and repairs 121,289 124,789 (3,500) (2.8)%
Depreciation and amortization 131,638 90,148 41,490 46.0 %
Airport-related expenses 21,550 30,782 (9,232) (30.0)%
Aircraft fuel 6,821 30,851 (24,030) (77.9)%
Aircraft rentals 16,697 18,006 (1,309) (7.3)%
CARES Act payroll support grant (151,938) — (151,938) NM
Other operating expenses 38,167 61,948 (23,781) (38.4)%
Total operating expenses $ 354,442 $ 600,290 $ (245,848) (41.0)%
Interest expense 30,926 32,770 (1,844) (5.6)%
Total airline expenses $ 385,368 $ 633,060 $ (247,692) (39.1)%
Salaries, wages and benefits. The $73.5 million decrease in salaries, wages and benefits was primarily due to a
reduction in scheduled departures and block hours related to the COVID-19 pandemic. Additionally, in response to the
COVID-19 pandemic, we have instituted a company-wide hiring freeze, suspended all non-scale pay increases and
offered voluntary unpaid leave to our employees.
Aircraft maintenance, materials and repairs. The $3.5 million decrease in aircraft maintenance expense was
primarily due to a significant reduction in departures during the three months ended June 30, 2020 partially offset by
increased engine maintenance expense during the three months ended June 30, 2020 compared to the three months ended
June 30, 2019.
Depreciation and amortization. The $41.5 million increase in depreciation and amortization expense was
primarily due to a reduction in the estimated useful life of our owned CRJ200 fleet that resulted in approximately $30.8
million of incremental depreciation expense during the three months ended June 30, 2020 and due to the acquisition of
seven new E175 aircraft and spare engines since June 30, 2019.
30
Airport-related expenses. Airport-related expenses include airport-related customer service costs such as
outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees
and station rents (our employee customer service labor costs are reflected in salaries, wages and benefits). The $9.2
million decrease in airport-related expenses was primarily due to a decrease in scheduled departures resulting from the
COVID-19 pandemic.
Aircraft fuel. The $24.0 million decrease in fuel cost was primarily due to a reduction in the number of prorate
flights we operated and the corresponding decrease in gallons of fuel we purchased and a decrease in our average fuel
cost per gallon from $2.57 for the three months ended June 30, 2019 to $1.45 for the three months ended June 30, 2020.
We purchase and incur expense for all fuel on flights operated under our prorate agreements. All fuel costs incurred
under our capacity purchase agreements are either purchased directly by our major airline partners or purchased by us
and reimbursed by our major airline partners, with the direct reimbursement recorded as a reduction to our fuel expense.
The following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods
indicated:
For the three months ended June 30,
(in thousands) 2020 2019 % Change
Fuel gallons purchased 4,691 12,019 (61.0)%
Fuel expense $ 6,821 $ 30,851 (77.9)%
Aircraft rentals. The $1.3 million decrease in aircraft rentals was primarily related to a reduction of our fleet
size that was financed through leases as a result of scheduled lease expirations subsequent to June 30, 2019.
CARES Act payroll support grant. In April 2020, we entered into an agreement with Treasury to receive up to
$438.0 million in emergency relief through the CARES Act payroll support program, of which $336.6 million will be in
the form of payroll support grants paid in installments through the end of July 2020. As of June 30, 2020, we received
$244.6 million in payroll support grants that are being recognized as a reduction in expense over the periods the grants
are intended to compensate. We recognized $151.9 million as a reduction in expense during the three months ended June
30, 2020 and expect to recognize the remainder of the grants from the CARES Act payroll support program as a
reduction in expenses by the end of 2020.
Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability
insurance, simulator costs, crew per diem, and crew hotel costs. The $23.8 million decrease in other operating expenses
was primarily related to a decrease in the number of scheduled flights related to the COVID-19 pandemic during the
three months ended June 30, 2020.
Interest Expense. The $1.8 million decrease in interest expense was primarily related to the reduction in
outstanding long-term debt from $3.1 billion as of June 30, 2019 to $3.0 billion as of June 30, 2020.
Total airline expenses. The $245.8 million decrease in total airline expenses was primarily related to the
COVID-19 pandemic and the related decrease in scheduled departures and block hours during the three months ended
June 30, 2020.
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Summary of interest income, other income (expense) and provision for income taxes:
Interest income. Interest income decreased $2.0 million, or 54.8%, during the three months ended June 30,
2020, compared to the three months ended June 30, 2019. The decrease in interest income was primarily related to a
decrease in interest rates earned on our marketable securities subsequent to June 30, 2019.
Other income (expense), net. Other income increased $0.1 million, or 43.1%, during the three months ended
June 30, 2020, compared to the three months ended June 30, 2019. Other income primarily consisted of income related
to our investment in a joint venture with a third party.
Income taxes. Our provision for income taxes was 22.6% and 23.7% for the three months ended June 30, 2020
and 2019, respectively. The decrease in the effective tax rate primarily relates to a lower discrete tax benefit from excess
tax deductions generated from employee equity transactions that occurred during the three months ended June 30, 2020
compared to the three months ended June 30, 2019 and a greater impact related to non-deductible expenses for the three
months ended June 30, 2020, compared to the three months ended June 30, 2019 as a result of lower pretax earnings for
the three months ended June 30, 2020 compared to the same period of 2019.
Net loss. Primarily due to the factors described above, we generated a net loss of $25.7 million, or $0.51 per
diluted share, for the three months ended June 30, 2020, compared to net income of $88.1 million, or $1.71 per diluted
share, for the three months ended June 30, 2019.
Six Months Ended June 30, 2020 and 2019
Operational Statistics. The following table sets forth our major operational statistics and the associated
percentage changes for the periods identified below:
For the six months ended June 30,
Block hours by aircraft type: 2020 2019 % Change
E175s 194,134 259,996 (25.3)%
CRJ900s 32,353 62,393 (48.1)%
CRJ700s 98,740 148,836 (33.7)%
CRJ200s 158,022 248,946 (36.5)%
Total block hours 483,249 720,171 (32.9)%
Departures 290,038 408,527 (29.0)%
Passengers carried 10,666,833 20,998,133 (49.2)%
Passenger load factor 58.0 % 81.4 % (23.4)pts
Average passenger trip length (miles) 492 501 (1.8)%
The operating statistics above exclude ExpressJet’s statistics prior to our sale of ExpressJet in January 2019 as
ExpressJet’s impact on our 2019 statistics was not significant.
Operating Revenues
The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):
For the six months ended June 30,
2020 2019 $ Change % Change
Flying agreements $ 1,045,864 $ 1,425,336 $ (379,472) (26.6)%
Lease, airport services and other 34,111 42,741 (8,630) (20.2)%
Total operating revenues $ 1,079,975 $ 1,468,077 $ (388,102) (26.4)%
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Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity
purchase agreements and prorate agreements with our major airline partners. Lease, airport services and other revenues
consist of revenue earned from providing airport counter, gate and ramp services, and revenue from leasing regional jet
aircraft and spare engines to third parties. Changes in our flying agreements revenue are summarized below (dollar
amounts in thousands).
For the six months ended June 30,
2020 2019 $ Change % Change
Capacity purchase agreements revenue: flight operations $ 498,469 $ 770,278 $ (271,809) (35.3)%
Capacity purchase agreements revenue: aircraft lease and fixed
revenue 410,838 414,059 (3,221) (0.8)%
Prorate agreements revenue 136,557 240,999 (104,442) (43.3)%
Flying agreements revenue $ 1,045,864 $ 1,425,336 $ (379,472) (26.6)%
The decrease in “Capacity purchase agreements revenue: flight operations” of $271.8 million was primarily due
to schedule reductions experienced from the COVID-19 pandemic.
The decrease in “Capacity purchase agreements revenue: aircraft lease and fixed revenue” of $3.2 million was
primarily due to the deferral of $69.1 million in fixed amount per aircraft revenue. Under our capacity purchase
agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the fixed amount per
aircraft per month proportionately to completed flights, our performance obligation. We operated a materially lower
number of flights during the six months ended June 30, 2020 from previous levels due to a reduction in flight schedules
resulting from the COVID-19 pandemic. We anticipate the future monthly flight levels will increase over the remaining
applicable contract terms compared to the six months ended June 30, 2020. Due to the materially reduced flight activity
during the six months ended June 30, 2020, and based on an anticipated increase in future monthly flight volumes over
the remaining contract terms, we determined the fixed amount per month per aircraft received during the six months
ended June 30, 2020 was disproportionately high relative to the volume of flights operated during the six months ended
June 30, 2020. Accordingly, we deferred revenue attributed to the fixed amount per month per aircraft received during
the six months ended June 30, 2020. Our deferred revenue balance will adjust over the remaining contract terms based
on our completed flight levels each period relative to the anticipated average monthly flight levels over the remaining
contract terms. This decrease in “Capacity purchase agreement revenue: aircraft lease revenue” was partially offset by
the incremental lease revenue generated from seven new E175 aircraft added to our fleet and economic improvements
made to certain existing capacity purchase agreements since June 30, 2019.
The decrease in prorate agreements revenue of $104.4 million was primarily due to the impact of COVID-19
and the corresponding decrease in prorate passengers during the six months ended June 30, 2020 compared to the six
months ended June 30, 2019.
The $8.6 million decrease in lease, airport services and other revenues was primarily related to a decrease in the
number of flights at locations where we were contracted to provide airport customer service during the six months ended
June 30, 2020 compared to the six months ended June 30, 2019.
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Operating Expenses
The following table summarizes our operating expenses and interest expense, (collectively, “Total airline
expenses") for the periods indicated (dollar amounts in thousands):
For the six months ended June 30,
2020 2019 $ Change % Change
Salaries, wages and benefits $ 419,379 $ 501,354 $ (81,975) (16.4)%
Aircraft maintenance, materials and repairs 281,505 243,051 38,454 15.8 %
Depreciation and amortization 243,346 180,134 63,212 35.1 %
Airport-related expenses 52,190 61,429 (9,239) (15.0)%
Aircraft fuel 32,234 56,507 (24,273) (43.0)%
Aircraft rentals 33,752 38,164 (4,412) (11.6)%
Special items — 21,869 (21,869) NM
CARES Act payroll support grant (151,938) — (151,938) NM
Other operating expenses 107,589 125,057 (17,468) (14.0)%
Total operating expenses $ 1,018,057 $ 1,227,565 $ (209,508) (17.1)%
Interest expense 61,130 65,278 (4,148) (6.4)%
Total airline expenses $ 1,079,187 $ 1,292,843 $ (213,656) (16.5)%
Salaries, wages and benefits. The $82.0 million decrease in salaries, wages and benefits was primarily due to a
reduction in scheduled departures and block hours related to the COVID-19 pandemic. Additionally, in response to the
COVID-19 pandemic, we have instituted a company-wide hiring freeze, suspended all non-scale pay increases and
offered voluntary unpaid leave to our employees.
Aircraft maintenance, materials and repairs. The $38.5 million increase in aircraft maintenance expense was
primarily due to an increase in direct maintenance costs incurred on a portion of SkyWest Airlines’ CRJ200 and CRJ700
fleet intended to extend the operational performance and reliability of the aircraft and increased engine maintenance
expense during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.
Depreciation and amortization. The $63.2 million increase in depreciation and amortization expense was
primarily due to a reduction in the estimated useful life of our owned CRJ200 fleet that resulted in approximately $45.8
million of incremental depreciation expense during the six months ended June 30, 2020 and due to the acquisition of
seven new E175 aircraft and spare engines since June 30, 2019.
Airport-related expenses. Airport-related expenses include airport-related customer service costs such as
outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees
and station rents (our employee customer service labor costs are reflected in salaries, wages and benefits). The $9.2
million decrease in airport-related expenses was primarily due to a decrease in scheduled departures resulting from the
COVID-19 pandemic.
Aircraft fuel. The $24.3 million decrease in fuel cost was primarily due to a reduction in the number of prorate
flights we operated and corresponding decrease in gallons of fuel we purchased and a decrease in our average fuel cost
per gallon from $2.50 for the six months ended June 30, 2019 to $2.00 for the six months ended June 30, 2020. We
purchase and incur expense for all fuel on flights operated under our prorate agreements. All fuel costs incurred under
our capacity purchase agreements are either purchased directly by our major airline partners or purchased by us and
reimbursed by our major airline partners, with the direct reimbursement recorded as a reduction to our fuel expense. The
following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods indicated:
For the six months ended June 30,
(in thousands) 2020 2019 % Change
Fuel gallons purchased 16,107 22,598 (28.7)%
Fuel expense $ 32,234 $ 56,507 (43.0)%
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Aircraft rentals. The $4.4 million decrease in aircraft rentals was primarily related to a reduction of our fleet
size that was financed through leases as a result of scheduled lease expirations subsequent to June 30, 2019.
Special Items. The $21.9 million special items expense for the six months ended June 30, 2019 related to a non-
cash write-off of $18.5 million in aircraft manufacturer part credits that we forfeited to settle future lease return
obligations with the aircraft manufacturer. The $18.5 million of expense was included in the SkyWest Airlines segment.
The special items expense also included $3.4 million of expense associated with a cash payout of certain ExpressJet
employees stock equity grants as part of the sale of ExpressJet, which was reflected in the ExpressJet segment. We did
not have a comparable special items expense during the six months ended June 30, 2020.
CARES Act payroll support grant. In April 2020, we entered into an agreement with Treasury to receive up to
$438.0 million in emergency relief through the CARES Act payroll support program, of which $336.6 million will be in
the form of payroll support grants, paid in installments through the end of July 2020. As of June 30, 2020, we received
$244.6 million in payroll support grants that is being recognized as a reduction in expense over the periods the grants are
intended to compensate. We recognized $151.9 million as a reduction in expense during the six months ended June 30,
2020 and expect to recognize the remainder of the grants from the CARES Act payroll support program as a reduction in
expense by the end of 2020.
Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability
insurance, simulator costs, crew per diem, and crew hotel costs. The $17.5 million decrease in other operating expenses
was primarily related to a decrease in the number of scheduled flights related to the COVID-19 pandemic during the six
months ended June 30, 2020.
Interest Expense. The $4.1 million decrease in interest expense was primarily related to the reduction in
outstanding long-term debt from $3.1 billion as of June 30, 2019 to $3.0 billion as of June 30, 2020.
Total airline expenses. The $213.7 million decrease in total airline expenses was primarily related to the
COVID-19 pandemic and the related decrease in scheduled departures and block hours during the six months ended June
30, 2020.
Summary of interest income, other income (expense) and provision for income taxes:
Interest income. Interest income decreased $3.3 million, or 43.6%, during the six months ended June 30, 2020,
compared to the six months ended June 30, 2019. The decrease in interest income was primarily related to a decrease in
interest rates earned on our marketable securities subsequent to June 30, 2019.
Other income (expense), net. During the six months ended June 30, 2020, we had other income, net of $0.8
million primarily related to income earned from our investment in a joint venture with a third party. During the six
months ended June 30, 2019, we had other income of $47.0 million primarily related to the gain on sale of ExpressJet.
Income taxes. Our provision for income taxes was 26.8% and 23.3% for the six months ended June 30, 2020
and 2019, respectively. The increase in the effective tax rate primarily relates to a lower discrete tax benefit from excess
tax deductions generated from employee equity transactions that occurred during the six months ended June 30, 2020
compared to the six months ended June 30, 2019 and a greater impact related to non-deductible expenses for the six
months ended June 30, 2020, compared to the six months ended June 30, 2019 as a result of lower pretax earnings for the
six months ended June 30, 2020 compared to the same period of 2019.
Net income. Primarily due to the factors described above, we generated net income of $4.3 million, or $0.08 per
diluted share, for the six months ended June 30, 2020, compared to net income of $176.2 million, or $3.40 per diluted
share, for the six months ended June 30, 2019.
35
Our Business Segments
Three Months Ended June 30, 2020 and 2019
For the three months ended June 30, 2020, we had two reportable segments, which were the basis of our internal
financial reporting: SkyWest Airlines and SkyWest Leasing. Our segment disclosure relates to components of our
business for which separate financial information is available to, and regularly evaluated by, our chief operating decision
maker.
For the three months ended June 30,
(dollar amounts in thousands)
2020 2019 $ Change % Change
Operating Revenues:
SkyWest Airlines operating revenue $ 227,808 $ 627,088 $ (399,280) (63.7)%
SkyWest Leasing operating revenues 122,231 117,295 4,936 4.2 %
Total Operating Revenues $ 350,039 $ 744,383 $ (394,344) (53.0)%
Airline Expenses:
SkyWest Airlines airline expense $ 279,307 $ 549,135 $ (269,828) (49.1)%
SkyWest Leasing airline expense 106,061 83,925 22,136 26.4 %
Total Airline Expenses (1) $ 385,368 $ 633,060 $ (247,692) (39.1)%
Segment profit (loss):
SkyWest Airlines segment profit (loss) $ (51,499) $ 77,953 $ (129,452) (166.1)%
SkyWest Leasing profit 16,170 33,370 (17,200) (51.5)%
Total Segment Profit (Loss) $ (35,329) $ 111,323 $ (146,652) (131.7)%
Interest Income 1,685 3,731 (2,046) (54.8)%
Other Income, net 402 281 121 43.1 %
Consolidated Income (Loss) Before Taxes $ (33,242) $ 115,335 $ (148,577) (128.8)%
(1) Total Airline Expenses includes operating expense and interest expense
SkyWest Airlines Segment Profit. SkyWest Airlines block hour production decreased to 126,026, or 66.0%, for
the three months ended June 30, 2020, from 370,782 for the three months ended June 30, 2019, primarily related to the
reduced demand for air travel due to the COVID-19 pandemic. Significant items contributing to the SkyWest Airlines
segment profit are set forth below.
The $399.3 million, or 63.7%, decrease in SkyWest Airlines Operating Revenues for the three months ended
June 30, 2020, compared to the three months ended June 30, 2019, was primarily due to the COVID-19 pandemic that
negatively impacted prorate revenue by $98.7 million and all other revenue (including capacity purchase agreement
revenue) by $300.6 million.
The $269.8 million, or 49.1%, decrease in SkyWest Airlines Airline Expenses for the three months ended June
30, 2020, compared to the three months ended June 30, 2019, was primarily due to the following factors:
• SkyWest Airlines’ salaries, wages and benefits expense decreased by $73.7 million, or 30.3%, primarily
due to the reduction in scheduled departures and block hours related to the COVID-19 pandemic.
• SkyWest Airlines’ depreciation and amortization expense increased by $18.8 million, or 46.2%, primarily
due to a decrease in the estimated useful life of SkyWest Airlines’ CRJ200 fleet and the related spare
engines.
• SkyWest Airlines’ fuel expense decreased $24.0 million, or 77.9%, primarily due to a decrease in the
volume of gallons purchased along with a decrease in the average fuel cost per gallon in 2020 compared to
2019. The average fuel cost per gallon was $1.45 and $2.57 for the three months ended June 30, 2020 and
2019, respectively.
36
• SkyWest Airlines recognized $151.9 million as a reduction in expense during the three months ended June
30, 2020 and expects to recognize the remainder of the grants from the CARES Act payroll support
program as a reduction in expenses by the end of 2020.
• SkyWest Airlines’ remaining airline expenses decreased $39.0 million, or 16.6%, primarily related to a
decrease in the number of scheduled flights related to the COVID-19 pandemic during the three months
ended June 30, 2020.
SkyWest Leasing Segment Profit. SkyWest Leasing profit decreased $17.2 million during the three months
ended June 30, 2020, compared to the three months ended June 30, 2019, primarily due to additional depreciation
expense resulting from a shortened estimated useful life of certain CRJ200 spare engines as a result of COVID-19,
partially offset by an additional seven new E175 aircraft added to our fleet subsequent to June 30, 2019.
Six Months Ended June 30, 2020 and 2019
For the six months ended June 30, 2020 and following the sale of ExpressJet, we had two reportable segments,
which were the basis of our internal financial reporting: SkyWest Airlines and SkyWest Leasing. Our segment disclosure
relates to components of our business for which separate financial information is available to, and regularly evaluated by,
our chief operating decision maker. Our operating segments for the six months ended June 30, 2019, prior to the sale of
ExpressJet, were SkyWest Airlines, ExpressJet and SkyWest Leasing. During 2019, our corporate overhead expense was
allocated to the operating expenses of SkyWest Airlines and ExpressJet.
For the six months ended June 30,
(dollar amounts in thousands)
2020 2019 $ Change % Change
Operating Revenues:
SkyWest Airlines operating revenue $ 834,650 $ 1,212,856 $ (378,206) (31.2)%
ExpressJet operating revenues — 24,050 (24,050) (100.0)%
SkyWest Leasing operating revenues 245,325 231,171 14,154 6.1 %
Total Operating Revenues $ 1,079,975 $ 1,468,077 $ (388,102) (26.4)%
Airline Expenses:
SkyWest Airlines airline expense $ 875,989 $ 1,098,854 $ (222,865) (20.3)%
ExpressJet airline expense — 28,690 (28,690) (100.0)%
SkyWest Leasing airline expense 203,198 165,299 37,899 22.9 %
Total Airline Expenses (1) $ 1,079,187 $ 1,292,843 $ (213,656) (16.5)%
Segment profit (loss):
SkyWest Airlines segment profit (loss) $ (41,339) $ 114,002 $ (155,341) (136.3)%
ExpressJet segment loss — (4,640) 4,640 (100.0)%
SkyWest Leasing profit 42,127 65,872 (23,745) (36.0)%
Total Segment Profit $ 788 $ 175,234 $ (174,446) (99.6)%
Interest Income 4,249 7,538 (3,289) (43.6)%
Other Income, net 800 47,006 (46,206) (98.3)%
Consolidated Income Before Taxes $ 5,837 $ 229,778 $ (223,941) (97.5)%
(1) Total Airline Expenses includes operating expense and interest expense
SkyWest Airlines Segment Profit. SkyWest Airlines block hour production decreased to 483,249, or 32.9%, for
the six months ended June 30, 2020, from 720,171 for the six months ended June 30, 2019, primarily due to the COVID-
19 pandemic. Significant items contributing to the SkyWest Airlines segment profit are set forth below.
The $378.2 million, or 31.2%, decrease in SkyWest Airlines Operating Revenues for the six months ended June
30, 2020, compared to the six months ended June 30, 2019, was primarily due to the COVID-19 pandemic that
negatively impacted prorate revenue by $104.4 million and all other revenue (including capacity purchase agreement
revenue) by $273.8 million.
37
The $222.9 million, or 20.3%, decrease in SkyWest Airlines Airline Expenses for the six months ended June 30,
2020, compared to the six months ended June 30, 2019, was primarily due to the following factors:
• SkyWest Airlines’ salaries, wages and benefits expense decreased by $67.9 million, or 14.0%, primarily
due to the reduction in scheduled departures and block hours related to the COVID-19 pandemic.
• SkyWest Airlines’ aircraft maintenance, materials and repairs expense increased by $42.7 million, or
18.5%, primarily attributable to an increase in maintenance parts expense and direct maintenance costs
incurred on a portion of SkyWest Airlines’ CRJ200 and CRJ700 fleet and increased engine maintenance
expense during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.
• SkyWest Airlines’ depreciation and amortization expense increased by $30.5 million, or 37.8%, primarily
due to a decrease in the estimated useful life of SkyWest Airlines’ CRJ200 fleet and the related spare
engines.
• SkyWest Airlines included special items related to a non-cash write-off of $18.5 million in aircraft
manufacturer part credits that we forfeited to settle future lease return obligations with the aircraft
manufacturer during the six months ended June 30, 2019.
• SkyWest Airlines’ fuel expense decreased $24.3 million, or 43.0%, primarily due to a decrease in the
volume of gallons purchased along with a decrease in the average fuel cost per gallon in 2020 compared to
2019. The average fuel cost per gallon was $2.00 and $2.50 for the six months ended June 30, 2020 and
2019, respectively.
• SkyWest Airlines recognized $151.9 million as a reduction in expense during the six months ended June
30, 2020 and expects to recognize the remainder of the grants from the CARES Act payroll support
program as a reduction in expenses by the end of 2020.
• SkyWest Airlines’ remaining airline expenses decreased $33.5 million, or 14.8%, primarily related to a
decrease in the number of scheduled flights related to the COVID-19 pandemic during the six months
ended June 30, 2020.
SkyWest Leasing Segment Profit. SkyWest Leasing profit decreased $23.7 million during the six months ended
June 30, 2020, compared to the six months ended June 30, 2019, primarily due to additional depreciation expense
resulting from a shortened estimated useful life of certain CRJ200 spare engines as a result of COVID-19, partially offset
by an additional seven new E175 aircraft added to our fleet subsequent to June 30, 2019.
38
Liquidity and Capital Resources
Sources and Uses of Cash
Cash Position and Liquidity. The following table provides a summary of the net cash provided by (used in) our
operating, investing and financing activities for the six months ended June 30, 2020 and 2019, and our total cash and
marketable securities positions as of June 30, 2020 and December 31, 2019 (in thousands):
For the six months ended June 30,
2020 2019 $ Change % Change
Net cash provided by operating activities $ 492,283 $ 362,123 $ 130,160 35.9 %
Net cash used in investing activities (70,623) (249,049) 178,426 (71.6)%
Net cash used in financing activities (56,619) (187,797) 131,178 (69.9)%
June 30, December 31,
2020 2019 $ Change % Change
Cash and cash equivalents $ 452,247 $ 87,206 $ 365,041 418.6 %
Marketable securities 309,823 432,966 (123,143) (28.4)%
Total cash and marketable securities $ 762,070 $ 520,172 $ 241,898 46.5 %
Cash Flows provided by Operating Activities
Cash flows from operating activities increased $130.2 million primarily due to deferred income related to the
CARES Act payroll grant of $92.7 million as of June 30, 2020, deferred revenue related to the amount of cash allocated
under our capacity purchase agreements in excess of revenue recognized of $69.1 million as of June 30, 2020 and an
increase in non-cash depreciation expense of $63.2 million for the six months ended June 30, 2020 compared to the same
period of 2019, partially offset by a decrease in cash provided by other working capital accounts during the six months
ended June 30, 2020 compared to the same period of 2019 and by a decrease in pretax income for the six months ended
June 30, 2020 compared to the same period of 2019.
Cash Flows used in Investing Activities
The $178.4 million decrease in cash used in investing activities was primarily due to the acquisition of 70
previously leased aircraft and five new E175 aircraft during the six months ended June 30, 2019, compared to the
acquisition of four used CRJ700 aircraft and two new E175 aircraft for the six months ended June 30, 2020. These
changes represented a $164.8 million decrease in aircraft purchases and related spare aircraft assets. Additionally, during
the six months ended June 30, 2019, we sold ExpressJet for $79.6 million partially offset by a note receivable issued to
the buyer of $26.4 million, resulting in net cash from the sale of ExpressJet of $53.2 million.
Cash Flows used in Financing Activities
The $131.2 million decrease in cash used in financing activities was primarily related to the decrease in
principal payments on long-term debt of $96.0 million for the six months ended June 30, 2020, compared to the six
months ended June 30, 2019. This decrease was primarily related to temporary deferrals on long-term debt payments we
received with certain lenders during the six months ended June 30, 2020. Additionally, during the six months ended June
30, 2020, we used an additional $26.2 million to purchase treasury shares and make income tax payments towards vested
employee equity awards compared to $68.9 million for the six months ended June 30, 2019.
Liquidity and Capital Resources as of June 30, 2020
Given the measures discussed above that we have implemented to mitigate the impact of the COVID-19
pandemic on our financial position and operations and our assumptions about its future impact on travel demand, which
could be materially different due to the inherent uncertainties of the current operating environment, we believe the
working capital currently available to us (including funds from government assistance provided or to be provided
39
pursuant to the CARES Act) will be sufficient to meet our present financial requirements, including anticipated
expansion, planned capital expenditures, and scheduled lease payments and debt service obligations for at least the next
12 months.
At June 30, 2020, our total capital mix was 44.6% equity and 55.4% long-term debt, compared to 45.3% equity
and 54.7% long-term debt at December 31, 2019.
In early July 2020, SkyWest Airlines executed a non-binding letter of intent with Treasury for approximately
$497.0 million in secured loans under the CARES Act and is evaluating the timing and level of participation in this loan
program.
Significant Commitments and Obligations
General
See Note 7, "Leases, Commitments and Contingencies," to the condensed consolidated financial statements for
our commitments and obligations for each of the next five years and thereafter.
Purchase Commitments and Options
We are coordinating with our major airline partners and aircraft manufactures on the timing of upcoming fleet
deliveries under previously announced deals in response to COVID-19 schedule reductions. The anticipated future
delivery dates summarized below are subject to change. As of June 30, 2020, we had a firm purchase commitment for 24
new E175 aircraft from Embraer, S.A. with delivery dates anticipated through 2022.
We have in recent years funded the majority of our aircraft acquisition cost with long-term debt. At the time of
each aircraft acquisition, we evaluate the financing alternatives available to us, and select an appropriate method to fund
the acquisition. At present, we intend to fund our acquisition of any additional aircraft through cash on hand and debt
financing. Based on current market conditions and discussions with prospective leasing organizations and financial
institutions, we currently believe that we will be able to obtain financing for our committed acquisitions, as well as
additional aircraft. We intend to finance the firm order for 24 new E175 aircraft with approximately 85% debt and the
remaining balance with cash.
Long-term Debt Obligations
As of June 30, 2020, we had $3.0 billion of long-term debt obligations, including current maturities, primarily
related to the acquisition of E175 aircraft. The average effective interest rate on the debt related to such aircraft was
approximately 4.1% at June 30, 2020.
Guarantees
We have guaranteed the obligations of SkyWest Airlines under the SkyWest Airlines Delta Connection
Agreement and the SkyWest Airlines United Express Agreement for the E175 aircraft. In addition, we have guaranteed
certain other SkyWest Airlines obligations under its aircraft financing and leasing agreements.
Seasonality
Our results of operations for any interim period are not necessarily indicative of those for an entire year, since
the airline industry is subject to seasonal fluctuations and general economic conditions. Our operations are somewhat
favorably affected by increased travel on our prorate routes, historically occurring during the summer months, and
unfavorably affected by decreased travel during the months November through February and by inclement weather,
which may occasionally or frequently, depending on the severity of the inclement weather in any given winter, result in
cancelled flights during the winter months. The COVID-19 pandemic has negatively impacted our summer schedule and
we anticipate that it will continue to have a negative impact throughout the remainder of 2020. The magnitude of the
40
impact will depend on various factors including passenger demand and the related flight schedules we are requested to
operate by our major airline partners under our capacity purchase agreements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Aircraft Fuel
In the past, we have not experienced difficulties with fuel availability and we currently expect to be able to
obtain fuel at prevailing prices in quantities sufficient to meet our future needs. Pursuant to our capacity purchase
agreements, United, Delta, Alaska and American have agreed to bear the economic risk of fuel price fluctuations on our
contracted flights. We bear the economic risk of fuel price fluctuations on our prorate operations. For the six months
ended June 30, 2020, prorate flying arrangements represented approximately 13.1% of our total flying agreements
revenue. For illustrative purposes only, we have estimated the impact of the market risk of fuel price fluctuations on our
prorate operations using a hypothetical increase of 25% in the price per gallon we purchase. Based on this hypothetical
assumption, we would have incurred an additional $8.1 million in fuel expense for the six months ended June 30, 2020.
Interest Rates
As of June 30, 2020, all of our interest rates on our long-term debt were fixed rates. We currently intend to
finance the acquisition of aircraft through manufacturer financing or long-term borrowings. Changes in interest rates may
impact the actual cost to us to acquire future aircraft. To the extent we place new aircraft in service under our code-share
agreements with Delta, United, American, Alaska or other carriers, our code-share agreements currently provide that
reimbursement rates will be adjusted to reflect the interest rates effective at the closing of the respective aircraft
financing.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation
of our disclosure controls and procedures, which have been designed to ensure that information we are required to
disclose in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Our
management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of June 30, 2020,
those controls and procedures were effective to ensure that information we are required to disclose in the reports we file
or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control
During the six months ended June 30, 2020, we implemented changes to our processes in response to the
adoption of Accounting Standards Update No. 2016-13, “Financial Instruments- Credit Losses (Topic 326) Measurement
of Credit Losses on Financial Instruments” (“Topic 326”) that became effective January 1, 2020. The operating
effectiveness of these changes will be evaluated as part of our annual assessment of the effectiveness of internal controls
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to certain legal actions which we consider routine to our business activities. As of June 30, 2020,
our management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters was not
likely to have a material adverse effect on our financial position, liquidity or results of operations.
41
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Report, you should carefully consider the factors discussed
in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, in Part II,
Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in our other
filings with the SEC, which factors could materially affect our business, financial condition and results of operations.
The risks described in our reports filed with the SEC are not the only risks facing our company. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition and results of operations. The information presented below updates, and should be read
in conjunction with, the risk factors and information disclosed in our Form 10-K and Form 10-Q for the quarter ended
March 31, 2020.
The outbreak and global spread of COVID-19 has resulted in a severe decline in demand for air travel which
has adversely impacted our and our major airline partners’ business, operating results, financial condition and
liquidity. The duration and severity of the COVID-19 pandemic, and similar public health threats that we may face in
the future, could result in additional adverse effects on our and our major airline partners’ business, operating
results, financial condition and liquidity.
In December 2019, a novel strain of coronavirus, COVID-19, was reported in Wuhan, China, and the World
Health Organization subsequently declared COVID-19 a global health pandemic. On March 11, 2020, the U.S.
Department of State issued a global Level 3 “reconsider travel” advisory for all travel abroad. On March 13, 2020, the
U.S. government declared a national emergency. On March 19, 2020, the U.S. Department of State issued a global Level
4 “do not travel” advisory advising U.S. citizens to avoid all international travel due to the global impact of COVID-19.
Additionally, the U.S. government has issued a travel advisory for residents of certain areas of the country due to
extensive community transmission of COVID-19 in the area. The U.S. government has also implemented enhanced
screenings, mandatory 14-day quarantine requirements and other travel restrictions in connection with the COVID-19
pandemic, including restrictions on travel from Mexico and Canada, and many foreign and U.S. state governments have
instituted similar measures and declared states of emergency.
The COVID-19 outbreak, along with the measures governments and private organizations worldwide have
implemented in an attempt to contain the spread of this pandemic, has resulted in a severe decline in demand for air
travel, which has adversely affected our and our major airline partners’ business, operations and financial condition to an
unprecedented extent. Measures ranging from travel restrictions, “shelter in place” and quarantine orders, limitations on
public gatherings to cancellation of public events have resulted in a precipitous decline in demand for both domestic and
international business and leisure travel. In response to this material decrease in demand, our major airline partners, upon
whom we depend to contract with us and to set our flight schedules, have drastically reduced their summer capacity in
2020 compared to 2019, and possibly more cuts beyond. We in turn have significantly reduced our capacity. Prior to the
COVID-19 pandemic, we anticipated operating approximately 2,500 to 2,600 daily departures in the month of July 2020;
however, in July 2020, we typically operated between approximately 1,200 to 1,400 daily departures as a result of
COVID-19-related schedule reductions. We also anticipate similar schedule reductions will likely continue into the third
quarter of 2020 and may continue throughout the remainder of 2020 and into 2021. We will continue to work with our
major airline partners regarding future schedules and make further demand-driven adjustments to our capacity as needed.
Additionally, we anticipate certain aircraft with scheduled contract expirations in 2020 will not be extended as a result of
decreased demand, including 36 CRJ200 aircraft operating under the SkyWest Airlines Delta Connection Agreement.
We also terminated our American Prorate Agreement on seven CRJ200 aircraft in the second quarter of 2020 and we
may have further reductions in the number of CRJ200 aircraft operating under our prorate agreements. We may have
further reductions in the number of CRJ200 aircraft operating under prorate agreements with our other major airline
partners throughout 2020 and into 2021. We also may receive requests by our major airline partners to defer deliveries of
new or used aircraft that were previously scheduled for 2020, 2021 and 2022. The duration and severity of the COVID-
19 pandemic remain uncertain, and there can be no assurance that these actions will suffice to sustain our business and
operations through this pandemic.
During the second quarter of 2020, the COVID-19 pandemic had a negative impact on our revenues. The
number of aircraft operating under our prorate agreements decreased from 64 aircraft as of June 30, 2019 to 47 aircraft as
42
of June 30, 2020, or 26.6%. Additionally, our prorate revenue decreased from $134.9 million for the three months ended
June 30, 2019 to $36.2 million for the three months ended June 30, 2020, or 73.2%. The negative impact to our revenues
as a result of the COVID-19 pandemic and its associated effects on the travel industry is anticipated to continue into the
third quarter of 2020 and throughout the remainder of 2020 and into 2021. Additionally, the majority of our code-share
agreements set forth minimum levels of flight operations which our major airline partners are required to schedule for
our operations and we are required to provide. These minimum flight operating levels are intended to provide a baseline
level of expected utilization of aircraft, labor, maintenance facilities and related flight operations support. Historically,
our major airline partners have utilized our flight operations at levels which exceed the minimum levels set forth in our
code-share agreements; however, the COVID-19 pandemic will likely cause our major airline partners to reduce our
utilization below the minimum levels. Given the significant impact COVID-19 has had on the airline industry, including
our major airline partners, we have waived enforcing such minimum utilization contract provisions during the three
months ended June 30, 2020. We may continue to waive the minimum utilization contract provisions prospectively. We
may not be able to maintain operating efficiencies previously obtained, which would negatively impact our operating
results and financial condition.
On April 23, 2020, SkyWest Airlines entered into the PSP Agreement with Treasury with respect to the Payroll
Support Program under the CARES Act and, as of June 30, 2020, SkyWest Airlines had received $306.6 million of the
expected $438.0 million. Of the $438.0 million, approximately $336.6 million will be a direct grant and approximately
$101.4 million will be in the form of a ten-year, low interest unsecured term loan. The Payroll Support Program includes
certain restrictions, including limitations on involuntary terminations and furloughs through September 30, 2020,
requirements to maintain certain levels of scheduled service, restrictions on the payment of dividends and the repurchase
of our common stock through September 30, 2021, and certain limitations on executive compensation. The substance
and duration of these restrictions will materially affect our operations, and we may not be successful in managing these
impacts.
We may also take additional actions to improve our financial position, including measures to improve liquidity,
such as drawing down on SkyWest Airlines’ line of credit, the issuance of secured debt securities, and/or the entry into
other debt facilities. There can be no assurance as to the timing of any such drawdown or issuance, which may be in the
near term, or that any such additional financing will be completed on favorable terms, or at all. Any such actions could
be conducted in the near term, may be material in nature and could result in significant additional borrowing. Measures
to improve liquidity or other strategic actions that we may take in the future in response to COVID-19 may not be
effective in offsetting decreased demand, and we will not be permitted to take certain strategic actions as a result of the
CARES Act, which could result in a material adverse effect on our business, operating results and financial condition.
The full extent of the ongoing impact of COVID-19 on our longer-term operational and financial performance
will depend on future developments, many of which are outside of our control, including the effectiveness of the
mitigation strategies discussed above, the duration and spread of COVID-19 and related travel advisories and
restrictions, the impact of COVID-19 on overall long-term demand for air travel, the impact of COVID-19 on our
financial health and operations and that of our major airline partners, and future governmental actions, all of which are
highly uncertain and cannot be predicted. The COVID-19 pandemic has had a material impact, and the continuation of
reduced demand could have a material adverse effect, on our business, operating results, financial condition and
liquidity. Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or
otherwise, they may also have the effect of heightening many of the other risks set forth in our Annual Report on Form
10-K for the year ended December 31, 2019.
In addition, a further outbreak of COVID-19, an outbreak of another disease or similar public health threat, or
fear of such an event, that affects travel demand, travel behavior or travel restrictions could have a material adverse
impact on our business, financial condition and operating results and those of our major airline partners. Outbreaks of
other diseases could also result in increased government restrictions and regulation, such as those actions described
above or otherwise, which could adversely affect our operations.
We have a significant amount of contractual long-term debt obligations.
43
As of June 30, 2020, we had a total of approximately $3.0 billion in total long-term debt obligations.
Substantially all of this long-term debt was incurred in connection with the acquisition of aircraft and engines. We also
have significant long-term lease obligations primarily relating to our aircraft fleet. As of June 30, 2020, we had 107
aircraft under operating leases with remaining terms ranging from less than one year to ten years. Future minimum lease
payments due under all long-term operating leases were approximately $406.6 million at June 30, 2020. At a 6.14%
discount factor, which is the average rate used to approximate the implicit rates within the applicable leases, the present
value of these lease obligations was equal to approximately $326.0 million at June 30, 2020. Our high level of fixed
obligations could impact our ability to obtain additional financing to support additional expansion plans or divert cash
flows from operations and expansion plans to service the fixed obligations.
Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning or
leasing the aircraft on a monthly basis. The aircraft compensation structure varies by agreement but is intended to cover
either our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft
lease expense costs while the aircraft is under contract. In the event any of our major airline partners defaults under a
capacity purchase agreement or we are unable to extend the flying contract terms on aircraft with ongoing financial
obligations, our financial position and financial results could be materially adversely affected.
In addition, in response to the travel restrictions, decreased demand and other effects the COVID-19 pandemic
has had and is expected to have on our business, we may seek material amounts of additional financial liquidity in the
short-term, which may include drawing down on SkyWest Airlines’ line of credit, the issuance of secured debt securities
and/or the entry into other debt facilities, among other items. There can be no assurance as to the timing of any such
drawdown or issuance, which may be in the near term, or that any such additional financing will be completed on
favorable terms, or at all. In addition, we have received financial assistance that is available to the airline industry under
the CARES Act, which financial assistance subjects us and our business to certain restrictions, including, but not limited
to, limitations on involuntary terminations and furloughs through September 30, 2020, requirements to maintain certain
levels of scheduled service, restrictions on the payment of dividends and the repurchase of our common stock through
September 30, 2021, and certain limitations on executive compensation.
Although the Company's cash flows from operations and its available capital have been sufficient to meet its
obligations and commitments to date, the Company's liquidity has been, and may in the future be, negatively affected by
the risk factors discussed in our Form 10-K for the year ended December 31, 2019, as updated by this Quarterly Report,
including risks related to future results arising from the COVID-19 pandemic. If our liquidity is materially diminished,
we might not be able to timely pay our leases and debts or comply with certain covenants under SkyWest Airlines’ line
of credit or with other material provisions of our contractual obligations.
44
ITEM 6. EXHIBITS
4.1 Warrant Agreement, dated as of April 23, 2020, by and between SkyWest, Inc. and the United States
Department of the Treasury.
4.2 Form of Warrant (incorporated by reference to Annex B of Exhibit 4.1).
10.1 Payroll Support Program Agreement, dated of April 23, 2020, by and between SkyWest Airlines, Inc.
and the United States Department of the Treasury.
10.2 Promissory Note, dated as of April 23, 2020, issued by SkyWest Airlines, Inc. to the United States
Department of the Treasury and guaranteed by SkyWest, Inc.
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer
32.2 Certification of Chief Financial Officer
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
45
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 7, 2020.
SKYWEST, INC.
By /s/ Robert J. Simmons
Robert J. Simmons
Chief Financial Officer
46
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47
2019 ANNUAL REPORT
N o t i c e o f 2 0 2 0 A n n u a l M e e t i n g a n d P rox y S t a t e m e n t
S K Y W E S T R O U T E S Y S T E M
Edmonton Saskatoon
Calgary
Winnipeg
Vancouver
Kalispell International Falls
Minot Devils Lake
Everett Spokane Williston Bemidji
Great Falls Grand Forks Hibbing Houghton/Hancock
Seattle/Tacoma Fargo
Pullman-Moscow Missoula Bismarck
Helena Duluth Marquette
Pasco/Kennewick Lewiston Jamestown Brainerd Sault Ste Marie
Butte Billings Iron Mountain
Bozeman Rhinelander
Portland Escanaba Pellston
Aberdeen Minneapolis/St. Paul
Green Bay Alpena Plattsburgh
Sheridan Pierre Watertown Eau Claire Ogdensburg
Eugene Redmond/Bend Rapid City Traverse City Burlington
Gillette La Crosse Appleton Toronto
Boise Sun Valley Idaho Falls Sioux Falls Muskegon Saginaw Portland
North Bend Jackson Hole Rochester Syracuse
Rochester Madison
Grand Rapids Flint Albany Manchester
Twin Falls Riverton Casper Milwaukee
Medford Pocatello Ithaca Boston
Cedar Rapids
Lansing Detroit
Erie
Buffalo Binghamton Worcester
Scottsbluff Kalamazoo Elmira Hartford
Rock Springs Des Moines
Laramie North Platte Moline Chicago Kalamazoo Wilkes-Barre/Scranton Providence
Cheyenne South Bend
Hayden/Steamboat Springs Omaha Cleveland State College White Plains Newburgh
New York
Arcata/Eureka Redding Elko Kearney Lincoln Peoria Fort Wayne Akron-Canton
Salt Lake City Allentown Newark
Eagle Columbus Philadelphia
Reno Vernal Denver Indianapolis Pittsburgh Harrisburg
Dayton
Manhattan Kansas City Springfield Baltimore
Sacramento Grand Junction Aspen Colorado Springs Hays Cincinnati Clarksburg
Columbia Washington, DC
Salina Louisville Charleston
Santa Rosa Stockton Gunnison St. Louis Evansville Shenandoah
Mammoth Lakes Moab Montrose
Pueblo Dodge City Lewisburg Charlottesville
San Francisco Oakland Cedar City Wichita Lexington Roanoke
Liberal Springfield Cape Girardeau
San Jose St. George Durango Richmond
Fresno Paducah Norfolk
Monterey Tri-Cities
Las Vegas Nashville Greensboro
Knoxville
Amarillo Tulsa NW Arkansas/Fayetteville Raleigh/Durham
Bakersfield Flagstaff Santa Fe Fort Smith Asheville Fayetteville
San Luis Obispo Oklahoma City Memphis Chattanooga
Prescott Albuquerque Lawton Charlotte
Santa Barbara Burbank Little Rock Huntsville Greenville
Ontario Wilmington
Los Angeles Palm Springs Phoenix Lubbock Columbus Atlanta Columbia
Long Beach Orange County Myrtle Beach
Roswell Birmingham
Yuma Tucson Hobbs Monroe Columbus Charleston
San Diego Dallas Jackson Meridian
Shreveport
Midland San Angelo Waco Tyler Hattiesburg Montgomery Albany Savannah
El Paso
Killeen Mobile Dothan Valdosta Brunswick
College Station
Baton Rouge
Lafayette Pensacola Jacksonville
Austin
Lake Charles New Orleans Gainesville
Houston
Hermosillo San Antonio
Chihuahua
Laredo Corpus Christi
Sarasota/Bradenton
Mazatlán
Pacific Mountain Central Eastern Atlantic
8:00 9:00 (Arizona does not observe Daylight Savings) 10:00 11:00 NOON
EFFECTIVE FEBRUARY 2020
To our Shareholders,
The past several years have been transformative for SkyWest as we look to minimize risk, increase
our market share within scope constraints, and solidify our leasing platform to maximize cash flow. A
key component of this strategy has been a significant fleet transition as we’ve taken on more than 150
new E175 aircraft, completed the sale of ExpressJet Airlines and moved forward with a smaller, more
efficient footprint. Our ability to execute these significant changes as we accept new aircraft and
transition others is only made possible through the dedication and good work of our more than 14,000
employees.
Our customers and the industry continue to expect and demand exceptional safety, reliability and
service. We believe the progress we’ve made at SkyWest uniquely positions us to deliver better than any
other airline in our space. Our operational and cultural successes continue to drive demand for our
product, and our pilot availability and fleet flexibility make us well positioned to deliver on that
demand.
During 2019, we secured substantial market share wins and continued to enhance our partners’
confidence in the SkyWest product. We reached new and extended agreements with our partners
throughout the year, solidifying a key component of our strategy to mitigate tail risk and maintain the
flexibility necessary to adapt and quickly respond to what our partners need and have come to expect
from SkyWest Airlines.
We also continued monetizing our assets within our leasing operation during 2019. Demand for
engines remains especially strong, and our leasing business continues to demonstrate SkyWest’s
creativity and ability to utilize the assets within our operational footprint profitably while maintaining a
clear focus on our contract partnerships.
Much uncertainty has been introduced into the US economy in early 2020 as a result of the spread
of the COVID-19 virus, and we are not immune to this. As we look ahead to the rest of 2020 and
beyond, we don’t know what the economic environment will look like, but we remain very focused on a
few key areas that make up the foundation of our current and future success. We believe our
competitive advantage is and will continue to be our ability to provide best in class operations, maintain
strong liquidity, and invest for the future. We believe as we remain firm in our execution of these
objectives, SkyWest will continue to deliver on its mission for employees, our customers and our
investors. We want to thank our team of professionals for their good work in delivering exceptional
performance and world-class service to our more than 40 million passengers last year.
13MAR200820562581 6MAR201519070928
Jerry C. Atkin Russell A. ‘‘Chip’’ Childs
Chairman Chief Executive Officer and President
SkyWest, Inc. SkyWest, Inc.
(This page has been left blank intentionally.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-14719
SKYWEST, INC.
Incorporated under the Laws of Utah 87-0292166
(IRS Employer ID No.)
444 South River Road
St. George, Utah 84790
(435) 634-3000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on which Registered
Common Stock, No Par Value SKYW The Nasdaq Global Select Market
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
The aggregate market value of the registrant’s common stock held by non-affiliates (based upon the closing sale price of the
registrant’s common stock on The Nasdaq Global Select Market) on June 28, 2019 was approximately $3,157,616,762.
As of February 12, 2020, there were 50,474,289 shares of the registrant’s common stock outstanding.
Documents Incorporated by Reference
Portions of the registrant’s proxy statement to be used in connection with the registrant’s 2020 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Report as specified. Such proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2019.
SKYWEST, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Page No.
PART I
Cautionary Statement Concerning Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . 69
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
PART IV
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
2
PART I
Unless otherwise indicated in this Report, “SkyWest,” “we,” “us,” “our” and similar terms refer to
SkyWest, Inc., including SkyWest’s wholly-owned subsidiary SkyWest Airlines, Inc. “SkyWest Airlines” refers to our
wholly-owned subsidiary SkyWest Airlines, Inc., and "ExpressJet" refers to our former wholly-owned subsidiary
ExpressJet Airlines, Inc.
On January 22, 2019, we completed the sale of ExpressJet. Our financial and operating results for the years
ended December 31, 2017, 2018 and 2019, and our financial position as of December 31, 2018 contained in this Report,
include the financial results and position of ExpressJet for those respective periods, as the sale of ExpressJet did not
qualify for presentation of discontinued operations (see Note 2 in the accompanying financial statements).
Cautionary Statement Concerning Forward-Looking Statements
Certain of the statements contained in this Report should be considered “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by
words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,”
“should,” “hope,” “likely,” and “continue” and similar terms used in connection with statements regarding our outlook,
anticipated operations, the revenue environment, our contractual relationships, and our anticipated financial performance.
These statements include, but are not limited to, statements about our future growth and development plans, including
our future financial and operating results, our plans, objectives, expectations and intentions and other statements that are
not historical facts. Readers should keep in mind that all forward-looking statements are based on our existing beliefs
about present and future events outside of our control and on assumptions that may prove to be incorrect. If one or more
risks identified in this Report materializes, or any other underlying assumption proves incorrect, our actual results will
vary, and may vary materially, from those anticipated, estimated, projected, or intended for a number of reasons,
including but not limited to: the challenges of competing successfully in a highly competitive and rapidly changing
industry; developments associated with fluctuations in the economy and the demand for air travel; the financial stability
of Delta Air Lines, Inc. (“Delta”), United Airlines, Inc. (“United”), American Airlines, Inc. (“American”) and Alaska
Airlines, Inc. (“Alaska”) (each, a “major airline partner”) and any potential impact of their financial condition on our
operations; fluctuations in flight schedules, which are determined by the major airline partners for whom SkyWest
conducts flight operations; variations in market and economic conditions; significant aircraft lease and debt
commitments; residual aircraft values and related impairment charges; the impact of global instability; labor relations
and costs; potential fluctuations in fuel costs, and potential fuel shortages; the impact of weather-related or other natural
disasters on air travel and airline costs; new aircraft deliveries; and the ability to attract and retain qualified pilots, as well
as the other factors described below in Item 1A. Risk Factors.
There may be other factors that may affect matters discussed in forward-looking statements set forth in this
Report, which factors may also cause actual results to differ materially from those discussed. We assume no obligation to
publicly update any forward-looking statement to reflect actual results, changes in assumptions or changes in other
factors affecting these statements other than as required by applicable law.
ITEM 1. BUSINESS
General
We offer scheduled passenger service to destinations in the United States, Canada, Mexico and the Caribbean.
Substantially all of our flights are operated as Delta Connection, United Express, American Eagle or Alaska Airlines
flights under code-share arrangements (commercial agreements between airlines that, among other things, allow one
airline to use another airline’s flight designator codes on its flights) with Delta, United, American or Alaska,
respectively. As of December 31, 2019, we offered approximately 2,300 daily departures, of which approximately 960
were Delta Connection flights, 850 were United Express flights, 340 were American Eagle flights and 150 were Alaska
Airlines flights. We generally provide regional flying to our major airline partners under long-term, fixed-fee, code-share
agreements. Under these fixed-fee agreements, our major airline partners generally pay us fixed rates for operating the
aircraft primarily based on the number of completed flights, flight time and the number of aircraft under contract. The
major airline partners either directly pay for or reimburse us for specified direct operating expenses (including fuel
3
expense). Our operations are conducted principally from airports located in Chicago (O’Hare), Denver, Houston, Los
Angeles, Minneapolis, Phoenix, Salt Lake City, San Francisco and Seattle.
SkyWest has been flying since 1972. During our long operating history, we have developed an industry-leading
reputation for providing quality regional airline service. As of December 31, 2019, we had 483 aircraft in scheduled
service consisting of the following:
CRJ200 CRJ700 CRJ900 E175 Total
Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 13 43 59 199
United . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 19 — 65 183
American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 62 — — 69
Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 32 32
Aircraft in scheduled service . . . . . . . . . . . . . . . . . . . . . . . . . 190 94 43 156 483
Subleased to an un-affiliated entity . . . . . . . . . . . . . . . . . . . . 4 10 5 — 19
Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 22 — — 42
Total Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 126 48 156 544
*As of December 31, 2019, these aircraft have been removed from service and are in the process of being placed under a
leasing arrangement with a third party, are aircraft transitioning between code-share agreements with our major airline
partners and being used as supplemental spare aircraft, or are in the process of being parted out.
As of December 31, 2019, our fleet scheduled for service consisted of aircraft manufactured by Bombardier
Aerospace (“Bombardier”) and Embraer S.A. (“Embraer”) summarized as follows:
Manufacturer Aircraft Type Seat Configuration
Bombardier . . . CRJ900s 76
Bombardier . . . CRJ700s 65-70
Bombardier . . . CRJ200s 50
Embraer . . . . . . E175s 70-76
Bombardier and Embraer are the primary manufacturers of regional jets operated in the United States and offer
many of the amenities of larger commercial jet aircraft, including flight attendant service, a stand-up cabin, overhead and
under seat storage, lavatories and in-flight snack and beverage service. The speed of Bombardier and Embraer regional
jets is comparable to larger aircraft operated by major airlines, and they have a range of approximately 1,600 miles and
2,100 miles, respectively.
We were incorporated in Utah in 1972. Our principal executive offices are located at 444 South River Road,
St. George, Utah 84790, and our primary telephone number is (435) 634-3000. We maintain an internet website at
inc.skywest.com, which provides links to our annual, quarterly and current reports filed with the Securities and Exchange
Commission (“SEC”). The information on our website does not constitute part of this Report. In addition, we provide
electronic or paper copies of our SEC filings free of charge upon request.
We conduct our code-share operations with our major airline partners pursuant to the following agreements:
Major airline partner Agreement
United . . . . . . . . . . . “United Express Agreements” and “United Express Prorate Agreement”
Delta . . . . . . . . . . . . “Delta Connection Agreement” and “Delta Connection Prorate Agreement”
American . . . . . . . . “American Agreement” and “American Prorate Agreement”
Alaska . . . . . . . . . . . “Alaska Agreement”
A summary of the terms for each of our code-share agreements is provided under the heading “Code-Share
Agreements” below on page [6].
4
ExpressJet
Prior to our sale of ExpressJet in January 2019, ExpressJet provided regional jet service to airports primarily
located in the Eastern and Midwestern United States, as well as Mexico, Canada and the Caribbean. ExpressJet’s
operations were conducted principally from airports located in Atlanta, Chicago (O’Hare), Houston, Newark and New
York.
SkyWest Leasing
The SkyWest Leasing segment includes revenue attributed to our Embraer E175 dual-class regional jet aircraft
(“E175”) ownership cost earned under the applicable fixed-fee contracts, and the depreciation and interest expense of our
E175 aircraft. The SkyWest Leasing segment’s total assets and capital expenditures include the acquired E175 aircraft.
The SkyWest Leasing segment additionally includes the revenue and expense from leasing aircraft and engines to third
parties.
Competition and Economic Conditions
The airline industry is highly competitive. SkyWest competes principally with other regional airlines. Our
operations extend throughout most major geographic markets in the United States. Our competition includes, therefore,
nearly every other domestic regional airline. Our primary competitors include Air Wisconsin Airlines Corporation (“Air
Wisconsin”); Endeavor Air, Inc. (“Endeavor”) (owned by Delta); Envoy Air Inc. (“Envoy”), PSA Airlines, Inc. (“PSA”)
and Piedmont Airlines (“Piedmont”) (Envoy, PSA and Piedmont are owned by American); ExpressJet (subsequent to
January 2019); Horizon Air Industries, Inc. (“Horizon”) (owned by Alaska Air Group, Inc.); Mesa Air Group, Inc.
(“Mesa”); Republic Airways Holdings Inc. (“Republic”); and Trans States Airlines, Inc. (“Trans States”). Major airlines
typically award code-share flying arrangements to regional airlines based primarily upon the following criteria: ability to
fly contracted schedules, availability of labor resources, including pilots, low operating cost, financial resources,
geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages
and the overall image of the regional airline.
The principal competitive factors for regional airline code-share arrangements include labor resources,
code-share agreement terms, reliable flight operations, operating cost structure, ability to finance new aircraft,
certification to operate certain aircraft types and geographical infrastructure and markets and routes served.
Our operations represent the largest regional airline operations in the United States. However, regional carriers
owned by major airlines may have access to greater resources than we do through their parent companies.
Generally, the airline industry is sensitive to changes in general economic conditions. Economic downturns,
combined with competitive pressures, have contributed to a number of reorganizations, bankruptcies, liquidations and
business combinations among major and regional carriers. The effect of economic downturns may be somewhat
mitigated by our predominantly contract-based flying arrangements. If, however, any of our major airline partners
experience a prolonged decline in the number of passengers or are negatively affected by low ticket prices or high fuel
prices, they may seek rate reductions in future code-share agreements, or materially reduce scheduled flights in order to
reduce their costs. In addition, adverse weather conditions can impact our ability to complete scheduled flights and can
have a negative impact on our operations and financial condition.
Industry Overview
Majors, Low-Cost Carriers and Regional Airlines
The airline industry in the United States has traditionally been comprised of several major airlines, including
Alaska, American, Delta and United. The major airlines offer scheduled flights to most major U.S. cities, numerous
smaller U.S. cities, and cities throughout the world through a hub and spoke network.
Low-cost carriers, such as Southwest Airlines Co. (“Southwest”) and JetBlue Airways Corporation (“JetBlue”),
generally offer fewer conveniences to travelers and have lower cost structures than major airlines, which permits them to
offer flights to and from many of the same markets as the major airlines, but at lower prices.
5
Regional airlines, including SkyWest, typically operate smaller aircraft on shorter distance routes than major
and low-cost carriers. Several regional airlines, including Endeavor, Envoy, Horizon, Piedmont and PSA, are
wholly-owned subsidiaries of major airlines.
Regional airlines generally do not try to establish an independent route system to compete with the major
airlines. Rather, regional airlines typically enter into relationships with one or more major airlines, pursuant to which the
regional airline agrees to use its smaller, lower-cost aircraft to carry passengers booked and ticketed by the major airline
between a hub of the major airline and a smaller outlying city. In exchange for such services, the major airline pays the
regional airline either a fixed flight fee, termed “contract” or “fixed-fee” flights, or the regional airline receives a
percentage of applicable passenger ticket revenues, termed “prorate” or “revenue-sharing” flights, as described in more
detail below.
Code-Share Agreements
Regional airlines generally enter into code-share agreements with major airlines, pursuant to which the regional
airline is authorized to use the major airline’s two-letter flight designator codes to identify the regional airline’s flights
and fares in the central reservation systems, to paint its aircraft with the colors and/or logos of the major airline and to
market and advertise its status as a carrier for the major airline. Code-share agreements also generally obligate the major
airline to provide services such as reservations, ticketing, ground support and gate access to the regional airline, and the
major airline often coordinates marketing, advertising and other promotional efforts. In exchange, the regional airline
provides a designated number of low-capacity (usually between 50 and 76 seats) flights between larger airports served
by the major airline and surrounding cities, usually in lower-volume markets. The financial arrangements between the
regional airlines and their code-share partners usually involve either fixed-fee arrangements or revenue-sharing
arrangements as explained below:
• Fixed-Fee Arrangements. Under a fixed-fee arrangement (referred to as a “fixed-fee arrangement,” “fixed-
fee contract,” “contract flying” or a “capacity purchase agreement”), the major airline generally pays the
regional airline a fixed-fee for each departure, flight hour (measured from takeoff to landing, excluding taxi
time) and block hour (measured from takeoff to landing, including taxi time) incurred, and an amount per
aircraft in service each month with additional incentives based on completion of flights, on-time
performance and other operating metrics. The regional airline typically acquires or finances the aircraft
used under the fixed-fee arrangement, which is considered a lease of the aircraft to our major airline
partner. In addition, under a fixed fee arrangement, the major airline bears the risk of fuel price fluctuations
and certain other costs. Regional airlines benefit from fixed-fee arrangements because they are protected
from some of the elements that cause volatility in airline financial performance, including variations in
ticket prices, number of passengers and fuel prices. However, regional airlines in fixed-fee arrangements
generally do not benefit from positive trends in ticket prices, ancillary revenue, such as baggage and food
and beverage fees, the number of passengers enplaned or fuel prices, because the major airlines retain
passenger fare volatility risk and fuel costs associated with the regional airline flight.
• Revenue-Sharing Arrangements. Under a revenue-sharing arrangement (referred to as a “revenue-sharing”
arrangement or “prorate” arrangement), the major airline and regional airline negotiate a passenger fare
proration formula for specifically identified routes, pursuant to which the regional airline receives a
percentage of the ticket revenues for those passengers traveling for one portion of their trip on the regional
airline and the other portion of their trip on the major airline. On the other hand, the regional airline
receives all of the passenger fare when a passenger purchases a ticket on a route solely operated by the
regional airline. Substantially all costs associated with the regional airline flight are borne by the regional
airline. In a revenue-sharing arrangement, the regional airline may realize increased profits as ticket prices
and passenger loads increase or fuel prices decrease and, correspondingly, the regional airline may realize
decreased profits as ticket prices and passenger loads decrease or fuel prices increase.
We have code-share agreements with Delta, United, American and Alaska.
During the year ended December 31, 2019, approximately 82.0% of our flying agreements revenue related to
fixed-fee contract flights, where Delta, United, American and Alaska controlled scheduling, ticketing, pricing and seat
inventories. The remainder of our flying agreements revenue during the year ended December 31, 2019 related to prorate
6
flights for Delta, United or American, where we controlled scheduling, pricing and seat inventories, and shared
passenger fares with Delta, United or American according to prorate formulas. The routes placed under our prorate
arrangements typically include flight service between one of our partners’ hub cities and a city not served under our
fixed-fee arrangements.
Under our fixed-fee arrangements, our major airline partners compensate us for our costs of owning or leasing
the aircraft on a monthly basis. The aircraft compensation structure varies by agreement but is intended to cover either
our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease
expense costs while the aircraft is under contract. The number of aircraft under our fixed-fee arrangements and our
prorate arrangements as of December 31, 2019 is reflected in the summary below. The following summaries of our code-
share agreements with our major airline partners do not purport to be complete and are qualified in their entirety by
reference to the applicable agreement.
Delta Connection Agreements
Number of
Agreement Aircraft type Aircraft Term / Termination Dates
Delta Connection Agreement . . . . . . . . . . . • CRJ 200 55 • Individual aircraft have scheduled
(fixed-fee arrangement) • CRJ 700 13 removal dates from 2020 to 2029
• CRJ 900 43 • The average remaining term of the
• E175 59 aircraft under contract is 4.1 years
Delta Connection Prorate Agreement . . . . • CRJ 200 29 • Terminable with 30-day notice
(revenue-sharing arrangement)
United Express Agreements
Number of
Agreement Aircraft type Aircraft Term / Termination Dates
United Express Agreements . . . . . . . . . . . • CRJ 200 68 • Individual aircraft have scheduled
(fixed-fee arrangement) • CRJ 700 19 removal dates under the agreement
• E175 65 between 2020 and 2029
• The average remaining term of the
aircraft under contract is 4.3 years
United Express Prorate Agreement . . . . . . • CRJ 200 31 • Terminable with 120-day notice
(revenue-sharing arrangement)
American Agreements
Number of
Agreement Aircraft type Aircraft Term / Termination Dates
American Agreement . . . . . . . . . . . . . . . . . • CRJ 700 62 • Individual aircraft have scheduled
(fixed-fee arrangement) removal dates from 2022 to 2025
• The average remaining term of the
aircraft under contract is 4.1 years
American Prorate Agreement . . . . . . . . . . • CRJ 200 7 • Terminable with 120-day notice
(revenue-sharing arrangement)
Alaska Capacity Purchase Agreement
Number of
Agreement Aircraft type Aircraft Term / Termination Dates
Alaska Agreement . . . . . . . . . . . . . . . . . . . • E175 32 • Individual aircraft have scheduled
(fixed-fee arrangement) removal dates from 2027 to 2030
• The average remaining term of the
aircraft under contract is 9.2 years
7
In addition to the contractual arrangements described above, SkyWest Airlines has entered into fixed-fee
agreements with Delta and American to place additional E175 aircraft into service. As of December 31, 2019, SkyWest
Airlines is scheduled to take delivery of six new E175 aircraft in connection with its agreement with Delta and 20 new
E175 aircraft in connection with its agreement with American. The delivery dates for the new E175 aircraft are currently
scheduled to take place by the end of 2021. Final delivery dates may be adjusted based on various factors. Additionally,
SkyWest Airlines is scheduled to add an additional six used E175 aircraft under the Delta fixed-fee agreement during
2020.
SkyWest Airlines also has an agreement with Delta to place one CRJ900 regional jet aircraft (“CRJ900”) in
2020 under a nine-year fixed-fee agreement. We anticipate Delta will finance the aircraft.
SkyWest Airlines also has an agreement with American to place ten used CRJ700 regional aircraft (“CRJ700”) under a
multi-year contract. As of December 31, 2019, SkyWest Airlines had placed two of these CRJ700 aircraft into service
with American. We anticipate acquiring five CRJ700 aircraft from a third party and internally sourcing three CRJ700s
through other contract expirations.
Delta Connection Agreements
We and Delta are parties to a Delta Connection Agreement (the "Delta Connection Agreement"), pursuant to
which we provide contract flight services for Delta.
The Delta Connection Agreement has a latest scheduled termination date of 2029. The Delta Connection
Agreement is subject to early termination in various circumstances, including:
• if we or Delta commit a material breach of the Delta Connection Agreement, subject to 30-day notice and
cure rights;
• if we fail to conduct all flight operations and maintain all aircraft under the Delta Connection Agreement in
compliance in all material respects with applicable government regulations;
• if we fail to satisfy certain performance and safety requirements; or
• if either party files for bankruptcy, reorganization or similar action (subject to limitations imposed by the
U.S. Bankruptcy Code) or makes an assignment for the benefit of creditors.
United Express Agreements
We and United are parties to two United Express agreements: a United Express agreement to operate certain
CRJ200s regional aircraft (“CRJ200”) and CRJ700s, and a United Express agreement to operate E175 aircraft
(collectively, the “United Express Agreements”).
The United Express Agreements have a latest scheduled termination date in 2029. The United Express
Agreements are subject to early termination in various circumstances including:
• if we or United fail to fulfill an obligation under the United Express Agreements for a period of 60 days
after written notice to cure;
• if our operations fall below certain performance levels for a period of three consecutive months;
• subject to limitations imposed by the U.S. Bankruptcy Code, if either party becomes insolvent, fails to pay
its debts when due, takes action leading to its cessation as a going concern, makes an assignment of
substantially all of its assets, or ceases or suspends operations; or
8
• subject to limitations imposed by the U.S. Bankruptcy Code, if bankruptcy proceedings are commenced
against either party and certain specified conditions are not satisfied.
American Agreement
We and American are parties to an agreement (the “American Agreement”) for the operation of CRJ700
aircraft. The American Agreement for CRJ700 aircraft is scheduled to terminate in 2025 and is subject to early
termination in various circumstances including:
• if we or American fail to fulfill any obligation under the American Agreement for a period of 30 days after
written notice to cure;
• if our operations fall below certain performance levels;
• subject to limitations imposed by the U.S. Bankruptcy Code, if either party makes a general assignment for
the benefit of creditors or becomes insolvent; or
• subject to limitations imposed by the U.S. Bankruptcy Code, if bankruptcy proceedings are commenced
against either party and certain specified conditions are not satisfied
Alaska Agreement
We and Alaska are parties to a Capacity Purchase Agreement (the “Alaska Agreement”) for the operation of
E175 aircraft. The agreement has a 12-year term for each of the aircraft subject to the agreement. The Alaska Agreement
is subject to early termination in various circumstances including:
• if we or Alaska fail to fulfill an obligation under the Alaska Capacity Purchase Agreement for a period of
30 days after written notice to cure;
• if our operational performance falls below certain performance levels;
• subject to limitations imposed by the U.S. Bankruptcy Code, if either party makes a general assignment for
the benefit of creditors or becomes insolvent; or
• subject to limitations imposed by the U.S. Bankruptcy Code, if bankruptcy proceedings are commenced
against either party and certain specified conditions are not satisfied.
Training and Aircraft Maintenance
SkyWest provides substantially all training to our crew members and maintenance personnel at our training
facilities. Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment
at our maintenance facilities. We also use third-party vendors for certain airframe and engine maintenance work.
Fuel
Our fixed-fee agreements with Delta, United, American and Alaska require the respective major airline partner
to either directly pay for or reimburse us for the fuel costs we incur under those agreements, thereby reducing our
exposure to fuel price fluctuations. Under our prorate agreements with Delta, United and American, we are responsible
for the costs to operate the flights, including fuel costs, and therefore we are exposed to fuel price fluctuations for flights
operated under our prorate agreements. During the year ended December 31, 2019, United and Delta purchased the
majority of the fuel for our aircraft flying under their respective fixed-fee agreements directly from their fuel vendors.
Historically, we have not experienced problems with the availability of fuel, and believe we will be able to obtain fuel in
quantities sufficient to meet our existing and anticipated future requirements at competitive prices. Standard industry fuel
9
purchase contracts generally do not provide protection against fuel price increases, nor do they ensure availability of
supply. We typically purchase fuel from third-party suppliers for our prorate agreements. A substantial increase in the
price of jet fuel for flights we operate under our prorate agreements, or the lack of adequate fuel supplies in the future,
could have a material adverse effect on our business, financial condition, results of operations or liquidity.
Employee Matters
Collective Bargaining
As of December 31, 2019, SkyWest and SkyWest Airlines collectively employed approximately 13,700
full-time equivalent employees, consisting of 5,239 pilots, 4,126 flight attendants, 1,435 airport operations personnel,
1,284 mechanics, 888 other maintenance personnel, 178 dispatchers and 550 operational support and administrative
personnel. Approximately 88.4% of these employees were represented by a labor group. Most of these employees are
represented by in-house labor associations that have entered into collective bargaining agreements regarding employee
compensation and work rules. None of these employees are currently represented by an outside union. Outside union
organizing efforts among our employees do occur from time to time and may continue in the future. If unionization
efforts are successful, we may be subjected to increased risks of work interruption or stoppage and/or incur additional
expenses associated with a change in labor representation of our employees. Neither SkyWest nor SkyWest Airlines has
ever experienced a work stoppage due to a strike or other labor dispute, and we consider our relationships with our
employees to be good.
Our relations with labor are governed by the Railway Labor Act (the “RLA”), the federal law governing labor
relations between air carriers and their employees. Under the RLA, a collective bargaining agreement between an airline
and a labor representative does not expire, but instead becomes amendable as of a stated date. If either party wishes to
modify the terms of any such agreement, it must notify the other party in the manner prescribed by the RLA and/or
described in the agreement. After receipt of such notice, the parties must meet for direct negotiations, and if no
agreement is reached, either party may request the National Mediation Board to initiate a process including mediation,
arbitration, and a potential “cooling off” period that must be followed before either party may engage in “self-help.”
“Self-help” includes, among other things, a strike by the representative or the imposition of proposed changes to the
collective bargaining agreement by the airline. The U.S. Congress and the President have the authority to prevent “self-
help” by enacting legislation that, among other things, imposes a settlement on the parties. SkyWest Airlines respects all
employees’ legal rights, including the rights to free association and collective bargaining. This includes the right to
decide whether to be represented by a union. Our employees are covered by the RLA. Under the RLA, employees have
the right to decide whether they wish to be represented by a union. They also have the right to reject union
representation.
Government Regulation
All interstate air carriers, including SkyWest, are subject to regulation by the U.S. Department of Transportation
(the “DOT”), the U.S. Federal Aviation Administration (the “FAA”) and other governmental agencies. Regulations
promulgated by the DOT primarily relate to economic aspects of air service. The FAA requires operating, air worthiness
and other certificates; approval of personnel who may engage in flight, maintenance or operating activities;
record-keeping procedures in accordance with FAA requirements; and FAA approval of flight training and retraining
programs. Generally, governmental agencies enforce their regulations through, among other methods, certifications,
which are necessary for the continued operations of SkyWest, and proceedings, which can result in civil or criminal
penalties or revocation of operating authority. The FAA can also issue maintenance directives and other mandatory
orders relating to, among other things, grounding of aircraft, inspection of aircraft, installation of new safety-related
items and the mandatory removal and replacement of aircraft parts.
We believe SkyWest is in compliance in all material respects with FAA regulations and holds all operating and
airworthiness certificates and licenses which are necessary to conduct our operations. We incur substantial costs in
maintaining current certifications and otherwise complying with the laws, rules and regulations to which we are subject.
Our flight operations, maintenance programs, recordkeeping and training programs are conducted under FAA approved
procedures. All air carriers operating in the United States are required to comply with federal laws and regulations
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pertaining to noise abatement and engine emissions. All such air carriers are also subject to certain provisions of the
Federal Communications Act of 1934, as amended, because of their extensive use of radio and other communication
facilities. SkyWest is also subject to certain federal and state laws relating to protection of the environment, labor
relations and equal employment opportunity. We believe SkyWest is in compliance in all material respects with these
laws and regulations.
Environmental Matters
We are subject to various federal, state, local and foreign laws and regulations relating to environmental
protection matters. These laws and regulations govern such matters as environmental reporting, storage and disposal of
materials and chemicals and aircraft noise. We are, and expect in the future to be, involved in various environmental
matters and conditions at, or related to, our properties. We are not currently subject to any environmental cleanup orders
or actions imposed by regulatory authorities. We are not aware of any active material environmental investigations
related to our assets or properties.
As the largest regional airline in the United States, we remain committed to lowering our environmental
footprint while continuing to offer the best service to our customers and the communities we serve. Through the use of
software and training, we heavily monitor and manage our fuel trends and fuel consumption which leads to better fuel
conservation and reductions in emissions. When possible, we try to mitigate the use of fuel, including by taxiing with the
use of a single engine, taking steps to improve the efficiency of aircraft routing and using ground power when the plane
is parked at the gate. We participate with our major airline partners in recycling programs, and we have implemented
recycling initiatives in our facilities to reduce the amount of paper, plastic and other recyclables going to landfills. We
have worked aggressively to reduce our reliance on paper manuals and have converted, or are in the process of
converting, our manuals and our maintenance logs into electronic form, further eliminating unnecessary waste while
increasing efficiencies.
Safety and Security
We are committed to the safety and security of our passengers and employees. We have taken many steps, both
voluntarily and as mandated by governmental authorities, to increase the safety and security of our operations. Some of
the safety and security measures we have taken with our major airline partners include: aircraft security and surveillance,
positive bag matching procedures, enhanced passenger and baggage screening and search procedures, and securing of
cockpit doors. We are committed to complying with future safety and security requirements.
Insurance
We maintain insurance policies we believe are of types customary in the industry and in amounts we believe are
adequate to protect against material loss. These policies principally provide coverage for public liability, passenger
liability, baggage and cargo liability, property damage, including coverage for loss or damage to our flight equipment,
and workers’ compensation insurance.
Seasonality
Our results of operations for any interim period are not necessarily indicative of those for the entire year, in part
because the airline industry is subject to seasonal fluctuations and changes in general economic conditions. Our
operations are somewhat favorably affected by pleasure travel on our prorate routes, historically contributing to
increased travel in the summer months, and are unfavorably affected by decreased business travel during the months
from November through January and by inclement weather which can result in cancelled flights, principally during the
winter months. Additionally, a significant portion of our fixed-fee arrangements is based on completing flights and we
typically have more scheduled flights during the summer months. We generally experience a significantly higher number
of weather cancellations during the winter months, which negatively impacts our revenue during such months.
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ITEM 1A. RISK FACTORS
In addition to factors discussed elsewhere in this Report, the following are important risks which could
adversely affect our future results. Additional risks and uncertainties not presently known to us or that we currently do
not deem material may also impair our business operations. If any of the risks we describe below occur, or if any
unforeseen risk develops, our operating results may suffer, our financial condition may deteriorate, the trading price of
our common stock may decline and investors could lose all or part of their investment in us.
Risks Related to Our Operations
Our business model is dependent on code-share agreements with four major airline partners.
Our business model depends on major airlines electing to contract with us instead of operating their own
regional jets. Some regional airlines are owned by a major airline. We have no guarantee that in the future our major
airline partners will choose to enter into contracts with us instead of operating their own regional jets. Our major airline
partners are not prohibited from doing so under our code-share agreements. A decision by any of our major airline
partners to phase out code-share relationships and instead acquire and operate their own regional jets could have a
material adverse effect on our financial results.
As of December 31, 2019, 382 out of our total 483 aircraft available for scheduled service were operating under
a fixed-fee arrangement or a revenue-sharing agreement with either Delta or United. If our code-share relationship with
Delta or United were terminated, we would be significantly impacted and likely would not have an immediate source of
revenue or earnings to offset such loss. A termination of either of these relationships would likely have a material
adverse effect on our financial condition, operating revenues and net income unless we are able to enter into satisfactory
substitute arrangements for the utilization of the affected aircraft by other code-share partners, or, alternatively, obtain
the airport facilities and gates and make the other arrangements necessary to fly as an independent airline. We may not
be able to enter into substitute code-share arrangements, and any such arrangements we might secure may not be as
favorable to us as our current agreements. Operating an airline independent from major airline partners would be a
significant departure from our business plan and would likely require significant time and resources, which may not be a
viable alternative.
Additionally, each of our agreements with our major airline partners is subject to certain early termination
provisions. For example, Delta’s termination rights include the right to terminate the agreements upon the occurrence of
certain force majeure events (including certain labor-related events) that prevent us from performing for certain periods.
United may terminate the United Express Agreements due to our uncured breach of certain operational or performance
provisions, including measures and standards related to flight completions, baggage handling and on-time arrivals. We
currently use the systems, facilities and services of Delta and United to support a significant portion of our operations,
including airport and terminal facilities and operations, information technology support, ticketing and reservations,
scheduling, dispatching, fuel purchasing and ground handling services. If Delta or United were to cease to maintain any
of these systems, close any of these facilities or no longer provide these services to us, due to termination of one of our
code-share agreements, a strike or other labor interruption by Delta or United personnel or for any other reason, we may
not be able to obtain alternative systems, facilities or services on terms and conditions as favorable as those we currently
receive, or at all. Since our revenues and operating profits are dependent on our level of flight operations, we could then
be forced to significantly reduce our operations. Furthermore, upon certain terminations of our code-share agreements,
Delta and United could require us to sell or assign to them certain airport related facilities, we use in connection with the
code-share services we provide. As a result, in order to offer airline service after termination of any of our code-share
agreements, we may have to replace these facilities. We may be unable to arrange such replacements on satisfactory
terms, or at all.
We are reliant on two aircraft manufacturers and one engine manufacturer.
We operate aircraft manufactured by Bombardier and Embraer. The issuance of FAA or manufacturer
directives restricting or prohibiting the use of any Bombardier or Embraer aircraft types we operate could negatively
impact our business and financial results. We are also dependent upon General Electric as the sole manufacturer of
engines used on the aircraft we operate. Our operations could be materially and adversely affected by the failure or
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inability of Bombardier, Embraer or General Electric to provide sufficient parts or related maintenance and support
services to us on a timely manner. Additionally, timing of aircraft deliveries could be delayed beyond our control.
Our growth may be limited with our major airline partners' flight systems.
Additional growth opportunities within our major airline partners’ flight systems are limited by various factors,
including a limited number of regional aircraft each such major airline partner can operate in its regional network due to
its own labor agreements. Except as contemplated by our existing code-share agreements, we cannot be sure that our
major airline partners will contract with us to fly any additional aircraft. We may not receive additional growth
opportunities, or may agree to modifications to our code-share agreements that reduce certain benefits to us in order to
obtain additional aircraft, or for other reasons. Given the competitive nature of the airline industry, we believe limited
growth opportunities may result in competitors accepting reduced margins and less favorable contract terms in order to
secure new or additional code-share operations. Even if we are offered growth opportunities by our major airline
partners, those opportunities may involve economic terms or financing commitments that are unacceptable to us.
Additionally, our major airline partners may reduce the number of regional jets in their system by not renewing or
extending existing flying arrangements with regional operators. Any one or more of these factors may reduce or
eliminate our ability to expand our flight operations with our existing major airline partners.
Increases in labor costs, including pilot costs, maintenance costs and overhead costs may result in lower operating
margins under our fixed-fee contracts.
Labor costs are a significant component of our total expenses. Currently, we believe our labor costs are
competitive relative to other regional airlines. However, we cannot provide assurance that our labor costs going forward
will remain competitive because of changes in supply and demand for labor in the regional industry. We compete against
other airlines and businesses for labor in many highly skilled positions. If we are unable to hire, train and retain qualified
employees at a reasonable cost, sustain employee engagement in our strategic vision, or if we are unsuccessful at
implementing succession plans for our key staff, we may be unable to grow or sustain our business. Attrition beyond
normal levels could negatively impact our operating results, increase our training and labor costs and our business
prospects could be harmed.
Additionally, under our fixed-fee contracts with Delta, United, American and Alaska, a portion of our
compensation is based upon pre-determined rates typically applied to production statistics (such as departures, block
hours, flight hours and number of aircraft in service each month). The primary operating costs intended to be
compensated by the pre-determined rates include labor costs, including crew training costs, certain aircraft maintenance
expenses, and overhead costs. During the year ended December 31, 2019, approximately 90.4% of our code-share
operating costs were reimbursable at pre-determined rates and 9.6% of our code-share operating costs were pass-through
costs. Additionally, our aircraft maintenance costs may increase annually as our fleet ages at a higher rate than our pre-
determined rates allow. Also, on an individual aircraft basis, various in-depth maintenance procedures are typically
scheduled to occur at multi-year intervals, which can result in maintenance expense fluctuations year-to-year. If our
operating costs for labor, aircraft maintenance and overhead costs exceed the compensation earned from our
pre-determined rates under our fixed-fee arrangements, our financial position and operating results will be negatively
affected.
We may experience difficulty recruiting and retaining qualified pilots and maintenance technicians.
Our operations rely on qualified personnel, including pilots and maintenance technicians. Our pilots, flight
attendants and maintenance technicians may seek employment at mainline airlines, which generally offer higher salaries
and more extensive benefit programs than regional airlines are financially able to offer. Should the turnover of
employees, particularly pilots and maintenance technicians, sharply increase, we may not be able to hire sufficient pilots
and maintenance technicians to replace those leaving. Additionally, FAA regulations regarding personnel certification
and qualifications, and potential future changes in FAA regulations, could limit the number of qualified new entrants that
we could hire. In the event we are unable to hire and retain qualified personnel, including pilots and mechanics, our
business and financial condition could be adversely affected.
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Information technology security breaches, hardware or software failures, or other information technology disruptions
may negatively impact our operations or reputation.
The performance and reliability of our technology are critical to our ability to compete effectively. Any internal
technological error or failure or large-scale external interruption in the technological infrastructure we depend on, such
as power, telecommunications or the internet, may disrupt our internal network. Any individual, sustained or repeated
failure of technology could impact our ability to conduct our business and result in increased costs. Our technological
systems and related data may be vulnerable to a variety of sources of interruption due to events beyond our control,
including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security
issues.
In addition, as a part of our ordinary business operations, we collect and store sensitive data, including personal
information of our passengers and employees and information of our business partners. Our information systems are
subject to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain
access to our systems or information through fraud or other means of deception. The methods used to obtain
unauthorized access, disable or degrade service or sabotage systems are constantly evolving, and may be difficult to
anticipate or to detect for long periods of time. We may not be able to prevent all data security breaches or misuse of
data. The compromise of our technology systems resulting in the loss, disclosure, misappropriation of, or access to,
customers’, employees’ or business partners’ information could result in legal claims or proceedings, liability or
regulatory penalties under laws protecting the privacy of personal information, disruption to our operations and damage
to our reputation, any or all of which could adversely affect our business and financial condition.
We may experience disruption in service with key third-party service providers.
We rely on outside vendors for a variety of services and functions critical to our business, including airframe
and engine maintenance, ground handling, fueling, computer reservation system hosting, telecommunication systems and
information technology infrastructure and services.
Even though we strive to formalize agreements with these vendors that define expected service levels, our use
of outside vendors increases our exposure to several risks. In the event that one or more vendors goes into bankruptcy,
ceases operation or fails to perform as promised, replacement services may not be readily available at competitive rates,
or at all. If one of our vendors fails to perform adequately, we may experience increased costs, delays, maintenance
issues, safety issues or negative public perception of our airline. Vendor bankruptcies, unionization, regulatory
compliance issues or significant changes in the competitive marketplace among suppliers could adversely affect vendor
services or force us to renegotiate existing agreements on less favorable terms. These events could result in disruptions in
our operations or increases in our cost structure.
We have aircraft lease and debt commitments that extend beyond our existing fixed-fee contractual term on certain
aircraft.
Under our fixed-fee arrangements with multiple major airline partners we have a total of 19 CRJ700s with
flying contract expirations in 2020. Our underlying lease or debt financing obligations associated with each of these
aircraft are scheduled to terminate in 2024 and 2025 on an aircraft-by-aircraft basis. We may not be successful in
extending the flying contract term on these aircraft with our major airline partner at acceptable economic terms. In the
event we are unsuccessful in extending the flying contract terms on these aircraft, we intend to pursue alternative uses for
the aircraft over the remaining aircraft financing term including, but not limited to, operating the aircraft with another
major carrier under a negotiated code-share agreement or subleasing the aircraft to another operator. Additionally, we
may negotiate an early lease return agreement with the aircraft lessor. In the event we are unable to extend the flying
contract terms for these aircraft at each respective contract’s expiration, we may incur cash and non-cash early lease
termination costs that would negatively impact our operations and financial condition. Additionally, in the event we are
unable to extend a flying contract with an existing major airline partner, but reach an agreement to place the aircraft into
service with a different major airline partner, we likely will incur inefficiencies and incremental costs, such as changing
the aircraft livery, which would negatively impact our financial results.
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There are long-term risks related to supply and demand of regional aircraft associated with our regional airline
services strategy.
Various factors could change our major airline partners’ long-term strategy in using regional aircraft to support
their network objectives. Such changes could result in a reduction in the number of regional aircraft our major airline
partners operate in the future. If our major airline partners’ future strategies include a material reduction in regional
aircraft generally or for specific aircraft types, such as 50-seat regional aircraft, the resulting decrease in demand in the
aircraft we operate could have a material negative impact on our business and financial condition.
The residual value of our owned aircraft may be less than estimated in our depreciation policies.
As of December 31, 2019, we had approximately $5.4 billion of property and equipment and related assets, net
of accumulated depreciation. In accounting for these long-lived assets, we make estimates about the expected useful
lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the
fair value of the assets and the cash flows they generate. Factors indicating potential impairment include, but are not
limited to, significant decreases in the market value of the long-lived assets, a significant change in the condition of the
long-lived assets and operating cash flow losses associated with the use of the long-lived assets. In the event the
estimated residual value of any of our aircraft types is determined to be lower than the residual value assumptions used in
our depreciation policies, the applicable aircraft type in our fleet may be impaired and may result in a material reduction
in the book value of applicable aircraft types we operate or we may need to prospectively modify our depreciation
policies. An impairment on any of our aircraft types we operate or an increased level of depreciation expense resulting
from a change to our depreciation policies could result in a material negative impact to our financial results.
Interruptions or disruptions in service at one of our hub airports, due to weather, system malfunctions or for any
other reason, could have a material adverse impact on our operations.
We currently operate primarily through hubs across the United States. Nearly all of our flights either originate
from or fly into one of these hubs. Our revenues depend primarily on our completion of flights and secondarily on
service factors such as timeliness of departure and arrival. Any interruptions or disruptions could, therefore, severely and
adversely affect us. Extreme weather such as hurricanes or tornados can cause flight disruptions, and, during periods of
storms or adverse weather, our flights may be canceled or significantly delayed. We operate a significant number of
flights to and from airports with particular weather difficulties, including Salt Lake City, Chicago, San Francisco and
Denver. A significant interruption or disruption in service at one of our hubs, due to adverse weather, system
malfunctions, security closures or otherwise, could result in the cancellation or delay of a significant portion of our
flights and, as a result, could have a severe adverse impact on our operations and financial performance.
Negative economic or industry conditions may result in reductions to our flight schedules, which could materially and
adversely affect our operations and financial condition.
Our operations and financial condition are affected by many changing economic and other conditions beyond
our control, including, among others:
• disruptions in the credit markets, which may impact availability of financing;
• actual or potential changes in international, national, regional and local economic, business and financial
conditions, including recession, inflation, higher interest rates, wars, terrorist attacks or political instability;
• changes in consumer preferences, perceptions, spending patterns or demographic trends;
• changes in the competitive environment due to industry consolidation, new airlines entering the market, our
major airline partners operating smaller sized aircraft that may reduce the demand for regional aircraft and
other factors;
• actual or potential disruptions to U.S. air traffic control systems;
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• price of jet fuel and oil;
• outbreaks of diseases that affect travel behavior, including, for example, the recent outbreak of respiratory
illness caused by a novel coronavirus first identified in Wuhan, Hubei Province, China; and
• weather and natural disasters.
The effect of any, or some combination, of the foregoing economic and industry conditions on our operations or
financial condition is virtually impossible to forecast; however, the occurrence of any or all of such conditions in a
significant manner could materially and adversely affect our operations and financial condition and could cause our
major airline partners to reduce the utilization levels of our aircraft under our code-share agreements.
The majority of our code-share agreements set forth minimum levels of flight operations which our major
airline partners are required to schedule for our operations and we are required to provide. These minimum flight
operating levels are intended to provide a baseline level of expected utilization of aircraft, labor, maintenance facilities
and related flight operations support. Historically, our major airline partners have utilized our flight operations at levels
which exceed the minimum levels set forth in our code-share agreements, however, the occurrence of any or all of the
foregoing economic and industry conditions may cause our major airline partners to reduce our utilization levels. If our
major airline partners schedule the utilization of our aircraft below historical levels (including taking into account the
route distances and frequency of our scheduled flights), we may not be able to maintain operating efficiencies previously
obtained, which would negatively impact our operating results and financial condition. Additionally, our major airline
partners may change routes and frequencies of flights, which can negatively impact our operating efficiencies. Changes
in schedules may increase our flight costs, which could exceed the reimbursed rates paid by our major airline partners.
Continued reduced utilization levels of our aircraft or other changes to our schedules under our code-share agreements
would adversely impact our financial results.
We may experience an increase in fuel prices in our prorate operations.
Dependence on foreign imports of crude oil, limited refining capacity and the possibility of changes in
government policy on jet fuel production, transportation and marketing make it impossible to predict the future
availability of jet fuel. If there are additional outbreaks of hostilities or other conflicts in oil-producing areas or
elsewhere, or a reduction in refining capacity (due to weather events, for example), or governmental limits on the
production or sale of jet fuel, there could be a reduction in the supply of jet fuel and significant increases in the cost of jet
fuel. Additionally, our operations may experience disruptions from temporary fuel shortages by our fuel vendors
resulting from fuel quality issues, refueling disruption, or other challenges. Major reductions in the availability of jet
fuel or significant increases in its cost, or a continuation of high fuel prices for a significant period of time, would have a
material adverse impact on us.
Pursuant to our fixed-fee arrangements, our major airline partners have agreed to bear the economic risk of fuel
price fluctuations on our contracted flights. However, we bear the economic risk of fuel price fluctuations on our prorate
operations. As of December 31, 2019, we operated 31 CRJ200s under a prorate agreement with United, 29 CRJ200s
under a prorate agreement with Delta, and seven CRJ200s under a prorate agreement with American. Our operating and
financial results with respect to these prorate arrangements can be negatively affected by the price of jet fuel in the event
we are unable to increase our passenger fares. Additionally in the event of prolonged low fuel prices, our competitors
may lower their passenger ticket prices on routes that compete with our prorate markets, which could negatively impact
our passenger load factors.
Our prorate arrangements with our major airline partners are terminable upon notice of 120 days or less.
Our prorate flying agreements with our major airline partners permit the major airline partner to terminate the
agreement in its discretion by giving us notice of 120 days or less. If one of our major airline partners elects to terminate
a flying agreement with notice of 120 days or less, our ability to use the aircraft under an alternative agreement with
similar economics may be limited, which could negatively impact our financial results. Additionally, even if we can
subsequently place the aircraft into service with a different major airline partner, of which there can be no assurance, we
likely would incur inefficiencies and incremental costs, such as changing the aircraft livery, during the transition period,
which would negatively impact our financial results.
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We have a significant amount of contractual obligations.
As of December 31, 2019, we had a total of approximately $3.0 billion in total long-term debt obligations.
Substantially all of this long-term debt was incurred in connection with the acquisition of aircraft and engines. We also
have significant long-term lease obligations primarily relating to our aircraft fleet. At December 31, 2019, we had 94
aircraft under lease, with remaining terms ranging up to ten years. Future minimum lease payments due under all
long-term operating leases were approximately $443.7 million at December 31, 2019. At a 6.4% discount factor, which
is the average rate used to approximate the implicit rates within the applicable leases, the present value of these lease
obligations was equal to approximately $354.0 million at December 31, 2019. Our high level of fixed obligations could
impact our ability to obtain additional financing to support additional expansion plans or divert cash flows from
operations and expansion plans to service the fixed obligations.
Our anticipated fleet replacement would require a significant increase in our leverage and the related cash
requirements.
We currently have 214 CRJ200s with an average life of 17.3 years. Over the next several years, we may
continue to replace the CRJ200s with larger regional jets. If we continue to add new aircraft to our fleet, we anticipate
using significant amounts of capital to acquire these larger regional jets.
There can be no assurance that our operations will generate sufficient cash flow or liquidity to enable us to
obtain the necessary aircraft acquisition financing to replace our current fleet, or to make required debt service payments
related to our existing or anticipated future obligations. Even if we meet all required debt, lease and purchase obligations,
the size of these long-term obligations could negatively affect our financial condition, results of operations and the price
of our common stock in many ways, including:
• increasing the cost, or limiting the availability of, additional financing for working capital, acquisitions or
other purposes;
• limiting the ways in which we can use our cash flow, much of which may have to be used to satisfy debt
and lease obligations; and
• adversely affecting our ability to respond to changing business or economic conditions or continue our
growth strategy.
If we need additional capital and cannot obtain such capital on acceptable terms, or at all, we may be unable to
realize our fleet replacement plans or take advantage of unanticipated opportunities.
Our business could be harmed if we lose the services of our key personnel.
Our business depends upon the efforts of our chief executive officer, Russell A. Childs, and our other key
management and operating personnel. We may have difficulty replacing management or other key personnel who cease
to be employed by us and, therefore, the loss of the services of any of these individuals could harm our business. We do
not maintain key-person insurance on any of our executive officers.
We may decrease our dividends and/or reduce the amount of stock repurchases in the future.
Historically, we have paid dividends and repurchased shares of our common stock in varying amounts. The
future payment and amount of cash dividends and our future repurchases of shares of common stock, if any, and the
number of shares of common stock we may repurchase will depend upon our financial condition and results of
operations and other factors deemed relevant by our board of directors. There can be no assurance that we will continue
our practice of paying dividends on our common stock or that we will have the financial resources to pay such dividends.
There also can be no assurance that we will continue our practice of repurchasing shares of common stock or that we will
have the financial resources to repurchase shares of common stock in the future.
In addition, repurchases of our common stock pursuant to our share repurchase program and any future
dividends could affect our stock price and increase its volatility. The existence of a share repurchase program and any
future dividends could cause our stock price to be higher than it would otherwise be and could potentially reduce the
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market liquidity for our stock. Additionally, our share repurchase program and any future dividends may reduce our cash
reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and
acquisitions. Further, our share repurchase program may fluctuate such that our cash flow may be insufficient to fully
cover our share repurchases. Although our share repurchase program is intended to enhance long-term shareholder value,
there is no assurance that it will do so because the market price of our common stock may decline below the levels at
which we repurchased shares of stock and short-term stock price fluctuations could reduce the program’s effectiveness.
Disagreements regarding the interpretation of our code-share agreements with our major airline partners could have
an adverse effect on our operating results and financial condition.
Long-term contractual agreements, such as our code-share agreements, are subject to interpretation and disputes
may arise under such agreements if the parties to an agreement apply different interpretations to that agreement. Those
disputes may divert management time and resources from the core operation of the business, and may result in litigation,
arbitration or other forms of dispute resolution.
In recent years we have experienced disagreements with our major airline partners regarding the interpretation
of various provisions of our code-share agreements. Some of those disagreements have resulted in litigation, and we may
be subject to additional disputes and litigation in the future. Those disagreements have also required a significant amount
of management time, financial resources and settlement negotiations of disputed matters.
To the extent that we experience disagreements regarding the interpretation of our code-share or other
agreements, we will likely expend valuable management time and financial resources in our efforts to resolve those
disagreements. Those disagreements may result in litigation, arbitration, settlement negotiations or other proceedings.
Furthermore, there can be no assurance that any or all of those proceedings, if commenced, would be resolved in our
favor. An unfavorable result in any such proceeding could have adverse financial consequences or require us to modify
our operations. Such disagreements and their consequences could have an adverse effect on our operating results and
financial condition.
We lease aircraft and engines to third parties and the lessee may default under the lease terms, which could
negatively affect our financial condition, cash flow and results of operations.
Lessee defaults may result in additional costs to us, including legal and other expenses necessary to repossess
the aircraft or engines, particularly if the lessee is contesting the proceedings or is in bankruptcy. We could also incur
substantial maintenance, refurbishment or repair costs if a defaulting lessee fails to pay such costs and where such
maintenance, refurbishment or repairs are necessary to put the aircraft or engines in suitable condition for remarketing or
sale. We may also incur storage costs associated with any aircraft or engine that we repossess and are unable to place
immediately with another lessee. Even if we are able to immediately place a repossessed aircraft or engine into service
ourselves, or place the aircraft and engines under another lessee, we may not be able to do so at a similar or favorable
lease rate. A lessee default under one of our lease agreements could negatively affect our financial condition, cash flow
and results of operations.
We have entered into a strategic engine leasing joint venture that operates under joint control with a third party that
involves significant risk.
We have entered into a strategic engine joint venture with a third party to lease engines to other parties. This
strategic venture involves significant risks, including:
• we may not realize a satisfactory return on our investment;
• the joint venture may divert management’s attention from our core business;
• our joint venture partner could have investment goals that are not consistent with our investment objectives,
including the timing, terms and strategies for any investments; and
• our joint venture partner might fail to fund their share of required capital contributions or fail to fulfill their
other obligations.
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Although we currently participate in the management of our engine joint venture, our joint venture agreement
requires unanimous approval over all significant actions. In addition, if we were unable to resolve a dispute with our
joint venture partner that retains material managerial veto rights, we might reach an impasse that could require us to
dissolve the joint venture at a time and in a manner that could negatively affect our financial results.
We may be a party to litigation in the normal course of business or otherwise, which could affect our financial
condition and results of operations.
We may become party to or otherwise involved in legal proceedings, claims and government inspections or
investigations and other legal matters, arising in the ordinary course of our business or otherwise, including those related
to tort, environmental, employment and commercial legal issues. Legal proceedings can be complex and take many
months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which
are not within our control. Litigation is subject to significant uncertainty and may be expensive, time-consuming, and
disruptive to our operations. Although we will vigorously defend ourselves in such legal proceedings, their ultimate
resolution and potential financial and other impacts on us are uncertain. If a legal proceeding is resolved against us, it
could result in significant compensatory damages or injunctive relief that could materially adversely affect our financial
condition, results of operations and cash flows.
Provisions of our charter documents and code-share agreements may limit the ability or desire of others to gain
control of our company.
Our ability to issue shares of preferred and common stock without shareholder approval may have the effect of
delaying or preventing a change in control and may adversely affect the voting and other rights of the holders of our
common stock, even in circumstances where such a change in control would be viewed as desirable by most investors.
The provisions of the Utah Control Shares Acquisitions Act may also discourage the acquisition of a significant interest
in or control of our company. Additionally, our code-share agreements contain termination and extension trigger
provisions related to change in control type transactions that may have the effect of deterring a change in control of our
company.
The adoption of new tax legislation or changes to existing tax laws and regulations could adversely affect our
financial condition or results of operations.
The airline industry is one of the most heavily taxed industries in the United States. We are subject to tax laws
and regulations of the U.S. federal, state and local governments as well as various non-U.S. jurisdictions. Potential
changes in existing tax laws, including future regulatory guidance, may impact our effective tax rate and tax payments.
There can be no assurance that changes in tax laws or regulations, both within the United States and the other
jurisdictions in which we operate, will not materially and adversely affect our effective tax rate, tax payments, financial
condition and results of operations. Similarly, changes in tax laws and regulations that impact our major airline partners,
customers or the economy generally may also impact our financial condition and results of operations.
In addition, tax laws and regulations are complex and subject to varying interpretations, and any significant
failure to comply with applicable tax laws and regulations in all relevant jurisdictions could give rise to substantial
penalties and liabilities. Any changes in enacted tax laws, rules or regulatory or judicial interpretations; any adverse
outcome in connection with tax audits in any jurisdiction; or any change in the pronouncements relating to accounting
for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and
results of operations.
Risks Related to the Airline Industry
The occurrence of an aviation accident involving our aircraft would negatively impact our operations and financial
condition.
An accident or incident involving one of our aircraft could result in significant potential claims of injured
passengers and others, as well as repair or replacement of a damaged aircraft and its consequential temporary or
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permanent loss from service. In the event of an accident, our liability insurance may not be adequate to offset our
exposure to potential claims and we may be forced to bear substantial losses from the accident. Substantial claims
resulting from an accident in excess of our related insurance coverage would harm our operational and financial results.
Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that our operations are
less safe or reliable than other airlines.
Increased labor costs, labor disputes and unionization of our workforces may adversely affect our ability to conduct
our business and reduce our profitability.
Our business is labor intensive, requiring large numbers of pilots, flight attendants, mechanics and other
personnel. Labor costs constitute a significant percentage of our total operating costs. For example, during the year ended
December 31, 2019, our salary, wage and benefit costs constituted approximately 40.7% of our total operating costs.
Increases in our labor costs could result in a material reduction in our earnings. Any new collective bargaining
agreements entered into by other regional carriers with their work forces may also result in higher industry wages and
increased pressure on us to increase the wages and benefits of our employees. Future agreements with represented
employees may be on terms that are not as attractive as our current agreements or comparable to agreements entered into
by our competitors.
SkyWest’s employees are represented by in-house associations; however, organizing efforts to join national
unions among those employees occur from time to time. Such efforts will likely continue in the future and may
ultimately result in some or all of our employees being represented by one or more national unions. If our employees
were to unionize or be deemed to be represented by one or more national unions, negotiations with these unions could
divert management attention and disrupt operations, which may result in increased operating expenses and may
negatively impact our financial results. Moreover, we cannot predict the outcome of any future negotiations relating to
union representation or collective bargaining agreements. Agreements reached in collective bargaining may increase our
operating expenses and negatively impact our financial results.
We are subject to significant governmental regulation and potential regulatory changes.
All interstate air carriers, including SkyWest, are subject to regulation by the DOT, the FAA and other
governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The
FAA requires operating, air worthiness and other certificates; approval of personnel who may engage in flight,
maintenance or operation activities; recordkeeping procedures in accordance with FAA requirements; and FAA approval
of flight training and retraining programs. We cannot predict whether we will be able to comply with all present and
future laws, rules, regulations and certification requirements or that the cost of continued compliance will not have a
material adverse effect on our operations. We incur substantial costs in maintaining our current certifications and
otherwise complying with the laws, rules and regulations to which we are subject. A decision by the FAA to ground, or
require time-consuming inspections of or maintenance on, all or any of our aircraft for any reason may have a material
adverse effect on our operations. In addition to state and federal regulation, airports and municipalities enact rules and
regulations that affect our operations. From time to time, various airports throughout the country have considered
limiting the use of smaller aircraft, such as our aircraft, at such airports. The imposition of any limits on the use of our
aircraft at any airport at which we operate could have a material adverse effect on our operations.
We cannot predict the impact, of potential regulatory changes that may affect our business or the airline
industry as whole including the potential impact of tariffs on aircraft deliveries. However, it is possible that these
changes could adversely affect our business. Our business may be subject to additional costs or loss of government
subsidies as a result of potential regulatory changes, which could have an adverse effect on our operations and financial
results.
The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer
potential code-share partners.
The airline industry is highly competitive. We not only compete with other regional airlines, some of which are
owned by or operated as code-share partners of major airlines, but we also face competition from low-cost carriers and
major airlines on many of our routes. Low-cost carriers such as Southwest, Allegiant, Spirit and JetBlue among others,
operate at many of our hubs, resulting in significant price competition. Additionally, a large number of other carriers
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operate at our hubs, creating intense competition. Certain of our competitors are larger and have significantly greater
financial and other resources than we do. Moreover, federal deregulation of the industry allows competitors to rapidly
enter our markets and to quickly discount and restructure fares. The airline industry is particularly susceptible to price
discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats.
Increased fare competition could adversely affect our operations and the price of our common stock. The airline industry
has undergone substantial consolidation, including the mergers between Alaska and Virgin America Inc. in 2016,
American and US Airways Group Inc. in 2013, Southwest Airlines Co. and AirTran Holdings, Inc. in 2011, United and
Continental Airlines, Inc. in 2010 and Delta and Northwest Airlines, Inc. in 2008. Any additional consolidation or
significant alliance activity within the airline industry could limit the number of potential partners with whom we could
enter into code-share relationships and could have a material adverse effect on our relationships with our major airline
partners.
Due, in part, to the dynamic nature of the airline industry, major airlines may also make other strategic changes
such as changing or consolidating hub locations. If our major airline partners were to make changes such as these in their
strategy and operations, our operations and financial results could be adversely impacted.
Terrorist activities or warnings have dramatically impacted the airline industry, and will likely continue to do so.
The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the airline industry in
general, including our operations. The primary effects experienced by the airline industry include a substantial loss of
passenger traffic and revenue. If additional terrorist attacks are launched against the airline industry, there will be lasting
consequences of the attacks, which may include loss of life, property damage, increased security and insurance costs,
increased concerns about future terrorist attacks, increased government regulation and airport delays due to heightened
security. Additional terrorist attacks and the fear of such attacks could negatively impact the airline industry, and result
in further decreased passenger traffic and yields, increased flight delays or cancellations associated with new government
mandates, as well as increased security, fuel and other costs. We cannot provide any assurance that these events will not
harm the airline industry generally or our operations or financial condition in particular.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
Flight Equipment
As of December 31, 2019, our fleet available for scheduled service consisted of the following types of owned
and leased aircraft:
Number of Number of Scheduled Average
Owned Leased Passenger Flight Cruising Average
Aircraft Type Aircraft Aircraft Capacity Range (miles) Speed (mph) Age (years)
CRJ900s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 24 76 1,500 530 9.2
CRJ700s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 27 65-70 1,600 530 13.6
CRJ200s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 37 50 1,500 530 17.3
E175s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 — 70-76 2,100 530 3.1
Several factors may impact our fleet size throughout 2020 and thereafter, including contract expirations, lease
expirations, growth opportunities and opportunities to transition to an alternative major airline partner. Below is our
2020 outlook on our fleet by aircraft type. Our actual future fleet size and/or mix of aircraft types will likely vary, and
may vary materially, from our current fleet size.
• CRJ900s/CRJ700s – We anticipate taking delivery of one new CRJ900 aircraft under a nine-year fixed-fee
agreement with Delta during 2020. We also anticipate acquiring and placing five used CRJ700 aircraft into
service with American under a multi-year contract.
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• E175s – We anticipate taking delivery of 26 new E175 aircraft (20 with American and six with Delta) and
six used E175 aircraft with Delta with scheduled delivery dates for the used E175 aircraft during 2020 and
scheduled delivery dates for the new E175 aircraft to take place by the end of 2021.
• CRJ200s –We currently anticipate a slight reduction in the total number of CRJ200 aircraft scheduled for
service during 2020.
Ground Facilities
We lease many of the buildings and associated land that we occupy. Most of these leases are with government
agencies that control the use of the airport. We lease maintenance, training and office facilities in Salt Lake City, Utah,
and we lease additional maintenance facilities in Boise, Idaho; Fresno, California; Tucson, Arizona; Chicago, Illinois;
Detroit, Michigan; Nashville, Tennessee; South Bend, Indiana; Fort Wayne, Indiana; Minneapolis, Minnesota; and San
Luis Obispo, California. We also lease ticket counters, passenger hold rooms, operating areas and other terminal space in
many of the airports that we serve.
We own our corporate headquarters facilities located in St. George, Utah and a maintenance accessory shop
facility in Salt Lake City, Utah. We also own maintenance facilities that we have land leases on in Milwaukee,
Wisconsin; Oklahoma City, Oklahoma; Colorado Springs, Colorado; and Palm Springs, California.
ITEM 3. LEGAL PROCEEDINGS
We are subject to certain legal actions which we consider routine to our business activities. As of December 31,
2019, our management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters
was not likely to have a material adverse effect on our financial position, liquidity or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
The disclosure required by this item is not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on The Nasdaq Global Select Market under the symbol “SKYW.” As of
February 12, 2020, there were approximately 730 stockholders of record of our common stock. Securities held of record
do not include shares held in securities position listings. The transfer agent for our common stock is Zions First National
Bank, Salt Lake City, Utah.
Dividends
During 2019, our Board of Directors declared regular quarterly dividends of $0.12 per share. During 2018, our
Board of Directors declared regular quarterly dividends of $0.10 per share. We intend to continue to pay quarterly
dividends subject to liquidity, capital availability and quarterly determinations that cash dividends are in the best
interests of our shareholders.
Issuer Purchases of Equity Securities
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Our Board of Directors has adopted a stock repurchase program which authorizes us to repurchase shares of our
common stock in the public market or in private transactions, from time to time, at prevailing prices. Our stock
repurchase program currently authorizes the repurchase of up to $250.0 million of our common stock. The following
table summarizes the repurchases under our stock repurchase program during the three months ended December 31,
2019:
Total Number of Shares Maximum Dollar Value of
Purchased as Part of a Shares that May Yet Be
Total Number of Average Price Publicly Announced Purchased Under the
Shares Purchased Paid Per Share Program (1) Program (in Thousands)
October 1, 2019 – October 31, 2019 . . . . . . 87,632 $ 57.05 87,632 $ 164,590
December 1, 2019 - December 31, 2019 . . . 79,749 62.07 79,749 159,590
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,381 $ 59.74 167,381 $ 159,590
(1) In February 2019, our Board of Directors authorized a new stock purchase program to repurchase up to $250.0
million of our common stock. Purchases are made at management’s discretion based on market conditions and
financial resources. As of December 31, 2019, we had repurchased 1,580,747 shares of our common stock for
$90.4 million under this authorization.
Stock Performance Graph
The following Performance Graph and related information shall not be deemed “soliciting material” or “filed”
with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent we
specifically incorporate it by reference into such filing.
The following graph compares the cumulative total shareholder return on our common stock over the five-year
period ended December 31, 2019, with the cumulative total return during such period of the Nasdaq Stock Market (U.S.
Companies) and the Nasdaq Stock Market Transportation Index. The following graph assumes an initial investment of
$100.00 with dividends reinvested. The stock performance shown on the graph below represents historical stock
performance and is not necessarily indicative of future stock price performance.
INDEXED RETURNS
$600
SkyWest, Inc.
NASDAQ Composite
$500 NASDAQ Transportation Index
$400
$300
$200
$100
$-
D EC 2 0 14 D EC 2 0 15 D EC 2 0 16 D EC 2 0 17 D EC 2 0 18 D EC 2 0 19
23
INDEXED RETURNS
Base
Period Years Ending
Company Name / Index 2014 2015 2016 2017 2018 2019
SkyWest, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 144.65 279.19 409.17 345.75 506.23
NASDAQ Composite. . . . . . . . . . . . . . . . . . . . . 100 106.96 116.45 150.96 146.67 200.49
NASDAQ Transportation Index . . . . . . . . . . . 100 77.05 99.57 127.01 115.52 145.48
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial and operating data should be read in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements
and related notes included elsewhere in this Report.
Selected Consolidated Financial Data (amounts in thousands, except per share data):
Year ended December 31,
2019 2018 2017 2016 2015
Operating revenues . . . . . . . . . . . . . . . $ 2,971,963 $ 3,221,679 $ 3,122,592 $ 3,063,702 $ 3,095,563
Operating income (loss)(1) . . . . . . . . . 512,258 474,280 388,199 (172,684) 234,515
Net income (loss)(2) . . . . . . . . . . . . . . 340,099 280,372 428,907 (161,586) 117,817
Net income (loss) per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . $ 6.68 $ 5.40 $ 8.28 $ (3.14) $ 2.31
Diluted . . . . . . . . . . . . . . . . . . . . . . . $ 6.62 $ 5.30 $ 8.08 $ (3.14) $ 2.27
Weighted average shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . 50,932 51,914 51,804 51,505 51,077
Diluted . . . . . . . . . . . . . . . . . . . . . . . 51,375 52,871 53,100 51,505 51,825
Total assets(3) . . . . . . . . . . . . . . . . . . . $ 6,657,129 $ 6,313,212 $ 5,474,400 $ 5,007,966 $ 4,781,984
Current assets(3) . . . . . . . . . . . . . . . . . 760,346 1,020,794 995,133 917,792 1,017,570
Current liabilities . . . . . . . . . . . . . . . . . 924,676 924,826 820,825 747,265 748,026
Long-term debt, net of current
maturities. . . . . . . . . . . . . . . . . . . . . . 2,628,989 2,809,768 2,377,346 2,240,051 1,659,234
Stockholders’ equity . . . . . . . . . . . . . . 2,175,014 1,964,281 1,754,322 1,350,943 1,506,435
Return (loss) on average equity(4) . . . 16.4 % 15.1 % 27.6 % (12.0)% 7.8 %
Cash dividends declared per
common share . . . . . . . . . . . . . . . . . . $ 0.48 $ 0.40 $ 0.32 $ 0.19 $ 0.16
(1) Our 2019 operating income included a special charge of $21.9 million, primarily consisting of a non-cash write-
off of aircraft manufacturer part credits that SkyWest Airlines forfeited to settle future lease return obligations.
Our operating loss for 2016 included a special charge of $465.6 million related to an impairment on our 50-seat
aircraft and related assets.
(2) Our net income for 2019 included a $46.5 million gain on the sale of ExpressJet. Our net income for 2017
included a $246.8 million benefit related to the revaluation of our net deferred tax liability and other tax
liabilities in accordance with the Tax Cuts and Jobs Act of 2017 that was enacted into law in December 2017.
(3) Certain reclassifications were made to 2017 balances to conform to the current period presentation, which
reflects the adoption of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with
Customers (Topic 606) (“Topic 606”). See Note 1 to our Consolidated Financial Statements included in Item 8
of this Report.
(4) Calculated by dividing net income (loss) by the average of beginning and ending stockholders’ equity for the
year.
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Selected Operating Data
Year ended December 31,
2019 (1) 2018 2017 2016 2015
Block hours . . . . . . . . . . . . . . . . . . . . . . . . . . 1,464,405 1,757,047 1,839,779 1,938,492 2,074,804
Departures . . . . . . . . . . . . . . . . . . . . . . . . . . . 842,098 1,010,053 1,087,052 1,153,480 1,226,897
Passengers carried . . . . . . . . . . . . . . . . . . . . . 43,660,766 48,350,470 51,483,552 53,539,438 56,228,593
Average passenger trip length . . . . . . . . . . . 500 523 512 523 528
Number of operating aircraft at end of
year(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483 596 595 652 660
(1) Excludes ExpressJet operating data since ExpressJet was sold during January 2019.
(2) Excludes aircraft leased to third parties.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis presents factors that had a material effect on our results of operations
during the years ended December 31, 2019, 2018 and 2017. Also discussed is our financial position as of December 31,
2019 and 2018. You should read this discussion in conjunction with our consolidated financial statements, including the
notes thereto, appearing elsewhere in this Report or incorporated herein by reference. This discussion and analysis
contains forward-looking statements. Please refer to the sections of this Report entitled “Cautionary Statement
Concerning Forward-Looking Statements” and “Item 1A. Risk Factors” for discussion of some of the uncertainties,
risks and assumptions associated with these statements.
This section of this Annual Report on Form 10-K generally discusses 2019 and 2018 items and year-to-year
comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons
between 2018 and 2017 that are not included in this Annual Report on Form 10-K can be found in the section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the
Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Overview
We have the largest regional airline operation in the United States. As of December 31, 2019, we offered
scheduled passenger and air freight service with approximately 2,300 total daily departures to destinations in the United
States, Canada, Mexico and the Caribbean. As of December 31, 2019, we had 483 aircraft available for scheduled
service consisting of the following:
CRJ200 CRJ700 CRJ900 E175 Total
Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 13 43 59 199
United . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 19 — 65 183
American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 62 — — 69
Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 32 32
Aircraft in scheduled service . . . . . . . . . . . . . . . . . . . . . . . . . 190 94 43 156 483
Subleased to an un-affiliated entity . . . . . . . . . . . . . . . . . . . . 4 10 5 — 19
Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 22 — — 42
Total Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 126 48 156 544
*As of December 31, 2019, these aircraft have been removed from service and are in the process of being placed under a
leasing arrangement with a third party, are aircraft transitioning between code-share agreements with our major airline
partners and being used as a supplemental spare aircraft, or are in the process of being parted out.
Our business model is based on providing scheduled regional airline service under code-share agreements
(commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight
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designator codes on its flights) with our major airline partners. Our success is principally centered on our ability to meet
the needs of our major airline partners through providing a reliable and safe operation at attractive economics. Over the
last several years, our business has evolved as we have added ten new E175 aircraft and seven new CRJ900 aircraft to
our fleet since December 31, 2018, and removed 100 unprofitable ERJ145 aircraft through the sale of ExpressJet in
January 2019, ten CRJ200 aircraft, 15 CRJ700 aircraft and five CRJ900 aircraft.
We anticipate our fleet will continue to evolve, as we are scheduled to add 26 new E175 aircraft, six used E175
aircraft and one new CRJ900 aircraft to existing fixed-fee agreements by the end of 2021. We anticipate seven of these
new aircraft will be replacing older CRJ900 and CRJ700 aircraft currently operating under fixed-fee agreements, with
the remaining coming from new flying opportunities. Our primary objective in the fleet changes is to improve our
profitability by adding new aircraft to fixed-fee agreements at improved economics, including the E175 aircraft,
extending contract terms at improved economics, and potentially removing older, less profitable aircraft from our fleet.
On January 22, 2019, we completed the sale of ExpressJet. In conjunction with the sale of ExpressJet, we
retained ownership of the 16 CRJ200 aircraft and the 10 CRJ700 aircraft operated by ExpressJet as of December 31,
2018. ExpressJet retained operation of the 100 ERJ145 aircraft that ExpressJet leased from United.
For the year ended December 31, 2019, approximately 41.2% of our aircraft in scheduled service were operated
for Delta, approximately 37.9% were operated for United, approximately 14.3% were operated for American and
approximately 6.6% were operated for Alaska.
Historically, multiple contractual relationships with major airlines have enabled us to reduce our reliance on any
single major airline code and to enhance and stabilize operating results through a mix of fixed-fee arrangements and our
prorate flying arrangements. For the year ended December 31, 2019, contract flying revenue and prorate revenue
represented approximately 82.0% and 18.0%, respectively, of our total flying agreements revenue. On contract routes,
the major airline partner controls scheduling, ticketing, pricing and seat inventories and we are compensated by the
major airline partner at contracted rates based on completed block hours (measured from takeoff to landing, including
taxi time), flight departures and other operating measures.
Our financial and operating results for the years ended December 31, 2017, 2018 and 2019, and our financial
position as of December 31, 2018 contained in this Report, include the financial results and position of ExpressJet
through January 22, 2019 for those respective periods.
Financial Highlights
We had total operating revenues of $3.0 billion for the year ended December 31, 2019, a 7.8% decrease
compared to total operating revenues of $3.2 billion for the year ended December 31, 2018. We had a net income of
$340.1 million, or $6.62 per diluted share, for the year ended December 31, 2019, compared to net income of
$280.4 million, or $5.30 per diluted share, for the year ended December 31, 2018.
The significant items affecting our financial performance during the year ended December 31, 2019 are outlined
below:
Revenue
The number of aircraft we have in scheduled service and the number of block hours we generate on our flights
are primary drivers to our flying agreements revenue under our fixed-fee arrangements. The number of flights we
operate and the corresponding number of passengers we carry are the primary drivers to our revenue under our prorate
flying agreements. During the year ended December 31, 2019, we had a net decrease in the number of aircraft operating
under fixed-fee agreements, primarily related to the sale of ExpressJet during January 2019. As summarized under the
Fleet Activity section below, from December 31, 2018 to December 31, 2019, we removed 130 aircraft from service that
were operating under less profitable flying contracts and added 17 aircraft to new fixed-fee arrangements primarily
through the sale of ExpressJet. The number of aircraft available for scheduled service decreased from 596 aircraft at
December 31, 2018 to 483 at December 31, 2019. Our completed block hours decreased 15.7% over the same period
primarily due to the sale of ExpressJet and the corresponding decrease in block hours generated by ExpressJet.
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Our total revenues decreased $249.7 million for the year ended December 31, 2019 compared to the year ended
December 31, 2018, primarily due to the sale of ExpressJet and the corresponding decrease in revenue associated with
ExpressJet flying contracts. ExpressJet revenue decreased from $564.2 million for the year ended December 31, 2018 to
$24.1 million for the year ended December 31, 2019. Revenue from SkyWest Airlines and our leasing subsidiary
SkyWest Leasing increased from $2.7 billion for the year ended December 31, 2018 to $2.9 billion for the year ended
December 31, 2019. The increase in revenue excluding the impact from the sale of ExpressJet was primarily related to
additional revenue generated from 10 new E175 aircraft and seven new CRJ900 aircraft added under fixed-fee contracts
since December 31, 2018.
Operating Expenses
Our total operating expenses decreased $287.7 million for the year ended December 31, 2019 compared to the
year ended December 31, 2018. This decrease was primarily due to the sale of ExpressJet and the corresponding
reduction in ExpressJet operating expenses, partially offset by additional operating expenses at SkyWest Airlines and
SkyWest Leasing that resulted from new, additional aircraft we placed into service since December 31, 2018. ExpressJet
operating expenses decreased from $577.6 million for the year ended December 31, 2018 to $28.7 million for the year
ended December 31, 2019. Operating expenses from SkyWest Airlines and SkyWest Leasing increased from $2.2 billion
for the year ended December 31, 2018 to $2.4 billion for the year ended December 31, 2019. Additional details regarding
the increase in our operating expenses are described in the section of this Report entitled “Results of Operations.”
Fleet Activity
The following table summarizes our fleet activity for 2019:
Aircraft in Service December 31, 2018 Additions Removals December 31, 2019
E175s . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 10 — 156
CRJ900s . . . . . . . . . . . . . . . . . . . . . . . . 41 7 (5) 43
CRJ700s . . . . . . . . . . . . . . . . . . . . . . . . 109 — (15) 94
CRJ200s . . . . . . . . . . . . . . . . . . . . . . . . 200 6 (16) 190
ERJ145s . . . . . . . . . . . . . . . . . . . . . . . . 100 — (100) —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 23 (136) 483
During 2019, we took delivery of ten new E175 aircraft and seven new CRJ900 aircraft and placed the aircraft
into service under fixed-fee flying agreements. We removed five CRJ900 aircraft from service that we are leasing to a
third party. We also removed 15 CRJ700 aircraft from service during 2019 that we are leasing to a third party or in the
process of transitioning to another major airline partner. We removed 100 ERJ145s resulting from the sale of ExpressJet.
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 1 to our Consolidated Financial Statements
included in Item 8 of this Report. Critical accounting policies are those policies that are most important to the preparation
of our consolidated financial statements and require management’s subjective and complex judgments due to the need to
make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to revenue
recognition, aircraft leases, long-lived assets, self-insurance and income tax as discussed below. The application of these
accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a
result, actual results will likely differ, and could differ materially, from such estimates.
Revenue Recognition
Flying agreements and airport customer service and other revenues are recognized when service is provided.
Under our fixed-fee and prorate flying agreements with our major airline partners, revenue is considered earned when
each flight is completed. A portion of our compensation under our fixed-fee flying agreements is designed to reimburse
us for the use of the aircraft we provide under such agreements. This compensation is deemed to be lease revenue,
inasmuch as the agreements identify the “right of use” or a specific type and number of aircraft over the agreement term.
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The amount of compensation deemed to be lease revenue is determined from the agreed upon rates for the use of the
aircraft included in each fixed-fee agreement, which we believe approximates fair value for the aircraft leases. Under our
airport customer service agreements, revenue is considered earned when each flight we provide customer service for
departs. Our revenues could be impacted by a number of factors, including changes to the applicable code-share
agreements, contract modifications resulting from contract renegotiations and our ability to earn incentive payments
contemplated under applicable agreements. In the event contracted rates are not finalized at a quarterly or annual
financial statement date, we record that period’s revenues based on the lower of the prior period’s approved rates or our
estimate of rates that will be implemented upon completion of negotiations. Also, in the event we have a reimbursement
dispute with a major airline partner at a quarterly or annual financial statement date, we evaluate the dispute under
established revenue recognition criteria and, provided the revenue recognition criteria have been met, we recognize
revenue for that period based on our estimate of the resolution of the dispute. Our rates were finalized under our code-
share agreements as of December 31, 2019.
Aircraft Leases
As of December 31, 2019, our fleet of aircraft in scheduled service included 94 aircraft under lease. In order to
determine the proper classification of our leased aircraft as either operating leases or capital leases, we must make certain
estimates at the inception of the lease relating to the economic useful life and the fair value of an asset as well as select
an appropriate discount rate to be used in discounting future lease payments. These estimates are utilized by management
in making computations as required by existing accounting standards that determine whether the lease is classified as an
operating lease or a capital lease. All of our aircraft leases have been classified as operating leases, which results in rental
payments being charged to expense over the terms of the related leases. Under the majority of our operating leases, we
are required to meet half-time lease return conditions with the aircraft, which presumes at least 50 percent of the eligible
flight time for certain components since the last overhaul remains when the aircraft is returned to the lessor. A liability
for probable lease return costs is recorded after the aircraft has completed its last maintenance cycle prior to being
returned. Several factors can impact the estimated liability for lease return costs including, but not limited to, timing of
scheduled maintenance events and anticipated condition of the aircraft at the end of the lease term. We believe it is
unlikely that materially different estimates for lease return obligations would be made or reported based on other
reasonable assumptions or conditions suggested by actual historical experience and other data available at the time
estimates were made. Additionally, we adopted Financial Accounting Standards Board issued ASU 2016-02, “Leases
(Topic 842)” (“Topic 842”) on January 1, 2019. Under Topic 842, we were required to estimate our incremental
borrowing rate to discount the lease payments based on information available at lease commencement.
Long-Lived Assets
As of December 31, 2019, we had approximately $5.4 billion of property and equipment and related assets net
of accumulated depreciation. In accounting for these long-lived, we make estimates about the expected useful lives of the
assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of
the assets and the cash flows they generate. Factors indicating potential impairment include, but are not limited to,
significant decreases in the market value of the long-lived assets, a significant change in the condition of the long-lived
assets and operating cash flow losses associated with the use of the long-lived assets. When considering whether or not
impairment of long-lived assets exists, we group similar assets together at the lowest level for which identifiable cash
flows are largely independent of the cash flows of other assets and liabilities and compare the undiscounted cash flows
for each asset group to the net carrying amount of the assets supporting the asset group. Asset groupings are done at the
fleet type or contract level. In 2016, we recorded an impairment on certain of our long-lived assets, which included
CRJ200 aircraft. In 2016, the market lease rate was less than the contractual lease rate on our CRJ200 leased aircraft.
Prior to the adoption of Topic 842 these lease rate differences were not allowed to be recognized for impairment. With
the adoption of Topic 842 we recorded an impairment of $13.1 million (net of tax) as an adjustment to our January 1,
2019 retained earnings related to the previously unrecognized impairment of these leased CRJ200s.
Self-Insurance
We use a combination of insurance and self-insurance mechanisms to provide for the potential liability of
certain risks, including workers’ compensation, healthcare benefits, general liability, product liability, property insurance
and directors’ and officers’ liability insurance. Liabilities associated with risks retained by us are not discounted and are
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estimated by considering historical claims experience, demographics, exposure and severity factors and other actuarial
assumptions.
Our workers’ compensation liability includes estimated outstanding losses of unpaid claims and allocated loss
adjustment expenses (“ALAE”), which includes case reserves, the development of known claims and incurred but not
reported claims. ALAE are the direct expenses for settling specific claims. The amounts reflect per occurrence and
annual aggregate limits maintained by us. The estimated liability analysis does not include estimating a provision for
unallocated loss adjustment expenses. We believe that the liability recorded at December 31, 2019 is adequate to cover
all workers' compensation claims incurred through December 31, 2019. If the actual costs of such claims and related
expenses exceed the amount estimated, additional reserves may be required which could have a material negative effect
on our operating results. Holding other factors constant, a 10 percent increase in our estimated workers compensation
liability as of December 31, 2019, would have resulted in additional expense of approximately $2.4 million for the year
ended December 31, 2019.
The liability related to our self-insured group medical insurance plans includes an estimate for claims incurred
but not paid. This estimate is created using general actuarial principles and our historical claims experience. The cost of
general liability, product liability and commercial auto liability is accrued based on estimates of the aggregate liability
claims incurred using certain actuarial assumptions and historical claims experience.
Income Tax
Deferred income taxes are determined based on the temporary differences between the financial reporting and
tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to
reverse. Estimating our tax liabilities involves judgments related to uncertainties in the application of complex tax
regulations. We make certain estimates and judgments to determine tax expense for financial statement purposes as we
evaluate the effect of tax credits, tax benefits and deductions, some of which result from differences in the timing of
recognition of revenue or expense for tax and financial statement purposes. Changes to these estimates may result in
significant changes to our tax provision in future periods. Each fiscal quarter we re-evaluate our tax provision and
reconsider our estimates and assumptions related to specific tax assets and liabilities, making adjustments as
circumstances change.
Recent Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements included in Item 8 of this Report for a description of recent
accounting pronouncements.
Results of Operations
2019 Compared to 2018
Operational Statistics. The following table sets forth our major operational statistics and the associated
percentages of change for the periods identified below. The decrease in block hours, departures and passengers carried
during the year ended December 31, 2019, compared to the year ended December 31, 2018, was primarily due to the sale
of ExpressJet in January 2019.
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For the year ended December 31,
2019 2018 % Change
SkyWest Airlines block hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,464,405 1,380,420 6.1 %
ExpressJet block hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,904 376,627 (95.5)%
Total block hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,481,309 1,757,047 (15.7)%
SkyWest Airlines departures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842,098 790,485 6.5 %
ExpressJet departures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,390 219,568 (95.7)%
Total departures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851,488 1,010,053 (15.7)%
SkyWest Airlines passengers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,660,766 40,302,301 8.3 %
ExpressJet passengers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,252 8,048,439 (95.3)%
Total passengers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,040,018 48,350,470 (8.9)%
Passenger load factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.3 % 80.5 % 1.8 pts
Average passenger trip length (miles) . . . . . . . . . . . . . . . . . . . . . . 500 523 (4.4)%
Operating Revenues
The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):
For the year ended December 31,
2019 2018 $ Change % Change
Flying agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,889,265 $ 3,169,520 $ (280,255) (8.8)%
Airport customer service and other . . . . . . . . . . . . . . . . . . . . . . . 82,698 52,159 30,539 58.5 %
Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,971,963 $ 3,221,679 $ (249,716) (7.8)%
Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity
purchase agreements and prorate agreements with our major airline partners. Airport customer service and other
revenues primarily consist of revenue earned from providing airport counter, gate and ramp services and lease revenue
from leasing aircraft and spare engines to third parties separate from our capacity purchase agreements. Changes in our
flying agreements revenue are summarized below (dollar amounts in thousands).
For the year ended December 31,
2019 2018 $ Change % Change
Capacity purchase agreements revenue: flight operations . . . . . $ 1,538,062 $ 1,856,253 $ (318,191) (17.1)%
Capacity purchase agreements revenue: aircraft lease . . . . . . . . 830,247 814,518 15,729 1.9 %
Prorate agreements revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,956 498,749 22,207 4.5 %
Flying agreements revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,889,265 $ 3,169,520 $ (280,255) (8.8)%
The decrease in “Capacity purchase agreements revenue: flight operations” of $318.2 million, or 17.1%, was
primarily due to the sale of ExpressJet and the corresponding decrease in revenue, partially offset by the incremental
revenue generated from ten new E175 aircraft and seven new CRJ900 aircraft added to our fleet and economic
improvements made to certain existing fixed-fee agreements since December 31, 2018. The increase in “Capacity
purchase agreement revenue: aircraft lease” of $15.7 million, or 1.9%, was primarily due to the ten new E175 aircraft
added subsequent to December 31, 2018. The increase in prorate agreements revenue of $22.2 million, or 4.5%, was
primarily due to an increase in the number of prorate flights operated during 2019 compared to 2018.
The $30.5 million, or 58.5%, increase in airport customer service and other revenues was primarily related to an
increase in revenue from leasing aircraft and spare engines to third parties.
Operating Expenses
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Individual expense components attributable to our operations are set forth in the following table (dollar amounts
in thousands).
For the year ended December 31,
2019 2018 $ Change % Change
Amount Amount Amount Percent
Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,001,746 $ 1,201,518 $ (199,772) (16.6)%
Aircraft maintenance, materials and repairs . . . . . . . . . . . . . . 514,313 556,259 (41,946) (7.5)%
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 368,098 334,589 33,509 10.0 %
Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,115 117,657 1,458 1.2 %
Airport-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,837 109,605 9,232 8.4 %
Aircraft rentals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,998 154,945 (82,947) (53.5)%
Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,869 — 21,869 NM
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,729 272,826 (29,097) (10.7)%
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,459,705 $ 2,747,399 $ (287,694) (10.5)%
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,755 120,409 7,346 6.1 %
Total airline expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,587,460 $ 2,867,808 $ (280,348) (9.8)%
Salaries, wages and benefits. The $199.8 million, or 16.6%, decrease in salaries, wages and benefits was
primarily due to a decrease in direct labor costs resulting from the sale of ExpressJet, partially offset by increased labor
costs and employee benefit costs for certain work groups, including flight crews at SkyWest Airlines.
Aircraft maintenance, materials and repairs. The $41.9 million, or 7.5%, decrease in aircraft maintenance
expense was primarily due to a decrease in direct maintenance costs corresponding with our sale of ExpressJet. This
decrease in aircraft maintenance expense was partially offset by an increase in direct maintenance costs incurred on a
portion of SkyWest Airlines’ CRJ200 fleet and an increase in the percentage of our fleet that is under long-term Power-
By-The-Hour engine maintenance agreements at SkyWest Airlines, including the additional ten E175 aircraft added
subsequent to December 31, 2018 and increased costs to perform airframe inspections in 2019.
Depreciation and amortization. The $33.5 million, or 10.0%, increase in depreciation and amortization expense
was primarily due to the purchase of ten E175 aircraft and spare engines subsequent to December 31, 2018.
Aircraft fuel. The $1.5 million, or 1.2%, increase in fuel cost was primarily due to an increase in the number of
prorate flights we operated and corresponding increase in gallons of fuel we purchased, partially offset by a decrease in
our average fuel cost per gallon from $2.60 for 2018 to $2.51 for 2019. We purchase and incur expense for all fuel on
flights operated under our prorate agreements. All fuel costs incurred under our fixed-fee contracts are either purchased
directly by our major airline partner, or if purchased by us, we record the direct reimbursement as a reduction to our fuel
expense. The following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods
indicated:
For the year ended December 31,
(in thousands) 2019 2018 % Change
Fuel gallons purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,535 45,299 4.9 %
Fuel expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 119,115 $ 117,657 1.2 %
Airport-related expenses. Airport-related expenses include airport-related customer service costs such as
outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees
and station rents (our employee customer service labor costs are reflected in salaries, wages and benefits). The $9.2
million, or 8.4%, increase in airport-related expenses was primarily due to an increase in airport terminal rents,
subcontract airport services and deicing events related to our prorate operations during 2019.
Aircraft rentals. During 2019, we acquired 56 CRJ aircraft under an early lease buyout arrangement. The
$82.9 million, or 53.5%, decrease in aircraft rentals was primarily due to the acquisition of these 56 CRJ aircraft and a
reduction of leased aircraft as a result of scheduled lease expirations subsequent to December 31, 2018.
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Special Items. The $21.9 million special items expense for 2019 related to a non-cash write-off of $18.5 million
in aircraft manufacturer part credits that we forfeited to settle future lease return obligations with the aircraft
manufacturer. The $18.5 million of expense was included in the SkyWest Airlines segment. The special items expense
also included $3.4 million of expense associated with a cash payout of certain ExpressJet employees’ stock equity grants
as part of the sale of ExpressJet, which was reflected in the ExpressJet segment.
Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability
insurance, simulator costs, crew per diem, and crew hotel costs. The $29.1 million, or 10.7%, decrease in other
operating expenses was primarily related to the sale of ExpressJet and the related decrease in crew costs.
Interest Expense. The $7.3 million, or 6.1%, increase in interest expense was primarily related to the additional
interest expense associated with the ten E175 aircraft added to our fleet since December 31, 2018, which were debt
financed.
Total airline expenses. The $280.3 million, or 9.8%, decrease in total airline expenses was primarily related to
the sale of ExpressJet and the related expenses associated with ExpressJet’s prior operations, partially offset by
additional operating expenses at SkyWest Airlines and SkyWest Leasing that resulted from new, additional aircraft we
placed into service since December 31, 2018.
Summary of interest income, other income (expense) and provision for income taxes:
Interest income. Interest income increased $5.3 million, or 60.2%, during 2019, compared to 2018. The
increase in interest income was primarily related to an increase in interest rates subsequent to December 31, 2018, and an
increase in interest earned from loans to third parties executed subsequent to December 31, 2018.
Other income (expense), net. During 2019, we had other income, net of $47.7 million primarily related to the
gain on sale of ExpressJet. During 2018, we had other income, net of $3.6 million primarily related to a mark-to-market
gain on trading securities and excess rotable spare parts sold during 2018.
Summary of provision for income taxes:
Provision for income taxes. For the years ended December 31, 2019 and December 31, 2018, we recorded
income tax provisions of 23.8% and 23.5%, respectively, which include the statutory federal income tax rate of 21% and
other reconciling income tax items, including state income taxes. We recorded a $3.5 million and $4.5 million benefit
from share-based compensation in 2019 and 2018, respectively, relating to ASU 2016-09 which requires excess tax
benefits and deficiencies to be recognized in the income tax provision during the period stock options are
vested/exercised.
Net Income. Primarily due to the factors described above, we generated net income of $340.1 million, or $6.62
per diluted share, for the year ended December 31, 2019, compared to a net income of $280.4 million, or $5.30 per
diluted share, for the year ended December 31, 2018.
Our Business Segments 2019 compared to 2018:
For 2019 and 2018 prior to the sale of ExpressJet in January 2019, we had three reportable segments, which
were the basis of our internal financial reporting: SkyWest Airlines, ExpressJet and SkyWest Leasing. Following the sale
of ExpressJet, we have two reportable segments: SkyWest Airlines and SkyWest Leasing.
Corporate overhead expenses, primarily administrative labor costs, were allocated to the operating expenses of
SkyWest Airlines, ExpressJet and SkyWest Leasing.
The segment information presented for ExpressJet for 2019 reflects ExpressJet’s results prior to the sale of
ExpressJet on January 22, 2019, when ExpressJet was operating as our subsidiary.
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The following table sets forth our segment data for the years ended December 31, 2019 and 2018 (in
thousands):
For the year ended December 31,
(dollar amounts in thousands)
2019 2018 $ Change % Change
Amount Amount Amount Percent
Operating Revenues:
SkyWest Airlines operating revenue . . . . . . . $ 2,478,681 $ 2,346,251 $ 132,430 5.6 %
ExpressJet operating revenues . . . . . . . . . . . . 24,050 564,202 (540,152) (95.7)%
SkyWest Leasing operating revenues . . . . . . 469,232 311,226 158,006 50.8 %
Total Operating Revenues. . . . . . . . . . . . . . . . . . $ 2,971,963 $ 3,221,679 $ (249,716) (7.8)%
Airline Expenses:
SkyWest Airlines airline expense . . . . . . . . . $ 2,228,157 $ 2,039,581 $ 188,576 9.2 %
ExpressJet airline expense . . . . . . . . . . . . . . . 28,690 579,948 (551,258) (95.1)%
SkyWest Leasing segment expense. . . . . . . . 330,613 248,279 82,334 33.2 %
Total Airline Expense(1). . . . . . . . . . . . . . . . . . . $ 2,587,460 $ 2,867,808 $ (280,348) (9.8)%
Segment profit (loss):
SkyWest Airlines segment profit. . . . . . . . . . $ 250,524 $ 306,670 $ (56,146) (18.3)%
ExpressJet segment loss . . . . . . . . . . . . . . . . . (4,640) (15,746) 11,106 (70.5)%
SkyWest Leasing segment profit . . . . . . . . . . 138,619 62,947 75,672 120.2 %
Total Segment Profit (loss) . . . . . . . . . . . . . . . . . $ 384,503 $ 353,871 $ 30,632 8.7 %
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . 14,131 8,823 5,308 60.2 %
Other Income, net . . . . . . . . . . . . . . . . . . . . . . . . 47,671 3,620 44,051 1,216.9 %
Consolidated Income Before Taxes . . . . . . . . . . $ 446,305 $ 366,314 $ 79,991 21.8 %
(1) Total Airline Expense includes operating expense and interest expense
SkyWest Airlines Segment Profit. SkyWest Airlines segment profit decreased $56.1 million, or 18.3%, during
2019, compared to 2018.
SkyWest Airlines block hour production increased to 1,464,405, or 6.1%, for 2019 from 1,380,420 for 2018,
primarily due to the additional block hour production from the new E175 and CRJ900 aircraft added subsequent to
December 31, 2018. Significant items contributing to the SkyWest Airlines segment profit are set forth below.
The $132.4 million, or 5.6%, increase to SkyWest Airlines operating revenue during 2019, compared to 2018,
was primarily due to ten E175 aircraft and seven CRJ900 aircraft placed into service in 2019 and additional aircraft
operating under prorate agreements since 2018.
The $188.6 million, or 9.2%, increase in the SkyWest Airlines airline expense during 2019, compared to 2018,
was primarily due to the following factors:
• SkyWest Airlines’ salaries, wages and benefits expense increased by $113.2 million, or 13.0%, primarily
due to increased labor costs and employee benefit costs for certain work groups, including flight crews and
due to additional block hour production.
• SkyWest Airlines’ aircraft maintenance, materials and repairs expense increased by $86.5 million, or
21.1%, primarily attributable to direct maintenance costs incurred on a portion of SkyWest Airlines’ CRJ
fleet including aircraft airframe inspections and an increase in the percentage of our fleet that is under long-
term Power-By-The-Hour engine maintenance agreements at SkyWest Airlines, including the additional
ten E175 aircraft added subsequent to December 31, 2018.
• SkyWest Airlines’ aircraft rental expenses decreased $77.0 million, or 52.9%, primarily due to the
acquisition of 56 CRJ aircraft under an early lease buyout arrangement during 2019 and through a
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reduction of our fleet size that was financed through leases as a result of scheduled lease expirations
subsequent to December 31, 2018.
• SkyWest Airlines operating expenses included special items related to a non-cash write-off of $18.5 million
in aircraft manufacturer part credits that we forfeited to settle future lease return obligations with the
aircraft manufacturer.
• SkyWest Airlines other operating expense increased $23.8 million, or 11.0%. The increase in other
operating expense was primarily due to an increase in the use of hotels for crews, property taxes on
additional aircraft added subsequent to December 31, 2018 and an increase in direct operating costs
associated with the increase in block hour production year-over-year.
• The remaining increase in SkyWest Airlines airline expense was primarily due to an increase in airport
related costs associated with the prorate operations.
ExpressJet Segment Loss. ExpressJet’s segment loss decreased $11.1 million, or 70.5%, during 2019, compared
to 2018, primarily due to the sale of ExpressJet in January 2019.
SkyWest Leasing Segment Profit. SkyWest Leasing profit increased $75.7 million, or 120.2%, during 2019,
compared to 2018, primarily due to ten E175 aircraft added to our fleet subsequent to December 31, 2018 and additional
revenue from leasing aircraft and spare engines to third parties.
Liquidity and Capital Resources
Sources and Uses of Cash—2019 Compared to 2018
Cash Position and Liquidity. The following table provides a summary of the net cash provided by (used in) our
operating, investing and financing activities for the years ended December 31, 2019 and 2018, and our total cash and
marketable securities position as of December 31, 2019 and December 31, 2018 (in thousands).
For the year ended December 31,
2019 2018 $ Change % Change
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . $ 721,030 $ 802,534 $ (81,504) (10.2)%
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . (657,034) (983,404) 326,370 (33.2)%
Net cash provided by (used in) financing activities . . . . . . . . . . . (305,174) 327,462 (632,636) (193.2)%
December 31, December 31,
2019 2018 $ Change % Change
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,206 $ 328,384 $ (241,178) (73.4)%
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,966 360,945 72,021 20.0 %
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 520,172 $ 689,329 $ (169,157) (24.5)%
Cash Flows from Operating Activities. The $81.5 million, or 10.2%, decrease in net cash provided by
operating activities was primarily due to changes in our working capital accounts during 2019 compared to 2018. This
decrease in cash provided by operating activities was partially offset by an increase in income before income taxes of
$80.0 million in 2019 compared to 2018.
Cash Flows from Investing Activities. The $326.4 million, or 33.2%, decrease in cash used in investing
activities was primarily due to the reduction of new E175 aircraft acquired from 39 during 2018, compared to ten for
2019. This reduction was partially offset by the acquisition of 85 used CRJ aircraft during 2019 including the 56 used
CRJ aircraft purchased under an early lease buyout during the first half of 2019. These changes represented a
$481.1 million decrease in aircraft purchases. Additionally, during 2019, we sold ExpressJet for $79.6 million partially
offset by a note receivable issued to the buyer of $26.4 million, resulting in net cash from the sale of ExpressJet of $53.2
million.
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Cash Flows from Financing Activities. The $632.6 million, or 193.2%, increase in cash used in financing
activities was primarily related to the decrease in proceeds from the issuance of long-term debt of $200.0 million
associated with ten E175 aircraft and two previously leased aircraft acquired during 2019, compared to proceeds from
the issuance of debt of $784.7 million associated with 39 E175 aircraft acquired during 2018. Additionally, during 2019,
we used an additional $35.9 million to purchase treasury shares and common stock, and for income tax payments
towards vested employee equity awards.
Liquidity and Capital Resources as of December 31, 2019 and 2018
We believe that in the absence of unusual circumstances, the working capital currently available to us, together
with our projected cash flows from operations, will be sufficient to meet our present financial requirements, including
anticipated expansion, planned capital expenditures, and scheduled lease payments and debt service obligations for at
least the next 12 months.
At December 31, 2019, our total capital mix was 45.3% equity and 54.7% long-term debt, compared to 41.1%
equity and 58.9% long-term debt at December 31, 2018.
At December 31, 2019, we had $8.8 million in letters of credit issued under our line of credit facility, which
reduced the amount available under the facility to $66.2 million. The facility expires on September 1, 2021 and has a
variable interest rate of LIBOR plus 2.5% at December 31, 2019.
As of December 31, 2019 and 2018, we had $61.7 million and $78.7 million, respectively, in letters of credit
and surety bonds outstanding with various banks and surety institutions.
As of December 31, 2019 and 2018, we had no restricted cash.
Significant Commitments and Obligations
General
The following table summarizes our commitments and obligations as noted for each of the next five years and
thereafter (in thousands):
Total 2020 2021 2022 2023 2024 Thereafter
Operating lease payments for
aircraft and facility obligations . $ 443,660 $ 94,806 $ 84,285 $ 73,960 $ 68,581 $ 27,282 $ 94,746
Firm aircraft and spare engine
commitments . . . . . . . . . . . . . . 779,410 489,796 284,114 5,500 — — —
Interest commitments(A) . . . . . . . 574,577 120,005 104,678 90,251 73,946 59,373 126,324
Principal maturities on
long-term debt . . . . . . . . . . . . . 3,017,523 367,954 352,005 365,907 374,906 327,630 1,229,121
Total commitments and
obligations . . . . . . . . . . . . . . . . $ 4,815,170 $1,072,561 $ 825,082 $ 535,618 $ 517,433 $ 414,285 $ 1,450,191
(A) At December 31, 2019, all of our total long-term debt had fixed interest rates.
Purchase Commitments and Options
As of December 31, 2019, we had a firm purchase commitment for 26 E175 aircraft from Embraer with
scheduled delivery dates through 2021.
We have not historically funded a substantial portion of our aircraft acquisitions with working capital. Rather,
we have generally funded our aircraft acquisitions through a combination of operating leases and long-term debt
financing. At the time of each aircraft acquisition, we evaluate the financing alternatives available to us, and select one or
more of these methods to fund the acquisition. At present, we intend to fund our acquisition of any additional aircraft
through cash on hand and debt financing. Based on current market conditions and discussions with prospective leasing
organizations and financial institutions, we currently believe that we will be able to obtain financing for our committed
35
acquisitions, as well as additional aircraft. We intend to finance the firm purchase commitment for 26 E175 aircraft with
approximately 85% debt and the remaining balance with cash.
Aircraft Lease and Facility Obligations
We also have significant long-term lease obligations, primarily relating to our aircraft fleet. At December 31,
2019, we had 94 aircraft under lease with remaining terms ranging from less than one to ten years. Future minimum lease
payments due under all long-term operating leases were approximately $443.6 million at December 31, 2019. Assuming
a 6.4% discount rate, which is the average incremental borrowing rate we anticipate we would have incurred on debt
obtained over a similar term to acquire these assets, the present value of these lease obligations would have been equal to
approximately $354.0 million at December 31, 2019.
Long-term Debt Obligations
As of December 31, 2019, we had $3.0 billion of long-term debt obligations related to the acquisition of aircraft
and certain spare engines. The average effective interest rate on those long-term debt obligations was approximately
4.2% at December 31, 2019.
Under our fixed-fee arrangements, the major airline partners compensate us for our costs of owning or leasing
the aircraft on a monthly basis. The aircraft compensation structure varies by agreement, but is intended to cover either
our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease
expense costs while the aircraft is under contract.
Guarantees
We have guaranteed the obligations of SkyWest Airlines under the Delta Connection Agreement and the United
Express Agreement for the E175 aircraft. In addition, we have guaranteed certain other obligations under aircraft
financing and leasing agreements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Aircraft Fuel
In the past, we have not experienced difficulties with fuel availability and we currently expect to be able to
obtain fuel at prevailing prices in quantities sufficient to meet our future needs. Pursuant to our contract flying
arrangements, Delta, United, American and Alaska have agreed to bear the economic risk of fuel price fluctuations on
our contracted flights. We bear the economic risk of fuel price fluctuations on our prorate operations. For each of the
years ended December 31, 2019, 2018 and 2017, approximately 18%, 16% and 14% of our total flying agreements
revenue was derived from prorate arrangements. For the years ended December 31, 2019, 2018 and 2017, the average
price per gallon of aircraft fuel was $2.51, $2.60 and $2.06, respectively. For illustrative purposes only, we have
estimated the impact of the market risk of fuel on our prorate operations using a hypothetical increase of 25% in the price
per gallon we purchase. Based on this hypothetical assumption, we would have incurred an additional $29.8 million,
$29.4 million and $21.3 million in fuel expense for the years ended December 31, 2019, 2018 and 2017, respectively.
Interest Rates
As of December 31, 2019, all of our interest rates on our long-term debt were fixed rates. We currently intend to
finance the acquisition of aircraft through manufacturer financing or long-term borrowings. Changes in interest rates may
impact the actual cost to us to acquire future aircraft. To the extent we place new aircraft in service under our code-share
agreements with Delta, United, American, Alaska or other carriers, our code-share agreements currently provide that
reimbursement rates will be adjusted to reflect the interest rates effective at the closing of the respective aircraft
financing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth below should be read together with the “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” appearing elsewhere herein.
36
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of SkyWest, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SkyWest, Inc. and subsidiaries (the
Company) as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income,
stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related
notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) and our report dated February 18, 2020 expressed an unqualified opinion
thereon.
Adoption of ASU No. 2016-02
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting
for leases in the year ended December 31, 2019 due to the adoption of ASU No. 2016-02, “Leases (Topic 842).”
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
37
Valuation of workers’ compensation liability
Description of At December 31, 2019, the Company’s workers’ compensation liability balance totaled $23.9
the Matter million, presented as a component of other current liabilities and other long-term liabilities on the
balance sheet. The Company discusses the estimate related to the workers’ compensation within
Note 5, Commitments and Contingencies.
Auditing the estimated ultimate losses associated with the workers’ compensation liability is
complex and highly judgmental due to the significant estimation required in determining the
ultimate aggregate liabilities for claims incurred. In particular, the estimate was sensitive to
significant assumptions such as the estimation of loss payment and loss reporting development
patterns.
How We We obtained an understanding, evaluated the design and tested the operating effectiveness of
Addressed the controls over the Company’s workers’ compensation liability process. As part of our testing, we
Matter in Our also considered controls over management’s review of the significant assumptions noted above.
Audit We also tested controls performed by management to review the historical estimates of the
workers’ compensation liability for accuracy.
To test the estimate of the Company’s workers’ compensation liability, we performed audit
procedures that included, among others, assessing methodologies and testing the significant
assumptions used in estimating the worker’s compensation liability and the underlying data used
by the Company in its analysis. We utilized the assistance of our actuarial specialists in assessing
the reasonableness of the methodologies used and significant assumptions applied, including the
estimation of loss payment and loss reporting development patterns, as well as developing an
independent projection of the Company’s unpaid claims obligations. We also assessed the
historical accuracy of management’s estimates.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2003.
Salt Lake City, Utah
February 18, 2020
38
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
December 31, December 31,
2019 2018
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,206 $ 328,384
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,966 360,945
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,141 25,936
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,977 64,194
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,503 127,690
Prepaid aircraft rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 87,031
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,553 26,614
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760,346 1,020,794
PROPERTY AND EQUIPMENT:
Aircraft and rotable spares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,078,801 6,433,916
Deposits on aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,858 42,012
Buildings and ground equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,398 291,544
7,393,057 6,767,472
Less-accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . (1,998,376) (1,761,728)
Total property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,394,681 5,005,744
OTHER ASSETS
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,009 —
Long-term prepaid assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 181,830
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,093 104,844
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502,102 286,674
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,657,129 $ 6,313,212
See accompanying notes to consolidated financial statements.
39
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
December 31, December 31,
2019 2018
CURRENT LIABILITIES:
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 364,126 $ 350,206
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,473 331,982
Accrued salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,856 161,606
Current maturities of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 94,806
Taxes other than income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,004 16,024
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,411 65,008
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 924,676 924,826
LONG-TERM DEBT, net of current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,628,989 2,809,768
DEFERRED INCOME TAXES PAYABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623,580 518,159
DEFERRED AIRCRAFT CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 29,308
NONCURRENT OPERATING LEASE LIABILITIES . . . . . . . . . . . . . . . . . . . . 259,237 —
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,633 66,870
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS’ EQUITY:
Preferred stock, 5,000,000 shares authorized; none issued . . . . . . . . . . . . . . . . — —
Common stock, no par value, 120,000,000 shares authorized; 81,742,937
and 81,239,289 shares issued, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . 686,806 690,910
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,079,179 1,776,585
Treasury stock, at cost, 31,420,179 and 29,850,999 shares, respectively . . . . (590,971) (503,182)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (32)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,175,014 1,964,281
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,657,129 $ 6,313,212
See accompanying notes to consolidated financial statements.
40
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
Year Ended December 31,
2019 2018 2017 (a)
OPERATING REVENUES:
Flying agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,889,265 $ 3,169,520 $ 3,078,297
Airport customer service and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,698 52,159 44,295
Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,971,963 3,221,679 3,122,592
OPERATING EXPENSES:
Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,001,746 1,201,518 1,192,067
Aircraft maintenance, materials and repairs . . . . . . . . . . . . . . . . . . . . . 514,313 556,259 579,463
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,098 334,589 292,768
Aircraft fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,115 117,657 85,136
Airport-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,837 109,605 118,374
Aircraft rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,998 154,945 215,807
Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,869 — —
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,729 272,826 250,778
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,459,705 2,747,399 2,734,393
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512,258 474,280 388,199
OTHER INCOME (EXPENSE):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,131 8,823 4,509
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127,755) (120,409) (104,925)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,671 3,620 400
Total other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,953) (107,966) (100,016)
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 446,305 366,314 288,183
PROVISION (BENEFIT) FOR INCOME TAXES . . . . . . . . . . . . . . . . . 106,206 85,942 (140,724)
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,099 $ 280,372 $ 428,907
BASIC EARNINGS PER SHARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.68 $ 5.40 $ 8.28
DILUTED EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.62 $ 5.30 $ 8.08
Weighted average common shares:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,932 51,914 51,804
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,375 52,871 53,100
COMPREHENSIVE INCOME:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,099 $ 280,372 $ 428,907
Net unrealized appreciation on marketable securities, net of taxes . . 32 18 21
TOTAL COMPREHENSIVE INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,131 $ 280,390 $ 428,928
(a) Amounts adjusted due to the adoption of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from
Contracts with Customers (Topic 606) (“Topic 606”). See Note 1 to the financial statements of this report for
additional information.
See accompanying notes to consolidated financial statements.
41
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Accumulated
Other
Common Stock Retained Treasury Stock Comprehensive
Shares Amount Earnings Shares Amount Income (Loss) Total
Balance at December 31, 2016 . . . . . . . . . . . 79,781 $ 657,353 $ 1,103,751 (28,015) $ (410,090) $ (71) $ 1,350,943
Net income . . . . . . . . . . . . . . . . . . . . . . . . . — — 428,907 — — — 428,907
Net unrealized appreciation on marketable
securities, net of tax of $7. . . . . . . . . . . . . — — — — — 21 21
Exercise of common stock options and
vested restricted stock units . . . . . . . . . . . 529 1,658 — — — — 1,658
Treasury shares acquired from vested
employee stock awards for income tax
withholdings . . . . . . . . . . . . . . . . . . . . . . — — — (145) (5,080) — (5,080)
Sale of common stock under employee
stock purchase plan . . . . . . . . . . . . . . . . . 88 3,002 — — — — 3,002
Stock based compensation expense related
to the issuance of equity awards . . . . . . . . — 10,580 — — — — 10,580
Impact of adoption of ASU 2016-09 (See
Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . — — 867 — — — 867
Treasury stock purchases . . . . . . . . . . . . . . . — — — (484) (20,008) — (20,008)
Cash dividends declared ($0.32 per share) . . — — (16,568) — — — (16,568)
Balance at December 31, 2017 . . . . . . . . . . . 80,398 672,593 1,516,957 (28,644) (435,178) (50) 1,754,322
Net income . . . . . . . . . . . . . . . . . . . . . . . . . — — 280,372 — — — 280,372
Net unrealized appreciation on marketable
securities, net of tax of $6. . . . . . . . . . . . . — — — — — 18 18
Exercise of common stock options and
vested restricted stock units . . . . . . . . . . . 780 2,174 — — — — 2,174
Treasury shares acquired from vested
employee stock awards for income tax
withholdings . . . . . . . . . . . . . . . . . . . . . . — — — (239) (13,556) — (13,556)
Sale of common stock under employee
stock purchase plan . . . . . . . . . . . . . . . . . 61 3,038 — — — — 3,038
Stock based compensation expense related
to the issuance of equity awards . . . . . . . . — 13,105 — — — — 13,105
Treasury stock purchases . . . . . . . . . . . . . . . — — — (968) (54,448) — (54,448)
Cash dividends declared ($0.40 per share) . . — — (20,744) — — — (20,744)
Balance at December 31, 2018 . . . . . . . . . . . 81,239 690,910 1,776,585 (29,851) (503,182) (32) 1,964,281
Change in accounting principle and other
(see Note 6) . . . . . . . . . . . . . . . . . . . . . . . — — (13,141) — — — (13,141)
Balance at December 31, 2018, as adjusted . 81,239 690,910 1,763,444 (29,851) (503,182) (32) 1,951,140
Net income . . . . . . . . . . . . . . . . . . . . . . . . . — — 340,099 — — — 340,099
Net unrealized appreciation on marketable
securities, net of tax of $10 . . . . . . . . . . . . — — — — — 32 32
Exercise of common stock options and
vested restricted stock units . . . . . . . . . . . 707 3,106 — — — — 3,106
Treasury shares acquired from vested
employee stock awards for income tax
withholdings . . . . . . . . . . . . . . . . . . . . . . — — — (173) (9,313) — (9,313)
Sale of common stock under employee
stock purchase plan . . . . . . . . . . . . . . . . . 65 3,165 — — — — 3,165
Stock based compensation expense related
to the issuance of equity awards, net of
forfeitures . . . . . . . . . . . . . . . . . . . . . . . . — 5,770 — — — — 5,770
Common stock purchased and cancelled . . . (268) (16,145) — — — (16,145)
Treasury stock purchases . . . . . . . . . . . . . . . — — — (1,396) (78,476) — (78,476)
Cash dividends declared ($0.48 per share) . . — — (24,364) — — — (24,364)
Balance at December 31, 2019 . . . . . . . . . . . 81,743 $ 686,806 $ 2,079,179 (31,420) $ (590,971) $ — $ 2,175,014
See accompanying notes to consolidated financial statements.
42
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2019 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,099 $ 280,372 $ 428,907
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,098 334,589 292,768
Stock based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,274 13,105 10,580
Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,525) — —
Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,869 — —
Net increase (decrease) in deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,654 99,139 (145,517)
Changes in operating assets and liabilities:
Decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 8,243
Decrease (increase) in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,700) (21,464) 4,201
Decrease (increase) in income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,795 (20,620) 1,673
Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,303) (7,935) (1,246)
Decrease in other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,707 77,484 26,017
Increase in operating lease right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (895) — —
Decrease in deferred aircraft credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (14,243) (8,520)
Increase (decrease) in accounts payable and other current liabilities . . . . . . . . . . . . (54,043) 62,107 67,018
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . 721,030 802,534 684,124
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,938,750) (2,308,768) (1,533,867)
Sales of marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,866,761 2,451,344 1,440,283
Net cash received from sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,200 — —
Acquisition of property and equipment:
Aircraft and rotable spare parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (581,329) (1,062,380) (661,176)
Buildings and ground equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80,586) (34,397) (27,467)
Proceeds from the sale of aircraft, property and equipment . . . . . . . . . . . . . . . . . . . . 26,008 — 51,994
Deposits on aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,817) (41,937) (46,733)
Return of deposits applied towards acquired aircraft . . . . . . . . . . . . . . . . . . . . . . . . . 46,346 49,550 36,533
Decrease (increase) in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,133 (36,816) (10,904)
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . (657,034) (983,404) (751,337)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,040 784,665 471,677
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382,442) (370,775) (330,258)
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,271 5,212 4,660
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78,476) (54,448) (20,008)
Purchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,145) — —
Employee income tax paid on vested equity awards . . . . . . . . . . . . . . . . . . . . . . . . . (9,313) (13,556) (5,080)
Increase in debt issuance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,642) (3,892) (3,737)
Payment of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,467) (19,744) (15,015)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . . . . . . . . . . . . . (305,174) 327,462 102,239
Increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (241,178) 146,592 35,026
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328,384 181,792 146,766
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 87,206 $ 328,384 $ 181,792
See accompanying notes to consolidated financial statements.
43
SKYWEST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing activities:
Acquisition of rotable spare parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,514 $ 367 $ 755
Debt assumed on aircraft acquired under operating leases . . . . . . . . . . . . . . . . . . . $ 14,475 $ 59,132 $ —
Engines contributed to joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,313 $ — $ —
Non-cash assets used to acquire aircraft under operating leases . . . . . . . . . . . . . . . $ 153,566 $ — $ —
Lease liability arising from the recognition of right-of-use asset . . . . . . . . . . . . . . . $ 456,472 $ — $ —
Cash paid during the period for:
Interest, net of capitalized amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,733 $ 118,268 $ 105,639
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,490 $ 2,661 $ 5,010
SUPPLEMENTAL DISCLOSURE OF SALE OF SUBSIDIARY:
Decrease in carrying amount of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (101,448) $ — $ —
Decrease in carrying amount of liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,341 — —
Cash received from buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,632 — —
Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,525 $ — $ —
See accompanying notes to consolidated financial statements.
44
SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
(1) Nature of Operations and Summary of Significant Accounting Policies
SkyWest, Inc. (the “Company”), through its subsidiary, SkyWest Airlines, Inc. (“SkyWest Airlines”) operates
the largest regional airline in the United States. On January 22, 2019, the Company completed the sale of its former
wholly owned subsidiary, ExpressJet Airlines, Inc. (“ExpressJet”). As of December 31, 2019, SkyWest Airlines offered
scheduled passenger service under code-share agreements with Delta, United, American and Alaska with approximately
2,300 total daily departures to destinations in the United States, Canada, Mexico and the Caribbean. Additionally, the
Company provides airport customer service and ground handling services for other airlines throughout its system. As of
December 31, 2019, the Company had 483 aircraft in scheduled service out of a combined fleet of 544 aircraft consisting
of the following:
CRJ200 CRJ700 CRJ900 E175 Total
Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 13 43 59 199
United . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 19 — 65 183
American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 62 — — 69
Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 32 32
Aircraft in scheduled service . . . . . . . . . . . . . . . . . . . . . . . . . 190 94 43 156 483
Subleased to an un-affiliated entity . . . . . . . . . . . . . . . . . . . . 4 10 5 — 19
Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 22 — — 42
Total Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 126 48 156 544
*As of December 31, 2019, these aircraft have been removed from service and are in the process of being placed under a
leasing arrangement with a third party, are aircraft transitioning between code-share agreements with the Company’s
major airline partners and being used as a supplemental spare aircraft, or are in the process of being parted out.
For the year ended December 31, 2019, approximately 41.2% of the Company’s aircraft in scheduled service
operated for Delta, approximately 37.9% was operated for United, approximately 14.3% was operated for American and
approximately 6.6% was operated for Alaska.
SkyWest Airlines has been a code-share partner with Delta since 1987, United since 1997, Alaska since 2011
and American since 2012. As of December 31, 2019, SkyWest Airlines operated as a Delta Connection carrier primarily
in Salt Lake City and Minneapolis, a United Express carrier primarily in Los Angeles, San Francisco, Denver, Houston,
Chicago and the Pacific Northwest, an American carrier primarily in Chicago, Los Angeles and Phoenix and an Alaska
carrier primarily in the Pacific Northwest.
SkyWest Airlines operates the following aircraft manufactured by Bombardier Aerospace (“Bombardier”):
CRJ200s, CRJ700s and CRJ900s, and E175s manufactured by Embraer S.A. (“Embraer”). The CRJ200 is a single-class
50-seat aircraft. The CRJ700, CRJ900 and E175 aircraft have a dual-class seat configuration typically configured with 65
to 76 seats.
45
Basis of Presentation
The Company’s consolidated financial statements include the accounts of the Company and the SkyWest
Airlines, ExpressJet (for the periods owned by the Company) and SkyWest Leasing segments, with all inter-company
transactions and balances having been eliminated.
In preparing the accompanying consolidated financial statements, the Company has reviewed, as determined
necessary by the Company’s management, events that have occurred after December 31, 2019, through the filing date of
the Company’s annual report with the U.S. Securities and Exchange Commission. The Company reclassified certain
prior period amounts to conform to the current period presentation (see Recent Accounting Pronouncements).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be
cash equivalents. The Company had no restricted cash as of December 31, 2019 and 2018.
Marketable Securities
The Company’s investments in debt securities are classified as available-for-sale and are reported at fair market
value with the net unrealized appreciation reported as a component of accumulated other comprehensive income (loss) in
stockholders’ equity. At the time of sale, any realized appreciation or depreciation, calculated by the specific
identification method, is recognized in other income and expense. At December 31, 2019, the fair market value of the
available-for-sale securities was the amortized cost. The Company’s position in marketable securities as of December 31,
2019 and 2018 was as follows (in thousands):
Gross unrealized Gross unrealized
At December 31, 2019 Amortized Cost holding gains holding losses Fair market value
Total cash and cash equivalents . . . . . . . . . . . . . $ 87,206 $ — $ — $ 87,206
Marketable securities:
Bond and bond funds . . . . . . . . . . . . . . . . . . . $ 267,243 $ — $ — $ 267,243
Commercial Paper . . . . . . . . . . . . . . . . . . . . . 165,723 — — 165,723
Total marketable securities . . . . . . . . . . . . . . . . $ 432,966 $ — $ — $ 432,966
Total assets measured at fair value . . . . . . . . . . . $ 520,172 $ — $ — $ 520,172
Gross unrealized Gross unrealized
At December 31, 2018 Amortized Cost holding gains holding losses Fair market value
Total cash and cash equivalents . . . . . . . . . . . . . $ 328,384 $ — $ — $ 328,384
Marketable securities:
Bond and bond funds . . . . . . . . . . . . . . . . . . . $ 229,825 $ — $ (42) $ 229,783
Commercial Paper . . . . . . . . . . . . . . . . . . . . . 131,163 — (1) 131,162
Total marketable securities . . . . . . . . . . . . . . . . $ 360,988 $ — $ (43) $ 360,945
Total assets measured at fair value . . . . . . . . . . . $ 689,372 $ — $ (43) $ 689,329
As of December 31, 2019 and 2018, the Company had classified $433.0 million and $360.9 million of
marketable securities, respectively, as short-term since it had the ability to redeem the securities within one year.
46
Inventories
Inventories include expendable parts, fuel and supplies and are valued at cost (FIFO basis) less an allowance for
obsolescence based on historical results, excess parts and management’s expectations of future operations. Expendable
inventory parts are charged to expense as used. An obsolescence allowance for flight equipment expendable parts is
accrued based on estimated lives of the corresponding fleet types and salvage values. The inventory allowance as of
December 31, 2019 and 2018 was $15.9 million and $22.1 million, respectively.
Property and Equipment
Property and equipment are stated at cost and depreciated over their useful lives to their estimated residual
values using the straight-line method as follows:
Assets Depreciable Life Current Residual Value
Aircraft, rotable spares, and spare engines . . . . up to 22 years up to 20 %
Ground equipment . . . . . . . . . . . . . . . . . . . . . . . . up to 10 years 0%
Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . up to 7 years 0%
Leasehold improvements . . . . . . . . . . . . . . . . . . Shorter of 15 years or lease term 0%
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 - 39.5 years 0%
Impairment of Long-Lived Assets
As of December 31, 2019, the Company had approximately $5.4 billion of property and equipment and related
assets. In accounting for these long-lived and intangible assets, the Company makes estimates about the expected useful
lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the
fair value of the assets and the cash flows they generate. Factors indicating potential impairment include, but are not
limited to, significant decreases in the market value of the long-lived assets, a significant change in the condition of the
long-lived assets and operating cash flow losses associated with the use of the long-lived assets. On a periodic basis, the
Company evaluates whether impairment indicators are present. When considering whether or not impairment of
long-lived assets exists, the Company groups similar assets together at the lowest level for which identifiable cash flows
are largely independent of the cash flows of other assets and liabilities and compare the undiscounted cash flows for each
asset group to the net carrying amount of the assets supporting the asset group. Asset groupings are done at the fleet or
contract level.
The Company did not recognize any impairment charges of long-lived assets during the years ended
December 31, 2019, 2018 and 2017.
Capitalized Interest
Interest is capitalized on aircraft purchase deposits as a portion of the cost of the asset and is depreciated over
the estimated useful life of the asset. During the years ended December 31, 2019, 2018 and 2017, the Company
capitalized interest costs of approximately $1.6 million, $1.5 million, and $1.4 million, respectively.
Maintenance
The Company operates under a U.S. Federal Aviation Administration approved continuous inspection and
maintenance program. The Company uses the direct expense method of accounting for its regional jet engine overhauls
wherein the expense is recorded when the overhaul event occurs. The Company has engine services agreements with
third-party vendors to provide long-term engine services covering the scheduled and unscheduled repairs for most of its
aircraft. Under the terms of the agreements, the Company pays a fixed dollar amount per engine hour flown on a monthly
basis and the third-party vendors will assume the responsibility to repair the engines at no additional cost to the
Company, subject to certain specified exclusions. Maintenance costs under these contracts are recognized when the
engine hour is flown pursuant to the terms of each contract.
47
The costs of maintenance for airframe and avionics components, landing gear and other recurring maintenance
are expensed as incurred.
Flying Agreements and Airport Customer Service and Other Revenues
The Company recognizes flying agreements revenue and airport customer service and other revenues when the
service is provided under its code-share agreements. Under the Company’s fixed-fee arrangements (referred to as “fixed-
fee arrangements,” “fixed-fee contracts” or “capacity purchase agreements”) with Delta Air Lines, Inc. (“Delta”), United
Airlines, Inc. (“United”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major
airline partner”), the major airline partner generally pays the Company a fixed-fee for each departure, flight hour
(measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi
time) incurred, and an amount per aircraft in service each month with additional incentives based on flight completion
and on-time performance. The major airline partner also directly pays for or reimburses the Company for certain direct
expenses incurred under the fixed-fee arrangement, such as fuel, airport landing fees and airport rents. Under the fixed-
fee arrangements, the Company’s performance obligation is met and revenue is recognized when each flight is
completed and is reflected in flying agreements revenue. The transaction price for the fixed-fee agreements is determined
from the fixed-fee consideration, incentive consideration and directly reimbursed expenses earned as flights are
completed over the agreement term. For the year ended December 31, 2019, fixed-fee arrangements represented
approximately 82.0% of the Company’s flying agreements revenue.
Under the Company’s revenue-sharing arrangements (referred to as a “revenue-sharing” or “prorate”
arrangement), the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which
the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a
Company airline and the other portion of their trip on the major airline partner. Under the Company’s prorate flying
agreements, the performance obligation is met and revenue is recognized when each flight is completed based upon the
portion of the prorate passenger fare the Company anticipates that it will receive for each completed flight. The
transaction price for the prorate agreements is determined from the proration formula derived from each passenger ticket
amount on each completed flight over the agreement term. For the year ended December 31, 2019, prorate flying
arrangements represented approximately 18.0% of the Company’s flying agreements revenue.
Airport customer service and other revenues primarily consist of ground handling functions, such as gate and
ramp agent services at applicable airports where the Company provides such services. The transaction price for airport
customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of
flights handled by the Company over the agreement term. Additionally, airport customer service and other revenues
includes revenue generated from aircraft and spare engines leased to third parties. Of the Company’s $5.4 billion of
property and equipment, net as of December 31, 2019, $97.0 million of regional jet aircraft and spare engines was leased
to third parties under operating leases. The Company mitigates the residual asset risks of these assets by leasing aircraft
and engine types that can be operated by the Company in the event of a default. A portion of the Company’s leases to
third parties contain variable payments from lessees based on departures where the Company pays for maintenance.
Additionally, the operating leases typically have specified lease return condition requirements paid by the lessee to the
Company and the Company typically maintains inspection rights under the leases.
The following table represents the Company’s airport customer service and other revenue for the years ended
December 31, 2019, 2018 and 2017 (in thousands):
For the year ended December 31,
2019 2018 2017
Airport customer service revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,538 $ 48,236 $ 41,002
Operating lease income relating to lease payments. . . . . . . . . . . . . . . . . . . . . 27,552 3,923 3,293
Operating lease income relating to variable lease payments . . . . . . . . . . . . . 9,608 — —
Airport customer service and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,698 $ 52,159 $ 44,295
48
The following table summarizes future minimum rental income under operating leases primarily related to
leased aircraft that had remaining non-cancelable lease terms as of December 31, 2019 (in thousands):
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,724
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,344
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,786
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,530
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,222
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,932
$ 180,538
Other ancillary revenues commonly associated with airlines, such as baggage fee revenue, ticket change fee
revenue and the marketing component of the sale of mileage credits, are retained by the Company’s major airline
partners on flights that the Company operates under its code-share agreements.
The following table represents the Company’s flying agreements revenue by type for the years ended
December 31, 2019, 2018 and 2017 (in thousands):
For the year ended December 31,
2019 2018 2017
Capacity purchase agreements revenue: flight operations . $ 1,538,062 $ 1,856,253 $ 1,805,510
Capacity purchase agreements revenue: aircraft lease . . . . 830,247 814,518 834,366
Prorate agreements revenue . . . . . . . . . . . . . . . . . . . . . . . . . 520,956 498,749 438,421
Flying agreements revenue . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,889,265 $ 3,169,520 $ 3,078,297
A portion of the Company’s compensation under its fixed-fee agreements is designed to reimburse the
Company for certain aircraft ownership costs. The consideration for aircraft ownership costs varies by agreement but is
intended to cover either the Company’s aircraft principal and interest debt service costs, its aircraft depreciation and
interest expense or its aircraft lease expense costs while the aircraft is under contract. The consideration received for the
use of the aircraft under the Company’s fixed-fee agreements is reflected as lease revenue, inasmuch as the agreements
identify the “right of use” of a specific type and number of aircraft over a stated period of time. The lease revenue
associated with the Company’s fixed-fee agreements is accounted for as an operating lease and is reflected as flying
agreements revenue on the Company’s consolidated statements of comprehensive income. The Company has not
separately stated aircraft rental income and aircraft rental expense in the consolidated statement of comprehensive
income since the use of the aircraft is not a separate activity of the total service provided.
The Company’s fixed-fee and prorate agreements include weekly provisional cash payments from the
respective major airline partner based on a projected level of flying each month. The Company and each major airline
partner subsequently reconcile these payments to the actual completed flight activity on a monthly or quarterly basis.
In the event a flying agreement includes a mid-term rate reset to adjust rates prospectively and the contractual
rates under the Company’s flying agreements have not been finalized at quarterly or annual financial statement dates, the
Company applies the variable constraint guidance under Topic 606, where the Company records revenue to the extent it
believes that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur
when the uncertainty associated with the variable consideration is subsequently resolved.
In several of the Company’s agreements, the Company is eligible to receive incentive compensation upon the
achievement of certain performance criteria. The incentives are defined in the agreements and are measured and
determined on a monthly, quarterly or semi-annual basis. At the end of each period during the term of an agreement, the
Company calculates the incentives achieved during that period and recognizes revenue attributable to that agreement
accordingly, subject to the variable constraint guidance under Topic 606.
The following summarizes the significant provisions of each code-share agreement the Company has with each
major airline partner through SkyWest Airlines:
49
Delta Connection Agreements
Number of
Agreement Aircraft type Aircraft Term / Termination Dates
Delta Connection Agreement . . . . . . . . . . • CRJ 200 55 • Individual aircraft have scheduled
(fixed-fee arrangement) • CRJ 700 13 removal dates from 2020 to 2029
• CRJ 900 43 • The average remaining term of the
• E175 59 aircraft under contract is 4.1 years
Delta Connection Prorate Agreement . . . . • CRJ 200 29 • Terminable with 30-day notice
(revenue-sharing arrangement)
United Express Agreements
Number of
Agreement Aircraft type Aircraft Term / Termination Dates
United Express Agreements . . . . . . . . . . . • CRJ 200 68 • Individual aircraft have scheduled
(fixed-fee arrangement) • CRJ 700 19 removal dates under the agreement
• E175 65 between 2020 and 2029
• The average remaining term of the
aircraft under contract is 4.3 years
United Express Prorate Agreement . . . . . . • CRJ 200 31 • Terminable with 120-day notice
(revenue-sharing arrangement)
American Agreements
Number of
Agreement Aircraft type Aircraft Term / Termination Dates
American Agreement . . . . . . . . . . . . . . . . . • CRJ 700 62 • Individual aircraft have scheduled
(fixed-fee arrangement) removal dates from 2022 to 2025
• The average remaining term of the
aircraft under contract is 4.1 years
American Prorate Agreement . . . . . . . . . . • CRJ 200 7 • Terminable with 120-day notice
(revenue-sharing arrangement)
Alaska Capacity Purchase Agreement
Number of
Agreement Aircraft type Aircraft Term / Termination Dates
Alaska Agreement . . . . . . . . . . . . . . . . . . . • E175 32 • Individual aircraft have scheduled
(fixed-fee arrangement) removal dates from 2027 to 2030
• The average remaining term of the
aircraft under contract is 9.2 years
In addition to the contractual arrangements described above, SkyWest Airlines has entered into fixed-fee
agreements with Delta and American to place additional E175 aircraft into service. As of December 31, 2019, the
Company was scheduled to take delivery of six new E175 aircraft in connection with its agreement with Delta and 20
new E175 aircraft in connection with its agreement with American. The delivery dates for the new E175 aircraft are
currently scheduled to be completed by the end of 2021. Final delivery dates may be adjusted based on various factors.
Additionally, the Company is scheduled to add an additional six used E175 aircraft under the Delta agreement during
2020.
SkyWest Airlines also entered into an agreement with Delta to place one CRJ900 aircraft under a nine-year
fixed-fee agreement in 2020.
SkyWest Airlines also entered into an agreement with American to place ten used CRJ700s under a multi-year
contract. As of December 31, 2019, SkyWest Airlines had placed two of these CRJ700 aircraft into service with
American.
50
When an aircraft is scheduled to be removed from a fixed-fee arrangement, the Company may, as practical
under the circumstances, negotiate an extension with the respective major airline partner, negotiate the placement of the
aircraft with another major airline partner, return the aircraft to the lessor if the aircraft is leased and the lease is expiring,
place owned aircraft for sale, or pursue other uses for the aircraft. Other uses for the aircraft may include placing the
aircraft in a prorate arrangement, leasing the aircraft to a third party or parting out the aircraft to use the engines and
parts as spare inventory or to lease the engines to a third party.
Airport customer service and other revenues primarily consist of ground handling functions, such as gate and
ramp agent services at applicable airports where the Company provides such services. The transaction price for airport
service agreements is determined from an agreed-upon rate by location applied to the applicable number of flights
handled (measured by departures) by the Company over the agreement term.
The Company’s operating revenues could be impacted by a number of factors, including changes to the
Company’s code-share agreements with its major airline partners, changes in flight schedules, contract modifications
resulting from contract renegotiations, the Company’s ability to earn incentive payments contemplated under the
Company’s code-share agreements and settlement of reimbursement disputes with the Company’s major airline partners.
As of December 31, 2019, the Company had $83.0 million in accounts receivable of which $58.8 million
related to flying agreements. As of December 31, 2018, the Company had $64.2 million in accounts receivable of which
$52.7 million related to flying agreements.
Income Taxes
The Company recognizes a net liability or asset for the deferred tax consequences of all temporary differences
between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that are
expected to result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities
are recovered or settled.
Net Income Per Common Share
Basic net income per common share (“Basic EPS”) excludes dilution and is computed by dividing net income
by the weighted average number of common shares outstanding during the period. Diluted net income per common share
(“Diluted EPS”) reflects the potential dilution that could occur if stock options or other contracts to issue common stock
were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or
conversion of securities that would have an anti-dilutive effect on net income (loss) per common share. During the year
ended December 31, 2019, 150,000 performance share units (at target performance) were excluded in the computation of
Diluted EPS since the Company had not achieved the minimum target thresholds as of December 31, 2019. During the
year ended December 31, 2018, 207,000 performance share units (at target performance) were excluded in the
computation of Diluted EPS since the Company had not achieved the minimum target thresholds as of December 31,
2018. During the year ended December 31, 2017, 284,000 performance share units (at target performance) were
excluded in the computation of Diluted EPS since the Company had not achieved the minimum target thresholds as of
December 31, 2017. The calculation of the weighted average number of common shares outstanding for Basic EPS and
Diluted EPS are as follows for the years ended December 31, 2019, 2018 and 2017 (in thousands):
Year Ended December 31,
2019 2018 2017
Numerator:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,099 $ 280,372 $ 428,907
Denominator:
Basic earnings per share weighted average shares . . . . . . . 50,932 51,914 51,804
Dilution due to stock options and restricted stock units . . . 443 957 1,296
Diluted earnings per share weighted average shares . . . . . . 51,375 52,871 53,100
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.68 $ 5.40 $ 8.28
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.62 $ 5.30 $ 8.08
51
Comprehensive Income (Loss)
Comprehensive income (loss) includes charges and credits to stockholders’ equity that are not the result of
transactions with the Company’s shareholders, including changes in unrealized appreciation on marketable debt
securities.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for receivables and accounts payable
approximate fair values because of the immediate or short-term maturity of these financial instruments. Marketable
securities are reported at fair value based on market quoted prices in the consolidated balance sheets. If quoted prices in
active markets are no longer available, the Company has estimated the fair values of these securities utilizing a
discounted cash flow analysis. These analyses consider, among other items, the collateralization underlying the security
investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the expectation of
the next time the security is expected to have a successful auction. The fair value of the Company’s long-term debt is
estimated based on current rates offered to the Company for similar debt and was approximately $3,049.1 million as of
December 31, 2019, as compared to the carrying amount of $3,017.5 million as of December 31, 2019. The Company’s
fair value of long-term debt as of December 31, 2018 was $3,157.3 million as compared to the carrying amount of
$3,185.4 million as of December 31, 2018.
Segment Reporting
Generally accepted accounting principles require disclosures related to components of a company for which
separate financial information is available to, and regularly evaluated by, the Company’s chief operating decision maker
when deciding how to allocate resources and in assessing performance. The Company’s three operating segments (prior
to the sale of ExpressJet in January 2019) consist of the operations conducted by SkyWest Airlines, ExpressJet (for the
periods owned by the Company) and SkyWest Leasing. Following the sale of ExpressJet, the Company has two
reportable segments: SkyWest Airlines and SkyWest Leasing. Information pertaining to the Company’s reportable
segments is presented in Note 2, Segment Reporting.
Recent Accounting Pronouncements
Standards Effective in Future Years and Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, “Financial
Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” (“Topic 326”), which
requires measurement and recognition of expected credit losses for financial assets held and requires enhanced disclosure
regarding significant estimates and judgments used in estimating credit losses. Topic 326 is effective for the Company
beginning January 1, 2020. The Company will adopt Topic 326, on January 1, 2020. The Company’s primary financial
assets as of December 31, 2019, include trade receivables from its flying agreements, notes and other receivables from
third parties. The Company estimates it will record a credit loss amount between $7.0 million and $12.0 million in
conjunction with the adoption. The Company anticipates that the initial credit loss recorded upon adoption of Topic 326
will be reflected as a January 1, 2020 beginning balance sheet entry to retained earnings (after income tax).
Recently Adopted Standards
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“Topic 842”). Topic 842 and
subsequently issued amendments require certain leases with durations longer than 12 months to be recognized on the
balance sheet. The Company adopted Topic 842 effective January 1, 2019 and elected the package of transition practical
expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company’s
contracts are or contain leases, (2) lease classification and (3) initial direct costs. In July 2018, the FASB issued ASU No.
2018-11, “Targeted Improvements - Leases (Topic 842).” This update provides an optional transition method that allows
entities to elect to apply the standard using the modified retrospective approach at its effective date, versus recasting the
prior years presented. If this adoption method is elected, an entity would recognize a cumulative-effect adjustment to the
52
opening balance of retained earnings in the year of adoption. The Company elected this adoption method and recognized
a cumulative-effect adjustment to the opening balance of retained earnings on January 1, 2019.
Additionally, the Company’s adoption of Topic 842 did not have a significant impact on the recognition,
measurement or presentation of lease revenue and lease expenses within the condensed consolidated statements of
operations and comprehensive income or the condensed consolidated statements of cash flows. The Company’s adoption
of Topic 842 did not have a material impact on the timing or amount of the Company’s lease revenue as a lessor. The
Company’s prepaid aircraft rents, accrued aircraft rents and deferred rent credits that were separately stated in the
Company’s December 31, 2018 balance sheet have been classified as a component of the Company’s right-of-use assets
effective January 1, 2019. The consolidated financial statements for 2019 are presented under the new standard, while
comparative years presented are not adjusted and continue to be reported in accordance with the Company’s historical
accounting policy.
See Note 6, "Leases" for more information.
(2) Segment Reporting
Generally accepted accounting principles require disclosures related to components of a company for which
separate financial information is available to, and regularly evaluated by, the Company’s chief operating decision maker
when deciding how to allocate resources and in assessing performance.
Prior to the Company’s sale of ExpressJet on January 22, 2019, the Company’s three reporting segments
consisted of the operations of SkyWest Airlines, ExpressJet and SkyWest Leasing activities. The segment information
presented for ExpressJet reflects the period of time prior to the sale, when ExpressJet was operating as a subsidiary of the
Company. The Company concluded that the sale of ExpressJet did not meet the criteria for a discontinued operation.
Following the sale of ExpressJet, the Company has two reportable segments: SkyWest Airlines and SkyWest Leasing.
The Company’s chief operating decision maker analyzes the profitability of operating new aircraft financed
through the issuance of debt, including the Company’s E175 fleet, separately from the profitability of the Company’s
capital deployed for ownership and financing of such aircraft. The SkyWest Airlines segment includes revenue earned
under the applicable fixed-fee contracts attributed to operating such aircraft and the respective operating costs. The
SkyWest Leasing segment includes applicable revenue earned under the applicable fixed-fee contracts attributed to the
ownership of new aircraft acquired through the issuance of debt and the respective depreciation and interest expense of
such aircraft. The SkyWest Leasing segment also includes the activity of leasing regional jet aircraft and spare engines to
third parties. The SkyWest Leasing segment’s total assets and capital expenditures include new aircraft acquired through
the issuance of debt and assets leased to third parties.
The following represents the Company’s segment data for the years ended December 31, 2019, 2018 and 2017
(in thousands).
Year Ended December 31, 2019
SkyWest
Airlines ExpressJet SkyWest Leasing Consolidated
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 2,478,681 $ 24,050 $ 469,232 $ 2,971,963
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . 2,214,632 28,690 216,383 2,459,705
Depreciation and amortization expense . . . . . . . 168,246 971 198,881 368,098
Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,508 3,361 — 21,869
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 13,525 — 114,230 127,755
Segment profit (loss) (1) . . . . . . . . . . . . . . . . . . . 250,524 (4,640) 138,619 384,503
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,728,964 — 3,928,165 6,657,129
Capital expenditures (including non-cash) . . . . 270,191 — 576,279 846,470
53
Year Ended December 31, 2018
SkyWest
Airlines ExpressJet SkyWest Leasing Consolidated
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 2,346,251 $ 564,202 $ 311,226 $ 3,221,679
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . 2,022,560 577,608 147,231 2,747,399
Depreciation and amortization expense . . . . . . . 155,511 37,290 141,788 334,589
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 17,021 2,340 101,048 120,409
Segment profit (loss) (1) . . . . . . . . . . . . . . . . . . . 306,670 (15,746) 62,947 353,871
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,531,707 279,303 3,502,202 6,313,212
Capital expenditures (including non-cash) . . . . 149,731 10,137 996,408 1,156,276
Year Ended December 31, 2017
SkyWest
Airlines ExpressJet SkyWest Leasing Consolidated
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 2,092,368 $ 790,282 $ 239,942 $ 3,122,592
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . 1,807,540 818,683 108,170 2,734,393
Depreciation and amortization expense . . . . . . . 134,563 51,982 106,223 292,768
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 21,544 4,127 79,254 104,925
Segment profit (loss) (1) . . . . . . . . . . . . . . . . . . . 263,284 (32,528) 52,518 283,274
Identifiable intangible assets, other than
goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,896 — 4,896
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,245,051 599,122 2,630,227 5,474,400
Capital expenditures (including non-cash) . . . . 124,955 14,278 550,165 689,398
(1) Segment profit is operating income less interest expense
(3) Long-term Debt
Long-term debt consisted of the following as of December 31, 2019 and 2018 (in thousands):
December 31, December 31,
2019 2018
Notes payable to banks, due in semi-annual installments, variable
interest based on LIBOR, or with an interest rate of 4.00% through
2019, secured by aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 6,429
Notes payable to a financing company, due in semi-annual
installments, with a fixed interest rate of 3.25% through 2021,
secured by aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,412 36,324
Notes payable to banks, due in semi-annual installments plus interest
at 6.10% to 6.51% through 2021, secured by aircraft . . . . . . . . . . . . . . . 22,557 41,592
Notes payable to banks, due in monthly installments, plus interest at
1.95% to 6.86% through 2029, secured by aircraft . . . . . . . . . . . . . . . . . 438,878 476,369
Notes payable to banks, due in quarterly installments, plus interest at
3.39% to 5.08% through 2031, secured by aircraft . . . . . . . . . . . . . . . . . 2,537,676 2,621,416
Notes payable to banks due in monthly installments, interest at 3.30%
through 2019, secured by spare engines . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,308
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,017,523 $ 3,185,438
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (367,954) (354,072)
Less long-term portion of unamortized debt issue cost, net . . . . . . . . . . . (20,580) (21,598)
Long-term debt, net of current maturities and debt issue costs . . . . . . . . . $ 2,628,989 $ 2,809,768
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367,954 354,072
Less current portion of unamortized debt issue cost, net . . . . . . . . . . . . . . (3,828) (3,866)
Current portion of long-term debt, net of debt issue costs . . . . . . . . . . . . . $ 364,126 $ 350,206
54
During the year ended December 31, 2019, the Company took delivery of ten E175 aircraft that the Company
financed through $200.0 million of long-term debt. The debt associated with the ten E175 aircraft has a 12-year term, is
due in quarterly installments with fixed annual interest rates ranging from 3.4% to 4.1% and is secured by the E175
aircraft. Additionally, the Company purchased two previously leased aircraft during the first quarter of 2019, for which
the Company assumed $14.5 million of long-term debt. The debt associated with the two previously leased aircraft has a
term of 18 months with monthly interest only payments with a fixed annual interest rate of 2.0% and is secured by the
previously leased aircraft.
As of December 31, 2019 and 2018, the Company had $3.0 billion and $3.2 billion, respectively, of long-term
debt obligations primarily related to the acquisition of aircraft and certain spare engines. The average effective interest
rate on the debt related to those long-term debt obligations at December 31, 2019 and 2018, was approximately 4.2%.
During the year ended December 31, 2019, the Company used $30.1 million in cash to extinguish $30.1 million
in debt early. During the year ended December 31, 2018, the Company used $43.5 million in cash to extinguish $43.5
million in debt early. These payments did not result in a pre-tax gain or loss in the consolidated statements of
comprehensive income.
The aggregate amounts of principal maturities of long-term debt as of December 31, 2019 were as follows (in
thousands):
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 367,954
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,005
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365,907
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374,906
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,630
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,229,121
$ 3,017,523
As of December 31, 2019 and 2018, SkyWest Airlines had a $75 million line of credit. The line of credit
includes minimum liquidity and profitability covenants and is secured by certain assets. As of December 31, 2019, the
Company was in compliance with the line of credit covenants. As of December 31, 2019 and 2018, SkyWest Airlines
had no amount outstanding under the facility. However, at December 31, 2019 and 2018 the Company had $8.8 million
and $9.7 million, respectively, in letters of credit issued under the facility which reduced the amount available under the
facility to $66.2 million and $65.3 million, respectively. The facility expires on September 1, 2021 and has a variable
interest rate of LIBOR plus 2.5% at December 31, 2019.
As of December 31, 2019 and 2018, the Company had $61.7 million and $78.7 million, respectively, in letters
of credit and surety bonds outstanding with various banks and surety institutions in addition to the letters of credit
outstanding under the line of credit.
55
(4) Income Taxes
The provision (benefit) for income taxes includes the following components (in thousands):
Year ended December 31,
2019 2018 2017
Current tax provision (benefit):
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,395) $ (21,598) $ 5,853
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891 1,465 180
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,575 —
(3,504) (18,558) 6,033
Deferred tax provision (benefit):
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,655 92,250 (166,890)
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,055 12,250 20,133
109,710 104,500 (146,757)
Provision (benefit) for income taxes . . . . . . $ 106,206 $ 85,942 $ (140,724)
The following is a reconciliation between a federal income tax rate of 21% in 2019 and 2018 and 35% for 2017
of income before income taxes and the effective tax rate which is derived by dividing the provision (benefit) for income
taxes by the income before the provision for income taxes (in thousands):
Year ended December 31,
2019 2018 2017
Computed provision for income taxes at the statutory rate . . $ 93,724 $ 76,926 $ 100,864
Increase (decrease) in income taxes resulting from:
State income tax provision, net of federal income tax
benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,645 12,711 7,778
Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,934 1,956 3,230
Valuation allowance changes affecting the provision for
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (517) (1,187) 505
Foreign income taxes, net of federal & state benefit . . . . . — 1,192 —
Excess tax benefits from share-based compensation . . . . . (3,525) (4,548) (5,377)
Revaluation of net deferred taxes for the Tax Cuts and
Jobs Act of 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (246,845)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,055) (1,108) (879)
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . $ 106,206 $ 85,942 $ (140,724)
For the year ended December 31, 2019, the Company released $0.5 million of valuation allowance against
certain deferred tax assets primarily associated with ExpressJet state net operating losses. For the year ended December
31, 2018, the Company released $1.2 million valuation allowance, respectively against certain deferred tax assets
primarily associated with ExpressJet state net operating losses with a limited carry forward period and Company capital
losses with a limited carry forward period. For the year ended December 31, 2017, the Company recorded $0.5 million
of valuation allowance against certain deferred tax assets primarily associated with ExpressJet state net operating losses.
The decrease in the valuation allowance for 2019 was primarily based on changes in the Company's income tax
projections which reduced the amount of deferred tax assets that are anticipated to expire before the deferred tax assets
may be utilized.
The Company recorded a $3.5 million, $4.5 million and $5.4 million benefit from share-based compensation in
2019, 2018 and 2017, respectively, relating to ASU 2016-09 which, requires excess tax benefits and deficiencies to be
recognized in the income tax provision during the period stock options are exercised and when stock awards vest.
56
The significant components of the Company’s net deferred tax assets and liabilities as of December 31, 2019
and 2018 are as follows (in thousands):
As of December 31,
2019 2018
Deferred tax assets:
Accrued benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,848 $ 32,462
Net operating loss carryforward . . . . . . . . . . . . . . . . . 358,685 344,375
AMT credit carryforward . . . . . . . . . . . . . . . . . . . . . . 4,397 15,744
Aircraft credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,114 35,924
Accrued reserves and other . . . . . . . . . . . . . . . . . . . . . 17,225 18,710
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . 410,269 447,215
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (892) (9,455)
Deferred tax liabilities:
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . (1,032,957) (955,919)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . (1,032,957) (955,919)
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . $ (623,580) $ (518,159)
The Company’s deferred tax liabilities were primarily generated through accelerated depreciation, combined
with shorter depreciable tax lives, allowed under the IRS tax code for purchased aircraft and support equipment
compared to the Company’s depreciation policy under GAAP for such assets using the straight-line method (see note 1
Nature of Operations and Summary of Significant Accounting Policies).
The Company's valuation allowance is related to certain deferred tax assets with a limited carry forward period
where the Company does not anticipate utilizing these deferred tax assets prior to the lapse of the carry forward period.
The Company's AMT credit carryforward includes credits from prior acquisitions.
At December 31, 2019 and 2018, the Company had federal net operating losses of approximately $1,581.1
million and $1,504.9 million and state net operating losses of approximately $766.4 million and $562.0 million,
respectively. The estimated effective tax rate applicable to the federal and state net operating losses at December 31,
2019 was 21.0% and 3.36%, respectively. The Company anticipated that the federal and state net operating losses will
start to expire in 2030 and 2020, respectively. The Company has recorded a valuation allowance for state net operating
losses the Company anticipates will expire before the benefit will be realized due to the limited carry forward periods.
As of December 31, 2019 and 2018, the Company also had an alternative minimum tax credit of approximately
$4.4 million and $8.8 million, respectively, which does not expire. Under the Tax Cuts and Jobs Act of 2017, the
Company will realize the alternative minimum tax credit either by offsetting regular tax due or as a refundable credit
over the next two years. The Company has no ongoing federal or state examinations. Federal tax years 2016, 2017 and
2018 are open to examination.
Under ASC Topic 740, the accounting guidance related to uncertainty in tax positions requires that the impact
of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. A reconciliation of the beginning and ending amount of unrecognized
tax benefits for the year ended December 31, 2019 and 2018 is as follows (in thousands):
As of December 31,
2019 2018
Unrecognized tax benefits at the beginning of
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,553 $ 2,223
Gross increases - current year tax positions . . . . — 13,899
Gross increases - prior year tax positions . . . . . . 67 —
Gross decreases - prior year tax positions . . . . . . — (1,569)
Unrecognized tax benefits at end of year . . . . . . $ 14,620 $ 14,553
Interest and penalties in year-end balance . . . . . . $ 67 $ —
57
For the year ending December 31, 2019, the Company has recorded $67,000 of interest expense related to
uncertain tax positions not offset by the Company's tax attributes.
(5) Commitments and Contingencies
Self-Insurance
The Company self-insures a portion of its potential losses from claims related to workers’ compensation,
environmental issues, property damage, medical insurance for employees and general liability. Losses are accrued based
on an estimate of the ultimate aggregate liability for claims incurred, using standard industry practices and the
Company’s actual experience. The Company uses judgment and estimates in determining the ultimate aggregate
liabilities for claims incurred in its workers’ compensation liability. The Company also used significant assumptions in
determining the workers compensation liability such as an estimation of loss payment and loss reporting development
patterns. At December 31, 2019 and 2018, the Company’s accrued workers’ compensation liability totaled $23.9 million
and $42.0 million, respectively. Actual results could differ from these estimates.
Legal Matters
The Company is subject to certain legal actions which it considers routine to its business activities. As of
December 31, 2019, management believed, after consultation with legal counsel, that the ultimate outcome of such legal
matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of
operations.
Concentration Risk and Significant Customers
The Company requires no collateral from its major airline partners or customers, but monitors the financial
condition of its major airline partners. Under the majority of the Company’s code-share agreements, the Company
receives weekly payments from its major code-share partners that approximate a significant percentage of the
compensation earned for such period. Additionally, the Company provides certain customer service functions at
multiple airports for various airlines and the Company maintains an allowance for doubtful accounts receivable based
upon expected collectability of all accounts receivable. The Company’s allowance for doubtful accounts totaled $18,000
and $158,000 as of December 31, 2019 and 2018, respectively. For the years ended December 31, 2019, 2018 and 2017,
the Company’s contractual relationships with Delta and United combined accounted for approximately 77.6%, 81.4%
and 82.9%, respectively of the Company’s total revenues.
Employees Under Collective Bargaining Agreements
As of December 31, 2019, the Company had approximately 13,700 full-time equivalent employees. Although
no SkyWest Airlines employees are represented by a national union, certain SkyWest Airline employees are covered
under a stable and binding collective bargaining agreement that is administered by employee representatives.
(6) Leases
Effective January 1, 2019, the Company adopted Topic 842. The Company leases property and equipment
under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating
lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company
used its incremental borrowing rate to discount the lease payments based on information available at lease
commencement.
Aircraft
During the first quarter of 2019, the Company acquired 52 CRJ aircraft under an early lease buyout arrangement
with the lessor for $111.7 million. During the third quarter of 2019, the Company acquired four CRJ900 aircraft under an
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early lease buyout arrangement with the lessor for $30.0 million. As of December 31, 2019, the Company had 94
aircraft under operating leases with remaining terms ranging from less than one year to ten years.
With the adoption of Topic 842, the Company evaluated whether leased aircraft asset groups within the
Company’s fleet were impaired. Under the transition guidance for Topic 842, a company is permitted to recognize a
previously unrecognized impairment related to a right-of-use asset in the period prior to the adoption date of Topic 842 if
the event giving rise to the impairment occurred before the adoption date. In 2016, the Company recorded an impairment
on certain of its long-lived assets, which included the Company’s CRJ200 aircraft. In 2016, the market lease rate was
less than the contractual lease rate on the Company’s CRJ200 leased aircraft. The Company recorded an impairment of
$13.1 million (net of tax) as an adjustment to the Company’s January 1, 2019 retained earnings related to the previously
unrecognized impairment of these leased CRJ200s.
Airport facilities
The Company has operating leases for facility space including airport terminals, office space, cargo warehouses
and maintenance facilities. The Company generally leases this space from government agencies that control the use of
the airport. The remaining lease terms for facility space vary from one month to 37 years. The Company’s operating
leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable factors are
excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting guidance.
Leases
As of December 31, 2019, the Company’s right-of-use assets were $336.0 million, the Company’s current
maturities of operating lease liabilities were $94.8 million, and the Company’s noncurrent lease liabilities were $259.2
million. During 2019, the Company paid $75.4 million in operating leases reflected as a reduction from operating cash
flows.
The table below presents lease related terms and discount rates as of December 31, 2019.
As of December 31, 2019
Weighted-average remaining lease term
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.84 years
Weighted-average discount rate
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4%
The Company’s lease costs for 2019 and 2018 included the following components (in thousands):
For the year ended December 31,
2019 2018
Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 104,011 $ 185,337
Variable and short-term lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,232 5,143
Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,436) —
Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 107,807 $ 190,480
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As of December 31, 2019, the Company leased aircraft, airport facilities, office space, and other property and
equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to
which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased
property. The Company expects that, in the normal course of business, such operating leases that expire will be renewed
or replaced by other leases, or the property may be purchased rather than leased. The following table summarizes future
minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining
non-cancelable lease terms as of December 31, 2019 (in thousands):
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 94,806
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,285
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,960
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,581
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,282
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,746
$ 443,660
The majority of the Company’s leased aircraft are owned and leased through trusts whose sole purpose is to
purchase, finance and lease these aircraft to the Company (“Leveraged Lease Agreements”). The Company is not a
beneficiary of such trusts and the Company does not have an ownership interest in such trusts. The Company’s
leveraged leases do not require the Company to guarantee a portion of the residual values of the leased assets held by the
trust and the Company’s leveraged lease agreements do not contain a fixed purchase option or have any other terms that
represent variable interests in such trusts. As a result, the Company has not consolidated any of these trusts.
Total rental expense for non-cancelable aircraft operating leases was approximately $72.0 million, $154.9
million and $215.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. The minimum rental
expense for airport station rents was approximately $23.1 million, $19.6 million and $30.3 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
Disclosures related to periods prior to the adoption of the New Lease Standard
The following table summarizes future minimum rental payments required under operating leases that had
non-cancelable lease terms in excess of one year as of December 31, 2018 (in thousands):
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,256
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,741
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,787
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,593
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,749
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,820
$ 477,946
(7) Fair Value Measurements
The Company holds certain assets that are required to be measured at fair value in accordance with GAAP. The
Company determined fair value of these assets based on the following three levels of inputs:
Level 1—Quoted prices in active markets for identical assets or liabilities.
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Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities. Some of the Company’s marketable securities
primarily utilize broker quotes in a non-active market for valuation of these
securities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities, therefore requiring an entity to
develop its own assumptions.
As of December 31, 2019, the Company held certain assets that are required to be measured at fair value on a
recurring basis. Assets measured at fair value on a recurring basis are summarized below (in thousands):
Fair Value Measurements as of December 31, 2019
Total Level 1 Level 2 Level 3
Marketable Securities
Bonds and bond funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 267,243 $ — $ 267,243 $ —
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,723 — 165,723 —
$ 432,966 $ — $ 432,966 $ —
Cash, Cash Equivalents and Restricted Cash . . . . . . . . . . . . . . . . . 87,206 87,206 — —
Total Assets Measured at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . $ 520,172 $ 87,206 $ 432,966 $ —
Fair Value Measurements as of December 31, 2018
Total Level 1 Level 2 Level 3
Marketable Securities
Bonds and bond funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 229,783 $ — $ 229,783 $ —
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,162 — 131,162 —
$ 360,945 $ — $ 360,945 $ —
Cash, Cash Equivalents and Restricted Cash . . . . . . . . . . . . . . . . . 328,384 328,384 — —
Total Assets Measured at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . $ 689,329 $ 328,384 $ 360,945 $ —
The Company’s “Marketable Securities” classified as Level 2 primarily utilize broker quotes in a non-active
market for valuation of these securities.
No significant transfers between Level 1, Level 2 and Level 3 occurred during the year ended December 31,
2019. The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end
of the reporting period.
(8) Special Items
The following table summarizes the components of the Company's special items, for the year ended
December 31, 2019, 2018 and 2017 (in thousands):
Year ended December 31,
2019 2018 2017
Special items:
Parts credit1 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,508 $ — $ —
Employee severance 2 . . . . . . . . . . . . . . . . . 3,361 — —
Total special items. . . . . . . . . . . . . . . . . . . . . . . $ 21,869 $ — $ —
(1) The Company terminated an agreement with an aircraft manufacturer that obligated the Company to future aircraft
lease return conditions on aircraft the Company leased. In conjunction with the terminated agreement, the aircraft
manufacturer released the Company from the future aircraft lease return obligations and the Company agreed to
terminate aircraft part credits previously issued by the manufacturer to the Company. As a result of the terminated
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agreement, the Company recorded a non-cash expense of $18.5 million (pre-tax) during 2019 to write-off the
terminated aircraft part credits, which was reflected as a special items operating expense in the consolidated
statement of comprehensive income. These special items are reflected in the SkyWest Airlines operating expenses
under Note 2 Segment Reporting.
(2) During 2019, the Company incurred $3.4 million of employee severance related costs associated with the sale of
ExpressJet that are also reflected in special items. These special items are reflected in the ExpressJet operating
expenses under Note 2 Segment Reporting.
(9) Capital Transactions
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock in one or more series without
shareholder approval. No shares of preferred stock are presently outstanding. The Company’s Board of Directors is
authorized, without any further action by the shareholders of the Company, to (i) divide the preferred stock into series;
(ii) designate each such series; (iii) fix and determine dividend rights; (iv) determine the price, terms and conditions on
which shares of preferred stock may be redeemed; (v) determine the amount payable to holders of preferred stock in the
event of voluntary or involuntary liquidation; (vi) determine any sinking fund provisions; and (vii) establish any
conversion privileges.
Stock Compensation
On May 7, 2019, the Company’s shareholders approved the adoption of the SkyWest, Inc. 2019 Long-Term
Incentive Plan, which provides for the issuance of up to 4,500,000 shares of common stock to the Company’s directors,
employees, consultants and advisors (the “2019 Incentive Plan”). The 2019 Incentive Plan provides for awards in the
form of options to acquire shares of common stock, stock appreciation rights, restricted stock grants, restricted stock
units and performance awards. The 2019 Incentive Plan is administered by the Compensation Committee of the
Company’s Board of Directors (the “Compensation Committee”). As of December 31, 2019, the 2019 Incentive Plan had
4.4 million shares remaining available for future issuance.
Stock Options
The fair value of stock options awarded under the Company’s stock option plans has been estimated as of the
grant date using the Black-Scholes option pricing model. The Company uses historical data to estimate option exercises
and employee termination in the option pricing model. The expected term of options granted is derived from the output
of the option pricing model and represents the period of time that options granted are expected to be outstanding. The
expected volatilities are based on the historical volatility of the Company’s traded stock and other factors. During the
years ended December 31, 2019, 2018 and 2017, the Company did not grant any options to purchase shares of common
stock.
Options are exercisable for a period as defined by the Compensation Committee on the date granted; however,
no stock option will be exercisable before six months have elapsed from the date of grant and no stock option shall be
exercisable after seven years from the date of grant. The following table summarizes the stock option activity for all of
the Company’s plans for the years ended December 31, 2019, 2018 and 2017.
62
2019 2018 2017
Weighted
Weighted Average Aggregate Weighted Weighted
Average Remaining Intrinsic Average Average
Number of Exercise Contractual Value Number of Exercise Number of Exercise
Options Price Term ($000) Options Price Options Price
Outstanding at beginning of
year . . . . . . . . . . . . . . . . . . . . 300,580 $ 13.70 3.0 years $ 9,249.4 458,103 $ 13.73 819,981 $ 13.58
Granted . . . . . . . . . . . . . . . . . . . — — — — — —
Exercised . . . . . . . . . . . . . . . . . (232,514) 13.36 (157,523) 13.80 (356,209) 13.36
Cancelled . . . . . . . . . . . . . . . . . (7,835) 15.86 — — (5,669) 14.33
Outstanding at end of year . . . 60,231 14.74 3.1 years $ 3,005.1 300,580 13.70 458,103 13.73
Exercisable at December 31,
2019 . . . . . . . . . . . . . . . . . . . . 60,231 14.74 3.1 years $ 3,005.1
Exercisable at December 31,
2018 . . . . . . . . . . . . . . . . . . . . 235,672 13.36 2.7 years $ 7,330.7
The total intrinsic value of options to acquire shares of the Company’s common stock that were exercised
during the years ended December 31, 2019, 2018 and 2017 was $10.5 million, $7.1 million and $9.94 million,
respectively.
The following table summarizes the status of the Company’s non-vested stock options as of December 31,
2019:
Weighted-Average
Number of Grant-Date
Shares Fair Value
Non-vested shares at beginning of year . . . . . . . . . . . . . . . 64,908 $ 5.32
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,073) 5.27
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,835) 5.66
Non-vested shares at end of year . . . . . . . . . . . . . . . . . . . . — $ —
The following table summarizes information about the Company’s stock options outstanding at December 31,
2019:
Options Outstanding Options Exercisable
Weighted Average
Number Remaining Weighted Average Number Weighted Average
Range of Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
$13.00 to $13.99 2,034 2.1 years $ 13.51 2,034 $ 13.51
$14.00 to $15.00 58,197 3.1 years 14.78 58,197 14.78
$13.00 to $15.00 60,231 3.1 years $ 14.74 60,231 $ 14.74
Restricted Stock Units (“RSUs”)
During the year ended December 31, 2019, the Company granted 104,120 restricted stock units to certain of the
Company’s employees under the 2019 Incentive Plan. The restricted stock units granted during the year ended December
31, 2019 have a three-year cliff-vesting period, during which the recipient must remain employed with the Company or
its subsidiaries. The weighted average fair value of the restricted stock units at the date of grants made during the year
ended December 31, 2019 was $48.65 per share.
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The following table summarizes the activity of restricted stock units granted to certain Company employees for
the years ended December 31, 2019, 2018 and 2017:
Weighted-Average
Grant-Date Fair
Number of RSUs Value
Non-vested RSUs outstanding at December 31, 2016 . 926,931 $ 13.65
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,137 35.81
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (230,903) 12.01
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,575) 15.78
Non-vested RSUs outstanding at December 31, 2017 . 815,590 $ 18.35
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,044 53.40
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (330,580) 13.57
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,273) 27.77
Non-vested RSUs outstanding at December 31, 2018 . 575,781 $ 27.71
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,120 48.65
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (251,853) 14.79
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143,362) 30.85
Non-vested RSUs outstanding at December 31, 2019 . 284,686 $ 45.21
Performance Stock Units (“PSUs”)
During the year ended December 31, 2019, the Compensation Committee granted performance share units,
which are performance based restricted stock units, to certain Company employees with three-year performance-based
financial metrics that the Company must meet before those awards may be earned and the performance period is
measured for the three years ending December 31, 2021. The Company’s compensation expense for performance share
units is based upon the projected number of performance share units estimated to be awarded at the conclusion of the
performance period. During 2019, the Compensation Committee awarded 67,853 additional shares of stock related to the
performance share grant in 2016 based on the Company’s performance for the three years ended December 31, 2018
measured against the pre-established targets for the same period. The Compensation Committee will determine the
achievement of performance results and corresponding vesting of performance shares for each year’s grant in 2017, 2018
and 2019 following the conclusion of the respective performance period. At the end of each performance period, the
number of shares awarded can range from 0% to 200% of the original granted amount for performance share units
granted in 2019, 2018 and 2017.
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The following table summarizes the activity of performance share units granted at target as of December 31,
2019.
Weighted-Average
Grant-Date
Number of PSUs Fair Value
Non-vested PSUs outstanding at December 31, 2016 . 363,993 $ 14.23
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,315 35.81
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,732) 15.00
Non-vested PSUs outstanding at December 31, 2017 . 468,576 $ 19.70
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,264 53.41
Additional PSUs awarded from the 2015 grant . . . . . . 92,335 13.62
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (277,029) 13.62
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,229) 30.09
Non-vested PSUs outstanding at December 31, 2018 . 370,917 $ 30.84
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,864 48.81
Additional PSUs awarded from the 2016 grant . . . . . . 67,853 14.80
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (203,582) 14.80
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (89,481) 34.70
Non-vested PSUs outstanding at December 31, 2019 . 233,571 $ 45.44
During the years ended December 31, 2019, 2018 and 2017 the Company granted fully-vested shares of
common stock to the Company’s directors in the amounts of 18,576, 15,165 and 22,617 shares, respectively, with a
weighted average grant-date fair value of $48.45, $53.40, and $35.81 respectively.
During the year ended December 31, 2019, 2018 and 2017, the Company recorded equity-based compensation
expense of $10.3 million, $13.1 million and $10.6 million, respectively. Additionally, the Company incurred $7.9
million of employee severance related costs associated with the sale of ExpressJet, partially offset by a forfeiture credit
of $4.5 million, primarily resulting from stock-based compensation awards that terminated upon the sale of ExpressJet
during 2019.
As of December 31, 2019, the Company had $10.0 million of total unrecognized compensation cost related to
non-vested restricted stock grants and non-vested performance stock units. Total unrecognized compensation cost will be
adjusted for future changes in estimated forfeitures. The Company expects to recognize this cost over a weighted average
period of 1.7 years.
Taxes
The Company’s treatment of stock option grants of non-qualified options, restricted stock units and
performance shares results in the creation of a deferred tax asset, which is a temporary difference, until the time that the
option is exercised or the restrictions lapse.
(10) Retirement Plans and Employee Stock Purchase Plans
SkyWest Retirement Plan
The Company sponsors the SkyWest, Inc. Employees’ Retirement Plan (the “SkyWest Plan”). Employees who
have completed 90 days of service and are at least 18 years of age are eligible for participation in the SkyWest Plan.
Employees may elect to make contributions to the SkyWest Plan. Generally, the Company matches 100% of such
contributions up to levels ranging from 2% to 12% of compensation, based on position and years of service.
Additionally, a discretionary contribution may be made by the Company. The Company’s combined contributions to the
SkyWest Plan were $40.7 million, $35.6 million and $26.1 million for the years ended December 31, 2019, 2018 and
2017, respectively.
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Employee Stock Purchase Plans
In May 2009, the Company’s Board of Directors approved the SkyWest, Inc. 2009 Employee Stock Purchase
Plan (the “2009 Stock Purchase Plan”). All employees who have completed 90 days of employment with the Company
or one of its subsidiaries are eligible to participate in the 2009 Stock Purchase Plan, except employees who own five
percent or more of the Company’s common stock. The 2009 Stock Purchase Plan enables employees to purchase shares
of the Company’s common stock at a five percent discount, through payroll deductions. Employees can contribute up to
15% of their base pay, not to exceed $25,000 each calendar year, for the purchase of shares. Shares are purchased semi-
annually at a five percent discount based on the end of the period price. Employees can terminate their participation in
the 2009 Stock Purchase Plan at any time upon written notice.
The following table summarizes purchases made under the 2009 Employee Stock Purchase Plans during the
years ended December 31, 2019, 2018 and 2017:
Year ended December 31,
2019 2018 2017
Number of shares purchased . . . . . . . . . . . . 65,148 60,950 88,362
Average price of shares purchased. . . . . . . . $ 48.58 $ 49.85 $ 33.96
The 2009 Stock Purchase Plan is a non-compensatory plan under the accounting guidance. Therefore, no
compensation expense was recorded for the years ended December 31, 2019, 2018 and 2017.
(11) Stock Repurchase
The Company’s Board of Directors has adopted a stock repurchase program which authorizes the Company to
repurchase shares of the Company’s common stock in the public market or in private transactions, from time to time, at
prevailing prices. The Company’s stock repurchase program authorizes the repurchase of up to $250.0 million of the
Company’s common stock commencing on February 5, 2019, of which $159.6 million remained available at December
31, 2019.
During the years ended December 31, 2019, 2018 and 2017, the Company repurchased 1.7 million, 1.0 million
and 0.5 million shares of common stock (including shares purchased from the Company’s Chairman of the Board see
Note 12 Related-Party Transactions for more details) for approximately $94.6 million, $54.4 million and $20.0 million,
respectively at a weighted average price per share of $56.86, $56.25 and $41.36, respectively. Additionally, during the
year ended December 31, 2019, 2018 and 2017, the Company paid $9.3 million, $13.6 million and $5.1 million,
respectively, for a net settlement of the income tax obligation on employee equity awards that vested during the
applicable periods.
(12) Related-Party Transactions
On June 13, 2019, the Company repurchased 268,025 shares of its common stock from Jerry Atkin, Chairman
of the Board, at a price of $60.24 per share, representing the volume-weighted average price of the Company’s common
stock over the five trading days immediately prior to such repurchase. The transaction was part of Mr. Atkin’s personal
long-term strategy for asset diversification, tax and estate planning and to fund philanthropic and charitable efforts. The
transaction was approved by the Company’s Audit Committee and was effected pursuant to the Company’s stock
repurchase plan that commenced on February 5, 2019.
During the year ended December 31, 2019, the Company purchased $93,540 of spare aircraft parts from an
entity affiliated with a director of the Company.
66
(13) Gain on Sale of ExpressJet
On January 22, 2019, the Company completed the sale of its former wholly owned subsidiary ExpressJet. The
Company recorded a gain of $46.5 million (pre-tax) from the sale of ExpressJet. The closing of the transaction was
completed in two parts, through an asset sale and stock sale, as further described below.
Asset Sale
On January 11, 2019, pursuant to the terms and conditions of the Asset Purchase Agreement, dated as of
December 17, 2018, by and among the Company, ExpressJet and United, United acquired certain specified assets and
liabilities of ExpressJet, including, among other things, aircraft engines, auxiliary power units, rotable spare parts,
ground support equipment and flight training equipment for $60.8 million in cash, subject to certain purchase price
adjustments (the “Asset Sale”). Certain assets and liabilities of ExpressJet were expressly excluded from the Asset Sale.
Stock Sale
Additionally, on January 22, 2019, pursuant to the terms and conditions of the Stock Purchase Agreement, dated
as of December 17, 2018, by and among the Company and ManaAir, LLC, a company in which United owns a minority
interest (the “Buyer”), the Buyer acquired all of the outstanding shares of capital stock of ExpressJet from the Company
for $18.8 million in cash, subject to certain purchase price adjustments (the “Stock Sale,”). To facilitate payment of the
purchase price for the Stock Sale, at the closing of the Stock Sale, the Company loaned $26 million to Kair Enterprises,
Inc. (the “Borrower”), the majority owner of the Buyer. Such loan accrues interest at the rate of 6.85% per annum,
matures on the last business day of the last month immediately preceding the two-year anniversary of the closing of the
Stock Sale and is secured by, among other things, the Borrower’s ownership interests in the Buyer. The Company also
leased 16 CRJ200 aircraft to ExpressJet for a portion of the 2019 year. The lease of these 16 CRJ200 aircraft was
terminated as of December 31, 2019.
(14) Investment in Other Companies
During 2019, the Company created a joint venture with Regional One, Inc. (“Regional One”) by investing $22.3
million for a 75% ownership interest in Aero Engines, LLC. (“Aero Engines”). The primary purpose of Aero Engines is
to lease engines to third parties. Aero Engines requires unanimous approval from the Company and Regional One for its
engine purchases, dispositions, lease agreements with third parties and all other material transactions. The Company
determined Aero Engines is a variable interest entity as the Company has a 75% ownership interest in Aero Engines and
all material decisions require unanimous approval from the Company and Regional One, resulting in disproportionate
ownership rights relative to voting rights. As unanimous approval is required for all Aero Engines’ material activities.
Aero Engines has no primary beneficiary. The Company accounts for its investment in Aero Engines under the equity
method. The Company’s exposure in its investment in Aero Engines primarily consists of the Company’s portion of
income or loss from Aero Engines’ engine lease agreements with third parties and the Company’s ownership percentage
in Aero Engines’ engines book value. The Company purchased 14 spare engines and sold the 14 spare engines to Aero
Engines at net book value during 2019. Since the initial investment, the Company has invested an additional $1.0 million
into Aero Engines during 2019. Aero Engines had no debt outstanding as of December 31, 2019. As of December 31,
2019, the Company’s investment balance in Aero Engines was $23.9 million. The Company’s investment in Aero
Engines has been recorded in “Other Assets” on the Company’s consolidated balance sheet. The Company’s portion of
the income generated by Aero Engines for 2019 was $0.6 million.
67
(15) Quarterly Financial Data (Unaudited)
Unaudited summarized financial data by quarter for 2019 and 2018 is as follows (in thousands, except per share
data):
Year ended December 31, 2019
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 723,694 $ 744,383 $ 760,295 $ 743,591 $ 2,971,963
Operating income . . . . . . . . . . . . . . . . . . . . . . . . 96,419 144,093 146,441 125,305 512,258
Net income (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,181 88,052 91,339 72,527 340,099
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.71 1.72 1.80 1.44 6.68
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.69 1.71 1.79 1.43 6.62
Weighted average common shares:
Basic: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,440 51,145 50,746 50,395 50,932
Diluted:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,098 51,477 51,129 50,796 51,375
(1) Net income for the first quarter of 2019 included a $46.5 million gain related to the sale of ExpressJet (see Note 13
Gain on Sale of ExpressJet for more details) and a $21.9 million special charge (see Note 8 Special Items for more
details).
Year ended December 31, 2018
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 783,400 $ 805,515 $ 829,275 $ 803,489 $ 3,221,679
Operating income . . . . . . . . . . . . . . . . . . . . . . . . 88,175 126,678 137,925 121,502 474,280
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,362 75,859 83,046 67,105 280,372
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.05 1.46 1.60 1.30 5.40
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03 1.43 1.57 1.28 5.30
Weighted average common shares:
Basic: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,921 52,046 52,039 51,650 51,914
Diluted:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
53,033 52,913 52,981 52,556 52,871
68
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation
of our disclosure controls and procedures, which have been designed to ensure that information we are required to
disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported
accurately and within the time periods specified in the SEC rules and forms. Our management, including our Chief
Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2019, those controls and procedures
were effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange
Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control
During the most recently completed fiscal quarter, we did not make any changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting principles generally accepted in the United
States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of
December 31, 2019 using the criteria issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated Framework (2013). Based on that evaluation, management
believes that our internal control over financial reporting was effective as of December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019, has been audited by
Ernst & Young LLP (“Ernst & Young”), the independent registered public accounting firm who also has audited our
Consolidated Financial Statements included in this Report. Ernst & Young’s report on our internal control over financial
reporting appears on the following page.
69
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of SkyWest, Inc.
Opinion on Internal Control over Financial Reporting
We have audited SkyWest, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, SkyWest, Inc. and subsidiaries (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of SkyWest, Inc. and subsidiaries as of December 31, 2019 and 2018, and the related
consolidated statements of comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended
December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 and our report dated
February 18, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Salt Lake City, Utah
February 18, 2020
70
ITEM 9B. OTHER INFORMATION
None.
PART III
Items 10, 11, 12, 13 and 14 in Part III of this Report are incorporated herein by reference to our definitive proxy
statement for our 2019 Annual Meeting of Shareholders scheduled for May 5, 2020. We intend to file our definitive
proxy statement with the SEC not later than 120 days after December 31, 2019, pursuant to Regulation 14A of the
Exchange Act.
Headings in Proxy Statement
ITEM 10. DIRECTORS, EXECUTIVE “Election of Directors,” “Executive Officers,” “Corporate
OFFICERS AND CORPORATE Governance,” “Meetings and Committees of the Board” and
GOVERNANCE “Delinquent Section 16(a) Reports”
ITEM 11. EXECUTIVE “Corporate Governance,” “Meetings and Committees of the Board,”
COMPENSATION “Compensation Discussion and Analysis,” “Compensation
Committee Report,” “Executive Compensation,” “Director
Compensation” and “Director Summary Compensation Table”
ITEM 12. SECURITY OWNERSHIP OF “Security Ownership of Certain Beneficial Owners” “Securities
CERTAIN BENEFICIAL Authorized for Issuance Under Equity Compensation Plans”
OWNERS AND
MANAGEMENT AND
RELATED STOCKHOLDER
MATTERS
ITEM 13. CERTAIN RELATIONSHIPS “Certain Relationships and Related Transactions”
AND RELATED
TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTANT “Audit and Finance Committee Disclosure” and “Fees Paid to
FEES AND SERVICES Independent Registered Public Accounting Firm”
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents Filed:
1. Financial Statements: Reports of Independent Auditors, Consolidated Balance Sheets as of
December 31, 2019 and 2018, Consolidated Statements of Comprehensive Income (Loss) for the years
ended December 31, 2019, 2018 and 2017, Consolidated Statements of Cash Flows for the years ended
December 31, 2019, 2018 and 2017, Consolidated Statements of Stockholders’ Equity for the years
ended December 31, 2019, 2018, 2017 and 2016 and Notes to Consolidated Financial Statements.
2. Financial Statement Schedule. The following consolidated financial statement schedule of our
company is included in this Item 15.
• Schedule II—Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are not required under the related instructions or are not
applicable, and therefore have been omitted.
71
(b) Exhibits
Incorporated
Number Exhibit by Reference
3.1 Restated Articles of Incorporation (1)
3.2 Amended and Restated Bylaws (11)
4.1 Specimen of Common Stock Certificate (2)
4.2 Description of Registered Securities Filed herewith
10.1 Amended and Restated Delta Connection Agreement, dated as of September 8, 2005, (3)
between SkyWest Airlines, Inc. and Delta Air Lines, Inc.
10.2 United Express Agreement dated July 31, 2003, between United Air Lines, Inc., and (4)
SkyWest Airlines, Inc.
10.3 Lease Agreement dated December 1, 1989 between Salt Lake City Corporation and (5)
SkyWest Airlines, Inc.
10.4 Master Purchase Agreement dated November 7, 2000 between Bombardier, Inc. and (6)
SkyWest Airlines, Inc.
10.5 Supplement to Master Purchase Agreement dated November 7, 2000 between (4)
Bombardier, Inc. and SkyWest Airlines, Inc.
10.6 SkyWest, Inc. 2002 Deferred Compensation Plan, as amended and restated, effective (5)
January 1, 2008
10.7 First Amendment to the Amended and Restated SkyWest, Inc. 2002 Deferred (5)
Compensation Plan
10.8 SkyWest, Inc. 2009 Employee Stock Purchase Plan (5)
10.9 SkyWest, Inc. 2010 Long-Term Incentive Plan (6)
10.10 Form of Restricted Stock Unit Award Agreement (16)
10.11 Form of Performance Share Award Agreement (16)
10.12 Capacity Purchase Agreement, dated November 12, 2010, by and among ExpressJet (9)
Airlines, Inc. and Continental Airlines, Inc.
10.13 Aircraft Purchase Agreement, dated December 7, 2012, between Mitsubishi Aircraft (10)
Corporation and SkyWest, Inc.
10.14 Letter Agreement dated December 7, 2012, between Mitsubishi Aircraft Corporation (10)
and SkyWest, Inc.
10.15 Purchase Agreement COM0028-13, between Embraer S.A. and SkyWest Inc. dated (12)
February 15, 2013
10.16 Purchase Agreement COM0344-13, between Embraer S.A. and SkyWest Inc. dated (12)
June 17, 2013
10.17 Form of Indemnification Agreement by and between SkyWest, Inc. and each of Jerry (12)
C. Atkin, W. Steve Albrecht, Henry J. Eyring, Steven F. Udvar-Hazy, James L.
Welch, Eric J. Woodward and Russell A. Childs, as of August 6, 2013
10.18 Form of Indemnification Agreement by and between SkyWest, Inc. and each of (12)
Ronald J. Mittelstaedt and Keith E. Smith, as of October 1, 2013
10.19 Amended and Restated Capacity Purchase Agreement, dated as of November 7, (13)
2014, by and between ExpressJet Airlines, Inc. and United Airlines*
10.20 Indemnification Agreement by and between SkyWest, Inc. and Robert J. Simmons, (15)
as of March 16, 2015
10.21 Form of Indemnification Agreement by and between SkyWest, Inc. and each of
Meredith S. Madden and Andrew C. Roberts, as of May 5, 2015 (15)
10.22 SkyWest, Inc. 2019 Long-Term Incentive Plan (19)
10.23 Severance and Release Agreement, dated as of February 12, 2019, by and between
the Registrant and Terry M. Vais (20)
21.1 Subsidiaries of the Registrant (11)
72
Incorporated
Number Exhibit by Reference
23.1 Consent of Independent Registered Public Accounting Firm Filed herewith
31.1 Certification of Chief Executive Officer Filed herewith
31.2 Certification of Chief Financial Officer Filed herewith
32.1 Certification of Chief Executive Officer Filed herewith
32.2 Certification of Chief Financial Officer Filed herewith
101 The following financial statements from the SkyWest Inc. Annual Report on Form
10-K for the year ended December 31, 2019, formatted in Inline Extensible Business
Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated
Statements of Comprehensive Income, (iii) Consolidated Statements of Stockholders’
Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated
Financial Statements, tagged as blocks of text and including detailed tags Filed herewith
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit
101) Filed herewith
* Certain portions of this exhibit have been omitted pursuant to Rule 24b-2 and are subject to a confidential
treatment request.
(1) Incorporated by reference to the exhibits to a Registration Statement on Form S -3 (File No. 333-129831) filed
on November 18, 2005
(2) Incorporated by reference to a Registration Statement on Form S- 3 (File No. 333-42508) filed on July 28, 2000
(3) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on September 13, 2005, as amended
by Amendment No. 2 on Form 8-K/A filed on February 21, 2006
(4) Incorporated by reference to exhibits to Registrant’s Quarterly Report on Form 10-Q filed on November 14,
2003
(5) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed for the quarter
ended December 31, 1986
(6) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on February 13,
2001
(7) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 23,
2009
(8) Incorporated by reference to Appendix A to Registrant's Definitive Proxy Statement on Schedule 14A (File No.
000-14719) filed on March 12, 2010
(9) Incorporated by reference to the exhibits to Registrant’s Current Report on Form 8-K filed on November 18,
2010
(10) Incorporated by reference to the exhibits to Registrant’s Current Report on Form 8-K filed on December 13,
2012, as amended by Amendment No. 1 to Current Report on Form 8-K/A filed on June 25, 2013
(11) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 24,
2012
(12) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on August 7,
2013, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed on November 4, 2013
73
(13) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 14,
2014
(14) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 18,
2015
(15) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 26,
2016
(16) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 27,
2017
(17) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 26,
2018
(18) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 21,
2019
(19) Incorporated by reference to Appendix B of the Registrant’s Definitive Proxy Statement on Schedule 14A filed
on March 22, 2019
(20) Incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on February 15,
2019
ITEM 16. FORM 10-K SUMMARY
None.
74
SKYWEST, INC. AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2019, 2018 and 2017
(Dollars in thousands)
Additions
Balance at Charged to
Beginning Costs and Balance at
Description of Year Expenses Deductions End of Year
Year ended December 31, 2019:
Allowance for inventory obsolescence . . . . . . . . $ 22,141 — (6,251) $ 15,890
Allowance for doubtful accounts receivable . . . 158 — (140) 18
$ 22,299 — (6,391) $ 15,908
Year ended December 31, 2018:
Allowance for inventory obsolescence . . . . . . . . $ 17,098 5,043 — $ 22,141
Allowance for doubtful accounts receivable . . . 157 1 — 158
$ 17,255 5,044 — $ 22,299
Year ended December 31, 2017:
Allowance for inventory obsolescence(1) . . . . . $ 40,497 — (23,399) $ 17,098
Allowance for doubtful accounts receivable . . . 173 — (16) 157
$ 40,670 — (23,415) $ 17,255
(1) The deductions in 2017 related to the disposal of excess and obsolete inventory in 2017.
75
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of 1934, as amended, the Registrant
has duly caused this Annual Report on Form 10-K for the year ended December 31, 2019, to be signed on its behalf by
the undersigned, thereunto duly authorized, on February 18, 2020.
SKYWEST, INC.
By: /s/ ROBERT J. SIMMONS
Robert J. Simmons
Chief Financial Officer
76
ADDITIONAL SIGNATURES
Pursuant to the requirement of the Securities Act of 1934, as amended, this Annual Report on Form 10-K has
been signed below by the following persons in the capacities and on the dates indicated.
Name Capacities Date
/s/ JERRY C. ATKIN
Chairman of the Board February 18, 2020
Jerry C. Atkin
/s/ RUSSELL A. CHILDS
Chief Executive Officer and President
Russell A. Childs February 18, 2020
(Principal Executive Officer) and Director
/s/ ROBERT J. SIMMONS Chief Financial Officer (Principal Financial
February 18, 2020
Robert J. Simmons Officer)
/s/ ERIC J. WOODWARD Chief Accounting Officer (Principal
February 18, 2020
Eric J. Woodward Accounting Officer)
/s/ STEVEN F. UDVAR-HAZY
Lead Director February 18, 2020
Steven F. Udvar-Hazy
/s/ W. STEVE ALBRECHT
Director February 18, 2020
Steve Albrecht
/s/ HENRY J. EYRING
Director February 18, 2020
Henry J. Eyring
/s/ MEREDITH S. MADDEN
Director February 18, 2020
Meredith S. Madden
/s/ RONALD J. MITTELSTAEDT
Director February 18, 2020
Ronald J. Mittelstaedt
/s/ ANDREW C. ROBERTS
Director February 18, 2020
Andrew C. Roberts
/s/ KEITH E. SMITH
Director February 18, 2020
Keith E. Smith
/s/ JAMES L. WELCH
Director February 18, 2020
James L. Welch
77
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SkyWest, Inc.
444 South River Road ● St. George, UT 84790
March 13, 2020
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of SkyWest, Inc. scheduled to be held at
10:00 a.m., Mountain Daylight Time on Tuesday, May 5, 2020, at our headquarters located at 444 South River Road,
St. George, Utah 84790.
The accompanying Notice of Annual Meeting of Shareholders and Proxy Statement describe the items to be
considered and acted upon by shareholders.
Your vote is very important. Whether you plan to attend the Annual Meeting or not, we urge you to vote your
shares as soon as possible. This will ensure representation of your shares at the Annual Meeting if you are unable to
attend.
We are pleased to make these proxy materials available over the Internet, which we believe increases the
efficiency and reduces the expense of our annual meeting process. As a result, we are mailing to shareholders a Notice of
Internet Availability of Proxy Materials (the “Notice”) instead of paper copies of these proxy materials and our 2019
Annual Report. The Notice contains instructions on how to access those documents over the Internet or request that a
full set of printed materials be sent to you. The Notice also gives instructions on how to vote your shares.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Jerry C. Atkin
Board Chair
(This page has been left blank intentionally.)
SkyWest, Inc.
444 South River Road ● St. George, UT 84790
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
OF SKYWEST, INC.
Date: Tuesday, May 5, 2020
Time: 10:00 a.m., Mountain Daylight Time (MDT)
Place: SkyWest, Inc. Headquarters
444 South River Road
St. George, Utah 84790
Purposes: 1. To elect ten directors of SkyWest, Inc. (the “Company”), to serve until the next Annual
Meeting of the Company’s shareholders and until their successors are duly elected and
qualified;
2. To conduct a vote, on an advisory basis, on the compensation of the Company’s named
executive officers;
3. To ratify the appointment of Ernst & Young LLP as the Company’s independent
registered public accounting firm for the year ending December 31, 2020; and
4. To transact such other business that may properly come before the Annual Meeting and
any adjournment thereof.
Who Can Vote: Shareholders at the close of business on March 4, 2020.
How You Can Vote: Shareholders may vote at the Annual Meeting, or in advance over the Internet, by telephone, or
by mail.
By authorization of the Board of Directors,
Jerry C. Atkin
Board Chair
March 13, 2020
(This page has been left blank intentionally.)
Proxy Statement for the
Annual Meeting of Shareholders of
SKYWEST, INC.
To Be Held on Tuesday, May 5, 2020
TABLE OF CONTENTS
Page
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Proposal 1—Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Meetings and Committees of the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Director Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Security Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Proposal 2—Advisory Vote on Named Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Proposal 3—Ratification of Appointment of Independent Registered Public Accounting Firm . . . . . . . . . . 52
Fees Paid to Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Delinquent Section 16(a) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Shareholder Proposals for the 2021 Annual Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Delivery of Documents to Shareholders Sharing an Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
OF
SKYWEST, INC.
TUESDAY, MAY 5, 2020
OVERVIEW
Solicitation
This Proxy Statement, the accompanying Notice of Annual Meeting, proxy card and the Annual Report to
Shareholders of SkyWest, Inc. (the “Company” or “SkyWest”) are being mailed on or about March 26, 2020. The Board
of Directors of the Company (the “Board”) is soliciting your proxy to vote your shares at the Annual Meeting of the
Company’s Shareholders to be held on May 5, 2020 (the “Meeting”). The Board is soliciting your proxy in an effort to
give all shareholders of record the opportunity to vote on matters that will be presented at the Meeting. This Proxy
Statement provides information to assist you in voting your shares.
What is a proxy?
A proxy is your legal designation of another person to vote on your behalf. You are giving the individuals
appointed by the Board as proxies (Jerry C. Atkin, Russell A. Childs and Robert J. Simmons) the authority to vote your
shares in the manner you indicate.
Why did I receive more than one notice?
You may receive multiple notices if you hold your shares in different ways (e.g., joint tenancy, trusts, or
custodial accounts) or in multiple accounts. If your shares are held by a broker (i.e., in “street name”), you will receive
your notice or other voting information from your broker. In any case, you should vote for each notice you receive.
Voting Information
Who is qualified to vote?
You are qualified to receive notice of and to vote at the Meeting if you owned shares of common stock of
SkyWest (the “Common Stock”) at the close of business on the record date of Wednesday, March 4, 2020.
How many shares of Common Stock may vote at the Meeting?
As of March 4, 2020, there were 50,257,387 shares of Common Stock outstanding and entitled to vote. Each
share of Common Stock is entitled to one vote on each matter presented at the Meeting.
What is the difference between a “shareholder of record” and a “street name” holder?
If your shares are registered directly in your name with Zions First National Bank, the Company’s transfer
agent, you are a “shareholder of record.” If your shares are held in the name of a brokerage, bank, trust or other nominee
as a custodian, you are a “street name” holder.
1
How can I vote at the Meeting?
You may vote in person by attending the Meeting. You may also vote in advance over the Internet, or by
telephone, or you may request a complete set of traditional proxy materials and vote your proxy by mail. To vote your
proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available when you
access the Internet website or place your telephone call. To vote your proxy by mail, mark your vote on the enclosed
proxy card, then follow the instructions on the card.
What are the Board’s recommendations on how I should vote my shares?
The Board recommends that you vote your shares as follows:
Proposal 1—FOR the election of all ten nominees for director.
Proposal 2—FOR the non-binding resolution to approve the compensation of the Company’s named executive officers.
Proposal 3—FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered
public accounting firm for the year ending December 31, 2020.
What are my choices when voting?
Proposal 1—You may cast your vote in favor of up to ten individual director-nominees. You may vote for less than ten
director-nominees if you choose. You may also abstain from voting.
Proposals 2 and 3—You may cast your vote in favor of, or against, each proposal. You may also abstain from voting.
How will my shares be voted if I do not specify how they should be voted?
If you execute the enclosed proxy card without indicating how you want your shares to be voted, the proxies
appointed by the Board will vote as recommended by the Board and described previously in this section.
Similarly, shares represented by proxies that reflect a “broker non-vote” will be counted for purposes of
determining whether a quorum exists. A broker non-vote occurs when a broker, bank or other financial institution
holding shares in street name for a beneficial owner has not received instructions from the beneficial owner and does not
have discretionary authority to vote the shares for a particular proposal. Under the rules of various national and regional
securities exchanges, the organization that holds your shares in street name has discretionary authority to vote only on
routine matters and cannot vote on non-routine matters. The only proposal at the meeting that is considered a routine
matter under applicable rules is the proposal to ratify the appointment of Ernst & Young LLP as the Company’s
independent registered public accounting firm for the year ending December 31, 2020. Therefore, unless you provide
voting instructions to the broker, bank or other financial institution holding shares on your behalf, they will not have
discretionary authority to vote your shares on any of the other proposals described in this proxy statement. Please vote
your proxy or provide voting instructions to the broker, bank or other financial institution holding your shares so your
vote on the other proposals will be counted.
2
What is the quorum requirement for the Annual Meeting?
Under Utah law and the Company’s Bylaws, the holders of a majority of the votes entitled to be cast on the
matter constitutes a quorum. Therefore, the holders of a majority of the Common Stock issued and outstanding and
entitled to vote at the Meeting, present in person or represented by proxy, constitute a quorum for the transaction of
business at the Meeting. If you submit a properly executed proxy via the Internet or by telephone or mail, regardless of
whether you abstain from voting on one or more matters, your shares will be counted as present at the Meeting for the
purpose of determining a quorum. Broker non-votes will also be counted as present for the purpose of determining the
presence of a quorum at the Meeting. The inspectors of election will determine whether a quorum is present and will
tabulate the votes cast at the Meeting.
What vote will be required to approve each proposal?
Proposal 1 provides that, assuming a quorum is present at the Meeting, the ten director-nominees who receive a
majority of the votes cast with respect to his or her election will be elected as directors of the Company. This means that
the number of shares voted “for” the election of a director must exceed the number of shares voted “against” the election
of that director.
Proposals 2 and 3 will be approved if, assuming a quorum is present at the Meeting, the number of votes cast, in
person or by proxy, in favor of a particular proposal exceeds the number of votes cast in opposition to the proposal.
Proposal 2 is an advisory vote only, and has no binding effect on the Board or the Company.
How will withheld votes, abstentions and broker non-votes be treated?
Withheld votes, abstentions and broker non-votes will be deemed as “present” at the Meeting and will be
counted for quorum purposes only. Withheld votes, abstentions and broker non-votes, if any, will not count as a vote cast
as to any director-nominee’s election and thus will have no effect in determining whether a director nominee has
received a majority of the votes cast. For purposes of the votes on Proposals No. 2 and No. 3, abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the result of the votes on such proposals.
Can I change my vote?
You may revoke your proxy before the time of voting at the Meeting in any of the following ways:
• by mailing a revised proxy card to the Chief Financial Officer of the Company;
• by changing your vote on the Internet website;
• by using the telephone voting procedures; or
• by voting in person at the Meeting.
Who will count the votes?
Representatives from Zions First National Bank, the Company’s transfer agent, or other individuals designated
by the Board, will count the votes and serve as inspectors of election. The inspectors of election will be present at the
Meeting.
3
Who will pay the cost of this proxy solicitation?
The Company will pay the costs of soliciting proxies. Upon request, the Company will reimburse brokers,
dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding proxy materials to
beneficial owners of shares of the Common Stock.
Is this Proxy Statement the only way proxies are being solicited for use at the Meeting?
Yes. The Company does not intend to employ any other methods of solicitation.
How are proxy materials being delivered?
The Company is pleased to take advantage of Securities and Exchange Commission rules that allow companies
to furnish their proxy materials over the Internet. As a result, the Company is mailing to most of its shareholders a Notice
of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this Proxy Statement and the
Company’s 2019 Annual Report to Shareholders. The Notice contains instructions on how to access those documents
over the Internet. The Notice also contains instructions on how to request a paper copy of the Company’s proxy
materials, including this Proxy Statement, the 2019 Annual Report to Shareholders and a form of proxy card or voting
instruction card. All shareholders who do not receive a Notice will receive a paper copy of the proxy materials by mail.
The Company believes this process will allow it to provide its shareholders with the information they need in a more
efficient manner, while reducing the environmental impact and lowering the costs of printing and distributing these
proxy materials.
4
PROPOSAL 1
ELECTION OF DIRECTORS
The Board currently consists of ten directors. All directors serve a one-year term and are subject to re-election
each year. The terms of all of the Company’s current directors expire at the Meeting. At the Meeting, the Company
proposes to elect the ten current directors to hold office until the 2021 Annual Meeting of Shareholders and until their
successors have been elected and have qualified. The ten nominees for election at the Meeting are listed below.
• Jerry C. Atkin, Chair
• W. Steve Albrecht
• Russell A. Childs
• Henry J. Eyring
• Meredith S. Madden
• Ronald J. Mittelstaedt
• Andrew C. Roberts
• Keith E. Smith
• Steven F. Udvar-Hazy
• James L. Welch
The Board Recommends That Shareholders Vote FOR All Ten Director Nominees.
All of the nominees are currently serving as a director of the Company and have consented to be named as a
nominee. Shareholders voting in person or by proxy at the Meeting may only vote for ten nominees. If, prior to the
Meeting, any of the nominees becomes unable to serve as a director, the Board may designate a substitute nominee. In
that event, the persons named as proxies intend to vote for the substitute nominee designated by the Board.
The Board and the Nominating and Corporate Governance Committee believe that each of the following
nominees possesses the experience and qualifications that directors of the Company should possess, as described in
detail below, and that the experience and qualifications of each nominee compliments the experience and qualifications
of the other nominees. The experience and qualifications of each nominee, including information regarding the specific
experience, qualifications, attributes and skills that led the Board and its Nominating and Corporate Governance
Committee to conclude that he or she should serve as a director of the Company at the present time, in light of the
Company’s business and structure, are set forth on the following pages.
5
Jerry C. Atkin
Age: 71 Director Since: 1974 Committees: None
Principal Occupation: Board Chair
Experience: Mr. Atkin joined the Company in July 1974 as the Company’s Director of Finance. In 1975, he assumed the office of
President and Chief Executive Officer (“CEO”) and was elected Board Chair in 1991. Mr. Atkin served as President of the
Company until 2011 and as CEO until December 31, 2015.
The Board nominated Mr. Atkin to serve as a director, in part, because of his deep knowledge and understanding of the Company,
the regional airline industry as well as having served as the Company’s CEO for more than 40 years. Mr. Atkin performs an
extremely valuable role as the Board Chair, providing critical leadership and direction to the Board’s activities and deliberations.
The Board also believes his values and integrity are tremendous assets to the Company and its shareholders.
Other Directorships: Mr. Atkin currently serves as a director of Zions Bancorporation, a regional bank holding company based in
Salt Lake City, Utah (“Zions”).
W. Steve Albrecht
Committees: Chair of the Audit Committee;
Director Since: 2012 (Also served as a director of the Member of the Nominating and Corporate
Age: 73
Company from 2003-2009) Governance Committee; Audit Committee Financial
Expert
Principal Occupation: Emeritus Professor at Brigham Young University
Experience: Mr. Albrecht, a certified public accountant, certified internal auditor, and certified fraud examiner, joined the faculty
of Brigham Young University in 1977, after teaching at the University of Illinois and Stanford University. At Brigham Young
University, he served as director of the School of Accountancy from 1990 to 1999, and as associate dean of the Marriott School
from 1999 to 2008. He served as the President of the Japan Tokyo Mission of The Church of Jesus Christ of Latter day Saints from
July 2009 to July 2012. Mr. Albrecht has also served as the President of the American Accounting Association, the Association of
Certified Fraud Examiners and Beta Alpha Psi, an international honor organization for accounting, finance and information systems
students. He has also served as a member of the Committee of Sponsoring Organizations of the Treadway Commission (COSO);
the Financial Accounting Standards Advisory Committee, an advisory committee to the Financial Accounting Standards Board (the
“FASB”); and the Financial Accounting Foundation that oversees the FASB and the Governmental Accounting Standards Board.
Mr. Albrecht has consulted with many major corporations and other organizations and has been an expert witness in over 38 major
financial statement fraud cases, including some of the largest cases in U.S. history.
The Board recognizes Mr. Albrecht’s valuable contribution as a director of the Company from 2003 through 2009 and since his re-
election in 2012, including his service as the Chair of the Audit Committee. The Board nominated Mr. Albrecht because of his
exceptional academic and professional record, his achievements, awards and other forms of recognition in the accounting
profession, his extensive training in accounting practices and fraud detection, and his outstanding past service on the Board.
Other Directorships: Mr. Albrecht currently serves as a director of and Board Chair for Cypress Semiconductor Corporation.
6
Russell A. Childs
Age: 52 Director Since: 2016 Committees: None
Principal Occupation: CEO and President of the Company and its operating subsidiary, SkyWest Airlines, Inc. (“SkyWest
Airlines”)
Experience: Mr. Childs was named CEO of the Company effective January 1, 2016, and has served as President of the Company
since 2014. He is responsible for the holding company’s operating entities and all commercial activities. He joined the Company in
2001 and became Vice President – Controller later that year. He served as the President and Chief Operating Officer of SkyWest
Airlines from 2007 to 2014. Mr. Childs earned his bachelor's degree in Economics and master's degree in Accounting from
Brigham Young University. Prior to joining the Company, Mr. Childs was a certified public accountant employed by a public
accounting firm.
The Board nominated Mr. Childs, among other reasons, because it recognizes Mr. Childs’ critical role in delivering value to all
Company stakeholders, as well as noting the importance of the Company's CEO serving on the Board, as he is the one closest to the
Company's day-to-day operations and is able to communicate the Board’s expectations, advice and encouragement to the
Company’s approximately 14,000 employees.
Other Directorships: Mr. Childs currently serves as a Chair of the Salt Lake City Branch of the Federal Reserve Bank of San
Francisco and is the Chair of the NextGen Advisory Committee of the Federal Aviation Administration (FAA).
Henry J. Eyring
Director Since: 2006 (Also served as a director Committees: Member of the Compensation Committee; Member
Age: 56
of the Company from 1995-2003) of the Audit Committee
Principal Occupation: President at Brigham Young University Idaho
Experience: Mr. Eyring was appointed President of Brigham Young University-Idaho in April 2017. Prior to that, he served in
various positions of administration at Brigham Young University-Idaho from 2006 to April 2017, including Academic Vice
President. Mr. Eyring was the Director of the Masters of Business Administration Program at Brigham Young University from
1998 to 2002. From 2002 to 2003, he was a special partner with Peterson Capital, a private equity investment firm before serving as
president of the Japan Tokyo North Mission of The Church of Jesus Christ of Latter day Saints from 2003 to 2006.
The Board recognizes the strong business and strategic consulting experience Mr. Eyring contributes to the Board’s direction of the
Company. In addition to the recent experience summarized above, Mr. Eyring was previously engaged with the Monitor Company,
an internationally recognized management consulting firm. Mr. Eyring is a sound strategic thinker who possesses the ability to
apply his academic thought and studies to the practical day-to-day challenges of the Company’s operations. The Board believes that
his thoughtful application of business and legal principles makes him a valuable contributor to the Board.
7
Meredith S. Madden
Committees: Member of the Compensation Committee; Member of the Safety &
Age: 46 Director Since: 2015
Compliance Committee
Principal Occupation: CEO of NORDAM Group, Inc. (“NORDAM”).
Experience: Mrs. Madden was appointed CEO of NORDAM in 2011. Headquartered in Tulsa, Oklahoma, NORDAM is one of the
world’s premier family-owned aerospace providers of composites and engineered solutions. Prior to becoming the CEO, she was
vice president of NORDAM’s Repair Group; vice president of Global Sales and Marketing; and vice president of NORDAM
International. Since joining NORDAM in 1999, Mrs. Madden has been based in Tulsa, and has spent considerable time at
NORDAM’s facilities in the United Kingdom and Singapore. Mrs. Madden has played a key role in transforming NORDAM into
the global aerospace entity it is today.
The Board nominated Mrs. Madden, in part, because of her expertise and strategic insights related to aircraft maintenance vendor
planning. Additionally, Mrs. Madden has extensive expertise working with international maintenance service providers.
Ronald J. Mittelstaedt
Committees: Member of the Compensation Committee; Member of the Nominating
Age: 56 Director Since: 2013 & Corporate Governance Committee; Member of the Safety & Compliance
Committee
Principal Occupation: Board Executive Chair of Waste Connections, Inc. (“Waste Connections”)
Experience: Mr. Mittelstaedt has served as the Executive Chair of Waste Connections, a company he founded in 1998, since July
of 2019, and he previously served as its Chair and CEO from 1997 to July of 2019. Under Mr. Mittelstaedt’s leadership, Waste
Connections has become the second largest company in the North American solid waste and recycling industry, employing more
than 17,000 people nationwide, and is traded on the New York Stock Exchange. Mr. Mittelstaedt also established the RDM
Positive Impact Foundation in 2004 to improve the lives of underprivileged and at-risk children. Prior to his career in waste
management, he spent three years in the air freight industry. Mr. Mittelstaedt holds a bachelor’s degree in Business Economics
from the University of California – Santa Barbara.
The Board nominated Mr. Mittelstaedt, in part, because of his expertise in making large capital equipment decisions, extensive
experience working with diverse employee and other groups in various geographic regions and a history of developing an
organizational culture of strong work ethics. Mr. Mittelstaedt also contributes to the Board his insight as an experienced CEO of a
publicly traded company, which the Board has found valuable in its deliberations.
Other Directorships: Mr. Mittelstaedt currently serves as the Board Chair for Waste Connections.
8
Andrew C. Roberts
Committees: Chair of the Safety & Compliance Committee; Member of the Audit
Age: 59 Director Since: 2015
Committee
Principal Occupation: Chair, STS Aviation Group, LLC
Experience: Since January 2019, Mr. Roberts has served as the Chair of STS Aviation Group LLC, a diversified aviation product
and services provider, and holds a board position at Continental Aerospace Technologies., a subsidiary and the principal operating
entity of AVIC International Holding (HK) Ltd. (0232.HK) since November 2015, a manufacturer of propulsion units for General
Aviation. Mr. Roberts also, has held a board position at Dart Aerospace since March 2019, a manufacturer of helicopter accessories
and other aviation products.
Mr. Roberts was the Executive Chair of Ryan Herco Flow Solutions, a national distributor of high purity fluid conveyance and
control products, from 2015 to 2018. Additionally, he served as CEO, President and Board Member at Align Aerospace, a global
distributor of products to the aerospace and aviation industries, from January 2014 to September 2015; and CEO & President of
Permaswage Holding SA, a designer and manufacturer of fluid fitting products, from 2009 to 2014. He has experience in the
management and operation of major and regional airlines, including Northwest Airlines from 1997 to 2008, where he served in
multiple executive positions. From 2000 until 2008 he served as Chair of Aeroxchange Ltd. Mr. Roberts holds a bachelor of
science degree (with Honors) in Engineering from the University of Birmingham and a post graduate diploma in Engineering from
Coventry University.
The Board nominated Mr. Roberts, in part, due to his extensive background in the aviation maintenance and overhaul industry, as
well as his commercial airline executive leadership. Mr. Roberts' education and professional training in the fields of engineering
and aerospace manufacturing have allowed him to make valuable contributions to the Board in assessing the Company's technical
operations.
Keith E. Smith
Committees: Chair of the Compensation Committee; Member of the Audit
Age: 59 Director Since: 2013
Committee
Principal Occupation: President and CEO of Boyd Gaming Corporation (“Boyd Gaming”)
Experience: Mr. Smith is President, CEO and a director of Boyd Gaming, one of the nation’s leading casino entertainment
companies, with 29 operations in ten states and more than 25,000 employees. Mr. Smith is an industry veteran with more than 33
years of gaming experience. He joined Boyd Gaming in 1990 and held various executive positions before being promoted to Chief
Operating Officer in 2001. In 2005, Mr. Smith was named President and elected as a director of Boyd Gaming and in 2008 he
assumed the role of CEO. The common stock of Boyd Gaming is traded on the New York Stock Exchange.
Mr. Smith holds a bachelor’s degree in Accounting from Arizona State University. He served as Chair of the Los Angeles Branch
of the Federal Reserve Bank of San Francisco from 2012 to 2014. He served as Chair of the American Gaming Association and the
Nevada Resort Association. He served as Vice Chair of the Las Vegas Convention and Visitors Authority from 2005 to 2011.
The Board recognizes Mr. Smith’s diverse experience in investing in, financing, and managing capital assets and real properties in
various geographic regions. Mr. Smith also has extensive experience in leading and directing a large group of diverse employees.
Mr. Smith’s accounting training and experience and his service as Chair of the Los Angeles Branch of the Federal Reserve Bank of
San Francisco also enable him to provide valuable service as the Chair of the Compensation Committee and to the Audit
Committee.
Other Directorships: Mr. Smith is a director of Boyd Gaming.
9
Steven F. Udvar-Hazy
Committees: Lead Independent Director; Chair of the Nominating & Corporate
Age: 74 Director Since: 1986
Governance Committee; Member of the Compensation Committee
Principal Occupation: Board Executive Chair of Air Lease Corporation
Experience: Mr. Udvar-Hazy has been engaged in aircraft leasing and financing for more than 47 years and has served as the
Board Executive Chair of Air Lease Corporation since July 2016, and as Chair and CEO of Air Lease Corporation from its launch
in February 2010. Prior to his current engagement with Air Lease Corporation, which leases and finances commercial jet aircraft
worldwide, Mr. Udvar-Hazy founded and served as the Board Chair and CEO of International Lease Finance Corporation, which
leases and finances commercial jet aircraft.
Mr. Udvar-Hazy is recognized as one of the leading experts in the aviation industry, and contributes to the Board the wisdom and
insight he has accumulated through a lengthy, distinguished career in aviation, aircraft leasing and finance. The Company has
benefitted greatly from his position in the aviation industry, including introductions to his vast industry contacts and networking
opportunities. In addition to his extensive industry experience, Mr. Udvar-Hazy is extremely knowledgeable of the Company’s
operations and opportunities, having served as a director of the Company for more than 35 years.
The Board believes that Mr. Udvar-Hazy’s even temperament and ability to encourage discussion, together with his experience as
CEO and director of other successful organizations in the airline industry, make him an effective Lead Independent Director.
Other Directorships: Mr. Udvar-Hazy is Board Executive Chair of Air Lease Corporation.
James L. Welch
Committees: Member of the Audit Committee; Member of the Nominating &
Age: 65 Director Since: 2007
Corporate Governance Committee; Member of the Safety & Compliance Committee
Principal Occupation: Retired CEO of YRC Worldwide Inc. (“YRC Worldwide”)
Experience: From July 2011 until his retirement in July 2018, Mr. Welch served as the CEO of YRC Worldwide, a provider of
global, national and regional ground transportation services. From 2008 to July 2011, Mr. Welch served as the President and CEO
of Dynamex, Inc., a provider of same-day transportation and logistics services in the United States and Canada. During 2007 and
2008, he served as Interim CEO of JHT Holdings, a holding company of multiple enterprises engaged in automotive transport and
management services. From 2000 to 2007, Mr. Welch served as the President and CEO of Yellow Transportation, an international
transportation services provider.
Mr. Welch has over 37 years of senior executive experience in the transportation sector, including extensive experience working
with organized labor groups and labor unions. His insights have been particularly valuable to the Board as the Company has
addressed labor and related issues arising in the operation of SkyWest Airlines. Mr. Welch also contributes to the Board valuable
practical experience in the operation of a large enterprise, as well as the perspective of a successful entrepreneur.
Other Directorships: Mr. Welch serves as a director for Schneider, Inc.
10
EXECUTIVE OFFICERS
In addition to Russell A. Childs, the CEO and President of the Company, whose biographical information is set
forth above, the following individuals served as executive officers of the Company or its operating subsidiaries during
2019.
Robert J. Simmons
Age: 57 Title: Chief Financial Officer
Mr. Simmons is the Chief Financial Officer of the Company and its operating subsidiary, SkyWest Airlines. He is
responsible for the areas of finance, accounting, treasury and investor relations for the Company and its subsidiaries.
From 2009 until his appointment as SkyWest’s Chief Financial Officer in March 2015, Mr. Simmons served as a Partner
with Bendigo Partners, LLC. (“Bendigo Partners”), a privately held firm focused on technology-based financial services
as private equity investors and operational consultants. In his role with Bendigo Partners, he was responsible for
portfolio management. He previously served as Chief Financial Officer as well as Corporate Treasurer for E*TRADE
Financial Corporation. He has more than 30 years of finance and treasury experience in various leadership positions at
companies including Oracle, Iomega, and Bank of America.
Mr. Simmons holds a master’s degree in business administration, with an emphasis in finance from the Kellogg Graduate
School of Management at Northwestern University, and graduated magna cum laude with a bachelor’s degree in
international business from Brigham Young University.
Wade J. Steel
Age: 44 Title: Chief Commercial Officer
Mr. Steel is the Chief Commercial Officer of the Company and its operating subsidiary, SkyWest Airlines. He is
responsible for the Company’s contractual relationships with American Airlines, Inc. (“American”), Delta Air Lines, Inc.
(“Delta”), United Airlines, Inc. (“United”) and Alaska Airlines, Inc. (“Alaska”), development of new business
opportunities with network airlines, fleet management and information technology. He also plays a vital role in the
strategic planning and development opportunities of the Company.
Mr. Steel was initially employed with the Company in March 2007 as Director of Financial Planning and Analysis and
was appointed to serve as Vice President – Controller for SkyWest Airlines in 2011. From May 2014 until his
appointment as Chief Commercial Officer of the Company in March 2015, he served as the Executive Vice President
and acting Chief Financial Officer of the Company, with responsibility for the areas of finance, treasury, investor
relations and information technology for the Company and its subsidiaries. Prior to joining the Company, Mr. Steel was
employed by a public accounting firm.
Mr. Steel holds bachelor’s and master’s degrees in accounting from Brigham Young University and is a member of the
American Institute of Certified Public Accountants.
Michael B. Thompson
Age: 44 Title: Chief Operating Officer
Mr. Thompson is the Chief Operating Officer of SkyWest Airlines. He is responsible for oversight of all aspects of
SkyWest Airlines’ operations, including safety, quality, flight operations, maintenance and customer service. He also
oversees SkyWest Airline’s operational relationships with American, Delta, United and Alaska.
11
Mr. Thompson was initially employed with the Company in April 2001 as Operations Analyst and was later named
Director of Market Planning. In 2007 he was named Vice President of Market Development of SkyWest Airlines, in
which position he served until May 2014, when he was appointed to serve as Chief Operating Officer of SkyWest
Airlines.
Mr. Thompson holds a bachelor’s degree in manufacturing engineering and a master’s degree in both mechanical
engineering and business administration from Brigham Young University.
Eric J. Woodward
Age: 48 Title: Chief Accounting Officer
Mr. Woodward is the Chief Accounting Officer of the Company and its operating subsidiary, SkyWest Airlines. He is
responsible for the oversight of the Company’s financial accounting practices, internal controls and reporting to the
Securities and Exchange Commission.
Mr. Woodward was employed in various other capacities with the Company from April 2004 until April 2007 and served
as the Company’s Vice President – Controller from April 2007 until May 2011, when he was appointed to serve as Chief
Accounting Officer of the Company. He is a certified public accountant and was employed by a public accounting firm
prior to joining the Company.
Mr. Woodward holds a bachelor’s and master’s degree in accounting from the University of Utah, and is a member of
the American Institute of Certified Public Accountants and Utah Association of Certified Public Accountants.
CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines and periodically reviews and ratifies those guidelines,
including most recently on February 4, 2020. The Corporate Governance Guidelines can be accessed at the Company’s
website, inc.skywest.com. The Corporate Governance Guidelines supplement the Company’s Bylaws and the charters of
the Board’s committees. Excerpts from the principal sections of the Company’s Corporate Governance Guidelines are
noted below.
Director Independence
At a minimum, the Board will have a majority of directors who meet the criteria for independence as required
by The Nasdaq Global Select Market.
Director Qualifications
Criteria for Membership
The Company’s Nominating and Corporate Governance Committee is responsible for annually
reviewing with the Board the desired skills and characteristics of directors, as well as the composition
of the Board as a whole.
Terms and Limitations
All directors currently stand for election each year. The Board does not believe it should establish a
limit on the number of times that a director may stand for election.
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Retirement
Directors are required to submit their resignation from the Board when their term expires upon
reaching the age of 75 years old. The Board will accept the resignation unless the Nominating and
Corporate Governance Committee recommends otherwise. Directors generally will not be nominated
for election following their 75th birthday.
Ownership of Company Stock
Directors are required to own shares of Common Stock having a value equal to at least five times the
cash component of their annual base compensation.
Director Responsibilities
General Responsibilities
The basic responsibility of directors is to exercise their business judgment to act in what they
reasonably believe to be in the best interests of the Company and its shareholders.
Oversight of Management
The Board is responsible for encouraging the Company’s management to effectively implement
policies and strategies developed by the Board, and to provide dynamic leadership of the Company.
Board Meetings and Materials
Frequency of Meetings
The Board has four regularly scheduled in person meetings per year. As determined necessary by the
Board and in order to address the Company’s needs, special meetings of the Board, including
telephonic meetings, are convened from time to time.
Meeting Responsibilities
Absent extraordinary circumstances, directors of the Company should attend all Board meetings,
meetings of the committee(s) on which they serve and shareholder meetings. The Board Chair is
responsible for establishing the agenda for each Board meeting. Each director is free to suggest the
inclusion of items on the agenda and to raise at any Board meeting subjects that are not on the agenda
for that meeting.
Executive Sessions of Independent Directors
The Company’s independent directors meet in executive session regularly, generally quarterly. The
independent directors may either choose one director annually to serve as the Lead Independent
Director and to preside at all executive sessions or establish a procedure by which a Lead Independent
Director will be selected. The independent directors of the Company have chosen Mr. Udvar-Hazy to
serve as the Lead Independent Director.
Director Compensation
The form and amount of director compensation is determined by the Board based on general principles
established on the Nominating and Corporate Governance Committee’s recommendation. These principles are in
accordance with the policies and principles set forth in the Nominating and Corporate Governance Committee’s charter
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and are intended to be consistent with rules established by The Nasdaq Global Select Market, including those relating to
director independence and to compensation of Audit Committee members.
CEO Evaluation and Management Succession
The Nominating and Corporate Governance Committee conducts an annual review to assess the performance of
the Company’s CEO. The Nominating and Corporate Governance Committee communicates the results of its review to
the other directors in a meeting that is not attended by the CEO. The directors of the Company, excluding the CEO,
review the Nominating and Corporate Governance Committee’s report to assess the CEO’s leadership in the long and
short-term, as well as the Company’s long-term succession plans.
Annual Evaluations
The Board conducts an annual evaluation to determine if the Board and its committees are functioning
effectively. The Nominating and Corporate Governance Committee solicits comments from all of the Company’s
directors and reports annually to the Board with an assessment of the Board’s performance. Each of the Board’s standing
committees conducts an annual evaluation to assess the performance of the applicable committee.
Review and Access to Guidelines
The Nominating and Corporate Governance Committee reviews the Company’s Corporate Governance
Guidelines at least annually, then, as it deems appropriate, recommends amendments to the Board.
Board Leadership Structure and Director Independence
Although the Board does not have a formal policy as to whether the roles of Board Chair and CEO should be
combined or separated, from 1991 until January 2016, Jerry C. Atkin served as both Board Chair and CEO of the
Company. In January 2016, the Board appointed Russell A. Childs to serve as the CEO of the Company, which resulted
in the separation of the roles of Board Chair and CEO. Currently, Mr. Atkin serves as Board Chair and Mr. Childs serves
as the CEO. The Board believes that such separation allows Mr. Childs to focus his time and energy on managing the
Company’s business on a day-to-day basis, while also leveraging Mr. Atkin’s background with the Company,
perspective and vast experience in the aviation industry as he devotes his time and attention to matters of Board
oversight. Accordingly, the Board has determined that the Company’s Board leadership structure is the most appropriate
at this time, given the specific characteristics and circumstances of the Company, and the unique skills and experience of
each of Mr. Atkin and Mr. Childs.
The Company is committed to independent Board oversight. Pursuant to the Company’s Corporate Governance
Guidelines, all of the Company’s directors (other than Messrs. Atkin and Childs) meet the standards of independence
applicable to the Company, and the Board has designated Steven F. Udvar-Hazy as Lead Independent Director. As Lead
Independent Director, Mr. Udvar-Hazy is empowered to prepare agendas for and conduct meetings of the non-
management directors, communicate with the Board Chair, disseminate information to the Board, and raise issues with
management on behalf of the independent directors when appropriate. The Board’s independent oversight function is
enhanced by the fact that the Audit, Compensation, Nominating and Corporate Governance and Safety and Compliance
Committees are comprised entirely of independent directors.
The Board believes no single leadership model is right for all companies at all times. The Board recognizes that,
depending on the circumstances, other leadership models may be appropriate. The independent directors and the
Nominating and Corporate Governance Committee regularly review the Company’s leadership structure and, depending
on the Company’s needs and the available resources, the Board may modify the Company’s existing leadership structure.
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Communications with the Board
Shareholders and other interested parties may communicate with one or more directors or the non-management
directors as a group in writing by regular mail. The following address may be used by those who wish to send such
communications by regular mail:
Board of Directors or Name of Individual Director(s)
c/o Chief Financial Officer
SkyWest, Inc.
444 South River Road
St. George, UT 84790
Code of Ethics
The Company has adopted a Code of Ethics for Directors and Senior Executive Officers (the “Code of Ethics”),
which is available on the Company’s website, inc.skywest.com. The Code of Ethics includes the following principles
related to the Company’s directors and executive officers:
• Act ethically with honesty and integrity;
• Promote full, fair, accurate, timely and understandable disclosure in reports and documents filed with the
Securities and Exchange Commission and other public communications;
• Comply in all material respects with laws, rules and regulations of governments and their agencies;
• Comply in all material respects with the listing standards of the stock exchange where the shares of
Common Stock are traded;
• Respect the confidentiality of information acquired in the course of performing work for the Company,
except when authorized or otherwise legally obligated to disclose the information;
• Do not use confidential information of the Company for personal advantage or for the benefit of
acquaintances, friends or relatives; and
• In order to avoid the appearance that any Company employee is trading on inside information, not engage
in speculative trading such as short sales or trade in puts, calls, or other options on the Company’s or its
affiliates’ stock, and not purchase or use, directly or indirectly, financial instruments that are designed to
hedge or offset any decrease in the market value of the Company’s securities.
A copy of the Code of Ethics is posted to the Company’s website at inc.skywest.com. Copies of the Code of
Ethics will be provided to any shareholder upon written request to Robert J. Simmons, Chief Financial Officer of the
Company, 444 South River Road, St. George, Utah 84790, Telephone: (435) 634-3200. The Company will promptly
disclose any waivers of, or amendments to, certain provisions of the Code of Ethics on its website.
Corporate Sustainability
We understand the importance of ensuring the satisfaction and security of our customers, employees, investors
and other stakeholders through an unwavering commitment to corporate integrity, no matter the environment. We also
believe good governance is a source of competitive advantage. Our Board of Directors, which is responsible for the
control and direction of the Company and governed by a Code of Ethics, represents and is accountable to our
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shareholders. Our corporate governance policies are designed both for compliance and to drive effective use of the
collective skills and experience of our directors, officers and employees for ethical, responsible, and superior
performance. In addition to our overall dedication to ethical and accountable business practices, our corporate
sustainability efforts include the areas of environmental and social sustainability. We take social and environmental
responsibility and sustainability seriously.
Environmental Sustainability
As the largest regional airline in the United States, we remain committed to lowering our environmental
footprint while continuing to offer the best service to our customers and the communities we serve. Through the use of
software and training, we heavily monitor and manage our fuel trends and fuel consumption which leads to better fuel
conservation and reductions in emissions. When possible, we try to mitigate the use of fuel, including by taxiing with the
use of a single engine, taking steps to improve the efficiency of aircraft routing and using ground power when the plane
is parked at the gate. We participate with our major airline partners in recycling programs, and we have implemented
recycling initiatives in our facilities to reduce the amount of paper, plastic and other recyclables going to landfills. We
have worked aggressively to reduce our reliance on paper manuals and have converted, or are in the process of
converting, our manuals and our maintenance logs into electronic form, further eliminating unnecessary waste while
increasing efficiencies.
Social Sustainability
We are a dedicated people-first organization, providing various avenues to enhance the quality of life for our
customers, employees and communities. We know that if we take good care of our employees, they will take good care
of our customers, which will result in value returned to our shareholders. We maintain an employee scholarship program,
which awards annual scholarships to employees and their family members to help them in their pursuits of higher
education. We are committed to creating a diverse and inclusive workforce, empowering professional growth and
development and investing in our employees’ health, emotional and financial wellness. Additionally, we are dedicated to
protecting our customers by providing employee training programs focused on, among other topics, safety, fuel
conservation, diversity, and procedures for identifying and reporting human trafficking. We continue to seek to increase
diversity in the workplace, including by participating in and sponsoring several recruitment and industry events. During
2019, such events included those organized by such organizations as Women in Aviation, Girls in Aviation, National
Gay Pilots Association, Organization of Black Aerospace Professionals, Military Organizations, among others.
Policies Against Hedging and Pledging of Company Stock
Pursuant to the Company’s Code of Ethics, in order to avoid the appearance that any Company employee is
trading on inside information, Company officers and directors are prohibited from engaging in speculative trading such
as short sales or trading in puts, calls, or other options on our stock or the stock of our affiliates, and are likewise
prohibited from purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any
decrease in the market value of our securities.
In addition, the Company’s insider trading policy expressly prohibits all directors, officers and employees from
purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any decrease in the
market value of the Company’s securities. Pledging the Company’s securities as collateral to secure loans is also
prohibited.
Risk Oversight
The Board and its committees are involved in overseeing risk associated with the Company and its operations.
The Board and the Audit Committee monitor the Company’s credit risk, liquidity risk, regulatory risk, operational risk
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and enterprise risk by regular reviews with management and internal and external auditors and other advisors. In its
periodic meetings with the internal auditors and the Company’s independent accountants, the Audit Committee discusses
the scope and plan for the internal audit and includes management in its review of accounting and financial controls,
assessment of business risks, legal and ethical compliance programs and related-party transactions. The Board and the
Nominating and Corporate Governance Committee monitor the Company’s governance and succession risk by regular
review with management and outside advisors. The Board and the Compensation Committee monitor CEO succession
and the Company’s compensation policies and related risks by regular reviews with management and the Compensation
Committee’s outside advisors. The Board and the Safety and Compliance Committee monitor management’s
administration of airline flight operations safety and compliance with safety regulations.
Whistleblower Hotline
The Company has established a whistleblower hotline that enables employees, customers, suppliers and
shareholders of the Company and its subsidiaries, as well as other interested parties, to submit confidential and
anonymous reports of suspected or actual violations of the Code of Ethics.
MEETINGS AND COMMITTEES OF THE BOARD
The Board
Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or
her duties and to attend all Board, committee and shareholders' meetings. The Board met four times during 2019. All
directors attended at least 75% of the aggregate number of meetings of the Board and of the committees on which he or
she served during the year ended December 31, 2019, as well as the Company's Annual Meeting of Shareholders held on
May 7, 2019.
Committees of the Board
The Board has four standing committees to facilitate and assist the Board in the execution of its responsibilities:
(1) Audit, (2) Compensation, (3) Nominating and Corporate Governance and (4) Safety and Compliance. The Board
may, from time to time, establish or maintain additional committees as the Board deems necessary or appropriate. All the
standing committees are comprised solely of non-employee, independent directors under the rules of the Securities and
Exchange Commission and The Nasdaq Global Select Market listing standards. Each committee acts under a written
charter setting forth its responsibilities and duties. Charters for each committee are available on the Company’s website,
inc.skywest.com, and are also available in print, free of charge, upon request. Requests for a printed copy of any
committee charter should be submitted to Eric J. Woodward, Chief Accounting Officer of the Company, at 444 South
River Road, St. George, Utah 84790.
The table below shows current membership for each of the standing Board committees:
Nominating & Corporate
Audit Compensation Governance Safety and Compliance
W. Steve Albrecht* Keith E. Smith* Steven F. Udvar-Hazy* Andrew C. Roberts*
Henry J. Eyring Henry J. Eyring W. Steve Albrecht Meredith S. Madden
Andrew C. Roberts Meredith S. Madden Ronald J. Mittelstaedt Ronald J. Mittelstaedt
Keith E. Smith Ronald J. Mittelstaedt James L. Welch James L. Welch
James L. Welch Steven F. Udvar-Hazy
* Committee Chair
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Audit Committee
The Audit Committee has five members and met eight times during the year ended December 31, 2019. The
Board has determined that Mr. W. Steve Albrecht, Chair of the Audit Committee, is an “audit committee financial
expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).
The Audit Committee’s responsibilities, which are discussed in further detail in its charter, include the
responsibility to:
• Establish and implement policies and procedures for review and approval of the appointment,
compensation and termination of the independent registered public accounting firm;
• Review and discuss with management and the independent registered public accounting firm the audited
financial statements of the Company and the Company’s financial disclosure practices;
• Pre-approve all audit and permissible non-audit fees;
• Provide oversight of the Company’s internal auditors;
• Hold meetings and executive sessions periodically with the Company’s independent registered public
accounting firm, the Company’s internal auditors and management to review and monitor the adequacy and
effectiveness of the Company’s financial reporting, internal controls and risk assessment and compliance
with Company policies;
• Review the Company’s consolidated financial statements and related disclosures;
• Review with management and the Company’s independent registered public accounting firm and approve
disclosure controls and procedures and accounting principles and practices; and
• Perform other functions or duties deemed appropriate by the Board.
Additional information regarding the Audit Committee’s processes and procedures is addressed below under the
heading “Report of the Audit Committee.”
Compensation Committee
The Compensation Committee has five members and met three times during the year ended December 31, 2019.
The Compensation Committee’s responsibilities, which are discussed in detail in its charter, include the responsibility to:
• In consultation with the Company’s senior management, establish the Company’s general compensation
philosophy and oversee the development and implementation of the Company’s compensation programs;
• Recommend to the Board the base salary, incentive compensation and any other compensation for the
Company’s CEO and review and approve the CEO’s recommendations for the compensation of all other
officers of the Company;
• Administer the Company’s incentive and stock-based compensation plans, and discharge the duties
imposed on the Compensation Committee by the terms of those plans;
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• Review and approve any severance or termination payments proposed to be made to any current or former
officer of the Company;
• Prepare and issue the report of the Compensation Committee required by the rules of the Securities and
Exchange Commission; and
• Perform other functions or duties deemed appropriate by the Board.
Additional information regarding the Compensation Committee’s processes and procedures for consideration of
executive compensation are addressed below under the Heading “Compensation Discussion and Analysis.” The report of
the Compensation Committee is set forth on page 35 of this Proxy Statement.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee has four members and met twice during the year ended
December 31, 2019. The Nominating and Corporate Governance Committee’s responsibilities, which are discussed in
detail in its charter, include the responsibility to:
• Develop qualifications and criteria for selecting and evaluating directors and nominees;
• Consider and propose director nominees;
• Make recommendations to the Board regarding Board compensation;
• Make recommendations to the Board regarding Board committee memberships;
• Develop and recommend to the Board corporate governance guidelines;
• Facilitate an annual assessment of the performance of the Board and each of its standing committees;
• Consider the independence of each director and nominee for director; and
• Perform other functions or duties deemed appropriate by the Board.
Safety and Compliance Committee
The Safety and Compliance Committee has four members and met once during the year ended December 31,
2019. The responsibilities of the Safety and Compliance Committee, which are discussed in detail in its charter, include
the responsibility to:
• Review and make recommendations to the Board addressing airline flight operations, safety and
compliance with safety regulations;
• Periodically review with the Company’s management, and such advisors as the Safety and Compliance
Committee deems appropriate, aspects of flight operations, safety and compliance with safety regulations;
and
• Monitor and provide input with respect to management’s efforts to create and maintain a safety culture
within the Company’s operations.
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Nomination Process
The policy of the Nominating and Corporate Governance Committee is to consider properly submitted
shareholder recommendations for candidates to serve as directors of the Company. In evaluating those recommendations,
the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and
capability on the Board and to address the membership criteria described below. Any shareholder wishing to recommend
a candidate for consideration by the Nominating and Corporate Governance Committee should submit a recommendation
in writing indicating the candidate’s qualifications and other relevant biographical information and provide confirmation
of the candidate’s consent to serve as a director. This information should be addressed to Jerry C. Atkin, Board Chair of
the Company, 444 South River Road, St. George, Utah 84790.
As contemplated by the Company’s Corporate Governance Guidelines, the Nominating and Corporate
Governance Committee reviews the appropriate skills and characteristics required of directors in the context of the
current composition of the Board at least annually. There is currently no set of specific minimum qualifications that must
be met by a nominee recommended by the Nominating and Corporate Governance Committee, as different factors may
assume greater or lesser significance at particular times and the needs of the Board may vary in light of its composition
and the Nominating and Corporate Governance Committee’s perceptions about future issues and needs. Among the
factors the Nominating and Corporate Governance Committee considers, which are outlined in the Corporate
Governance Guidelines, are independence, diversity, age, skills, integrity and moral responsibility, policy-making
experience, ability to work constructively with the Company’s management and directors, capacity to evaluate strategy
and reach sound conclusions, availability of time and awareness of the social, political and economic environment.
In addition, board diversity is considered broadly, not merely with regard to race, gender, or national origin, but
also with regard to general background, geographical location, and other factors. The Board believes that ethnic, gender
and cultural diversity among its members provides value and is important. In considering a potential new candidate, the
Board considers whether the candidate would increase the Board’s ethnic, gender or cultural diversity. The consideration
of diversity permeates all discussions of the Nominating and Corporate Governance Committee. Additionally on an
annual basis, as part of the Board’s self-evaluation process, the Board assesses whether the mix and diversity of board
members is appropriate.
The Nominating and Corporate Governance Committee utilizes a variety of methods for identifying and
evaluating director nominees. The Nominating and Corporate Governance Committee assesses the appropriate size of the
Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies
are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee considers various potential
candidates for director. Candidates may come to the attention of the Nominating and Corporate Governance Committee
through various means, including current directors, professional search firms, shareholder recommendations or other
referrals. Candidates are evaluated at meetings of the Nominating and Corporate Governance Committee, and may be
considered at any point during the year. All director-nominee recommendations which are properly submitted to the
Nominating and Corporate Governance Committee are aggregated and considered by the Nominating and Corporate
Governance Committee at a meeting prior to the issuance of the proxy statement for the next annual meeting of
shareholders. Any materials provided by a shareholder in connection with the recommendation of a director candidate
are forwarded to the Nominating and Corporate Governance Committee, which considers the recommended candidate in
light of the director qualifications discussed above. The Nominating and Corporate Governance Committee also reviews
materials provided by professional search firms, if applicable, or other parties in connection with a candidate who is not
proposed by a shareholder. In evaluating such recommendations, the Nominating and Corporate Governance Committee
seeks to achieve a balance of knowledge, experience and capability on the Board. The Nominating and Corporate
Governance Committee has, on occasion, engaged professional search firms to assist in identifying qualified candidates
for Board service. When such firms have been engaged, the Nominating and Corporate Governance Committee has
utilized their services principally for the purpose of identifying and screening potential candidates and conducting
background research; however, the members of the Nominating and Corporate Governance Committee, as well as other
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directors of the Company, have conducted interviews with prospective candidates and have performed other functions in
completing the nomination process.
Compensation Committee Interlocks and Insider Participation
Keith E. Smith, Henry J. Eyring, Meredith S. Madden, Ronald J. Mittelstaedt and Steven F. Udvar-Hazy served
as members of the Compensation Committee during the year ended December 31, 2019. None of the individuals who
served on the Compensation Committee during the year ended December 31, 2019 was an officer or employee of the
Company in 2019 or any time prior thereto. None of the members of the Compensation Committee during the year ended
December 31, 2019 had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K
promulgated under the Exchange Act. None of the executive officers of the Company served as a member of the
Compensation Committee or of any similar committee of any other company whose executive officer(s) served as a
director of the Company.
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COMPENSATION DISCUSSION AND ANALYSIS
The following compensation discussion and analysis provides information regarding the Company’s executive
compensation objectives, principles, practices and decisions as they relate to the following named executive officers of
the Company (the “Named Executives”) for 2019:
• Russell A. Childs, CEO and President of the Company and its operating subsidiary, SkyWest Airlines (the
"Chief Executive");
• Robert J. Simmons, Chief Financial Officer of the Company and its operating subsidiary, SkyWest
Airlines;
• Wade J. Steel, Chief Commercial Officer of the Company and its operating subsidiary, SkyWest Airlines;
• Michael B. Thompson, Chief Operating Officer of SkyWest Airlines;
• Eric J. Woodward, Chief Accounting Officer of the Company and its operating subsidiary, SkyWest
Airlines; and
• Terry M. Vais, former Chief Operating Officer of ExpressJet Airlines, Inc. (“ExpressJet”)
Mr. Vais separated from the Company on February 12, 2019. Mr. Vais was not granted any equity grants or
cash incentives for his 2019 services. As a result, he is only included in the compensation discussion and analysis
sections below to the extent applicable.
This compensation discussion and analysis provides narrative perspective to the tables and disclosure in the
tables following this section.
Compensation Objectives and Principles
The overall objective of the Company’s executive compensation programs is to create long-term value for the
Company’s shareholders by attracting and retaining talented executives that effectively manage the Company in a
manner that is consistent with the long-term interest of shareholders.
Accordingly, the executive compensation program incorporates the following principles:
• The overall compensation package should encourage long-term focus and shareholder value creation;
• A significant amount of total compensation should be incentive based, and should correlate rewards with
the Company’s financial performance, as well as the achievement of operational objectives;
• Compensation should be competitive with other airlines in order to attract and retain talented executives;
• Compensation should be based upon individual responsibility, leadership ability and experience; and
• Compensation should not encourage the taking of undue risk that could cause material harm to the
Company.
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All of the Named Executives’ total annual target compensation for 2019 was set below the median for total
annual target compensation in our peer group, as further described below.
Current Year Accomplishments
SkyWest made great strides operationally and structurally in 2019, positioning itself for changes in the industry
and future profitability by adding new aircraft with improved economics under Mr. Childs’ leadership.
The Company’s income before income taxes under generally accepted accounting principles in the United
States (“GAAP”) improved to $446 million in 2019, from $366 million in 2018. GAAP operating income improved to
$512 million in 2019, from $474 million in 2018. These improvements reflected above-median performance against our
compensation peer group. The improvements in 2019 were driven, in part, by the following accomplishments:
• The continued improvement in aircraft fleet mix can be summarized as follows:
o Took delivery of ten new Embraer dual-class regional jet ("E175") aircraft and seven new CRJ900
aircraft under flying contracts that we believe will improve our profitability; and
o Sold ExpressJet in January 2019, which removed 100 ERJ145 aircraft from service.
• The Company secured a multi-year flying contract extension on 38 CRJ700 aircraft with American.
• The Company secured a flying agreement with Delta for six used E175 aircraft that were operated a
regional airline transitioning out of Delta Connection.
• The Company secured an agreement to lease 29 CRJ700 aircraft to a third-party for a ten-year term.
• The Company purchased 56 CRJ aircraft through early lease buyouts reducing the aircraft ownership cost
and eliminating lease return cost obligations; and
• The Company’s net income was $340 million, or $6.62 per diluted share for the 2019 year, compared to net
income of $280 million, or $5.30 per diluted share for the 2018 year. The Company’s adjusted net income
for the 2019 year was $321 million, or $6.25 per diluted share, excluding the gain on the sale of ExpressJet
and other special items recorded in 2019 (see Appendix A to the Proxy Statement for a reconciliation of
Non-GAAP financial measures).
These accomplishments not only improved the Company’s performance in 2019, but the Board believes the
fleet and contract improvements position the Company well for the future.
Role of the Compensation Committee. The Compensation Committee has responsibility for establishing and
monitoring the executive compensation programs and for making decisions regarding executive compensation. The
Chief Executive regularly attends the Compensation Committee meetings, and the Compensation Committee also meets
regularly in executive sessions. The Chief Executive is not present for deliberations by the Compensation Committee
regarding his compensation. The Compensation Committee recommends the Chief Executive’s compensation to the
Board, which then reviews and approves the Committee’s recommendation, unless the Committee is required to approve
such compensation under applicable law. The Compensation Committee also considers the recommendations of the
Chief Executive with respect to compensation of the other Named Executives, and after reviewing such
recommendations, determines their compensation. The Compensation Committee also monitors, administers and
approves awards under the various incentive compensation plans for all levels within the Company, including awards
under the Company’s annual cash incentive plan and 2019 Long-Term Incentive Plan (the “2019 Plan”). As permitted by
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the 2019 Plan, the Compensation Committee has delegated its authority to the Chief Executive to approve interim awards
under the 2019 Plan to non-executives on a limited basis between meetings of the Compensation Committee.
Role of Consultants. During 2018 and 2019, the Company and the Compensation Committee received advice
from Frederic W. Cook & Co., Inc. (“F.W. Cook”) with respect to executive compensation practices within the airline
and related transportation and logistics industries using data from the peer group listed below. The Company and the
Compensation Committee retained F.W. Cook to advise on the amounts and forms of compensation awarded to Named
Executives in 2018 and 2019. After conducting an evaluation using the factors established by the Securities and
Exchange Commission and The Nasdaq Global Select Market, the Compensation Committee determined that F.W. Cook
is independent and that there is no conflict of interest resulting from the engagement of F.W. Cook during 2019. The
Compensation Committee has sole authority to hire and fire external compensation consultants.
Industry Compensation Data. The Compensation Committee evaluates data regarding the executive
compensation programs of other air carriers, as well as other transportation and logistics companies, in order to
determine the competitiveness of the Company’s executive compensation programs. The Compensation Committee
performed such a review in November 2018 and again in November 2019, which included a review of the executive
compensation levels and practices at peer companies where SkyWest approximates the median in enterprise value and
market capitalization. The peer companies used in the November 2018 review for purposes of setting 2019 executive
compensation were: Air Canada Inc., Alaska Air Group, Inc., Allegiant Travel Company, Atlas Air Worldwide
Holdings, Inc., Genesee & Wyoming Inc., Hawaiian Holdings, Inc., Hub Group, Inc., J.B. Hunt Transport Services, Inc.,
JetBlue Airways Corporation, Kansas City Southern, Old Dominion Freight Line, Inc., Spirit Airlines, Inc., Werner
Enterprises, Inc., WestJet Airlines Ltd., XPO Logistics, Inc. and YRC Worldwide Inc. The peer group was modified in
November 2019 to remove XPO Logistics, Inc. because it was too large based on the metrics for selection, and it was
replaced with Mesa Air Group, Inc., which the Compensation Committee determined was a relevant contract air carrier.
The Compensation Committee had the 2018 peer group data available when 2019 Named Executive
compensation decisions were made at the start of the year and it had the 2019 compensation peer group data available
when it approved cash incentive payouts for 2019.
Compensation Determination. The Compensation Committee relies on its judgment in making compensation
decisions in addition to reviewing relevant information and results. When setting total compensation for each of the
Named Executives, the Compensation Committee reviews tally sheets which show the Named Executive’s current
compensation, including base pay, annual cash incentive objectives, long-term, equity-based compensation objectives,
and deferred compensation retirement funding. The executive compensation procedures and the Compensation
Committee assessment process take into account these tally sheets as well as the industry compensation data described
above, company performance, the results of the most recent say-on-pay vote, performance expected in the current and
upcoming years, and such other factors as the Compensation Committee determines are appropriate. The Compensation
Committee has the sole discretion to award compensation and make adjustments to awards based on its review of
relevant information and other unusual or non-recurring items.
The Company does not target specific pay levels and uses the peer company market data for context. The
Company’s directors rely upon their judgment in making compensation decisions, after reviewing the factors described
above. Competitive compensation paid by other companies is one of the many factors that the Company considers in
assessing the reasonableness of compensation and the Company does not attempt to maintain a certain target percentile
within a peer group. Nevertheless, the Committee set target total direct compensation below the median of similar
positions in the peer group.
The Company strives to achieve an appropriate mix between long-term equity incentive awards and cash
payments in order to meet its objectives. The Company’s mix of compensation elements is designed to reward recent
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results, align compensation with shareholder interests and fairly compensate executives through a combination of cash
and equity incentive awards.
Compensation Committee Consideration of Shareholder Advisory Vote. At the Company’s Annual Meeting of
Shareholders held in May 2019, the Company submitted the compensation of its named executive officers to the
Company’s shareholders in a non-binding vote. The Company’s executive compensation program received the support
of more than 97% of votes cast. The Compensation Committee considered the results of the 2019 vote and views the
outcome as evidence of positive shareholder support of its executive compensation decisions and policies.
The Compensation Committee continued to refine the Company’s executive compensation program for 2019 in
an effort to better align the compensation packages of the Named Executives with the executive compensation programs
of other regional carriers and major airlines. The Compensation Committee will continue to review the peer group data
and future shareholder voting results, including the voting results with respect to “Proposal 2—Advisory Vote on Named
Executive Compensation” described in this Proxy Statement, and determine whether to make any changes to the
Company’s executive compensation program in light of such data and voting results.
Elements of Compensation
The Company’s executive compensation objectives and principles are implemented through the use of the
following principal elements of compensation, each discussed more fully below:
• Salary
• Annual Cash Incentive
• Long-Term Incentive Awards
• Retirement and Other Benefits
The compensation components for each Named Executive for 2019 are more fully described in the following
paragraphs.
Salary. Salary is provided with the objective of paying for the underlying role and responsibility associated
with the Named Executive’s position, which the Compensation Committee believes allows the Company to attract and
retain qualified executives. The Named Executives’ salaries are set at levels that the Compensation Committee believes
are generally competitive with the compensation paid to officers in similar positions at other airlines. Salary adjustments
are considered annually and influenced by growth of the Company’s operations, individual performance, changes in
responsibility, changes in cost of living, and other factors. Mr. Childs was provided a $40,000 increase to his base salary
for 2019 over his 2018 base salary. Mr. Simmons was provided a $10,000 increase to his base salary for 2019 over his
respective 2018 base salary. Mr. Steel was provided a $20,000 increase to his base salary for 2019 over his respective
2018 base salary. Mr. Thompson was provided a $5,000 increase to his base salary for 2019 over his respective 2018
base salary. Mr. Woodward was provided a $6,000 increase to his base salary for 2019 over his respective 2018 base
salary. The salaries of the Named Executives are set forth in the Summary Compensation Table immediately following
this section. The salaries of all Named Executives in 2019 were below the median salary level of similar positions in our
peer group.
Annual Cash Incentive. In an effort to encourage achievement of the Company’s objectives, an annual
performance-based cash incentive plan is maintained for the Named Executives. The combination of salary and annual
cash incentives is intended to result in a cash compensation package for each Named Executive that, when performance
objectives are met, falls within competitive market standards as determined by the Compensation Committee based on its
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review of the peer group company data, as well as its understanding of other regional and major air carrier executive
compensation programs. The review of market data in November 2019 showed that the 2019 total cash opportunity of
the Named Executives, consisting of salary plus target cash incentive, and was below the median for all Named
Executives when compared to the peer group competitive market data.
The purpose of the annual cash incentive program is to reward the Named Executives with an annual cash
incentive in an amount that correlates (i) in part, to one or more financial objectives achieved for the year; and (ii) in
part, to the achievement of one or more specific operational objectives during the year. The 2019 annual target incentive
opportunity was 110% of salary for Mr. Childs, 80% of salary for Messrs. Simmons, Steel and Thompson and 60% of
salary for Mr. Woodward, and their potential annual incentive was allocated by the Compensation Committee for the
Named Executives between the applicable financial and operational objectives. The differing percentages for the Named
Executives are due to differing entity level responsibilities.
2019 Corporate Performance Objectives. For 2019 annual incentive determination purposes, the
Compensation Committee determined that pre-tax earnings would be the financial objective and that controllable
completion and controllable on time departures would be the operational objectives. These are viewed as value drivers
for shareholders that are also in the control of the executive team through their financial and operating decisions and
leadership. In the case of Messrs. Childs, Simmons, Steel and Woodward, the applicable pre-tax earnings objective and
controllable completion objective were based on the pre-tax earnings and controllable completion of the entire Company.
This is because they are corporate level executives with Company-wide responsibility and accountability.
Mr. Thompson’s pre-tax earnings objective, controllable completion objective and controllable on time departure
objective were set solely based on the SkyWest Airlines operating segment, since this is his area of responsibility and
accountability.
• 2019 Financial Objective. In setting the 2019 pre-tax earnings objective, the Compensation Committee
considered both the planned 2019 budget, as well as the level of pre-tax earnings that would reflect strong
performance and generate shareholder value. The pre-tax earnings objective was set to encourage continued
focus on profitability and to facilitate the exchange of best practices between the Company’s operating
subsidiaries. The earnings goal was set above the median of trailing four quarter peer group earnings
available at the time.
• 2019 Operational Objective. A portion of the Named Executives’ annual cash incentives is based on
achievement of operating objectives established at the start of the year. The Compensation Committee
believes the use of operating objectives allows for consideration of operating execution and achievements
that may not be reflected by corporate financial performance. For 2019, the Compensation Committee
determined that the operational objectives would be tied to both controllable completion and controllable
on time departures. Controllable completion is the percentage of completed scheduled flights over which
SkyWest Airlines had control, excluding cancelled flights due to uncontrollable factors such as weather.
Controllable on time departures is the percentage of flights departing the gate at or before scheduled
departure time over which SkyWest Airlines had control, excluding delayed flights due to uncontrollable
factors such as weather.
The Compensation Committee established threshold, target and maximum objectives for each of the financial
and operational objectives. At threshold performance achievement, the Named Executives were able to earn 50% of their
target annual incentive, while the maximum performance allowed by the Named Executives to earn 200% of their target
annual incentive.
At year-end, the Compensation Committee reviewed the actual pre-tax earnings and operating performance for
the year and determined the extent to which the applicable objectives were met. The actual amount of the cash incentive
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payment for each Named Executive is determined by the Compensation Committee based on the Company’s and/or
SkyWest Airlines’ achievement of the foregoing objectives and the actual cash incentives paid for 2019 were based on
the pre-established 2019 cash incentive formula, without application of discretion.
The table below includes the “threshold,” “target” and “maximum” objectives assigned by the Compensation
Committee for the corporate performance measures for 2019 and the 2019 performance relative to those objectives for
the Named Executives (dollars in millions).
2019 Annual Cash Incentive Objectives Interpolated Weighted
Threshold Target Maximum Achieved Payout Weight Payout
SkyWest, Inc.
Pre-tax Earnings ($ millions) . . . . . . . . . . . . . . . $ 362 $ 402 $ 442 $ 405.6 109.0% 70.0 % 76.3%
Operating Objective - Controllable completion . . 99.6 % 99.8 % 99.9 % 99.87% 170.0% 20.0 % 34.0%
Operating Objective – Controllable departures . . 75.0 % 80.0 % 85.0 % 79.85% 97.0% 10.0 % 9.7%
Total Annual Cash Incentive Results
120.0%
(% of Target) . . . . . . . . . . . . . . . . . . . . . . . . .
SkyWest Airlines
Pre-tax Earnings ($ millions) . . . . . . . . . . . . . . . $ 270 $ 300 $ 330 $ 271.0 51.8% 70.0 % 36.3%
Operating Objective - Controllable completion . . 99.6 % 99.8 % 99.9 % 99.87% 170.0% 20.0 % 34.0%
Operating Objective - Controllable departures . . 75.0 % 80.0 % 85.0 % 79.85% 97.0% 10.0 % 9.7%
Total Annual Cash Incentive Results
80.0%
(% of Target) . . . . . . . . . . . . . . . . . . . . . . . . .
The Company’s achieved pre-tax earnings of $405.6 million for purposes of the 2019 annual incentive plan
payouts included certain adjustments to GAAP pre-tax earnings, including items relating to the sale of ExpressJet, write-
off of aircraft manufacturer parts credit, and other income items not included in the target setting process. The
Compensation Committee believes these adjustments to GAAP pre-tax earnings lead to continued focus on long-term
profitability and incentivize Named Executives to make beneficial long-term business decisions and will enhance the
Company’s long-term financial performance and ability to respond to its major airline partners’ future needs.
If the Company’s pre-tax earnings or operating objective achieved results were between two achievement
levels, “threshold,” “target” and “maximum”, the earned achievement was determined by linear interpolation between
the applicable achievement levels.
The corresponding annual cash incentive payments earned for each Named Executive based on performance
during the year ended December 31, 2019, are set forth below.
Total
Target Target Annual Total
Annual Annual Cash Annual
Cash Cash Incentive Cash
Incentive Incentive Results Incentive
(% of Salary) ($) (% of Target) Results ($)
Russell A. Childs . . . . . . . 110.0 % $ 550,000 120.0 % $ 660,000
Robert J. Simmons . . . . . 80.0 % $ 276,000 120.0 % $ 331,200
Wade J. Steel . . . . . . . . . . 80.0 % $ 268,000 120.0 % $ 321,600
Michael B. Thompson. . . 80.0 % $ 200,000 80.0 % $ 160,000
Eric J. Woodward . . . . . . 60.0 % $ 126,600 120.0 % $ 151,920
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Amount of 2019 Performance-Based Annual Cash Incentive. The total annual performance-based cash
incentive amounts earned by the Named Executives for 2019 are included in the amounts shown in the Summary
Compensation Table below under the caption heading “Non-Equity Incentive Plan Compensation.”
Long-Term Incentive Awards. The Company grants discretionary long-term incentive awards, in the form
of restricted stock units and performance shares to the Named Executives annually.
Long-term incentive awards are made to encourage the Named Executives to continue their engagement with
the Company throughout the vesting periods of the awards and to align management and shareholder interests. In making
awards to the Named Executives, the grant size and the appropriate mix of equity-based awards are considered. The
Compensation Committee generally grants long-term incentive awards at its first meeting of each year. Long-term
incentive awards generally vest only if the Named Executive remains employed by the Company for three years from the
date of grant. The three-year cliff-vesting schedule for time-based restricted stock unit awards is to assist with retaining
Named Executives and to encourage the Named Executives to focus on the Company’s long-term performance. Equity
incentive awards granted during 2019, accelerate vesting under certain circumstances, as described in the section
Potential Payments upon Termination or Change in Control.
Amount and allocation of grant—For 2019, the total annual targeted long-term incentive grant value was
$2,200,000 for Mr. Childs, $775,000 for Mr. Simmons, $775,000 for Mr. Steel, $650,000 for Mr. Thompson and
$248,000 for Mr. Woodward. The Compensation Committee established these annual targeted amounts to provide a
competitive target total compensation when combined with the salary and target bonus that was above the 25th percentile
but below the median. The equity award is to ensure that a material portion of each Named Executive’s compensation
was based on continuing long-term service and correlated to the creation of shareholder value. Each Named Executive’s
2019 long-term incentive award was allocated among the two types of long-term incentive awards as follows: restricted
stock units and performance shares. The target value of 2019 equity compensation was generally below the median of
the 2019 peer data reviewed by the Compensation Committee for all Named Executive Officer positions.
Restricted stock unit and performance share grants in 2019 were made pursuant to the Company’s 2010 Plan, as
shown in greater detail below and in the table labeled “Grants of Plan Based Awards.”
The following table summarizes the number and nature of long-term incentive awards granted to the Named
Executives by the Company in 2019.
Time Vesting Awards Performance Vesting Awards
Number of Restricted Stock Units “Target” Performance Shares (1)
Russell A. Childs . . . . . . . . . . . 18,163 27,245
Robert J. Simmons . . . . . . . . . 6,398 9,598
Wade J. Steel . . . . . . . . . . . . . . 6,398 9,598
Michael B. Thompson. . . . . . . 5,366 8,050
Eric J. Woodward . . . . . . . . . . 2,047 3,071
(1) Number of performance shares if 100% of target is achieved, although the threshold earnout is 50% of target and the
maximum earnout is 200% of target.
Restricted Stock Units—The Company granted restricted stock units to the Named Executives in 2019 under the
2010 Long-Term Incentive Plan (the “2010 Plan”). Restricted stock units comprised 40% of each Named Executive's
2019 long-term incentive compensation. The restricted stock units awarded to a Named Executive entitle the Named
Executive to receive a designated number of shares of Common Stock upon completion of a three-year vesting period,
measured from the date of grant. Until the vesting date, the shares underlying the restricted stock units are not issued and
outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on the shares underlying his
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restricted stock units unless and until those restricted stock units vest. The purpose of the restricted stock unit component
is to support continued employment through volatile economic and stock market conditions, to manage dilution
overhang, and to align officers’ interests with maintaining shareholder value already created as well as future value
creation. The Compensation Committee believes this approach mitigates the incentive for Named Executives to take
unnecessary risks and helps retain the Named Executives’ expertise through continued employment.
Performance Shares.
2019-2021 Performance Share Awards. The remaining component of each Named Executive’s 2019 annual
long-term incentive compensation was performance shares payable in Common Stock under the 2010 Plan. Performance
share value comprised 60% of each Named Executive's 2019 long-term incentive compensation (target performance
share value is stock price at grant multiplied by the shares earned if the objectives are achieved). The purpose of the
performance share awards is to reward achievement of the three-year financial plan, which the Company believes will
also support shareholder value achievement. Under each Named Executive’s performance shares award, a number of
performance shares will vest upon completion of a three-year performance period from the date of the grant (subject to
the Named Executive’s continued employment through the last day of the performance period), based on the
achievement of certain corporate performance objectives.
For purposes of the performance share awards granted in 2019, which will be eligible to vest based on corporate
performance during the three-year performance period ending December 31, 2021 (the “2019-2021 PSU Awards”), the
Compensation Committee set three-year performance share objectives, based on cumulative three-year adjusted earnings
before interest, taxes, depreciation and amortization (“EBITDA”) per share, three-year average return on capital
objectives and three-year average controllable completion. Under each Named Executive’s performance share award, the
performance shares are eligible to vest (and be settled in shares of Common Stock) upon completion of the three-year
performance period (subject to the Named Executive’s continued employment through the last day of the performance
period), based on the level of EBITDA per share, adjusted return on invested capital and controllable completion actually
attained in aggregate over the 2019 to 2021 calendar years. Until the vesting date, the shares underlying the performance
shares are not issued and outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on
the shares underlying his performance shares unless and until those performance shares vest. For purposes of the 2019-
2021 PSU Awards, return on invested capital for any calendar year is defined as the Company's adjusted operating
income for such year divided by the Company's average invested capital for such calendar year.
The Compensation Committee’s philosophy for setting performance share targets is to set target awards that
reflect the three-year budget (the budget expectation is for a growth rate that is above the median), and maximum targets
that will be difficult for the Named Executives to achieve on a consistent basis. For the 2019-2021 PSU Awards, the
Compensation Committee established threshold, target and maximum performance levels for each of the three corporate
performance objectives, with the actual number of performance shares that will vest to be adjusted in proportion to the
extent to which the combined actual results varied from the target levels of performance. The performance shares are
allocated 40% to the cumulative three-year EBITDA per share objective, 40% to the three-year average return on
invested capital objective and 20% to the three-year average controllable completion in determining the actual awarded
performance shares payable in Common Stock. Specifically, a number of performance shares attributable to each
objective according to the weightings assigned by the Compensation Committee will be earned ranging from 50% (for
threshold performance) to 100% (for target performance) to 200% (for maximum performance), with performance in
between such levels determined by linear interpolation. If performance is below the threshold level for one or more of
the objectives, no performance shares will be earned with respect to such objective(s).
The corporate objectives for the 2019-2021 PSU Awards for each Named Executive were based on the
Company-wide performance, with no individual component or subsidiary-level objectives, in order to encourage
teamwork and a collective focus on the creation of long-term value for the Company’s shareholders. In determining the
degree to which the corporate objectives have been attained, the Company’s performance will be adjusted for unusual or
non-recurring items.
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Actual results for 2019-2021 PSU Awards are measured over the three-year performance period. Therefore, the
degree to which performance shares granted in 2019 ultimately earned will not be determined until the conclusion of the
2021 calendar year.
2017-2019 Performance Shares.
For purposes of the performance share awards granted in 2017, which were eligible to vest based on corporate
performance during the three-year performance period ending December 31, 2019 (the “2017-2019 PSU Awards”), the
Compensation Committee set three-year performance share objectives, based on cumulative three-year adjusted pre-tax
earnings and three-year average return on capital objectives. Under each Named Executive’s performance share award,
the performance shares are eligible to vest (and be settled in shares of Common Stock) upon completion of a three-year
performance period (subject to the Named Executive’s continued employment through the last day of the performance
period), based on the level of adjusted pre-tax earnings and adjusted return on invested capital actually attained in
aggregate over the 2017 to 2019 calendar years.
For the 2017-2019 PSU Awards, the Compensation Committee established threshold, target and maximum
performance levels for each of the two corporate performance objectives, with the actual number of performance shares
that will vest to be adjusted in proportion to the extent to which the combined actual results varied from the target levels
of performance. The performance shares are allocated 60% to the cumulative three-year adjusted pre-tax earnings
objective and 40% to the three-year average return on invested capital objective in determining the actual awarded
performance shares payable in Common Stock. Specifically, a number of performance shares attributable to each
objective according to the weightings assigned by the Compensation Committee were earned ranging from 50% (for
threshold performance) to 100% (for target performance) to 200% (for maximum performance), with performance in
between such levels determined by linear interpolation. If performance is below the threshold level for one or more of
the objectives, no performance shares were earned with respect to such objective(s).
In February 2020, the Compensation Committee determined the Company’s achievement relative to the
objectives previously established for the 2017-2019 PSU Awards as follows (see Appendix A to this proxy statement on
page 58 for a reconciliation of certain 2019, 2018 and 2017 non-GAAP financial measures used to calculate the
achievement levels described below for the most directly comparable financial measures prepared in accordance with
GAAP):
Achieved
Threshold Target Maximum Performance
Adjusted Pre-tax Income ($ millions) (1) $ 804 $ 892 $ 981 $ 1,076
Average Return on Invested Capital (2) 13.2 % 13.7 % 14.1 % 15.1 %
(1) Adjusted pre-tax income for the three-year period ending December 31, 2019 was adjusted in 2019 for special items
primarily associated with the sale of ExpressJet and the write-off of non-cash aircraft manufacturer part credits to
settle future aircraft lease return obligations.
(2) Represents the average return on invested capital for 2017, 2018 and 2019 using adjusted net income in 2019 for
special items related to the sale of ExpressJet and the write-off of aircraft manufacturer part credits and for the Tax
Cuts and Jobs Act benefit in 2017. For purposes of the 2017-2019 PSU Awards, return on invested capital for any
calendar year was defined as the Company's adjusted operating income for such year divided by the Company's
average invested capital for such calendar year.
As a result of the foregoing, in February 2020, the Named Executives vested in the maximum number of
performance shares relative to the 2017-2019 PSU Awards, which was 200% of their target awards: Mr. Childs, 43,564
30
shares; Mr. Simmons, 21,782 shares; Mr. Steel, 20,106 shares; Mr. Thompson, 15,080 shares; and Mr. Woodward, 7,708
shares.
Long-Term Incentive Awards for 2020. The Compensation Committee did not make any significant changes for
the 2020 long-term incentive awards from that of the 2019 long-term incentive awards.
No Employment and Severance Agreements
The Named Executives do not have employment, severance or change-in-control agreements, although the
vesting of long-term equity incentive awards may accelerate under certain circumstances, as described below under
“Elements of Compensation – Long-Term Incentive Awards.” The Named Executives serve at the will of the Board,
which enables the Board to terminate the employment of any Named Executive with discretion as to the terms of any
severance. This is consistent with the Company’s performance-based employment and compensation philosophy.
Acceleration of Long-Term Incentive Awards. With respect to long-term incentive awards granted to the
Named Executives commencing in 2017, such awards will vest on an accelerated basis under certain circumstances.
Specifically, restricted stock unit awards granted to the Named Executives will vest on an accelerated basis
(i) in the event of the Named Executive’s involuntary termination without cause or resignation for good reason, or (ii) in
the event of the Named Executive’s death.
Performance share awards granted to the Named Executives will vest on an accelerated basis (i) in the event of
the Named Executive’s death prior to a change in control, as to the “target” number of performance shares subject to the
award on the date of death and as to any incremental performance shares above “target” based on the Company’s actual
performance relative to the corporate performance objectives under such award at the end of the three-year performance
period (or, if earlier, a change in control of the Company), (ii) in the event of the Named Executive’s death following a
change in control, any “vesting eligible shares” (as described below) will vest upon the date of death, (iii) in the event of
the Named Executive’s involuntary termination without cause or resignation for good reason, in each case prior to a
change in control, the Named Executive will remain eligible to vest in such number of performance shares as ultimately
vest based on the Company’s actual performance relative to the corporate performance objectives under such award at
the end of the three-year performance period (or, if earlier, a change in control of the Company), which vesting will be
prorated for the portion of the performance period that has elapsed prior to the date of termination, or (iv) in the event of
the Named Executive’s involuntary termination without cause or resignation for good reason, in each case following a
change in control, any vesting eligible shares will vest upon the date of such termination. For purposes of the
performance shares, in the event of a change in control of the Company, the performance shares will be converted into a
number of “vesting eligible shares” that will vest at the end of the three-year performance period based on the greater of
(i) the “target” number of performance shares subject to the award, or (ii) the number of performance shares that would
vest if performance had been measured against the corporate performance objectives as of the date of the change in
control.
Retirement and Other Benefits.
The Company and SkyWest Airlines sponsor a 401(k) retirement plan for their eligible employees, including
the Named Executives other than Mr. Vais. Prior to the sale of ExpressJet, ExpressJet also maintained a substantially
equivalent 401(k) plan for its eligible employees, including Mr. Vais. Both plans are broad based, tax-qualified
retirement plans under which eligible employees, including the Named Executives, may make annual pre-tax salary
reduction contributions subject to the various limits imposed under the Internal Revenue Code of 1986, as amended (the
“Code”). The sponsoring employers make matching contributions under the plans on behalf of eligible participants;
however, the right of Named Executives and other officers to such matching contributions is limited. The Compensation
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Committee believes that maintaining the 401(k) retirement plans and providing a means to save for retirement is an
essential part of a competitive compensation package necessary to attract and retain talented executives.
The Company also maintains the SkyWest, Inc. 2002 Deferred Compensation Plan, a non-qualified deferred
compensation plan for the benefit of officers and other highly compensated employees. All of the Named Executives
other than Mr. Vais participate in the SkyWest, Inc. 2002 Deferred Compensation Plan. Prior to the sale of ExpressJet,
ExpressJet also maintained a separate but similar non-qualified deferred compensation plan, the ExpressJet Executive
Deferred Compensation Plan, for its highly compensated management employees, including Mr. Vais. Under both such
deferred compensation plans (the “Deferred Compensation Plans”), the employer credits each Named Executive’s
account with a discretionary employer contribution equal to 15% of salary and annual cash incentive. These amounts are
included in the Summary Compensation Table under the column “All Other Compensation”. Additional information on
the Deferred Compensation Plans is found in the section “Non-Qualified Deferred Compensation for 2018” below. The
purpose of the Deferred Compensation Plans is to attract and retain executive talent by assisting with building retirement
assets over the course of their career with the Company.
The SkyWest Inc. 2002 Deferred Compensation Plan (but not the ExpressJet Executive Deferred Compensation
Plan) also permits eligible executives, including the Named Executives, to elect in advance of each calendar year to defer
up to 100% of their cash salary and annual cash incentive compensation for the year. Only Mr. Simmons elected to defer
any portion of his salary or annual cash incentive for 2019.
The Company and its subsidiaries do not maintain any defined benefit pension plans for the Named Executives.
Other Benefits.
In addition to the benefits described above, the Company provides certain other benefits to the Named
Executives that the Compensation Committee believes are generally consistent with the benefits provided to senior
executives of other airlines. The Compensation Committee believes that those benefits, which are detailed in the
footnotes to the Summary Compensation Table applicable to the heading “All Other Compensation” below, are
reasonable, competitive and consistent with overall executive compensation objectives. Those benefits consist primarily
of employer-paid premiums on health, dental and eye insurance, a personal automobile allowance, and use of Company
owned recreational equipment.
The Company and its subsidiaries also maintain a non-discriminatory, broad based program under which all
full-time employees and their dependents, including the Named Executives and their dependents, may fly without charge
on a space available basis on regularly scheduled flights of aircraft operated by the Company’s operating airline
subsidiaries.
The Company has not agreed to provide its Named Executives with any gross-up or reimbursement for taxes.
Share Ownership Guidelines
The Company maintains ownership guidelines for the Named Executives to encourage the alignment of their
interests with the long-term interests of the Company’s shareholders. Each Named Executive is required to maintain a
minimum ownership interest in the Company. The guideline ownership level is a number of shares of Common Stock
having a value equal to a multiple of the annual base salary for each Named Executive. The Chief Executive’s guideline
ownership level is five times salary while the remaining Named Executives’ guideline ownership level is three times
salary.
The guidelines also include an expectation that the Named Executives will hold 50% of their net after-tax profit
shares after vesting or option exercise if the applicable guideline ownership level has not yet been met. The Named
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Executives are limited in their ability to sell shares under long-term incentive awards until their applicable guideline
ownership level is reached. Each Named Executive met the ownership guidelines at December 31, 2019. The holdings of
the Named Executives are summarized in the table entitled “Security Ownership of Certain Beneficial Owners” below.
Policies Against Hedging and Pledging of Company Stock
Pursuant to the Company's Code of Ethics, in order to avoid the appearance that any Company employee is
trading on inside information, Company officers and directors are prohibited from engaging in speculative trading such
as short sales or trading in puts, calls, or other options on our stock or the stock of our affiliates, and are likewise
prohibited from purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any
decrease in the market value of our securities.
In addition, the Company's insider trading policy expressly prohibits all directors, officers and employees from
purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any decrease in the
market value of the Company’s securities. Pledging the Company’s securities as collateral to secure loans is also
prohibited.
Deductibility of Executive Compensation
Section 162(m) of the Code imposes a $1 million annual limit on the amount that a publicly traded company
may deduct for compensation paid to the company’s principal executive officer during a tax year or to any of the
company’s three other most highly compensated executive officers who are still employed at the end of the tax year
(other than the Company’s principal financial officer). Prior to 2018, the limit did not apply to compensation that met the
requirements of Section 162(m) of the Code for “qualified performance-based compensation” (i.e., compensation paid
only if the executive meets pre-established, objective goals based upon performance criteria approved by the Company’s
shareholders). The Tax Cuts and Jobs Act of 2017 eliminated the “qualified performance-based compensation” exception
to Section 162(m) of the Code and expanded the limitation on deductibility to generally include all named executive
officers. The Compensation Committee reviews and considers the deductibility of executive compensation under
Section 162(m) of the Code, and has reserved, and continues to reserve, the right to approve compensation that may not
be deductible under Code Section 162(m) in order to ensure competitive levels of total compensation for the Company’s
executive officers.
Effect of Compensation on Risk
The Compensation Committee believes the Company’s compensation policies and practices are designed to
create appropriate and meaningful incentives for the Company’s employees without encouraging excessive or
inappropriate risk taking. Among other factors, the Compensation Committee considered the following:
• The Company’s compensation policies and practices are designed to include a significant level of
long-term compensation, which discourages short-term risk taking;
• The base salaries and target cash incentive opportunities the Company provides to its employees are
generally consistent with salaries paid for comparable positions in the Company’s industry, and provide the
Company’s employees with steady income while reducing the incentive for employees to take risks in
pursuit of short-term benefits;
• The Company’s cash incentive and performance equity incentive compensation is capped at levels
established by the Compensation Committee, consistent with peer data, and at which the Compensation
Committee believes reduces the incentive for excessive risk-taking;
33
• The Company has established internal controls and adopted codes of ethics and business conduct, which
are designed to reinforce the balanced compensation objectives established by the Compensation
Committee; and
• The Company has adopted equity ownership guidelines for its executive officers, which the Compensation
Committee believes discourages excessive risk-taking.
• There is a policy against hedging stock and against pledging stock or using it as collateral.
Based on the review outlined above, the Company has concluded that the risks arising from its compensation
policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.
34
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed the foregoing compensation discussion and analysis and discussed
with the Company’s management the information set forth herein. Based on such review and discussions with
management, the Compensation Committee recommended to the Board that the foregoing compensation discussion and
analysis be included in this proxy statement.
The Compensation Committee
Keith E. Smith, Chair
Henry J. Eyring
Meredith S. Madden
Ronald J. Mittelstaedt
Steven F. Udvar-Hazy
The information contained in this Compensation Committee Report shall not be deemed to be “soliciting
material,” to be “filed” with the Securities and Exchange Commission or be subject to Regulation 14A or Regulation
14C or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into
any filing of SkyWest, Inc., except to the extent that SkyWest, Inc. specifically incorporates it by reference into a
document filed under the Securities Act of 1933 or the Exchange Act.
35
EXECUTIVE COMPENSATION
Summary Compensation Table
The table below summarizes the total compensation paid to or earned by each of the Named Executives for the
years indicated.
Stock Awards Non-Equity
Restricted Performance Option Incentive Plan All Other
Salary Bonus Stock Units Shares Awards Compensation Compensation Total
Name and Principal Position Year ($) ($)(1) ($)(2) ($)(2) ($)(2) ($)(3) ($) ($)
Russell A. Childs . . . . . . . . . . 2019 $500,000 $ — $ 880,000 $ 1,320,000 $ — $ 660,000 $ 251,011 (4) $ 3,611,011
CEO & President 2018 $460,000 $ — $ 680,000 $ 1,020,000 $ — $ 940,728 $ 243,052 $ 3,343,780
2017 $420,000 $ — $ 520,000 $ 780,000 $ — $ 924,000 $ 213,395 $ 2,857,395
Robert J. Simmons . . . . . . . . 2019 $345,000 $ — $ 310,000 $ 465,000 $ — $ 331,200 $ 158,784 (5) $ 1,609,984
Chief Financial Officer 2018 $335,000 $ — $ 290,000 $ 435,000 $ — $ 498,251 $ 160,115 $ 1,718,366
2017 $325,000 $ — $ 260,000 $ 390,000 $ — $ 520,000 $ 147,148 $ 1,642,148
Wade J. Steel . . . . . . . . . . . . . 2019 $335,000 $ — $ 310,000 $ 465,000 $ — $ 321,600 $ 151,108 (6) $ 1,582,708
Chief Commercial Officer 2018 $315,000 $ — $ 270,000 $ 405,000 $ — $ 468,505 $ 151,679 $ 1,610,184
2017 $300,000 $ — $ 240,000 $ 360,000 $ — $ 480,000 $ 134,287 $ 1,514,287
Michael B. Thompson . . . . . . 2019 $250,000 $ — $ 260,000 $ 390,000 $ — $ 160,000 $ 127,229 (7) $ 1,187,229
Chief Operating Officer 2018 $245,000 $ — $ 240,000 $ 360,000 $ — $ 368,480 $ 125,274 $ 1,338,754
—SkyWest Airlines 2017 $235,000 $ — $ 180,000 $ 270,000 $ — $ 376,000 $ 106,010 $ 1,167,010
Terry M. Vais . . . . . . . . . . . . 2019 $ 30,237 $ — $ — $ — $ — $ — $ 1,050,728 (8) $ 1,080,965
Former, Chief Operating 2018 $265,000 $ — $ 232,000 $ 348,000 $ — $ 287,260 $ 90,519 $ 1,222,779
Officer —ExpressJet 2017 $250,000 $ — $ 180,000 $ 270,000 $ — $ 200,000 $ 110,436 $ 1,010,436
Eric J. Woodward . . . . . . . . . 2019 $211,000 $ — $ 99,200 $ 148,800 $ — $ 151,920 $ 84,317 (9) $ 695,237
Chief Accounting Officer
(1) No discretionary annual performance bonuses were awarded to the Named Executives in 2017, 2018 or 2019.
(2) These columns show the grant date fair value of stock awards granted during the applicable fiscal year as computed
under ASC Topic 718 (excluding estimates for forfeitures in case of awards with service-based vesting). With
respect to the performance share awards, the grant date fair value is reported based on the probable outcome of the
performance conditions as of the grant date. The maximum potential value of the 2019 performance share awards,
assuming the highest level of performance achievement, is as follows: Mr. Childs, $1,560,000 (2017), $2,040,000
(2018), $2,640,000 (2019); Mr. Simmons, $780,000 (2017), $870,000 (2018), $930,000 (2019); Mr. Steel, $720,000
(2017), $810,000 (2018), $930,000 (2019); Mr. Thompson, $540,000 (2017), $720,000 (2018), $780,000 (2019);
Mr. Vais, $540,000 (2017); and Mr. Woodward $297,600 (2019). These amounts do not reflect the extent to which
the Named Executive realized or will realize an actual financial benefit from the awards. Assumptions and
methodologies used in the calculation of these amounts are included in footnotes to the Company’s audited financial
statements for the year ended December 31, 2019, which are included in the Company’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
(3) The amounts in this column reflect the annual performance cash incentive amounts earned in the year indicated
based on performance in that year and paid in the subsequent year. As described in the section entitled
“Compensation Discussion and Analysis” above, annual performance cash incentives payable to the Named
Executives are calculated based upon the financial and operational performance of the Company or its subsidiaries.
The threshold, target and maximum amount of each Executive’s annual performance cash incentive opportunity for
2019 is reported in the “Grants of Plan-Based Awards for 2019” table below.
(4) All other compensation for Mr. Childs for 2019 included $218,047 of employer credits under the SkyWest Deferred
Compensation Plan attributable to compensation earned for 2019. The remaining other compensation relates to
36
employer-paid health insurance premiums, a personal vehicle lease, personal use of the Company’s recreational
equipment, and discretionary matching contributions under the SkyWest 401(k) Plan.
(5) All other compensation for Mr. Simmons for 2019 included $127,107 of employer credits under the SkyWest
Deferred Compensation Plan attributable to compensation earned for 2019. The remaining other compensation
relates to employer-paid health insurance premiums, a personal vehicle lease, personal use of the Company’s
recreational equipment, and discretionary matching contributions under the SkyWest 401(k) Plan.
(6) All other compensation for Mr. Steel for 2019 included $122,455 of employer credits under the SkyWest Deferred
Compensation Plan attributable to compensation earned for 2019. The remaining other compensation relates to
employer-paid health insurance premiums, a personal vehicle lease, personal use of the Company’s recreational
equipment, and discretionary matching contributions under the SkyWest 401(k) Plan.
(7) All other compensation for Mr. Thompson for 2019 included $95,575 of employer credits under the SkyWest
Deferred Compensation Plan attributable to compensation earned for 2019. The remaining other compensation
relates to employer-paid health insurance premiums, a personal vehicle lease, personal use of the Company’s
recreational equipment, and discretionary matching contributions under the SkyWest 401(k) Plan.
(8) All other compensation for Mr. Vais includes $1.0 million in severance paid to Mr. Vais during 2019 in connection
with his separation from the Company pursuant to his severance and release agreement, as further described below,
$4,751 in employer credits under the ExpressJet Deferred Compensation Plan attributable to compensation earned
for 2019 and $20,384 relating to the payout of accrued vacation time. The remaining other compensation relates to
employer-paid health insurance premiums and a personal vehicle lease prior to his separation from the Company.
(9) All other compensation for Mr. Woodward for 2019 included $67,664 of employer credits under the SkyWest
Deferred Compensation Plan attributable to compensation earned for 2019. The remaining other compensation
relates to employer-paid health insurance premiums, personal use of the Company’s recreational equipment, and
discretionary matching contributions under the SkyWest 401(k) Plan.
Grants of Plan-Based Awards For 2019
The following table provides information about non-equity based and equity-based plan awards granted to the
Named Executives for the year ended December 31, 2019:
All Other Stock All Other Stock Grant Date
Estimated Possible Payouts Under Estimated Possible Payouts Under Awards Awards Fair Value
Non-Equity Incentive Plan Awards Equity Incentive Plan Awards Number of Number of Exercise Price of of Stock
Threshold Target Maximum Threshold Target Maximum Units Options Option Awards and Option
Name Grant Date ($)(1) ($)(1) ($)(1) (#) (#) (#) (#) (#) ($/Share) Awards($)(4)
Russell A. Childs . . . . . . . $ 275,000 $ 550,000 $ 1,100,000 $ 550,000
5-Feb-2019(2) 13,623 27,245 54,490 $ 1,320,000
5-Feb-2019(3) 18,163 $ 880,000
Robert J. Simmons . . . . . . $ 138,000 $ 276,000 $ 552,000 $ 276,000
5-Feb-2019(2) 4,799 9,598 19,196 $ 465,000
5-Feb-2019(3) 6,398 $ 310,000
Wade J. Steel . . . . . . . . . $ 134,000 $ 268,000 $ 536,000 $ 268,000
5-Feb-2019(2) 4,799 9,598 19,196 $ 465,000
5-Feb-2019(3) 6,398 $ 310,000
Michael B. Thompson . . . . $ 100,000 $ 200,000 $ 400,000 $ 200,000
5-Feb-2019(2) 4,025 8,050 16,100 $ 390,000
5-Feb-2019(3) 5,366 $ 260,000
Eric J. Woodward . . . . . . $ 63,300 $ 126,600 $ 253,200 $ 126,600
5-Feb-2019(2) 1,536 3,071 6,142 $ 148,800
5-Feb-2019(3) 2,047 $ 99,200
(1) The amounts in these columns reflect the threshold, target and maximum amount of each Named Executive’s annual
cash incentive opportunity for 2019. As described in the section entitled “Compensation Discussion and Analysis”
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above, annual cash incentives payable to the Named Executives are calculated based upon the financial and
operational performance of the Company or its subsidiaries.
(2) Represents the 2019-2021 PSU Awards granted in 2019 which will be eligible to vest based on corporate
performance during the three-year performance period ending December 31, 2021. The Compensation Committee
determined that the corporate objectives for purposes of such awards would be EBITDA per share, return on
invested capital and controllable completion actually attained over the three-year performance period. Until the
vesting date, the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named
Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and
until those performance shares vest. For the 2019-2021 PSU Awards, the Compensation Committee established
threshold, target and maximum performance levels for each of the three corporate performance objectives, with the
actual number of performance shares that will vest to be adjusted in proportion to the extent to which the combined
actual results varied from the target levels of performance. The performance shares are allocated 40% to the
cumulative three-year EBITDA per share, 40% to the three-year adjusted average return on invested capital and 20%
the three-year average controllable completion in determining the actual awarded performance shares payable in our
common stock. Specifically, a number of performance shares attributable to each objective according to the
weightings assigned by the Compensation Committee will be earned ranging from 50% (for threshold performance)
to 100% (for target performance) to 200% (for maximum performance), with performance in between such levels
determined by linear interpolation. If performance is below the threshold level for one or more of the objectives, no
performance shares will be earned with respect to such objective(s).
(3) Represents restricted stock unit awards that entitle the Named Executive to receive a designated number of shares of
our common stock upon completion of a three-year vesting period, measured from the date of grant, the restricted
stock units will be eligible to vest on the third anniversary of the grant date, subject to the Named Executive’s
continued employment through such date.
(4) This column shows the grant date fair value of the stock awards granted as computed under ASC Topic 718
(excluding estimates for forfeitures in case of awards with service-based vesting). With respect to the performance
share awards, the grant date fair value is reported based on the probable outcome of the performance conditions as
of the grant date. These amounts do not reflect the extent to which the Named Executive realized or will realize an
actual financial benefit from the awards. Assumptions and methodologies used in the calculation of these amounts
are included in footnotes to the Company’s audited financial statements for the year ended December 31, 2019
which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
38
Outstanding Equity Awards at Year-End
The following table provides information on the holdings of stock options and other stock awards (restricted
stock units and performance shares) by the Named Executives as of December 31, 2019.
Option Awards Stock Awards
Equity Incentive
Equity Incentive Plan Awards:
Number of Number of Number of Market Value Plan Awards: Market or
Securities Securities Shares of Shares Number of Shares, Payout Value of
Underlying Underlying or Units of or Units Units or Other Shares, Units or
Unexercised Unexercised Option Option Stock of Stock Rights Other Rights
Options Options Exercise Expiration That Have That Have That Have That Have
Name Exercisable (#) Unexercisable (#) Price ($) Date(1) Not Vested (#) Not Vested(8)($) Not Vested (#) Not Vested(8)($)
Russell A. Childs . . . 41,020 $ 14.78 10-Feb-23
14,521 (2) $ 938,492
43,564 (3) $ 2,815,542
12,734 (4) $ 822,998 19,101 (5) $ 1,234,498
18,163 (6) $ 1,173,875 27,245 (7) $ 1,760,844
Robert J. Simmons. . 7,783 $ 14.78 10-Feb-23
7,261 (2) $ 469,278
21,782 (3) $ 1,407,770
5,431 (4) $ 351,006 8,146 (5) $ 526,476
6,398 (6) $ 413,503 9,598 (7) $ 620,319
Wade J. Steel . . . . . 6,702 (2) $ 433,150
20,106 (3) $ 1,299,450
5,056 (4) $ 326,769 7,584 (5) $ 490,154
6,398 (6) $ 413,503 9,598 (7) $ 620,319
Michael B.
Thompson . . . . . . 5,027 (2) $ 324,895
15,080 (3) $ 974,620
4,494 (4) $ 290,447 6,742 (5) $ 435,735
5,366 (6) $ 346,805 8,050 (7) $ 520,272
Eric J. Woodward . . 2,968 $ 14.78 10-Feb-23
2,569 (2) $ 166,034
7,708 (3) $ 498,168
1,813 (4) $ 117,174 2,719 (5) $ 175,729
2,047 (6) $ 132,298 3,071 (7) $ 198,479
(1) All stock option awards have a term of seven years from the date of grant.
(2) Restricted stock unit awards that entitle the Named Executive to receive a designated number of shares of Common
Stock on February 9, 2020, subject to the achievement of a threshold performance objective included in such
restricted stock unit awards for Section 162(m) purposes. The threshold performance objective for purposes of the
2017 restricted stock units was the Company’s achievement of pre-tax earnings of at least $54.9 million during
2017, 2018 or 2019. If the threshold goal was not achieved, none of the restricted stock units would have been
eligible to vest. In February 2018, the Compensation Committee determined that the Company’s 2017 pre-tax
earnings of $288 million satisfied the threshold goal for purposes of the 2017 restricted stock unit awards, and such
awards will be eligible to vest based on the third anniversary of the grant date.
(3) Represents the 2017-2019 PSU Awards granted in 2017 which were eligible to vest based on corporate performance
during the three-year performance period ending December 31, 2019. The Compensation Committee determined
that the corporate objectives for purposes of such awards would be adjusted pre-tax earnings and average return on
invested capital actually attained over the three-year performance period. Until the vesting date, the shares
underlying the performance shares are not issued and outstanding. Accordingly, the Named Executive is not entitled
to vote or receive dividends on the shares underlying his performance shares unless and until those performance
shares vest. For the 2017-2019 PSU Awards, the Compensation Committee established threshold, target and
maximum performance levels for each of the two corporate performance objectives, with the actual number of
performance shares that will vest to be adjusted in proportion to the extent to which the combined actual results
varied from the target levels of performance. The performance shares are allocated 60% to the cumulative three-year
39
adjusted pre-tax earnings objectives and 40% to the three-year average return on invested capital objectives in
determining the actual awarded performance shares payable in Common Stock. Specifically, a number of
performance shares attributable to each objective according to the weightings assigned by the Compensation
Committee were eligible to be earned ranging from 50% (for threshold performance) to 100% (for target
performance) to 200% (for maximum performance), with performance in between such levels determined by linear
interpolation. If performance was below the threshold level for one or more of the objectives, no performance shares
would have been earned with respect to such objective(s). The actual number of shares of Common Stock issued to
our Named Executives following the conclusion of a performance period is based on our performance relative to the
corporate performance objectives for that performance period. The Company has reported the number and market
value of the performance shares subject to the awards based on “maximum” performance. In February 2020, the
Compensation Committee determined that the Company had satisfied the maximum performance level for these
awards, and such awards vested at the maximum levels on February 9, 2020. In addition, these awards are reported
in the "Number of Shares or Units of Stock" column because, as of December 31, 2019, the applicable performance
objectives had been met and the vesting of the awards was subject only to the Compensation Committee’s
certification of such results.
(4) Restricted stock unit awards scheduled to vest on February 7, 2021.
(5) Represents the 2018-2020 PSU Awards granted in 2018 which will be eligible to vest based on corporate
performance during the three-year performance period ending December 31, 2020. The Compensation Committee
determined that the corporate objectives for purposes of such awards would be adjusted pre-tax earnings and
average return on invested capital actually attained over the three-year performance period. Until the vesting date,
the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named Executive is
not entitled to vote or receive dividends on the shares underlying his performance shares unless and until those
performance shares vest. For the 2018-2020 PSU Awards, the Compensation Committee established threshold,
target and maximum performance levels for each of the two corporate performance objectives, with the actual
number of performance shares that will vest to be adjusted in proportion to the extent to which the combined actual
results varied from the target levels of performance. The performance shares are allocated 60% to the cumulative
three-year adjusted pre-tax earnings objectives and 40% to the three-year average return on invested capital
objectives in determining the actual awarded performance shares payable in our common stock. Specifically, a
number of performance shares attributable to each objective according to the weightings assigned by the
Compensation Committee will be earned ranging from 50% (for threshold performance) to 100% (for target
performance) to 200% (for maximum performance), with performance in between such levels determined by linear
interpolation. If performance is below the threshold level for one or more of the objectives, no performance shares
will be earned with respect to such objective(s). The actual number of shares of our common stock issued to our
Named Executives following the conclusion of a performance period will be based on our performance relative to
the corporate performance objectives for that performance period. The Company has reported the number and
market value of the performance shares subject to the awards based on “target” performance.
(6) Restricted stock unit awards scheduled to vest on February 5, 2022.
(7) Represents the 2019-2021 PSU Awards granted in 2019 which will be eligible to vest based on corporate
performance during the three-year performance period ending December 31, 2021. The Compensation Committee
determined that the corporate objectives for purposes of such awards would be EBITDA per share, return on
invested capital and controllable completion actually attained over the three-year performance period. Until the
vesting date, the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named
Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and
until those performance shares vest. For the 2019-2021 PSU Awards, the Compensation Committee established
threshold, target and maximum performance levels for each of the two corporate performance objectives, with the
actual number of performance shares that will vest to be adjusted in proportion to the extent to which the combined
actual results varied from the target levels of performance. The performance shares are allocated 40% to the
40
cumulative three-year EBITDA per share, 40% to the three-year adjusted average return on invested capital and 20%
the three-year average controllable completion in determining the actual awarded performance shares payable in our
common stock. Specifically, a number of performance shares attributable to each objective according to the
weightings assigned by the Compensation Committee will be earned ranging from 50% (for threshold performance)
to 100% (for target performance) to 200% (for maximum performance), with performance in between such levels
determined by linear interpolation. If performance is below the threshold level for one or more of the objectives, no
performance shares will be earned with respect to such objective(s). The Company has reported the number and
market value of the performance shares subject to the awards based on “target” performance.
(8) Based on market closing price per share of our common stock of $64.63 on December 31, 2019, the last trading day
of 2019.
Option Exercises and Stock Vested
Stock options exercised, restricted stock units and performance shares that vested for the Named Executives
during the year ended December 31, 2019 are outlined below.
Option Awards Stock Awards(1)
Number of Shares Value Realized Number of Shares Value Realized
Acquired on Exercise on Exercise Acquired on Vesting on Vesting
Name (#) ($) (#) ($)
Russell A. Childs . . . . . . . . . . . . 37,023 $ 1,747,220 67,660 $ 3,638,755
Robert J. Simmons . . . . . . . . . . — $ — 37,753 $ 2,030,329
Wade J. Steel . . . . . . . . . . . . . . . 7,030 $ 318,025 34,100 $ 1,833,898
Michael B. Thompson . . . . . . . . 5,523 $ 250,789 26,793 $ 1,440,901
Terry M. Vais. . . . . . . . . . . . . . . 7,175 $ 270,082 29,228 $ 1,571,855
Eric J. Woodward . . . . . . . . . . . — $ — 14,398 $ 774,298
(1) Includes both restricted stock units and performance shares that vested during the year ended December 31, 2019.
Non-Qualified Deferred Compensation for 2019
Pursuant to the SkyWest Deferred Compensation Plan and the ExpressJet Deferred Compensation Plan, covered
Named Executives may elect prior to the beginning of each calendar year to defer the receipt of base salary and annual
performance cash incentives earned for the ensuing calendar year. Amounts deferred are credited to an unfunded liability
account maintained by the Company on behalf of the applicable Named Executive, which account is deemed invested in
and earns a rate of return based upon certain notational, self-directed investment options offered under the applicable
plan.
Each Named Executive’s account under the SkyWest Deferred Compensation Plan and ExpressJet Deferred
Compensation Plan, as applicable, is also credited with a discretionary employer contribution monthly, whether or not
the Named Executive contributes. For 2019 that discretionary employer contribution was 15% of the Named Executive’s
salary and annual cash incentive. Participant account balances under the SkyWest and ExpressJet Deferred
Compensation Plans are fully vested and will be paid by the Company to each Named Executive upon retirement or
separation from employment, or on other specified dates, in a lump sum form or in installments according to a schedule
elected in advance by the Named Executive.
41
The following table provides information regarding the SkyWest Deferred Compensation Plan for Messrs.
Childs, Simmons, Steel, Thompson and Woodward for the year ended December 31, 2019:
Aggregate
Executive Registrant Aggregate Withdrawals/ Aggregate
Contributions in Contributions in Earnings in Distributions in Balance at
Last Year Last Year Last Year Last Year Last Year
Name ($)(1) ($)(2) ($)(3) ($) End ($)(4)
Russell A. Childs . . . . . . . . . . . . . . . . . . . . . . $ — $ 218,047 $ 287,513 $ — $2,174,744
Robert J. Simmons . . . . . . . . . . . . . . . . . . . . $ 24,929 $ 127,107 $ 117,588 $ — $ 701,370
Wade J. Steel . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 122,455 $ 163,177 $ — $ 820,340
Michael B. Thompson . . . . . . . . . . . . . . . . . . $ — $ 95,575 $ 158,202 $ — $ 939,851
Eric J. Woodward . . . . . . . . . . . . . . . . . . . . . $ — $ 67,664 $ 155,774 $ — $ 844,070
(1) The amount in this column represents deferral of base salary for 2019 and annual performance cash incentives
earned for the ensuing calendar year, which deferred amounts are reported in the Summary Compensation Table
above.
(2) The amounts in this column reflect the amounts of employer contributions credited under the applicable deferred
compensation plan for 2019 at the rate of 15% of each Executive’s 2019 base salary and annual cash incentive
which was paid in 2019. The amounts reported in this column are also included in the amounts reported in the
“Other Compensation” column of the Summary Compensation Table appearing above.
(3) The amounts in this column reflect the notational earnings during 2019 credited to each Executive’s account under
the SkyWest Deferred Compensation Plan. These amounts are not reported in the Summary Compensation Table
because they are based on market rates determined by reference to mutual funds that are available to participants in
the SkyWest 401(k) Plan or otherwise broadly available.
(4) All Named Executive and Company contributions in prior years to the SkyWest Deferred Compensation Plan have
been reported in the Summary Compensation Tables in the company’s previously filed proxy statements, to the
extent that an executive was a named executive officer in that fiscal year. These amounts are as follows: Mr. Childs,
$218,047 (2019), $211,109 (2018) and $183,402 (2017); Mr. Simmons, $152,036 (2019), $146,521 (2018) and
$142,346 (2017); Mr. Steel, $122,455 (2019), $122,190 (2018) and $110,411 (2017); Mr. Thompson, $95,575
(2019), $95,785 (2018), and $82,134 (2017); and Mr. Woodward, $67,664 (2019).
At the election of the executive, deferred amounts are invested in a selection of third party investment funds and
each executive receives the rates of return under those funds on such deferred amounts.
The following table provides information regarding the ExpressJet Deferred Compensation Plan for Mr. Vais
for 2019. During 2019, Mr. Vais separated from the Company and received the compensation related to his Deferred
Compensation account which was valued at $733,463 at the time the balance was distributed to Mr. Vais in accordance
with the ExpressJet Deferred Compensation Plan.
Aggregate
Executive Registrant Aggregate Withdrawals/ Aggregate
Contributions in Contributions in Earnings in Distributions in Balance at
Last Year Last Year Last Year Last Year Last Year
Name ($) ($)(1) ($)(2) ($)(3) End ($)
Terry M. Vais. . . . . . . . . . . . . . . . . . . . . . . . . — $ 4,751 $ 137,120 $ (733,463) $ —
42
(1) The amount in this column reflects the employer contributions credited under the applicable deferred compensation
plan for 2019 at the rate of 15% of Mr. Vais’s 2019 base salary. The amount reported in this column is also included
in the amount reported in the “Other Compensation” column of the Summary Compensation Table appearing above.
(2) The amounts in this column reflect the notational earnings during 2019 credited to Mr. Vais’s account under the
ExpressJet Deferred Compensation Plan. This amount is not reported in the Summary Compensation Table because
it is based on market rates determined by reference to mutual funds that are available to participants in the
ExpressJet 401(k) Plan or, in certain cases, otherwise broadly available.
(3) All Named Executive and Company contributions in prior years to the ExpressJet Deferred Compensation Plan have
been reported in the Summary Compensation Tables in the company’s previously filed proxy statements, to the
extent that Mr. Vais was a named executive officer in that fiscal year. These amounts are as follows: $4,751 (2019),
$70,581 (2018) and $92,248 (2017).
At the election of the executive, deferred amounts are invested in a selection of third party investment funds and
each executive receives the rates of return under those funds on such deferred amounts.
Potential Payments upon Termination or Change in Control
The information below describes and quantifies certain payments or benefits that would be payable under the
existing plans and programs of the Company and its subsidiaries if a Named Executive’s employment had terminated on
December 31, 2019, or the Company had undergone a change in control on December 31, 2019. These benefits are in
addition to benefits generally available to all salaried employees of the Company in connection with a termination of
employment, such as distributions from the 401(k) plan and accrued vacation pay. Except as noted below, the Named
Executives do not have any other severance benefits, severance agreements or change-in-control agreements.
Accelerated Vesting of Long-Term Incentive Awards.
With respect to long-term incentive awards granted to the Named Executives, such awards will vest on an
accelerated basis under certain circumstances, but there is no single trigger accelerated vesting of such awards upon a
change in control. Specifically, restricted stock unit awards granted to the Named Executives will vest on an accelerated
basis (i) in the event of the Named Executive’s involuntary termination without cause or resignation for good reason, or
(ii) in the event of the Named Executive’s death. Performance share awards granted to the Named Executives will vest
on an accelerated basis (i) in the event of the Named Executive’s death prior to a change in control, as to the “target”
number of performance shares subject to the award on the date of death and as to any incremental performance shares
above “target” based on the Company’s actual performance relative to the corporate performance objectives under such
award at the end of the three-year performance period (or, if earlier, a change in control of the Company), (ii) in the
event of the Named Executive’s death following a change in control, any “vesting eligible shares” (as described below)
will vest upon the date of death, (iii) in the event of the Named Executive’s involuntary termination without cause or
resignation for good reason, in each case prior to a change in control, the Named Executive will remain eligible to vest in
such number of performance shares as ultimately vest based on the Company’s actual performance relative to the
corporate performance objectives under such award at the end of the three-year performance period (or, if earlier, a
change in control of the Company), which vesting will be prorated for the portion of the performance period that has
elapsed prior to the date of termination, or (iv) in the event of the Named Executive’s involuntary termination without
cause or resignation for good reason, in each case following a change in control, any vesting eligible shares will vest
upon the date of such termination. For purposes of the performance shares, in the event of a change in control of the
Company, the performance shares will be converted into a number of “vesting eligible shares” that will vest at the end of
the three-year performance period based on the greater of (i) the “target” number of performance shares subject to the
award, or (ii) the number of performance shares that would vest if performance had been measured against the corporate
performance objectives as of the date of the change in control.
43
The following table shows for each Named Executive the intrinsic value of his unvested restricted stock units
and performance shares, as of December 31, 2019, the vesting or settlement of which would have been accelerated had a
change in control of the Company occurred on that date and/or a termination under one of the circumstances identified
below had occurred on that date, calculated in the case of restricted stock units and performance shares, by multiplying
the number of underlying shares by the closing price of the Common Stock on December 31, 2019, the last trading day
of 2019 ($64.63 per share). Mr. Vais is not included in the table, as his employment terminated in February 2019, but his
actual separation arrangements are discussed below.
Involuntary Termination
Change Following a Change Involuntary Termination
Name in Control in Control or Death Prior to a Change in Control
Russell A. Childs
RSU Acceleration . . . . . . . . $ — $ 2,935,365 $ 2,935,365
PSU Acceleration (1) . . . . . $ 2,815,542 $ 5,810,884 $ 4,225,489
Robert J. Simmons
RSU Acceleration . . . . . . . . $ — $ 1,233,787 $ 1,233,787
PSU Acceleration (1) . . . . . $ 1,407,770 $ 2,554,565 $ 1,965,527
Wade J. Steel
RSU Acceleration . . . . . . . . $ — $ 1,173,422 $ 1,173,422
PSU Acceleration (1) . . . . . $ 1,299,450 $ 2,409,923 $ 1,832,992
Michael B. Thompson
RSU Acceleration . . . . . . . . $ — $ 962,147 $ 962,147
PSU Acceleration (1) . . . . . $ 974,620 $ 1,903,627 $ 1,438,534
Eric J. Woodward
RSU Acceleration . . . . . . . . $ — $ 415,506 $ 415,506
PSU Acceleration (1) . . . . . $ 498,168 $ 872,376 $ 681,480
1) Reflects the value of the performance shares granted in 2018 and 2019 at “target” performance levels. The value
under the “Change in Control” column includes only the 2017 performance shares, which are reflected at
"maximum" performance levels based on the performance relative to the performance objectives for the
performance period that ended on December 31, 2019 under such awards, since, as of December 31, 2019, the
applicable performance objectives had been met and the vesting of the awards was subject only to the Compensation
Committee’s certification of such results (but the settlement of such awards would have been accelerated to the date
of the change in control occurring on December 31, 2019). While these 2017 performance shares were no longer
subject to performance or service conditions at December 31, 2019, they are included in this table as the settlement
of such performance shares would have accelerated (as compared to the regular settlement date in February 2020
upon Compensation Committee certification of final performance results) upon the occurrence of a change in
control. The value of the 2017 performance shares are reflected in the other two columns, but no acceleration of the
settlement of such awards would occur under a termination under those circumstances (and such awards would vest
in February 2020 upon Compensation Committee certification of final performance results), other than in the case of
death, in which case the "target" awards would have been subject to immediate settlement.
Deferred Compensation. If the employment of a Named Executive were terminated on December 31, 2019,
the Named Executive would have become entitled to receive the balance in his account under the applicable deferred
compensation plan. Distribution would be made in the form of a lump sum or in installments, and in accordance with the
distributions schedule elected by the Named Executive under the applicable plan. The 2019 year-end account balances
under those plans are shown in the applicable Non-Qualified Deferred Compensation Tables included herein. A Named
Executive’s account balance would continue to be credited with notational investment earnings or losses through the date
of actual distribution.
44
Separation Arrangements with Mr. Vais. In connection with the completion of the sale of ExpressJet, as of
January 22, 2019, Terry M. Vais ceased serving as the Chief Operating Officer of ExpressJet and transitioned into a non-
executive operations role with us. Effective February 12, 2019, Mr. Vais separated from the Company. In connection
with his separation from the Company, Mr. Vais is eligible to receive the following benefits pursuant to a severance and
release agreement with us, in exchange for his execution of a general release of claims and his compliance with certain
restrictive covenants for a period of three years following his separation from the Company, including a noncompetition
covenant: (1) $2.4 million, payable in equal installments over a 24 month period following his date of separation from
the Company, consisting of two years’ base salary and cash payout of his 2017 and 2018 restricted stock units and
performance shares; and (2) paid health insurance coverage for 24 months or until his subsequent approved re-
employment.
Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item
402(u) of Regulation S-K, we are providing the following information regarding the relationship of the annual total
compensation of our employees and the annual total compensation of Russell A. Childs, the Chief Executive. The pay
ratio included in this information is a reasonable estimate calculated in a manner that is intended to be consistent with
Item 402(u) of Regulation S-K.
For 2019, our last completed fiscal year:
• the median of the annual total compensation of all employees of the Company (other than the CEO) was
$39,000; and
• the annual total compensation of the CEO, as reported in the Summary Compensation Table included
elsewhere in this Proxy Statement, was $3,611,011.
Based on this information, for 2019, the ratio of the median of the total compensation of all employees of the
Company to the annual total compensation of Mr. Childs, the CEO, was 1 to 93.
Determining the Median Employee. Due to the disposition of ExpressJet during 2019, pursuant to SEC rules,
the Company identified a new median employee for 2019. The Company determined that, as of December 31, 2019, the
employee population consisted of approximately 14,600 individuals. The employee workforce consists of full and part
time employees. For purposes of measuring the compensation of the employees, the Company selected total annual cash
compensation for 2019 as the most appropriate measure of compensation, which was consistently applied to all the
employees included in the calculation. With respect to the total annual compensation of the “median employee,” the
Company identified and calculated the elements of such employee’s compensation for 2019 in accordance with the
requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in the annual total compensation reflected above.
45
DIRECTOR COMPENSATION
The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified
candidates to serve as directors. In setting director compensation, the Company considers the significant amount of time
that directors expend in fulfilling their duties to the Company, as well as the skill level required by the Company of its
directors.
Cash Compensation Paid to Directors
For the year ended December 31, 2019, all directors who were not employees of the Company received an
annual cash retainer of $100,000. The Chair of the Audit Committee was paid an annual fee of $20,000, the Chair of the
Compensation Committee was paid an annual fee of $15,000, the Chair of Nominating and Corporate Governance
Committee was paid an annual fee of $10,000, the Chair of the Safety and Compliance Committee was paid an annual
fee of $10,000 and the Lead Independent Director was paid an annual fee of $20,000. The members of the Audit
Committee were paid an annual fee of $4,000. The Board Chair was paid an annual fee of $200,000. Russell A. Childs,
who is a director and an employee of the Company, received no compensation for his service on the Board.
Stock Awards
Each non-employee director receives a stock award annually, the value of which is determined annually by the
Board. On February 5, 2019, each of the non-employee directors received an award of 2,064 vested shares of Common
Stock, representing approximately $100,000 of value based on the trailing 20-day average stock price as of the date of
award. The Company did not grant stock options to its non-employee directors in 2019.
Share Ownership Guidelines
The Company maintains ownership guidelines for the directors to encourage the alignment of their interests
with the long-term interests of the Company’s shareholders. Each director is required to maintain a minimum ownership
interest in the Company. The guideline ownership level is a number of shares of Common Stock having a value equal to
at least five times the cash component of the annual base compensation for each director. Each director met the
ownership guidelines at December 31, 2019. The holdings of the directors are summarized in the table entitled “Security
Ownership of Certain Beneficial Owners” below.
Policies Against Hedging and Pledging of Company Stock
Pursuant to the Company's Code of Ethics, in order to avoid the appearance that any Company employee is
trading on inside information, Company officers and directors are prohibited from engaging in speculative trading such
as short sales or trading in puts, calls, or other options on our stock or the stock of our affiliates, and are likewise
prohibited from purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any
decrease in the market value of our securities.
In addition, the Company's insider trading policy expressly prohibits all directors, officers and employees from
purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any decrease in the
market value of the Company’s securities. Pledging the Company’s securities as collateral to secure loans is also
prohibited.
46
DIRECTOR COMPENSATION TABLE
The table below summarizes the compensation paid by the Company to its non-employee directors for the year
ended December 31, 2019.
(a) (b) (c) (d) (e) (f) (g)
Change in
Pension Value
and Deferred
Fees Earned or Compensation All Other
Paid in Cash Stock Awards Option Awards Earnings Compensation Total
Name(1) ($) ($)(2) ($) ($) ($) ($)
Jerry C. Atkin. . . . . . . . . . . . . . . . . $ 300,000 $ 100,000 — — — $ 400,000
Steven F. Udvar-Hazy . . . . . . . . . . $ 130,000 $ 100,000 — — — $ 230,000
W. Steve Albrecht . . . . . . . . . . . . . $ 120,000 $ 100,000 — — — $ 220,000
Henry J. Eyring . . . . . . . . . . . . . . . $ 104,000 $ 100,000 — — — $ 204,000
Meredith S. Madden . . . . . . . . . . . $ 100,000 $ 100,000 — — — $ 200,000
Ronald J. Mittelstaedt . . . . . . . . . $ 100,000 $ 100,000 — — — $ 200,000
Andrew C. Roberts . . . . . . . . . . . . $ 114,000 $ 100,000 — — — $ 214,000
Keith E. Smith . . . . . . . . . . . . . . . . $ 119,000 $ 100,000 — — — $ 219,000
James L. Welch . . . . . . . . . . . . . . . $ 104,000 $ 100,000 — — — $ 204,000
(1) Russell A. Childs, the CEO, President and a director of the Company, is not included in the foregoing table as he
was an employee of the Company during 2019 and received no financial remuneration for his service as a director.
(2) Represents the aggregate grant date fair market values of awards as computed under ASC Topic 718. Assumptions
and methodologies used in the calculation of these amounts are included in footnotes to the Company’s audited
financial statements for the year ended December 31, 2019, which are included in the Company’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission. All such shares of our common stock are fully
vested and none of our non-employee directors holds, or as of December 31, 2019 held any unvested shares or other
equity awards.
47
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transaction with Related Party
During the year ended December 31, 2019, the Company purchased $93,540 of spare aircraft parts from
NORDAM, an entity affiliated with Meredith S. Madden, a director of the Company.
On June 13, 2019, the Company repurchased 268,025 shares of its common stock from Jerry Atkin, Board
Chair, at a price of $60.24 per share, representing the volume-weighted average price of the Company’s common stock
over the five trading days immediately prior to such repurchase. The transaction was part of Mr. Atkin’s personal long-
term strategy for asset diversification, tax and estate planning and to fund philanthropic and charitable efforts. The
transaction was approved by the Company’s Audit Committee and was effected pursuant to the Company’s previously
announced stock repurchase plan.
Review and Approval of Transactions with Related Parties
The Company believes that transactions between the Company and its directors and executive officers, or
between the Company and persons related to directors and executive officers of the Company, present a heightened risk
of creating or appearing to create a conflict of interest. Accordingly, the Company has adopted a policy regarding
related-party transactions that has been approved by the Board and incorporated into the Charter of the Audit Committee.
The policy provides that the Audit Committee will review all transactions between the Company and related persons (as
defined in Item 404 of Regulation S-K promulgated by the Securities and Exchange Commission) for potential conflicts
of interest. Under the Company’s policy, all transactions between the Company and related persons are required to be
submitted to the Audit Committee for approval prior to the Company’s entry or participation in such transactions.
48
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Security Ownership of Directors and Executive Officers
The following table sets forth the beneficial ownership of the Common Stock as of March 4, 2020, for each
director and nominee for director, each Named Executive, and by all directors (including nominees) and executive
officers of the Company as a group.
Options Beneficial
Name Common Stock Exercisable (1) Total Ownership(2)
Russell A. Childs . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,237 41,020 178,257 (3)
Robert J. Simmons . . . . . . . . . . . . . . . . . . . . . . . . . . 39,105 7,783 46,888 (3)
Wade J. Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,270 — 34,270 (3)
Michael B. Thompson . . . . . . . . . . . . . . . . . . . . . . . . 26,045 — 26,045 (3)
Terry M. Vais. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,870 — 19,870 (3)
Eric J. Woodward . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,949 2,968 27,917 (3)
W. Steve Albrecht . . . . . . . . . . . . . . . . . . . . . . . . . . 40,188 — 40,188 (3)
Jerry C. Atkin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767,805 — 767,805 1.5%
Henry J. Eyring . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,738 — 41,738 (3)
Meredith S. Madden . . . . . . . . . . . . . . . . . . . . . . . . . 15,556 — 15,556 (3)
Ronald J. Mittelstaedt . . . . . . . . . . . . . . . . . . . . . . . 23,007 — 23,007 (3)
Andrew C. Roberts . . . . . . . . . . . . . . . . . . . . . . . . . . 15,556 — 15,556 (3)
Keith E. Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,007 — 23,007 (3)
Steven F. Udvar-Hazy . . . . . . . . . . . . . . . . . . . . . . . 52,408 — 52,408 (3)
James L. Welch . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,791 — 42,791 (3)
All officers and directors as a group (15 persons). . 1,303,532 51,771 1,355,303 2.7%
(1) Represents shares that the beneficial owner has the right to acquire within 60 days of March 4, 2020 pursuant to the
exercise of such stock options.
(2) Based on 50,257,387 shares outstanding as of March 4, 2020.
(3) Less than one percent of the total shares outstanding as of March 4, 2020.
49
Security Ownership of Other Beneficial Owners
As of March 4, 2020, the Company’s records and other information available from outside sources indicated
that the following shareholders were beneficial owners of more than five percent of the outstanding shares of Common
Stock. The information following is as reported in filings with the Securities and Exchange Commission. The Company
is not aware of any other beneficial owner of more than five percent of the Common Stock.
Amount of
Beneficial Ownership
Common Stock
Percent
Name Shares of Class
Black Rock, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,669,333 (1) 15.26%
55 East 52nd Street
New York, NY 10055
The Vanguard Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,780,885 (2) 11.50%
100 Vanguard Blvd
Malvern, PA 19355
Dimensional Fund Advisors LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,272,488 (3) 8.50%
6300 Bee Cave Road
Austin, TX 78746
(1) Based on a Schedule 13G/A filed on February 4, 2020 by BlackRock, Inc., which stated therein that it has sole
voting power over 7,571,678 shares and sole dispositive power over 7,669,333 shares.
(2) Based on a Schedule 13G/A filed on February 12, 2020 by The Vanguard Group, Inc., which stated therein that it
has sole voting power over 42,744 shares, shared voting power over 1,100 shares, sole dispositive power over
5,738,494 shares and shared dispositive power over 42,391 shares.
(3) Based on a Schedule 13G/A filed by Dimensional Fund Advisors LP on February 12, 2020, which stated therein that
it has sole voting power over 4,199,328 shares and sole dispositive power over 4,272,488 shares.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table contains information regarding the Company’s equity compensation plans as of
December 31, 2019.
Number of Securities
Weighted-Average Remaining Available for
Exercise Price of Future Issuance under
Number of Securities to be Outstanding Equity Compensation
Issued upon Exercise of Options, Plans (Excluding
Outstanding Options, Warrants and Securities Reflected in
Plan Category Warrants and Rights Rights the First Column)
Equity compensation plans approved by security holders(1) 60,231 $ 14.74 5,040,266 (2)
(1) Consists of the Company’s SkyWest Inc. Long Term Incentive Plan and the Employee Stock Purchase Plan.
(2) Includes 640,640 shares remaining available for future issuance under the Employee Stock Purchase Plan, of which
24,334 were eligible to be purchased during the purchase period in effect on December 31, 2019.
50
PROPOSAL 2
ADVISORY VOTE ON NAMED EXECUTIVE COMPENSATION
Background
Section 14A of the Exchange Act, which was enacted pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act, requires that the Company provide its shareholders with the opportunity to vote on an
advisory (non-binding) resolution to approve the compensation of the Named Executives (referred to as a “Say-on-Pay”
proposal) as disclosed in this Proxy Statement.
Accordingly, the following resolution will be submitted to the Company’s shareholders for approval at the
Meeting:
“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named
Executives, as disclosed in the Company’s Proxy Statement for the 2020 Annual Meeting of Shareholders
pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the
Compensation Discussion and Analysis, the 2019 Executive Compensation table and the other related tables
and disclosure.”
As described in detail under the heading “Compensation Discussion and Analysis,” the Board believes the
Company’s compensation of the Named Executives achieves the primary goals of (i) attracting and retaining
experienced, well-qualified executives capable of implementing the Company’s strategic and operational objectives,
(ii) aligning management compensation with the creation of shareholder value on an annual and long-term basis, and
(iii) linking a substantial portion of the Named Executives’ compensation with long-term Company performance and the
achievement of pre-determined goals, while at the same time avoiding the encouragement of unnecessary or excessive
risk-taking. The Board encourages you to review in detail the Compensation Discussion and Analysis beginning on
page 22 of this Proxy Statement and the executive compensation tables beginning on page 36 of this Proxy Statement. In
light of the information set forth in such sections of this Proxy Statement, the Board believes the compensation of the
Named Executives for the fiscal year ended December 31, 2019 was fair and reasonable and that the Company’s
compensation programs and practices are in the best interests of the Company and its shareholders.
The vote on this Say-on-Pay resolution is not intended to address any specific element of compensation; rather,
the vote relates to all aspects of the compensation of the Named Executives, as described in this Proxy Statement. While
this vote is only advisory in nature, which means that the vote is not binding on the Company, the Board and the
Compensation Committee (which is composed solely of independent directors), value the opinion of the Company’s
shareholders and will consider the outcome of the vote when addressing future compensation arrangements.
Voting
Approval of the resolution above (on a non-binding, advisory basis) requires that the number of votes cast at the
Meeting, in person or by proxy, in favor of the resolution exceeds the number of votes cast in opposition to the
resolution.
The Board and the Compensation Committee Recommend that Shareholders Vote FOR Approval of the
Compensation of the Named Executives, as disclosed in this Proxy Statement.
51
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Following an evaluation by the Audit Committee and by the Company’s management of the performance of
Ernst & Young LLP during the prior fiscal year, the Audit Committee has recommended and approved the appointment
of Ernst & Young LLP as the Company’s independent registered public accounting firm to examine the consolidated
financial statements of the Company for the year ending December 31, 2020. The Company is seeking shareholder
ratification of such action.
It is expected that representatives of Ernst & Young LLP will attend the Meeting, will have an opportunity to
make a statement if they desire and will be available to respond to appropriate questions.
The Board and the Audit Committee Recommend that Shareholders Vote FOR the Ratification of Appointment
of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the year ending
December 31, 2020.
52
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table represents aggregate fees billed to us for services related to the years ended December 31,
2019 and 2018, by Ernst & Young LLP (“EY”):
Year Ended December 31,
2019 2018
Audit Fees (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,049,500 $ 1,371,000
Audit-Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Tax Fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 36,000
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,049,500 $ 1,407,000
(1) Audit Fees consist of fees and related expenses for the annual audit of the Company’s financial statements,
including the integrated audit of internal control over financial reporting and the quarterly reviews of the
Company’s financial statements included in its Quarterly Reports on Form 10-Q.
(2) Tax Fees consist of fees and related expenses for research compiled relating to the Tax Cuts and Jobs Act.
The Audit Committee has concluded that EY’s delivery of non-audit services is compatible with EY’s
independence.
Pre-Approval Policies and Procedures
The Audit Committee charter provides that the Audit Committee shall pre-approve all external audit services,
internal control-related services and permissible non-audit services (including the fees and terms thereof), subject to
certain specified exceptions. The Audit Committee has also adopted a policy regarding the retention of the independent
registered public accounting firm that requires pre-approval of all of its services by the Audit Committee or the Chair of
the Audit Committee. When services are pre-approved by the Chair of the Audit Committee, notice of such approval is
given to the other members of the Audit Committee and presented to the full Audit Committee for ratification at its next
scheduled meeting. The Audit Committee considers whether the provision of each non-audit service is compatible with
maintaining the independence of the auditors. All of the services listed above were pre-approved by the Audit Committee
in accordance with this policy.
53
REPORT OF THE AUDIT COMMITTEE
Management of the Company has primary responsibility for the Company’s financial statements and internal
control over the Company’s financial reporting. EY, the Company’s independent registered public accounting firm, has
responsibility for the integrated audit of the Company’s financial statements and internal control over financial reporting.
It is the responsibility of the Audit Committee to oversee financial and control matters, among other responsibilities
fulfilled by the Audit Committee under its charter. The Audit Committee meets regularly with representatives of EY and
Protiviti, Inc. (“Protiviti”), the Company’s principal internal auditor, without the presence of management, to ensure
candid and constructive discussions about the Company’s compliance with accounting standards and best practices
among public companies comparable in size and scope to the Company.
At its meetings during the year ended December 31, 2019, the Audit Committee reviewed and discussed the
following topics, among other matters: financial performance; financial reporting practices; quarterly and annual reports,
including Management’s Discussion and Analysis of Financial Condition and Results of Operations; cybersecurity
matters and risks and information technology controls; enterprise risk management and risk assessment; legal and
regulatory issues; accounting and financial management issues; critical accounting policies and critical audit matters;
accounting standards; airline industry matters; and a summary of calls received on the Company’s anonymous
whistleblower hotline. The Audit Committee held separate executive sessions regularly with representatives of EY,
Protiviti and the Company’s legal counsel, during which the following topics, among other matters, were discussed:
financial management, accounting, internal controls, finance and accounting staffing, legal matters and compliance
issues. The Audit Committee also regularly reviewed with its outside advisors material developments in the law and
accounting literature that could be pertinent to the Company’s financial reporting practices.
In addition, the Audit Committee reviewed management’s report on internal control over financial reporting,
required under Section 404 of the Sarbanes Oxley Act of 2002 and related rules. As part of this review, the Audit
Committee reviewed the bases for management’s conclusions in that report, and also reviewed the report of the
independent registered public accounting firm on internal control over financial reporting. Throughout the year ended
December 31, 2019, the Audit Committee reviewed management’s plan for documenting and testing controls, the results
of their documentation and testing, any deficiencies discovered and the resulting remediation of any such deficiencies.
In connection with the financial statements for the year ended December 31, 2019, the Audit Committee has:
(1) reviewed and discussed the audited financial statements with management;
(2) discussed with EY, the Company’s independent registered public accounting firm, the matters required to
be discussed by applicable standards of the Public Company Accounting Oversight Board (“PCAOB”) and
the Securities and Exchange Commission; and
(3) received the written disclosures and letter from EY regarding the auditors’ independence required by
applicable requirements of the PCAOB regarding EY’s communications with the Audit Committee
concerning independence, and has discussed with EY its independence.
Based upon these reviews and discussions, the Audit Committee recommended to the Board at the February 4,
2020 meeting of the Board that the Company’s audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission. The Board approved
this inclusion.
54
The Audit Committee
W. Steve Albrecht, Chair
Henry J. Eyring
Andrew C. Roberts
Keith E. Smith
James L. Welch
The information contained in this Audit Committee Report shall not be deemed to be “soliciting material,” to be
“filed” with the Securities and Exchange Commission or be subject to Regulation 14A or Regulation 14C or to the
liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing of
SkyWest, Inc., except to the extent that SkyWest, Inc. specifically incorporates it by reference into a document filed under
the Securities Act of 1933 or the Exchange Act.
55
DELINQUENT SECTION 16(a) REPORTS
The Company’s executive officers, directors and 10% shareholders are required under Section 16 of the
Exchange Act to file reports of ownership and changes in ownership with the Securities and Exchange Commission.
Copies of these reports must also be furnished to the Company.
Based solely on a review of copies of reports furnished to the Company, or written representations that no
reports were required, the Company believes that during 2019 its executive officers, directors and 10% holders complied
with all filing requirements of Section 16 of the Exchange Act, except that one Form 4 was filed late for Mr. Atkin with
respect to a single transaction.
SHAREHOLDER PROPOSALS FOR THE 2021 ANNUAL MEETING OF SHAREHOLDERS
If any shareholder intends to present a proposal to be considered for inclusion in the Company’s proxy materials
in connection with the Company’s 2021 Annual Meeting of Shareholders, the proposal must be in proper form (per
Securities and Exchange Commission Regulation 14A, Rule 14a-8—Shareholder Proposals) and received by the Chief
Financial Officer of the Company on or before November 13, 2020. Shareholder proposals to be presented at the 2021
Annual Meeting of Shareholders which are not to be included in the Company’s proxy materials must be received by the
Company no earlier than February 4, 2021, and no later than February 24, 2021, in accordance with the procedures set
forth in the Company’s Bylaws.
56
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
In instances in which multiple holders of the Common Stock share a common address and are the beneficial
owners, but not the record holders, of those shares of Common Stock, the holders’ banks, brokers or other nominees may
only deliver one copy of this Proxy Statement and the Company’s 2019 Annual Report to Shareholders, unless the
applicable bank, broker or nominee has received contrary instructions from one or more of the shareholders. The
Company will deliver promptly, upon written request, a separate copy of this Proxy Statement and the Company’s 2019
Annual Report to Shareholders to any shareholder at a shared address to which a single copy of the documents was
delivered. A shareholder who wishes to receive a separate copy of this Proxy Statement and the Company’s 2019 Annual
Report to Shareholders should submit a request in writing to Robert J. Simmons, Chief Financial Officer of the
Company, 444 South River Road, St. George, Utah 84790, Telephone: (435) 634-3200. Beneficial owners sharing an
address who are receiving multiple copies of proxy materials and annual reports and who wish to receive a single copy of
such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of
each document be mailed to all shareholders at the shared address in the future.
OTHER BUSINESS
The Company’s management does not know of any other matter to be presented for action at the Meeting.
However, if any other matters should be properly presented at the Meeting, it is the intention of the persons named in the
accompanying proxy to vote said proxy in accordance with their best judgment.
Robert J. Simmons
Chief Financial Officer
St. George, Utah
March 13, 2020
57
APPENDIX A
TO
PROXY STATEMENT
Reconciliation of non-GAAP financial measures
The non-GAAP information presented in this proxy statement should not be considered in isolation or as a
substitute for any measure derived in accordance with GAAP. The non-GAAP information may also be inconsistent with
the manner in which similar measures are derived or used by other companies. Management uses such non-GAAP
information for financial and operational decision-making purposes and as a means to evaluate period-over-period
comparisons and in forecasting the Company’s business going forward. Management believes that the presentation of
such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information,
provides additional useful comparative information for investors in their assessment of the underlying performance of
the Company’s business without regard to these items.
Reconciliation to Adjusted Net Income and Diluted Earnings per Share (unaudited)
(Dollars in thousands, except per diluted share)
For the year ended December 31, 2019
Income tax
Pre-tax benefit Net income per
income (expense) Net income Diluted Share
GAAP income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 446,305 $ (106,206) $ 340,099 $ 6.62
2019 adjustments (1) . . . . . . . . . . . . . . . . . . . . . . . . . (24,656) 5,646 (19,010)
Adjusted income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 421,649 $ (100,560) $ 321,089 $ 6.25
For the year ended December 31, 2017
Income tax
Pre-tax benefit Net income per
income (expense) Net income Diluted Share
GAAP income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 288,183 $ 140,724 $ 428,907 $ 8.08
2017 adjustments (2) . . . . . . . . . . . . . . . . . . . . . . . . . - (246,845) (246,845)
Adjusted income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 288,183 $ (106,121) $ 182,062 $ 3.43
These adjustments allow investors to better understand and analyze our recurring core performance in the
periods presented.
(1) Excludes the gain on the sale of ExpressJet of $46.5 million (pre-tax); also excludes special item operating expenses
of $21.9 million (pre-tax), primarily consisting of a non-cash write-off of aircraft manufacturer part credits that
SkyWest forfeited to settle future lease return obligations. These adjustments were recorded in the first quarter of
2019.
(2) Adjusts for tax benefit resulting from the Tax Cuts and Jobs Act enacted during the fourth quarter of 2017 that
resulted in a revaluation of SkyWest’s deferred tax assets and liabilities.
The Company had no non-GAAP reconciliation items relating to 2018.
58
OFFICERS AND DIRECTORS
SKYWEST, INC. and SUBSIDIARY
SKYWEST, INC. BOARD OF DIRECTORS
Russell A. Childs Jerry C. Atkin Ronald J. Mittelstaedt
Chief Executive Officer & President Chairman of the Board Executive Chairman, Waste Connections,
Member of the Board since 2016 Elected Chairman 1991 Inc.
Member of the Board since 1974 Member, Compensation Committee
Robert J. Simmons Member, Nominating & Corporate
Chief Financial Officer Steven F. Udvar-Hazy Governance
Executive Chairman, Air Lease Member, Safety & Compliance
Wade J. Steel Corporation Committee
Chief Commercial Officer Board Lead Director Member of the Board since 2013
Chairman, Nominating & Corporate
Eric J. Woodward Andrew C. Roberts
Governance Committee
Chief Accounting Officer Chairman, STS Aviation Group, LLC
Member, Compensation Committee
Chairman, Safety & Compliance
Member of the Board since 1986
Justin L. Esplin Committee
Vice President, Information Technology Member, Audit Committee
W. Steve Albrecht
Member of the Board since 2015
Emeritus Professor, Brigham Young
SKYWEST AIRLINES, INC.
University
Keith E. Smith
Michael B. Thompson Chairman, Audit Committee President & Chief Executive Officer, Boyd
Chief Operating Officer Member, Nominating & Corporate Gaming Corporation
Governance Committee Chairman, Compensation Committee
Bradley W. Blake Member of the Board since 2012 (also Member, Audit Committee
Vice President, Operation Control Center served from 2003-2009) Member of the Board since 2013
Bill C. Dykes Henry J. Eyring James L. Welch
Vice President, Maintenance President, Brigham Young University Retired, Chief Executive Officer, YRC
Idaho Worldwide, Inc.
Tracy T. Gallo Member, Audit Committee Member, Audit Committee
Vice President, Flight Operations Member, Compensation Committee Member, Nominating & Corporate
Member of the Board since 2006 (also Governance Committee
Lori A. Hunt served from 1995-2003) Member, Safety & Compliance
Vice President, People Committee
Meredith S. Madden Member of the Board since 2007
Sonya P. Wolford Chief Executive Officer, NORDAM
Vice President, InFlight Services Member, Compensation Committee
Member, Safety & Compliance
Greg Wooley Committee
Vice President, Airport Operations Member of the Board since 2015
CORPORATE INFORMATION
Headquarters Independent Public Accountants Registrar and Transfer Agent
444 South River Road Ernst & Young, LLP Zions First National Bank
St George Utah 84790 15 W South Temple, Suite 1800 Stock Transfer Department
P: 435-634-3000 Salt Lake City, Utah 84101 PO Box 9088
inc.skywest.com Salt Lake City, Utah 84130
NASDAQ Stock Symbol: SKYW
i n c. s k y we s t. co m
SCHEDULE 3.17
Subsidiaries
The following is each Subsidiary of the Parent:
%
Subsidiary Jurisdiction Owner
Ownership
1. SkyWest Airlines, Inc. Utah SkyWest, Inc. 100
2. *SkyWest Leasing, Inc. Utah SkyWest, Inc. 100
3. **SkyWest Insurance Utah SkyWest, Inc.
100
Company, Inc.
* Subsidiary is an “Excluded Subsidiary” under the Loan Agreement, pursuant to category (iii) of the
definition.
** Subsidiary is an “Excluded Subsidiary” under the Loan Agreement, pursuant to category (ii) of the
definition.
SCHEDULE 5.14
Post-Closing Matters
None
SCHEDULE 6.05(i)
Restricted Payments
[REDACTED]
SCHEDULE 6.06
Investments
[REDACTED]
SCHEDULE 6.07
Affiliate Transactions
None
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