Item 1.01. Entry into a Material Definitive Agreement.
As of May 29, 2020, Atlas Air, Inc. ("Atlas") and Southern Air Inc. ("Southern"
and, together with Atlas, the "PSP Recipients"), each a wholly owned subsidiary
of Atlas Air Worldwide Holdings, Inc. (the "Company"), entered into definitive
documentation with the United States Department of the Treasury ("Treasury")
with respect to payroll support funding (the "Payroll Support Program")
available to cargo air carriers pursuant to Section 4112 of the Coronavirus Aid,
Relief, and Economic Security Act ("CARES Act"). These funds will be used to pay
wages, salaries and benefits for eligible employees at Atlas and Southern. The
PSP Recipients' expected disbursements under the Payroll Support Program consist
of approximately $207.0 million in direct payroll support and a $199.8 million
unsecured ten-year term loan. In addition, and as compensation for the payroll
support, the Company is providing warrants to purchase up to an aggregate of
625,452 shares of the Company's common stock, par value $0.01 per share ("Common
Stock"), to be issued to Treasury as funds are disbursed. Funds are expected to
be disbursed to the PSP Recipients in three installments from June to July 2020.
The Payroll Support Program subjects the PSP Recipients and certain of their
affiliates to a number of restrictions, including prohibitions against
reductions in certain employee salaries, wages and benefits, certain involuntary
terminations and furloughs of employees, share buybacks and the payment of
dividends until September 30, 2021, as well as certain limitations on executive
compensation until March 24, 2022.
Payroll Support Program Agreement
As of May 29, 2020, the PSP Recipients entered into a payroll support program
agreement (the "PSP Agreement") with Treasury, pursuant to which the PSP
Recipients will receive payroll support funding ("Payroll Support") under the
Payroll Support Program. Funds received in connection with Payroll Support are
to be used exclusively for the payment of certain employee wages, salaries and
benefits of the PSP Recipients. The PSP Agreement subjects the PSP Recipients
and certain of their affiliates to a number of restrictions as summarized above
and also imposes reporting obligations on the Company and the PSP Recipients.
Payroll Support Agreement Promissory Note
As compensation for Payroll Support, as of May 29, 2020, the Company issued a
senior unsecured promissory note (the "Note") to Treasury. In connection with
the disbursement of the initial Payroll Support, the Note was issued at an
initial principal amount of $85,915,990. The principal amount of the Note will
be increased as the Company receives additional funds under the PSP Agreement,
up to an expected maximum principal amount of $199.8 million after the final
disbursement. The Note is guaranteed by each of the PSP Recipients.
The Note matures in full on May 29, 2030, and is subject to mandatory prepayment
requirements in connection with certain change of control triggering events. The
Company may prepay the Note, in whole or in part, at any time prior to its
maturity without premium or penalty. Principal amounts outstanding under the
Note bear interest at a rate per annum of 1.00% until May 29, 2025 and,
afterwards, at a rate per annum equal to an interest rate based on the Secured
Overnight Financing Rate (SOFR) plus 2.00%. The Note contains customary
representations and warranties, covenants and events of default provisions.
Payroll Support Program Warrant Agreement and Warrant
As compensation for Payroll Support, as of May 29, 2020, the Company entered
into a warrant agreement with Treasury (the "Warrant Agreement"), pursuant to
which the Company agreed to issue warrants (each such issuance, a "Warrant" and,
together with the PSP Agreement, the Note and the Warrant Agreement, the
"Payroll Support Documents") to purchase shares of Common Stock of the Company
to Treasury. In connection with the disbursement of the initial Payroll Support,
the Company issued a Warrant to purchase up to 268,908 shares of the Company's
Common Stock. Upon each subsequent disbursement of Payroll Support to the PSP
Recipients under the PSP Agreement, the Company will issue a Warrant to Treasury
in an amount equal to 10% of the increase in the principal amount of the Note,
divided by the exercise price of $31.95 (which was the closing price of the
Company's Common Stock on the Nasdaq Global Select Market on May 1, 2020).
The Warrant Agreement sets out the Company's obligations to issue Warrants in
connection with disbursements of Payroll Support and provides Treasury certain
registration rights with respect to the Warrants and the underlying Common
Stock. Assuming the total installments to be paid pursuant to the PSP Agreement
aggregate to the total expected disbursements, the total number of Warrants
issuable to Treasury will be 625,452, subject to certain anti-dilution
provisions. Each Warrant is exercisable at an exercise price of $31.95 per share
of Common Stock and will expire on the fifth anniversary of the issue date of
such Warrant. Warrants may be settled through net share settlement or net cash
settlement, at the Company's option. The Warrants will include customary
anti-dilution provisions and will be freely transferable with registration
rights. Treasury will not vote any shares it acquires upon exercise of the
Warrants.
The Warrants issued to Treasury will trigger an anti-dilution adjustment to the
terms of the warrants that the Company issued to Amazon.com, Inc. in 2016 and
2019 in accordance with their terms.
The Warrants issued under the Warrant Agreement are issued pursuant to an
exemption from registration provided for under Section 4(a)(2) of the Securities
. . .
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of the Registrant.
The information provided in Item 1.01 is incorporated herein by reference to the
extent responsive to Item 2.03.
Item 3.02. Unregistered Sales of Equity Securities.
The information provided in Item 1.01 is incorporated herein by reference to the
extent responsive to Item 3.02.
Item 8.01. Other Events.
The information provided in Item 1.01 is incorporated herein by reference to the
extent responsive to Item 8.01.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Number Description
104 Cover page interactive data file (embedded within the Inline XBRL document).
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