SkyWest Airlines 2014 Annual Report Download - page 98

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(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 4, 2010, the Company’s shareholders approved the adoption of the SkyWest Inc. 2010
Long-Term Incentive Plan, which provides for the issuance of up to 5,150,000 shares of common stock
to the Company’s directors, employees, consultants and advisors (the ‘‘2010 Incentive Plan’’). The 2010
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 2010
Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors
(the ‘‘Compensation Committee’’), which is authorized to designate option grants as either incentive
stock options for income tax purposes (‘‘ISO’’) or non-statutory stock options ISOs are granted at not
less than 100% of the market value of the underlying common stock on the date of grant.
Non-statutory stock options are granted at a price as determined by the Compensation Committee.
In prior years, the Company adopted three stock option plans: the Executive Stock Incentive Plan
(the ‘‘Executive Plan’’), the 2001 Allshare Stock Option Plan (the ‘‘Allshare Plan’’) and SkyWest Inc.
Long-Term Incentive Plan (the ‘‘2006 Incentive Plan’’). As of December 31, 2014, options to purchase
an aggregate 1,821,804 shares of the Company’s common stock remained outstanding under the
Executive Plan, the Allshare Plan and the 2006 Incentive Plan. There are no additional shares of
common stock available for issuance under these plans.
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. The Company
granted 255,503, 173,560 and 200,115 stock options to employees under the 2010 Incentive Plan during
the years ended December 31, 2014, 2013 and 2012, respectively. The following table shows the
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