<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999 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 1-12649
AMERICA WEST HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 86-0847214
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
111 WEST RIO SALADO PARKWAY, TEMPE, ARIZONA 85281
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (480) 693-0800
</TABLE>
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT)
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 XX NO ____
THE COMPANY HAS 1,100,000 SHARES OF CLASS A COMMON STOCK AND 35,319,459, SHARES
OF CLASS B COMMON STOCK OUTSTANDING AS OF JULY 31, 1999.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICA WEST HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 186,592 $ 108,360
Short-term investments ............................... -- 27,485
Accounts receivable, net ............................. 102,433 96,381
Expendable spare parts and supplies, net ............. 37,586 31,147
Prepaid expenses ..................................... 53,624 38,730
---------- ----------
Total current assets ............................. 380,235 302,103
---------- ----------
Property and equipment:
Flight equipment ..................................... 900,987 931,134
Other property and equipment ......................... 177,653 157,718
Equipment purchase deposits .......................... 87,149 83,649
---------- ----------
1,165,789 1,172,501
Less accumulated depreciation and amortization ....... 385,178 410,461
---------- ----------
Net property and equipment ...................... 780,611 762,040
---------- ----------
Other assets:
Restricted cash ...................................... 33,433 35,262
Reorganization value in excess of amounts allocable to
identifiable assets, net ......................... 326,024 336,772
Deferred income taxes ................................ 28,450 28,054
Other assets, net .................................... 87,095 60,799
---------- ----------
Total other assets ............................... 475,002 460,887
---------- ----------
$1,635,848 $1,525,030
========== ==========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
2
<PAGE> 3
AMERICA WEST HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt ...................................... $ 78,641 $ 80,439
Accounts payable .......................................................... 139,744 112,563
Air traffic liability ..................................................... 242,428 209,525
Accrued compensation and vacation benefits ................................ 42,842 48,338
Accrued taxes ............................................................. 78,472 43,489
Other accrued liabilities ................................................. 51,957 40,905
----------- -----------
Total current liabilities ............................................. 634,084 535,259
----------- -----------
Long-term debt, less current maturities ....................................... 198,003 207,906
Deferred credits and other liabilities ........................................ 109,621 112,407
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 48,800,000
shares; no shares issued .............................................. -- --
Class A common stock, $.01 par value. Authorized
1,200,000 shares; issued and outstanding 1,100,000 shares at
June 30, 1999 and December 31, 1998 ................................... 11 11
Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued
45,378,982 shares at June 30, 1999 and 45,280,199 shares at
December 31, 1998 ..................................................... 454 453
Additional paid-in capital ................................................ 554,523 556,508
Retained earnings ......................................................... 321,871 253,678
----------- -----------
876,859 810,650
Less: Cost of Class B Common Stock in treasury, 9,550,095
shares in 1999 and 7,388,095 shares in 1998 ........................... (182,719) (141,192)
----------- -----------
Total stockholders' equity ............................................ 694,140 669,458
----------- -----------
$ 1,635,848 $ 1,525,030
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
3
<PAGE> 4
AMERICA WEST HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues:
Passenger ................................. $ 524,246 $ 491,042 $ 1,002,868 $ 934,834
Cargo ..................................... 10,670 11,887 21,398 24,492
Other ..................................... 19,171 16,508 36,176 31,015
TLC net revenues .......................... 15,393 14,258 28,664 26,570
----------- ----------- ----------- -----------
Total operating revenues .............. 569,480 533,695 1,089,106 1,016,911
----------- ----------- ----------- -----------
Operating expenses:
Salaries and related costs ................ 120,434 112,743 238,495 218,859
Aircraft rents ............................ 65,577 60,195 131,102 118,940
Other rents and landing fees .............. 31,589 28,795 60,850 58,253
Aircraft fuel ............................. 53,070 47,798 97,433 98,082
Agency commissions ........................ 30,750 34,900 60,442 66,517
Aircraft maintenance materials and repairs 51,938 44,041 100,624 86,469
Depreciation and amortization ............. 12,322 12,765 23,997 25,063
Amortization of excess reorganization value 4,974 4,974 9,948 9,948
TLC expenses .............................. 11,990 10,267 22,450 20,116
Other ..................................... 111,245 100,476 217,459 188,516
----------- ----------- ----------- -----------
Total operating expenses .............. 493,889 456,954 962,800 890,763
----------- ----------- ----------- -----------
Operating income .............................. 75,591 76,741 126,306 126,148
----------- ----------- ----------- -----------
Nonoperating income (expenses):
Interest income ........................... 2,658 3,972 5,560 6,972
Interest expense, net ..................... (5,995) (6,313) (12,257) (14,048)
Other, net ................................ 3,064 (652) 2,446 (1,068)
----------- ----------- ----------- -----------
Total nonoperating expenses, net ...... (273) (2,993) (4,251) (8,144)
----------- ----------- ----------- -----------
Income before income taxes .................... 75,318 73,748 122,055 118,004
----------- ----------- ----------- -----------
Income taxes .................................. 33,064 32,331 53,862 51,449
----------- ----------- ----------- -----------
Net income .................................... $ 42,254 $ 41,417 $ 68,193 $ 66,555
=========== =========== =========== ===========
Earnings per share:
Basic ..................................... $ 1.12 $ 0.95 $ 1.78 $ 1.52
=========== =========== =========== ===========
Diluted ................................... $ 1.06 $ 0.86 $ 1.68 $ 1.38
=========== =========== =========== ===========
Shares used for computation:
Basic ..................................... 37,824 43,617 38,407 43,808
=========== =========== =========== ===========
Diluted ................................... 39,985 48,410 40,547 48,132
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
4
<PAGE> 5
AMERICA WEST HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999 1998
---- ----
<S> <C> <C>
Net cash provided by operating activities ........................ $ 203,262 $ 241,747
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment .......................... (101,338) (67,789)
Sales (purchases) of short-term investments .................. 27,485 (64,423)
Equipment purchase deposits and other ........................ 8,699 (10,456)
--------- ---------
Net cash used in investing activities .................... (65,154) (142,668)
--------- ---------
Cash flows from financing activities:
Repayment of debt ............................................ (109,606) (45,634)
Proceeds from issuance of debt ............................... 94,274 --
Repurchase of common stock and AWA warrants .................. (45,901) (63,652)
Other ........................................................ 1,357 3,318
--------- ---------
Net cash used in financing activities .................... (59,876) (105,968)
--------- ---------
Net increase (decrease) in cash and cash equivalents ............. 78,232 (6,889)
--------- ---------
Cash and cash equivalents at beginning of period ................. 108,360 172,303
--------- ---------
Cash and cash equivalents at end of period ....................... $ 186,592 $ 165,414
========= =========
Cash, cash equivalents and short-term investments at end of period $ 186,592 $ 229,837
========= =========
Cash paid for:
Interest, net of amounts capitalized ......................... $ 11,269 $ 11,898
========= =========
Income taxes ................................................. $ 22,692 $ 4,211
========= =========
Non-cash financing activities:
Notes payable issued for equipment purchase deposits ......... $ 10,500 $ 3,500
========= =========
Notes payable canceled under the aircraft purchase agreement . $ (7,000) $ (10,309)
========= =========
Equipment acquired through manufacturer credits .............. $ 500 $ --
========= =========
Equipment acquired through capital leases .................... $ -- $ 230
========= =========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
5
<PAGE> 6
AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the
accounts of America West Holdings Corporation ("Holdings" or the "Company") and
its wholly owned subsidiaries, America West Airlines, Inc. ("AWA"), and The
Leisure Company ("TLC"). These statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission and in
accordance with those rules and regulations, certain information and footnotes
required by generally accepted accounting principles have been omitted. In the
opinion of management, the condensed consolidated financial statements reflect
all adjustments, which are of a normal recurring nature, necessary for a fair
presentation. Certain prior year amounts have been reclassified to conform with
current year presentation. The accompanying condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
2. EARNINGS PER SHARE ("EPS")
The following table presents the computation of basic and diluted EPS
in accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share."
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
(In thousands of dollars except share data)
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income applicable to common stock .............. $ 42,254 $ 41,417 $ 68,193 $ 66,555
=========== =========== =========== ===========
Weighted average common shares outstanding ..... 37,823,972 43,616,703 38,406,886 43,808,055
=========== =========== =========== ===========
Basic earnings per share ....................... $ 1.12 $ 0.95 $ 1.78 $ 1.52
=========== =========== =========== ===========
DILUTED EARNINGS PER SHARE
Income applicable to common stock .............. $ 42,254 $ 41,417 $ 68,193 $ 66,555
=========== =========== =========== ===========
Share computation:
Weighted average common shares outstanding ... 37,823,972 43,616,703 38,406,886 43,808,055
Assumed exercise of stock options and warrants 2,160,660 4,792,985 2,140,411 4,323,876
----------- ----------- ----------- -----------
Weighted average common shares
outstanding as adjusted ................ 39,984,632 48,409,688 40,547,297 48,131,931
=========== =========== =========== ===========
Diluted earnings per share ..................... $ 1.06 $ 0.86 $ 1.68 $ 1.38
=========== =========== =========== ===========
</TABLE>
6
<PAGE> 7
AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
For the three and six months ended June 30, 1999, options for 1,796,616
and 1,702,500 shares, respectively, are not included in the computation of
diluted EPS because the option exercise prices were greater than the average
market price of common stock for the respective periods. Similarly, for the
three and six months ended June 30, 1998, options for 10,549 and 176,119 shares,
respectively, are not included in the computation of diluted EPS.
3. STOCK REPURCHASE PROGRAM
In May 1999, the Company's Board of Directors approved the extension of
the Company's stock repurchase program to provide for the repurchase of up to
5.0 million additional shares of Class B Common Stock and all of AWA's publicly
traded warrants by December 31, 2001. Pursuant to this program, in the second
quarter of 1999 the Company repurchased 2,034,000 shares of Class B Common Stock
on the open market for approximately $39.2 million and AWA repurchased 199,500
of its publicly traded warrants to purchase common stock of Holdings for
approximately $2.0 million. In July 1999, the Company repurchased 590,200 shares
of Class B Common Stock for approximately $12.0 million. The Company has now
returned over $247 million to its shareholders through equity purchases over the
past four years.
4. PROPERTY AND EQUIPMENT
In the second quarter of 1999, AWA reduced the balance of its flight
equipment accounts by $96.4 million to remove capitalized maintenance which was
fully amortized. This reduction was fully offset by a corresponding decrease in
accumulated depreciation and amortization. Consequently, this transaction had no
net effect on the Company's property and equipment accounts.
5. BORROWING UNDER CREDIT FACILITY
On February 19, 1999 AWA borrowed $94.3 million, the total amount then
available under its senior secured revolving credit facility, to provide
additional liquidity in the event of service disruptions related to the
Company's contract negotiations with its flight attendants. The Company repaid
the $94.3 million on April 19, 1999 in accordance with the terms of the credit
facility. (See Note 8, "Labor Contract".)
6. BOND FINANCING
In June 1999, Series 1999 special facility revenue bonds ("new bonds")
were issued by a municipality to fund the retirement of the Series 1994A bonds
("old bonds") and the construction of a new concourse with 14 gates at Terminal
4 in Phoenix Sky Harbor International Airport in support of AWA's strategic
growth plan. Under the operating agreements with the airport, AWA is required to
make payments sufficient to pay principal and interest when due on the bonds.
The new bonds are due June 2019 with interest at 6.25% payable semiannually on
June 1 and December 1, commencing on December 1, 1999. The new bonds are subject
to optional redemption prior to the maturity date on or after June 1, 2009 in
whole or in part, on any interest payment date at the following redemption
prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or December 1,
2010; and 100% on June 1, 2011 and thereafter.
7
<PAGE> 8
AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
7. INCENTIVE EQUITY PLAN
In May 1999, the Company's Board of Directors and its shareholders
approved an amendment to the America West 1994 Incentive Equity Plan (the
"Plan") increasing by 1.5 million the number of shares of the Company's Class B
common stock available for awards under the Plan. The Plan is the Company's
stock based long-term compensation program under which executives of the Company
may be awarded stock options, restricted stock and other stock based
compensation.
8. LABOR CONTRACT
On May 4, 1999 AWA and the Association of Flight Attendants ("AFA")
entered into a five-year collective bargaining agreement covering the airline's
2,400 flight attendants. The five-year agreement resolves issues regarding pay
rates, benefits and working conditions and is the flight attendants' first
contract with AWA.
9. SEGMENT DISCLOSURES
In 1998 the Company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which established standards for the
way public business enterprises report information about operating segments in
annual and interim financial statements. Generally, financial information is
required to be reported on the basis that is used internally for evaluating
segment performance and allocation of resources to segments. It also established
standards for related disclosures about products and services, geographic areas,
and major customers.
Segment reporting financial data as of and for the three and six months
ended June 30, 1999 and 1998, respectively, follows (in thousands of dollars):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
Other/
AWA TLC Eliminations Total
--- --- ------------ -----
<S> <C> <C> <C> <C>
Operating revenue........................ $ 554,193 $15,393 $ (106) $ 569,480
Depreciation and amortization............ 12,322 567 (567) 12,322
Amortization of reorganization value..... 4,974 400 (400) 4,974
Operating income ........................ 74,059 3,403 (1,871) 75,591
Capital expenditures..................... 54,902 3,145 -- 58,047
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1998
Other/
AWA TLC Eliminations Total
--- --- ------------ -----
<S> <C> <C> <C> <C>
Operating revenue........................ $ 519,489 $14,258 $ (52) $ 533,695
Depreciation and amortization............ 12,765 99 (99) 12,765
Amortization of reorganization value..... 4,974 333 (333) 4,974
Operating income ........................ 73,792 3,991 (1,042) 76,741
Capital expenditures..................... 30,534 101 -- 30,635
</TABLE>
8
<PAGE> 9
AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
Other/
AWA TLC Eliminations Total
--- --- ------------ -----
<S> <C> <C> <C> <C>
Operating revenue........................ $1,060,655 $28,664 $ (213) $1,089,106
Depreciation and amortization............ 23,997 997 (997) 23,997
Amortization of reorganization value..... 9,948 800 (800) 9,948
Operating income ........................ 122,948 6,214 (2,856) 126,306
Capital expenditures..................... 98,061 3,277 -- 101,338
Segment assets (end of period)........... 1,728,773 96,204 (189,129) 1,635,848
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
Other/
AWA TLC Eliminations Total
--- --- ------------ -----
<S> <C> <C> <C> <C>
Operating revenue........................ $ 990,442 $26,570 $ (101) $1,016,911
Depreciation and amortization............ 25,063 222 (222) 25,063
Amortization of reorganization value..... 9,948 733 (733) 9,948
Operating income ........................ 121,615 6,454 (1,921) 126,148
Capital expenditures..................... 67,215 574 -- 67,789
Segment assets (end of period)........... 1,619,618 86,032 (124,180) 1,581,470
</TABLE>
10. SUBSEQUENT EVENT
FEDERAL AVIATION ADMINISTRATION ("FAA") SETTLEMENT
In July 1998, AWA and the FAA entered into an agreement to settle
disputes over alleged maintenance violations. Under the agreement, AWA has
implemented certain changes in maintenance oversight and paid a civil penalty of
$2.5 million. In July 1999, the FAA determined that AWA has complied with the
terms of the settlement agreement and has forgiven an additional civil penalty
of $2.5 million which could have been assessed under the agreement.
9
<PAGE> 10
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Holdings is the parent company of AWA and TLC. AWA is the ninth largest
commercial airline carrier in the United States serving 57 destinations in the
U.S., Canada and Mexico. TLC arranges and sells leisure travel products that may
include airfare, hotel accommodations, ground transportation and a variety of
other travel options. The business of TLC commenced as a subsidiary of Holdings
in January 1998. Holdings' primary business activity is ownership of all the
capital stock of AWA and TLC.
RESULTS OF OPERATIONS
With the commencement of TLC operations, Holdings' operations consist
of two distinct lines of business for financial reporting purposes. Management
believes that a discussion of each of these business lines is appropriate to
obtain an understanding of the Company's results of operations.
SUMMARY
Holdings earned record consolidated net income of $42.3 million in the
second quarter of 1999, a 2.0% increase over the second quarter 1998's previous
record consolidated net income of $41.4 million. Diluted earnings per share for
the second quarter of 1999 were a record $1.06 compared to $0.86 in last year's
second quarter. Consolidated income tax expense for financial reporting purposes
was $33.1 million for the 1999 second quarter compared to $32.3 million in the
second quarter of 1998.
Holdings also had record consolidated net income for the six months
ended June 30, 1999, realizing $68.2 million compared to $66.6 million in the
1998 period. For the six months ended June 30, 1999, diluted earnings per share
were $1.68 compared to $1.38 for the 1998 period. Consolidated income tax
expense for financial reporting purposes was $53.9 million and $51.4 million for
the six months ended June 30, 1999 and 1998, respectively.
10
<PAGE> 11
AWA
The following discussion provides an analysis of AWA's results of operations for
the second quarter and six months ended June 30, 1999 and material changes
compared to the second quarter and six months ended June 30, 1998.
AMERICA WEST AIRLINES, INC.
STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues:
Passenger ................................. $ 524,246 $ 491,042 $ 1,002,868 $ 934,834
Cargo ..................................... 10,670 11,887 21,398 24,492
Other ..................................... 19,277 16,560 36,389 31,116
----------- ----------- ----------- -----------
Total operating revenues ............... 554,193 519,489 1,060,655 990,442
----------- ----------- ----------- -----------
Operating expenses:
Salaries and related costs ................ 119,962 112,262 237,517 217,846
Aircraft rents ............................ 65,577 60,195 131,102 118,940
Other rents and landing fees .............. 31,589 28,794 60,850 58,252
Aircraft fuel ............................. 53,070 47,798 97,433 98,082
Agency commissions ........................ 30,750 34,900 60,442 66,517
Aircraft maintenance materials and repairs 51,938 44,041 100,624 86,469
Depreciation and amortization ............. 12,322 12,765 23,997 25,063
Amortization of excess reorganization value 4,974 4,974 9,948 9,948
Other ..................................... 109,952 99,968 215,794 187,710
----------- ----------- ----------- -----------
Total operating expenses ............... 480,134 445,697 937,707 868,827
----------- ----------- ----------- -----------
Operating income .............................. 74,059 73,792 122,948 121,615
----------- ----------- ----------- -----------
Nonoperating income (expenses):
Interest income ........................... 4,402 6,041 8,915 11,086
Interest expense, net ..................... (7,804) (8,263) (15,824) (17,935)
Other, net ................................ 3,238 -- 2,647 (264)
----------- ----------- ----------- -----------
Total nonoperating expenses, net ....... (164) (2,222) (4,262) (7,113)
----------- ----------- ----------- -----------
Income before income taxes .................... $ 73,895 $ 71,570 $ 118,686 $ 114,502
=========== =========== =========== ===========
</TABLE>
11
<PAGE> 12
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
The table below sets forth selected operating data for AWA.
<TABLE>
<CAPTION>
Three Months Ended Percent Six Months Ended Percent
June 30, Change June 30, Change
1999 1998 1999-1998 1999 1998 1999-1998
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Aircraft (end of period).................... 113 104 8.7 113 104 8.7
Average daily aircraft utilization (hours).. 11.9 12.2 (2.5) 11.9 12.3 (3.3)
Available seat miles (in millions).......... 6,491 6,082 6.7 12,789 11,928 7.2
Block hours................................. 122,693 115,050 6.6 242,326 228,252 6.2
Average stage length (miles)................ 858 819 4.8 857 811 5.7
Average passenger journey (miles)........... 1,274 1,227 3.8 1,278 1,170 9.2
Revenue passenger miles (in millions)....... 4,477 4,287 4.4 8,507 7,923 7.4
Load factor (percent)....................... 69.0 70.5 (1.5) pts 66.5 66.4 0.1 pts
Passenger enplanements (in thousands)....... 4,724 4,643 1.7 8,987 8,792 2.2
Yield per revenue passenger mile (cents).... 11.71 11.46 2.2 11.79 11.80 (0.1)
Revenue per available seat mile:
Passenger (cents)........................ 8.08 8.07 0.1 7.84 7.84 --
Total (cents)............................ 8.54 8.54 -- 8.29 8.30 (0.1)
Fuel consumption (gallons in millions)...... 103.9 97.1 7.0 203.4 190.2 6.9
Fuel price (cents per gallon)............... 51.1 49.2 3.9 47.9 51.6 (7.2)
Average number of full-time equivalent
employees................................ 11,051 10,320 7.1 11,072 10,271 7.8
</TABLE>
The table below sets forth the major components of operating cost per
available seat mile ("CASM") for AWA.
<TABLE>
<CAPTION>
Three Months Ended Percent Six Months Ended Percent
June 30, Change June 30, Change
1999 1998 1999-1998 1999 1998 1999-1998
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
(in cents)
Salaries and related costs.................... 1.85 1.85 -- 1.86 1.83 1.6
Aircraft rents................................ 1.01 .99 2.0 1.02 1.00 2.0
Other rents and landing fees.................. .49 .47 4.3 .47 .49 (4.1)
Aircraft fuel................................. .82 .79 3.8 .76 .82 (7.3)
Agency commissions............................ .47 .57 (17.5) .47 .56 (16.1)
Aircraft maintenance materials and repairs.... .80 .72 11.1 .79 .72 9.7
Depreciation and amortization................. .19 .21 (9.5) .19 .21 (9.5)
Amortization of excess reorganization value... .08 .08 -- .08 .08 --
Other......................................... 1.69 1.65 2.4 1.69 1.57 7.6
---- ---- ----- ---- ---- -----
7.40 7.33 1.0 7.33 7.28 0.7
==== ==== ===== ==== ==== =====
</TABLE>
12
<PAGE> 13
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
Three Months Ended June 30, 1999 and 1998
For the three months ended June 30, 1999, AWA realized record operating
income of $74.1 million, which was a 0.4% increase over the previous record
$73.8 million operating income in last year's second quarter. Income before
income taxes for the three month period in 1999 was $73.9 million compared to
$71.6 million in 1998.
Total operating revenues for the 1999 second quarter were a record
$554.2 million. Passenger revenues were a record $524.2 million for the three
months ended June 30, 1999, an increase of $33.2 million or 6.8% from the 1998
quarter. A 4.4% increase in revenue passenger miles ("RPM") was more than offset
by a 6.7% increase in capacity as measured by available seat miles ("ASM"),
resulting in a 1.5 point decrease in load factor (the percentage of available
seats that are filled with revenue passengers). The decline in load factor was
more than offset by an increase in revenue per passenger mile ("yield") which
increased 2.2% to 11.71 cents. The increase in yield reflects the continued
benefits of AWA's improved product and revenue management capabilities.
Passenger revenue per available seat mile ("RASM") for the quarter increased
0.1% to 8.08 cents despite a 4.8% increase in aircraft stage length due to
increased flying to long-haul business markets. Cargo revenues decreased 10.2%
to $10.7 million due to lower freight and mail volumes. Other revenues increased
16.4% to $19.3 million for the second quarter of 1999 due primarily to expansion
and increased profitability of AWA's code sharing agreement with Mesa Airlines.
Operating expenses increased $34.4 million in the second quarter of
1999 or 7.7% as compared to the 1998 second quarter, while ASMs increased 6.7%.
As a result, CASM increased 1.0% to 7.40 cents in the second quarter of 1999
from 7.33 cents for the comparable 1998 period. Significant changes in the
components of CASM are explained as follows:
- Aircraft rent expense per ASM increased 2.0% due to the net
addition of nine leased aircraft to the fleet during the 1999
quarter as compared to 1998.
- Other rents and landing fees expense per ASM increased 4.3% in
the second quarter of 1999 primarily due to higher landing
fees resulting from increased rates and operations.
- Aircraft fuel expense per ASM increased 3.8% due to a 3.9%
increase in the average price per gallon of fuel to 51.1 cents
in the 1999 quarter from 49.2 cents in 1998.
- Agency commissions expense per ASM decreased 17.5% as the cost
reductions associated with the institution of the $50
commission cap implemented on May 1, 1998 and an increase in
the percentage of non-commissionable revenue in the second
quarter of 1999 more than offset the increase in commissions
resulting from higher passenger revenues in the 1999 second
quarter.
- Aircraft maintenance materials and repairs expense per ASM
increased 11.1% primarily due to an increase in capitalized
maintenance amortization expense of $7.7 million for the
second quarter of 1999 when compared to the 1998 second
quarter.
- Depreciation and amortization expense per ASM decreased 9.5%
due to an increase in the average depreciable life of certain
Boeing 737-200 aircraft that have been or will be modified to
meet the Federal Aviation Administration's Stage III noise
reduction requirements, which reduced depreciation expense in
the 1999 second quarter by $2.0 million.
13
<PAGE> 14
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
- Other operating expenses per ASM increased 2.4% to 1.69 cents
from 1.65 cents primarily due to the effect of non-salary
related Year 2000 ("Y2K") readiness costs which increased by
$7.6 million from $1.2 million in the second quarter of 1998
to $8.8 million in the second quarter of 1999.
Net nonoperating expenses decreased $2.0 million to $0.2 million in the
second quarter of 1999 from $2.2 million in 1998. The 1999 second quarter
benefited from a one-time, $2.7 million gain on sale of the Company's investment
in 30,000 shares of Priceline.com common stock.
Six Months Ended June 30, 1999 and 1998
For the six months ended June 30, 1999, AWA realized record operating
income of $122.9 million, a 1.1% increase over the previous record $121.6
million operating income in the six months ended June 30, 1998. Income before
income taxes for the six month period in 1999 was $118.7 million compared to
$114.5 million in 1998.
Total operating revenues for the six months ended June 30, 1999 were a
record $1.1 billion. Passenger revenues were a record $1.0 billion for the six
months ended June 30, 1999, an increase of $68.0 million or 7.3% from the 1998
period. RPMs increased 7.4% versus a 7.2% increase in capacity as measured by
ASMs, resulting in a 0.1 point increase in load factor. RASM and yield were 7.84
cents and 11.79 cents, respectively, for the six months ended June 30, 1999, or
relatively unchanged when compared to the 1998 period. This RASM and yield
performance was achieved despite a 5.7% increase in average stage length due to
increased flying to long-haul business markets. Cargo revenues decreased 12.6%
to $21.4 million due to lower freight and mail volumes. Other revenues increased
16.9% to $36.4 million for the six months ended June 30, 1999 due primarily to
expansion and increased profitability of AWA's code sharing agreement with Mesa
Airlines.
Operating expenses increased $68.9 million for the six months ended
June 30, 1999 or 7.9% as compared to the 1998 period, while ASMs increased 7.2%.
As a result, CASM increased 0.7% to 7.33 cents in the six months ended June 30,
1999 from 7.28 cents for the comparable 1998 period. Significant changes in the
components of CASM are explained as follows:
- Salaries and related costs per ASM increased 1.6% primarily
due to a higher number of employees in the 1999 period to
support anticipated growth. Also, the contracts with
International Brotherhood of Teamsters (signed October 1998)
and the Association of Flight Attendants (signed May 1999),
covering the airline's mechanics and flight attendants,
respectively, included higher wage rates, and the contract
with the Airline Pilots Association (signed May 1995) required
longevity-related salary level increases which contributed to
higher salary expense in 1999.
- Aircraft rent expense per ASM increased 2.0% due primarily to
the net addition of nine leased aircraft to the fleet during
the 1999 period as compared to 1998.
- Other rents and landing fees expense per ASM decreased 4.1% in
the six months ended June 30, 1999 primarily due to a
decreased level of part borrowing from other airlines and the
7.2% increase in ASMs.
- Aircraft fuel expense per ASM decreased 7.3% due to a 7.2%
decrease in the average price per gallon of fuel to 47.9 cents
in the 1999 period from 51.6 cents in 1998.
14
<PAGE> 15
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
- Agency commissions expense per ASM decreased 16.1% as the cost
reduction associated with the institution of the $50
commission cap implemented on May 1, 1998 and an increase in
the percentage of non-commissionable revenue in the 1999 six
month period more than offset the increase in commissions
resulting from higher revenue for the six months ended June
30, 1999.
- Aircraft maintenance materials and repairs expense per ASM
increased 9.7% primarily due to a $14.9 million increase in
capitalized maintenance amortization expense for the 1999
period when compared to the comparable period in 1998.
- Depreciation and amortization expense per ASM decreased 9.5%
due primarily to the increase in the average depreciable life
of certain Boeing 737-200 aircraft that have been or will be
modified to meet the FAA's Stage III noise reduction
requirements, which reduced depreciation expense for the first
six months of 1999 by approximately $4.0 million.
- Other operating expenses per ASM increased 7.6% to 1.69 cents
from 1.57 cents primarily due to non-salary related Y2K costs
which increased $14.5 million from $1.2 million in the first
half of 1998 to $15.7 million in the 1999 period.
Net nonoperating expenses decreased $2.8 million to $4.3 million in the
six months ended June 30, 1999 from $7.1 million in 1998. The period-over-period
change was primarily due to a $2.7 million gain on sale of the Company's
investment in 30,000 shares of Priceline.com common stock in the second quarter
of 1999.
15
<PAGE> 16
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
TLC
TLC's consolidated statements of income for the three and six months
ended June 30, 1999 include the results of The Vacation Store ("TVS"), acquired
in November 1998, and the National Leisure Group ("NLG"), acquired in May 1999.
TVS and NLG are national retail leisure travel companies that specialize in the
marketing, packaging and retail distribution of cruise and resort vacations.
These acquisitions add established retail networks to TLC's largely wholesale
travel product line. The following discussion provides an analysis of TLC's
results of operations and reasons for material changes therein.
THE LEISURE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues ................. $ 65,553 $ 50,436 $111,612 $ 93,396
Cost of goods sold ................. 50,160 36,178 82,948 66,826
-------- -------- -------- --------
Net revenues ....................... 15,393 14,258 28,664 26,570
-------- -------- -------- --------
Total operating expenses ........... 11,990 10,267 22,450 20,116
-------- -------- -------- --------
Operating Income ................... 3,403 3,991 6,214 6,454
-------- -------- -------- --------
Nonoperating income (expenses), net 36 (147) 163 (286)
-------- -------- -------- --------
Income before income taxes ......... $ 3,439 $ 3,844 $ 6,377 $ 6,168
======== ======== ======== ========
</TABLE>
TLC's income before income taxes for the three months ended June 30,
1999 was $3.4 million, a decrease of $0.4 million when compared to the second
quarter of 1998. Operating revenues increased $15.1 million to $65.6 million due
primarily to the inclusion in the 1999 quarter of revenues earned by TVS and
NLG, $7.2 million and $13.2 million, respectively. TLC's wholesale vacation
package revenue decreased $5.3 million as AWA's improving yield profile
continued to result in fewer wholesale seats being offered to TLC and therefore
lower volumes for TLC. Cost of goods sold was $50.2 million in the second
quarter of 1999, an increase of $14.0 million from the second quarter of 1998.
Net revenues increased by $1.1 million. Total operating expenses increased $1.7
million in the 1999 quarter when compared to 1998, primarily due to higher
infrastructure costs related to future growth needs and a year-over-year
increase in fees paid for services provided by AWA.
16
<PAGE> 17
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
For the six months ended June 30, 1999, income before income taxes was
$6.4 million, an increase of $0.2 million when compared to 1998. Operating
revenues were $111.6 million or $18.2 million higher than the 1998 period due
primarily to the inclusion in the 1999 period of revenues earned by TVS and NLG,
$14.6 million and $13.2 million, respectively. Wholesale vacation package
revenues were $9.6 million lower than 1998 due primarily to lower passenger
volumes. The cost of goods sold was $82.9 million for the six months ended June
30, 1999, an increase of $16.1 million. Net revenues increased $2.1 million in
1999. Total operating expenses increased $2.3 million for the six months ended
June 30, 1999 primarily due to higher infrastructure costs related to future
growth needs and a year-over-year increase in fees paid for services provided by
AWA.
LIQUIDITY AND CAPITAL RESOURCES
Holdings' unrestricted consolidated cash and cash equivalents and
short-term investments increased to $186.6 million at June 30, 1999 from $135.8
million at December 31, 1998. Net cash provided by operating activities
decreased to $203.3 million for the six months ended June 30, 1999 from $241.7
million in 1998 due principally to the period-over-period change in air traffic
liability, which grew 15.7% in the 1999 period as compared to 30.0% in the 1998
period, and the acquisition of NLG by TLC in 1999. In addition, $29.9 million of
restricted cash was released and became available for general corporate purposes
during the 1998 period as a result of the refinancing of AWA's variable rate
industrial development revenue bonds in April 1998. Net cash used in investing
activities decreased to $65.2 million for the 1999 period from $142.7 million
for the 1998 period. This decrease was primarily due to the sales of short-term
investments totaling $27.5 million in the 1999 period as compared to purchases
of $64.4 million of short-term investments in 1998. Net cash used in financing
activities was $59.9 million for the six months ended June 30, 1999 compared to
$106.0 million in the 1998 period primarily due to long-term debt repayments of
$15.3 million and purchases of common stock and AWA warrants totaling $45.9
million in 1999. In the first six months of 1998, AWA repaid $30 million of
revolving credit facility debt and the Company repurchased $63.7 million of
common stock and AWA warrants. The 1999 period also included $94.3 million
borrowed in February 1999 under AWA's revolving credit facility, which was
repaid in full in April 1999.
Operating with a working capital deficiency is common in the airline
industry as tickets sold for transportation which have not yet been provided are
classified as a current liability while the related income-producing assets, the
aircraft, are classified as non-current. The Company's working capital
deficiency at June 30, 1999 was $253.8 million.
Long-term debt maturities through 2001 consist primarily of principal
amortization of notes payable secured by certain of AWA's aircraft. Such
maturities are $65.1 million, $19.9 million and $19.8 million, respectively, for
the remainder of 1999, 2000 and 2001. Management expects to fund the remaining
long-term debt maturities with cash from operations or by refinancing the
underlying obligations, subject to availability and market conditions.
In June 1999, Series 1999 special facility revenue bonds ("new bonds")
were issued by a municipality to fund the retirement of the Series 1994A bonds
("old bonds") and the construction of a new concourse with 14 gates at Terminal
4 in Phoenix Sky Harbor International Airport in support of AWA's strategic
growth plan. The new bonds are due June 2019 with interest at 6.25% payable
semiannually on June 1 and December 1, commencing on December 1, 1999. The new
bonds are subject to optional redemption prior to the maturity date on or after
June 1, 2009 in whole or in part, on any interest payment date at the following
redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or
December 1, 2010; and 100% on June 1, 2011 and thereafter.
17
<PAGE> 18
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
At June 30, 1999, AWA had firm commitments to AVSA S.A.R.L., an
affiliate of Airbus Industrie ("AVSA"), to purchase a total of 27 Airbus
aircraft, with 11 remaining to be delivered in 1999. AWA also has an option to
purchase 46 more Airbus aircraft of which six are subject to reconfirmation by
AWA. The aggregate net cost of firm commitments remaining under the aircraft
order is approximately $1.0 billion based on a 3.5% annual price escalation. AWA
has arranged for financing from AVSA for approximately two-thirds of such
commitment. AWA intends to seek additional financing (which may include public
debt financing or private financing) in the future when and as appropriate.
There can be no assurance that sufficient funding will be obtained for all
aircraft. A default by AWA under the AVSA purchase commitment could have a
material adverse effect on AWA.
In October 1998, America West Airlines 1998-1 Pass Through Trusts
issued $190.5 million in Pass Through Trust Certificates in connection with the
financing of six Airbus A319 aircraft and two Airbus A320 aircraft to be
purchased from AVSA. The Pass Through Trust Certificates are not direct
obligations of or guaranteed by Holdings and AWA. The combined effective
interest rate on the financing is 6.99%. Three Airbus A319 aircraft that are the
subject of this financing were delivered in 1998. One Airbus A320 aircraft was
delivered in the first quarter of 1999 and one Airbus A320 was delivered in the
second quarter of 1999. The remaining three aircraft were delivered in July
1999.
Capital expenditures for the six months ended June 30, 1999 and 1998
were approximately $101.3 million and $67.8 million, respectively. Included in
these amounts are capital expenditures for capitalized maintenance of
approximately $52.2 million for the six months ended June 30, 1999 and $55.3
million for the six months ended June 30, 1998.
Certain of AWA's long-term debt agreements contain minimum cash balance
requirements, leverage ratios, coverage ratios and other financial covenants
with which AWA was in compliance at June 30, 1999.
OTHER INFORMATION
LABOR RELATIONS
The Company is in the process of negotiating an agreement with the
Transport Workers Union ("TWU") as the bargaining representative for AWA's
approximately 2,000 fleet service workers. The Company cannot predict the form
of this future collective bargaining agreement and therefore the effect, if any,
on AWA's operations or financial performance.
18
<PAGE> 19
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
YEAR 2000 COMPLIANCE PROGRAM AND RISKS
The Year 2000 issue results from computer programs being written using
two digits rather than four to define the applicable year. As a consequence,
time-sensitive computer equipment and software may recognize a date using "00"
as the year 1900 rather than the year 2000. Many of the Company's systems,
including information and computer systems and automated equipment, will be
affected by the Year 2000 issue. The Company is also heavily reliant on the
FAA's management of the nation's air traffic control system, local authorities'
management of the airports at which AWA operates, and vendors to provide goods
(fuel, catering, etc.), services (telecommunications, data networks, satellites,
etc.) and data (frequent flyer partnerships, alliances, etc.)
The Company has underway a Year 2000 Project (the "Project" or "Year
2000 Project") to identify the programs and infrastructure that could be
affected by the Year 2000 issue and is implementing a plan to resolve the
problems identified on a timely basis. The Project requires the Company to
devote a considerable amount of internal resources and hire substantial external
resources to assist with the implementation and monitoring of the Project, and
will require the replacement of certain equipment and modification of certain
software.
The Company believes that its Year 2000 Project will be completed prior
to any currently anticipated significant impact on the Company arising from the
Year 2000 issue. The Project is divided into three main sections, including
information technology ("IT") systems, embedded systems and third party
compliance. IT and embedded systems are substantially complete with minor
activity extending into the third quarter of 1999. Monitoring and corrective
actions, if required, will continue through the first quarter of 2000. An
initial assessment of third party suppliers is complete. Ongoing assessment will
continue through the year based on the supplier's Year 2000 readiness and their
importance to America West.
The Company currently estimates that the total cost of its Year 2000
Project will be approximately $48 million, which will be funded from operating
cash flows. These costs exclude approximately $8 million of normal system
software and equipment upgrades and replacements which the Company anticipated
incurring in the ordinary course of business regardless of the Year 2000 issue.
As of June 30, 1999 the Company had incurred approximately $31 million of
non-capital expenditures in connection with the Year 2000 Project. The Company
expects that approximately $39 million of the costs have been or will be
expensed as incurred and the Company has had or will have approximately $9
million of capital expenditures.
The costs and expected completion date of the Company's Year 2000
Project are based on management's best estimates, and reflect assumptions
regarding the availability and cost of personnel trained in this area, the
compliance plans of third parties and similar uncertainties. However, due to the
complexity and pervasiveness of the Year 2000 issue and in particular the
uncertainty regarding the compliance programs of third parties, no assurance can
be given that these estimates will be achieved, and actual results could differ
materially from those anticipated. If the Company's plan to address the Year
2000 issue is not successfully or timely implemented, the Company may need to
devote more resources to the process and additional costs may be incurred, which
could have an adverse effect on the Company's financial condition and results of
operations.
The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. While difficult to predict, we speculate that the most reasonably
likely worst case Year 2000 scenario will result from the failure of third
parties, including operators of airports and air traffic control systems, to
resolve their Year 2000 compliance issue. The Company has completed evaluations
of such parties and significant suppliers and vendors with which the Company's
systems interface and upon which the Company's business depends in an effort to
reduce any adverse impact of the Year 2000 issue.
19
<PAGE> 20
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
There can be no assurance, however, that the systems of such third parties will
be modified on a timely basis and any such failure may have a material adverse
effect on the Company's financial condition and results of operations.
As a component of its Year 2000 Project, the Company is developing a
comprehensive analysis of the operational problems and costs (including loss of
revenues) that would be reasonably likely to result from the failure by the
Company and certain third parties to complete efforts necessary to achieve Year
2000 compliance on a timely basis. The Company is developing contingency plans
designed to enable it to continue operations, consistent with the highest
standards of safety, in the event of any such third party failures.
ADDITIONAL INFORMATION
The air travel business historically fluctuates in response to general
economic conditions. The airline industry is sensitive to changes in economic
conditions that affect business and leisure travel and is highly susceptible to
unforeseen events that result in declines in air travel, such as political
instability, regional hostilities, recession, fuel price escalation, inflation,
adverse weather conditions, labor instability or regulatory oversight. The
Company's results of operations for interim periods are not necessarily
indicative of those for an entire year, because the travel business is subject
to seasonal fluctuations. Due to the greater demand for air and leisure travel
during the summer months, revenues in the airline and leisure travel industries
in the second and third quarters of the year tend to be greater than revenues in
the first and fourth quarters of the year.
This discussion contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management. When used in this
document, the words "anticipate", "estimate", "project", "expect" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated, projected or expected. Among the key factors that may have a direct
bearing on the Company's results are competitive practices in the airline and
travel industries generally and particularly in the Company's principal markets,
the ability of the Company to meet existing financial obligations in the event
of adverse industry or economic conditions or to obtain additional capital to
fund future commitments and expansion, the Company's relationship with employees
and the terms of future collective bargaining agreements and the impact of
current and future laws and governmental regulations affecting the airline and
travel industries and the Company's operations. For additional discussion of
such risks see "Business - Risk Factors," included in Item 1 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 which is on file
with the Securities and Exchange Commission. Any forward-looking statements
speak only as of the date such statements are made.
20
<PAGE> 21
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK SENSITIVE INSTRUMENTS
(a) Commodity Price Risk
As of June 30, 1999 the Company had entered into fixed price swap
transactions hedging approximately 50% of its projected 1999 fuel requirements
including 50% related to the third quarter and 50% related to the fourth
quarter. The use of such swap transactions in the Company's fuel hedging program
could result in the Company not fully benefiting from certain declines in jet
fuel prices. At June 30, 1999 the Company estimates that a 10% change in the
price per gallon of jet fuel would have changed the fair value of the existing
swap contracts by $7.5 million.
As of July 31, 1999 approximately 50% of AWA's 1999 fuel requirements
are hedged.
(b) Interest Rate Risk
The Company's exposure to interest rate risk relates primarily to its
variable rate long-term debt obligations. At June 30, 1999 the Company's
variable-rate long-term debt obligations represented approximately 14.7% of its
total long-term debt. If interest rates increased 10% in 1999, the impact on the
Company's results of operations would not be material.
21
<PAGE> 22
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDER
a. The 1999 Annual Meeting of Stockholders of the Company was held on
May 20, 1999. The five persons named below were elected as proposed in the proxy
statement pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended, to serve as directors until their successors are elected and qualified.
The following directors' term of office as a director continued after the
meeting: William A. Franke, John L. Goolsby, Walter T. Klenz, Richard C. Kraemer
and Denise M. O'Leary. There were 87,197,686 votes cast in the election of
directors and there were no abstentions and broker non-votes. The voting
regarding each nominee was as follows: John F. Tierney (for: 86,658,725 /
withheld: 538,961); Robert J. Miller (for: 86,657,505 / withheld: 540,181); W.
Douglas Parker (for: 86,659,155 / withheld: 538,531); Jeffrey A. Shaw (for:
86,658,699 / withheld: 538,987); and Gilbert D. Mook (for: 86,658,015 /
withheld: 539,671).
b. Also at the 1999 Annual Meeting of Stockholders of the Company, a
proposal to amend the America West 1994 Incentive Equity Plan to increase the
aggregate number of shares of the Company's Class B Common Stock authorized for
issuance under the Plan by 1.5 million shares was approved with 76,624,334 votes
for; 10,518,742 votes against; and 54,610 votes abstained. There were no broker
non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION AND METHOD OF FILING
------ --------------------------------
<S> <C>
*10.35 Indenture of Trust dated as of June 1, 1999
from the Industrial Development Authority of
the City of Phoenix, Arizona to Bank One,
Arizona, N.A.
*27.1 Financial Data Schedule.
-----
* Filed herewith.
</TABLE>
b. Reports on Form 8-K
None
22
<PAGE> 23
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICA WEST HOLDINGS CORPORATION
By /s/ W. Douglas Parker
---------------------
W. Douglas Parker
Executive Vice President
DATED: August 16, 1999
23
<PAGE> 24
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1999
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION AND METHOD OF FILING
------ --------------------------------
<S> <C>
*10.35 Indenture of Trust dated as of June 1, 1999
from the Industrial Development Authority of
the City of Phoenix, Arizona to Bank One,
Arizona, N.A.
*27.1 Financial Data Schedule.
-----
* Filed herewith.
</TABLE>
24
<PAGE> 1
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA
TO
BANK ONE, ARIZONA, NA
Trustee
--------------------------------
INDENTURE OF TRUST
--------------------------------
SECURING
$26,300,000
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA
AIRPORT FACILITIES REVENUE BONDS
(AMERICA WEST AIRLINES, INC. PROJECT)
SERIES 1999
--------------------------------
Dated as of June 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Recitals......................................................................................................... 1
Form of Face of Bond............................................................................................. 3
Form of Trustee's Certificate of Authentication.................................................................. 5
Form of Reverse of Bond.......................................................................................... 5
Form of Assignment............................................................................................... 9
Granting Clauses................................................................................................. 10
ARTICLE I DEFINITIONS........................................................................... 12
Section 1.01. Definitions........................................................................... 12
ARTICLE II THE BONDS............................................................................. 18
Section 2.01. Authorized Amount and Purpose of Bonds................................................ 18
Section 2.02. Issuance of Bonds..................................................................... 18
Section 2.03. Ownership, Transfer, Exchange and Registration of Bonds............................... 19
Section 2.04. Execution; Limited Obligation......................................................... 20
Section 2.05. Authentication........................................................................ 20
Section 2.06. Mutilated, Destroyed, Lost or Stolen Bonds............................................ 20
Section 2.07. Cancellation and Destruction of Surrendered Bonds..................................... 21
Section 2.08. Delivery of the Bonds................................................................. 21
Section 2.09. Book Entry System..................................................................... 22
ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY................................................... 22
Section 3.01. Optional Redemption................................................................... 22
Section 3.02. Extraordinary Mandatory Redemption of Bonds........................................... 23
Section 3.03. Mandatory Redemption Upon a Determination of Taxability............................... 23
Section 3.04. Notice of Redemption.................................................................. 24
Section 3.05. Deposit of Funds...................................................................... 25
Section 3.06. Partial Redemption of Bonds........................................................... 26
Section 3.07. Selection Of Bonds For Redemption..................................................... 26
ARTICLE IV PAYMENT; FURTHER ASSURANCES........................................................... 26
Section 4.01. Payment of Principal or Redemption Price of and Interest on Bonds..................... 26
Section 4.02. Performance of Covenants; The Issuer.................................................. 26
Section 4.03. Right to Payments Under Agreement; Instruments of Further Assurance................... 27
Section 4.04. Financing Statements.................................................................. 27
Section 4.05. Inspection of Project Books........................................................... 27
Section 4.06. Rights under Agreement................................................................ 28
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V REVENUES AND FUNDS.................................................................... 28
Section 5.01. Source of Payment of Bonds............................................................ 28
Section 5.02. Creation of the Bond Fund............................................................. 28
Section 5.03. Payments into the Bond Fund........................................................... 28
Section 5.04. Use of Moneys in the Bond Fund........................................................ 29
Section 5.05. Custody of the Bond Fund.............................................................. 29
Section 5.06. Non-Presentment of Bonds.............................................................. 29
Section 5.07. Trustee's Fees, Charges and Expenses.................................................. 29
Section 5.08. Moneys To Be Held in Trust............................................................ 29
Section 5.09. Repayment to the Company from the Bond Fund........................................... 29
Section 5.10. Revenues To Be Paid Over to Trustee................................................... 30
Section 5.11. Payments of Principal and Interest.................................................... 30
Section 5.12. Revenues To Be Held for All Bondholders; Certain Exceptions........................... 30
Section 5.13. Tax Agreement......................................................................... 30
Section 5.14. Cost of Issuance Fund................................................................. 30
Section 5.15. Construction Fund..................................................................... 30
Section 5.16. Completion of Improvements; Termination of Construction; Amounts Remaining
in Funds.......................................................................... 31
ARTICLE VI INVESTMENT OF MONEYS.................................................................. 31
Section 6.01. Investment of Bond Fund Moneys........................................................ 31
Section 6.02. Investments; Arbitrage................................................................ 32
ARTICLE VII DEFEASANCE............................................................................ 32
Section 7.01. Defeasance............................................................................ 32
ARTICLE VIII DEFAULT PROVISIONS; REMEDIES.......................................................... 34
Section 8.01. Defaults; Events of Default........................................................... 34
Section 8.02. Acceleration.......................................................................... 34
Section 8.03. Remedies; Rights Of Bondholders....................................................... 34
Section 8.04. Right of Bondholders to Direct Proceedings............................................ 35
Section 8.05. Application of Moneys................................................................. 35
Section 8.06. Remedies Vested in Trustee............................................................ 36
Section 8.07. Rights and Remedies of Bondholders.................................................... 36
Section 8.08. Termination of Proceedings............................................................ 36
Section 8.09. Waivers of Events of Default.......................................................... 36
Section 8.10. Opportunity of Company to Cure Events of Default...................................... 37
ARTICLE IX THE TRUSTEE........................................................................... 38
Section 9.01. Acceptance of the Trusts.............................................................. 38
Section 9.02. Corporate Trustee Required; Eligibility............................................... 41
Section 9.03. Fees, Charges and Expenses of Trustee................................................. 41
Section 9.04. Notice to Bondholders If Default Occurs............................................... 42
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 9.05. Intervention by Trustee............................................................... 42
Section 9.06. Successor Trustee..................................................................... 42
Section 9.07. Resignation by the Trustee............................................................ 42
Section 9.08. Removal of the Trustee................................................................ 42
Section 9.09. Appointment of Successor Trustee...................................................... 43
Section 9.10. Concerning Any Successor Trustees..................................................... 43
Section 9.11. Appointment of Co-Trustee............................................................. 44
ARTICLE X SUPPLEMENTAL INDENTURES............................................................... 45
Section 10.01. Supplemental Indentures Not Requiring Consent of Bondholders.......................... 45
Section 10.02. Supplemental Indentures Requiring Consent of Bondholders.............................. 46
Section 10.03. Consents to Supplemental Indentures................................................... 46
Section 10.04. Reliance on Opinions of Counsel....................................................... 47
ARTICLE XI AMENDMENT OF AGREEMENT................................................................ 47
Section 11.01. Amendments, Etc., to Agreement Not Requiring Consent of Bondholders................... 47
Section 11.02. Amendments, Etc., to Agreement Requiring Consent of Bondholders....................... 47
Section 11.03. Reliance on Opinions of Counsel....................................................... 48
ARTICLE XII MISCELLANEOUS......................................................................... 48
Section 12.01. Consents, Etc., Of Bondholders........................................................ 48
Section 12.02. Limitation of Rights.................................................................. 49
Section 12.03. Severability.......................................................................... 49
Section 12.04. Notices............................................................................... 49
Section 12.05. Holidays.............................................................................. 49
Section 12.06. Counterparts.......................................................................... 49
Section 12.07. Applicable Law........................................................................ 50
Section 12.08. Captions.............................................................................. 50
Section 12.09. Notice Regarding Cancellation of Contracts............................................ 50
Signature Page................................................................................................... 51
EXHIBIT I FORM OF INVESTOR LETTER
</TABLE>
-iii-
<PAGE> 5
THIS INDENTURE OF TRUST, made and entered into as of June 1, 1999, by
and between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX,
ARIZONA, an Arizona nonprofit corporation and political subdivision of the State
of Arizona (the "Issuer"), and BANK ONE, ARIZONA, NA as Trustee (the "Trustee"),
a banking corporation duly organized, existing and authorized to accept and
execute trusts of the character herein set out under the laws of the State of
Arizona, with its principal corporate trust office located in Phoenix, Arizona;
WITNESSETH:
WHEREAS, the Issuer is authorized and empowered under Title 35, Chapter
5, Arizona Revised Statutes, as amended (the "Act"), to issue revenue bonds in
accordance with Article 2 of the Act and to make secured or unsecured loans for
the purpose of financing or refinancing costs of certain airport facilities, to
charge and collect interest on such loans and pledge the proceeds of loan
agreements as security for the payment of principal of and interest on bonds, or
designated issues of bonds, issued by the Issuer and any agreements in
connection therewith, whenever the board of directors finds such loans to be in
furtherance of the purposes of the Issuer; and
WHEREAS, the Issuer has heretofore issued and sold its Airport Facility
Revenue Bonds (America West Airlines, Inc. Project) Series 1994A in the original
aggregate principal amount of $17,127,659.78, of which $10,053,191.61 is
currently outstanding (the "Prior Bonds"), which were issued to refund
$17,127,659.78 outstanding principal amount of the Authority's Airport Facility
Revenue Bonds (America West Airlines, Inc. Project) Series 1989 pursuant to a
Restated and Amended Trust Indenture, dated as of August 25, 1994 (the "Prior
Indenture"), between the Issuer and US Bank, St. Paul, Minnesota, as successor
trustee, and has loaned the proceeds thereof to America West Airlines, Inc., a
Delaware corporation (the "Company"), for the purpose of financing the airport
facilities more particularly described in the Prior Indenture (the "Original
Improvements").
WHEREAS, the Company has requested that the Issuer issue and sell bonds
to refund the Prior Bonds and to finance the costs of the acquisition,
construction and installation by the Issuer of certain Series 1999 Improvements
(hereinafter defined) to Phoenix Sky Harbor International Airport; and
WHEREAS, pursuant to the Act, the Issuer has determined to issue and
sell its airport facility revenue bonds as provided herein (the "Bonds") and to
lend the proceeds thereof to the Company pursuant to the Amended and Restated
Airport Use Agreement of even date herewith (the "Agreement"), between the
Issuer, the City of Phoenix, Arizona and the Company, for the purpose of
refunding the Prior Bonds and financing the Series 1999 Improvements; and
WHEREAS, pursuant to the terms of the Agreement, certain of the
Original Improvements have been transferred by the Issuer to the City and are no
longer subject to the Agreement (the "Transferred Improvements"); and
<PAGE> 6
WHEREAS, the Agreement provides for the acquisition, construction,
installation maintenance and operation of the Series 1999 Improvements and the
Original Improvements which do not constitute Transferred Improvements
(collectively, the "Improvements"); and
WHEREAS, the issuance and sale of the Bonds and the loan of the
proceeds thereof to the Company to refund the Prior Bonds and to finance the
Improvements will serve the purposes of the Issuer and the Act and in all
respects conform to the provisions and requirements of the Act; and
WHEREAS, in order to provide for the authentication and delivery of the
Bonds, to establish and declare the terms and conditions upon which the Bonds
are to be issued and secured and to secure the payment of the principal thereof
and of the interest and premium, if any, thereon, the Issuer has authorized the
execution and delivery of this Indenture, and
WHEREAS, all Bonds issued under this Indenture will be secured by a
pledge and assignment of the Issuer's rights under the Agreement; and
WHEREAS, the Bonds and the Trustee's certificate of authentication and
the form of assignment to be endorsed thereon are all to be in substantially the
following forms, with necessary and appropriate variations, omissions and
insertions as permitted or required by this Indenture, to wit:
-2-
<PAGE> 7
[FORM OF FACE OF BOND]
UNITED STATES OF AMERICA
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA
AIRPORT FACILITIES REVENUE BOND
(AMERICA WEST AIRLINES, INC. PROJECT)
SERIES 1999
<TABLE>
<CAPTION>
Registered Registered
No. R-1 $26,300,000
<S> <C> <C> <C>
Interest Rate: Dated Date: Maturity Date: CUSIP:
6.250% June 1, 1999 June 1, 2019
</TABLE>
Registered Owner: CEDE & CO.
Principal Amount: Twenty Six Million Three Hundred Thousand Dollars
[1] THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX,
ARIZONA (the "Issuer"), an Arizona nonprofit corporation and political
subdivision of the State of Arizona, for value received, hereby promises to pay
(but in each case only out of the source hereinafter provided) to the Registered
Owner identified above (the "Owner"), or registered assigns as hereinafter
provided, on the Maturity Date identified above, the Principal Amount identified
above, and to pay interest on said Principal Amount until payment of said
Principal Amount has been made or duly provided for at the Interest Rate
identified above, on June 1 and December 1 of each year, commencing on December
1, 1999, and to pay interest on overdue principal and, to the extent permitted
by law, on overdue interest at the rate borne by this Bond, except as the
provisions hereinafter set forth with respect to redemption prior to maturity
may become applicable hereto, the principal of, premium, if any, and interest on
this Bond being payable in lawful money of the United States of America at the
designated Corporate Trust Office of Bank One, Arizona, NA, as Trustee, or its
successor in trust (the "Trustee"); provided, however, payment of interest on
any Interest Payment Date shall be made to the Owner hereof as of the close of
business on the Record Date with respect to such Interest Payment Date and shall
be (i) paid by check or draft mailed on such Interest Payment Date to such Owner
hereof at his address as it appears on the registration books of the Issuer
maintained by the Trustee or at such other address as is furnished in writing by
such Owner to the Trustee as Bond Registrar not later than the close of business
on the Record Date or (ii) transmitted by wire transfer to an account with a
commercial bank located within the United States of America if such Owner owns
at least $1,000,000 in aggregate principal amount of the Bonds and shall have
provided wire transfer instructions to the Trustee prior to the close of
business on such Record Date.
-3-
<PAGE> 8
--------------------------------
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET
FORTH ON THE REVERSE HEREOF AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
--------------------------------
[16] THIS BOND DOES NOT, AND SHALL NEVER, CONSTITUTE AN INDEBTEDNESS OF
THE CITY OF PHOENIX, THE STATE OF ARIZONA OR THE ISSUER WITHIN THE MEANING OF
ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION, AND THIS BOND SHALL
NEVER CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF SAID CITY, SAID STATE
OR THE ISSUER OR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF SAID
CITY OR SAID STATE OR A CHARGE AGAINST THE GENERAL CREDIT OF THE ISSUER. THE
ISSUER HAS NO TAXING POWER.
[17] IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts and
conditions required to be performed precedent to and in the execution and
delivery of the Indenture and the issuance of this Bond have been performed in
due time, form and manner as required by law, and that the issuance of this Bond
and the issue of which it forms a part does not exceed or violate any
constitutional or statutory limitation.
[18] This Bond shall not be valid or become obligatory for any purpose
or be entitled to any security or benefit under the Indenture unless and until
the certificate of authentication hereon shall have been duly executed by the
Trustee.
[19] IN WITNESS WHEREOF, THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE
CITY OF PHOENIX, ARIZONA has caused this Bond to be executed in its name by the
manual or facsimile signature of its President and attested by the manual or
facsimile signature of its Secretary, all as of June 1, 1999.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE CITY OF PHOENIX, ARIZONA
By
President
Attest:
- --------------------------------
Secretary
-4-
<PAGE> 9
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This Bond is one of the Bonds described in the within-mentioned
Indenture of Trust.
Date of Authentication: BANK ONE, ARIZONA, NA,
as Trustee
________________________________ By_______________________________
Authorized Signatory
FORM OF REVERSE OF BOND]
[2] This Bond is one of an authorized issue of bonds limited in
aggregate principal amount to $26,300,000 (the "Bonds") issued pursuant to a
resolution duly adopted by the governing body of the Issuer on May 20, 1999 (the
"Resolution"), and the applicable provisions of Title 35, Chapter 5, Arizona
Revised Statutes, as supplemented and amended to the date hereof (the "Act"),
and issued under an Indenture of Trust (the "Indenture") dated as of June 1,
1999, between the Issuer and the Trustee, for the purpose of refunding bonds of
the Issuer the proceeds of which were used to finance costs of certain airport
facilities and to finance the costs of certain additional airport facility
improvements (collectively, the "Improvements"), all located within the
boundaries of the Issuer for America West Airlines, Inc. (the "Company").
Proceeds from the sale of the Bonds are to be loaned by the Issuer to the
Company under the terms of an Amended and Restated Airport Use Agreement, dated
as of June 1, 1999 (the "Agreement"), between the Issuer, the City of Phoenix,
Arizona and the Company, which provides for the repayment of such loan by the
Company.
[3] The Bonds are all issued under and equally and ratably secured by
and entitled to the benefits of the Indenture (except as otherwise expressly set
forth in the Indenture), including the security of a pledge and assignment of
certain revenues and receipts derived by the Issuer pursuant to the Agreement,
and all receipts of the Trustee credited under the provisions of the Indenture
against such payments, and from any other moneys held by the Trustee under the
Indenture for such purpose, and there shall be no other recourse against the
Issuer or any property now or hereafter owned by it.
[4] The Bonds are issuable as registered Bonds without coupons in
denominations of $100,000 and any integral multiple thereof ("Authorized
Denominations"). Subject to the limitations, upon payment of the charges
provided in the Indenture and upon surrender and cancellation hereof, this Bond
may be exchanged for a like aggregate principal amount of Bonds of other
Authorized Denominations. This Bond is transferable by the Owner hereof in
person or by his attorney duly authorized in writing at the designated Corporate
Trust Office of the Trustee but only in the manner, subject to the limitations
and upon payment of the charges provided in the Indenture, and upon surrender
and cancellation of this Bond. Upon such transfer a new
-5-
<PAGE> 10
registered Bond or Bonds, of Authorized Denomination or Authorized
Denominations, for the same aggregate principal amount, will be issued to the
transferee in exchange herefor.
[5] The Bonds are subject to redemption prior to maturity, at the
option of the Company, on or after June 1, 2009, in whole or in part on the
dates set forth below, at the redemption prices (expressed as percentages of
principal amount) set forth in the following table plus accrued interest, if
any, to the redemption date:
<TABLE>
<CAPTION>
Redemption Dates Redemption Prices
---------------- -----------------
<S> <C>
June 1, 2009 and December 1, 2009 101%
June 1, 2010 and December 1, 2010 100.5%
June 1, 2011 and any Interest Payment Date thereafter 100%
</TABLE>
[6] The Bonds shall be subject to mandatory redemption, in whole or in
part, at the principal amount thereof plus accrued interest thereon, but without
premium, from moneys transferred to the Bond Fund from the Construction Fund
pursuant to the Indenture within 60 days of the date of such transfer.
The Bonds shall be redeemed by the Issuer in full, at a redemption
price equal to the unpaid principal amount thereof plus accrued interest to the
redemption date, but without premium, within 60 days of and in the event of the
cancellation of certain provisions of the Agreement by the City pursuant to the
Agreement.
The Bonds shall be subject to mandatory redemption by the Issuer, in
full or in part, within 60 days of receipt by the Trustee of a direction from
the Company to redeem the Bonds pursuant to the Agreement or any other successor
user (a "User") of the Improvements pursuant to a Use Agreement between the User
and the Issuer (a "Use Agreement"), at a redemption price equal to the principal
of and accrued interest on the Bonds to be redeemed, without premium, upon the
occurrence of any of the following events: (i) if all or a material part of the
Improvements shall be damaged or destroyed and the Company pursuant to the
Agreement or any other User shall determine that it is not practicable or
desirable to rebuild, repair or restore the Improvements, or (ii) if all or a
material part of the Improvements shall be condemned or such use or control
thereof shall be taken by eminent domain and the Company or any other User shall
determine that it is not practicable or desirable to repair, restore, relocate,
modify or improve the Improvements to substantially the same condition as
existed prior to the exercise of such power of eminent domain. Bonds shall be
redeemed pursuant to this paragraph only to the extent moneys are received by
the Trustee either from insurance proceeds or from condemnation proceeds, as the
case may be.
The Bonds shall be redeemed at 100% of the principal amount thereof
plus accrued interest, if any, to the redemption date within 180 days after (i)
receipt by the Company of written notice of the issuance of a private letter
ruling or a technical advice memorandum by the Internal Revenue Service in a
proceeding in connection with which the Company has had the
-6-
<PAGE> 11
opportunity to participate or (ii) the Company receives written notice of a
final determination by any court of competent jurisdiction of the United States
in a proceeding to which the Company is a party or in which the Company has had
the opportunity to participate, in either case, to the effect that, as a result
of a failure by the Company to observe any covenant, agreement, representation
or warranty in the Agreement or the Project Certificate of the Company relating
to the Improvements financed or refinanced, among other matters, dated the date
hereof the interest payable on the Bonds is included in the gross income for
federal income tax purposes of the Owners or beneficial owners thereof (other
than a person who is a "substantial user" of the Project or a "related person"
within the meaning of Section 147(a) of the Code). Such determination shall not
include the inclusion of interest on the Bonds in gross income pursuant to the
alternative minimum tax provisions of the Code. Upon the occurrence of any such
event, the Bonds shall be redeemed in whole unless, in the opinion of Bond
Counsel, the redemption of a portion of the Outstanding Bonds would have the
result that interest payable on the Bonds remaining Outstanding after such
redemption would not be included in the gross income for federal income tax
purposes of any Owners or beneficial owners of the Bonds (other than a person
who is a "substantial user" of the Project or a "related person" within the
meaning of Section 147(a) of the Code in which event only such portion of the
Outstanding Bonds shall be redeemed.
[7] In the event any of the Bonds or Authorized Denominations thereof
are called for redemption, notice thereof identifying the Bonds or portions
thereof to be redeemed will be given by the Trustee upon mailing a copy of the
redemption notice by first class mail at least thirty days prior to the date
fixed for redemption to the Owner of each Bond to be redeemed in whole or in
part at the address shown on the registration books; provided, however, that
failure to give such notice by mailing, or any defect therein, shall not affect
the validity of the proceedings for the redemption of any Bond or portion
thereof with respect to which no such failure occurred. All Bonds so called for
redemption will cease to bear interest after the specified redemption date
provided funds for their redemption are on deposit at the place of payment at
that time. In the event any Bond is called for redemption in part only, the
Issuer shall execute and the Trustee shall authenticate and deliver to the Owner
thereof a new Bond or new Bonds of Authorized Denominations in aggregate
principal amount equal to the unredeemed portion of the Bond surrendered.
Additional notice of redemption of Bonds or portions thereof may be given by the
Trustee as provided in the Indenture, including notice to certain services and
by publication, but no failure to give any such additional notice or any defect
therein shall defeat the effectiveness of a call for redemption if notice
thereof is given as above prescribed.
[8] With respect to any notice of optional redemption of Bonds, unless
upon the giving of such notice such Bonds shall be deemed to have been paid
within the meaning of Article VII of the Indenture, such notice may state (if so
directed by the Company in writing) that such redemption shall be conditional
upon the receipt by the Trustee on or prior to the date fixed for such
redemption of moneys sufficient to pay the principal of, and premium, if any,
and interest on, such Bonds to be redeemed, and that if such moneys shall not
have been so received said notice shall be of no force and effect and the Issuer
shall not be required to redeem such Bonds. In the event that such notice of
redemption contains such a condition and such moneys are not so received, the
redemption shall not be made and the Trustee shall within a reasonable time
-7-
<PAGE> 12
thereafter give notice, in the manner in which the notice of redemption was
given, that such moneys were not so received.
[9] This Bond and all other Bonds of the series of which it forms a
part are issued pursuant to and in full compliance with the Constitution and
laws of the State of Arizona, particularly the Act, and pursuant to further
proceedings adopted by the governing authority of the Issuer, which proceedings
authorize the execution and delivery of the Indenture. This Bond and the series
of which it forms a part are special limited obligations of the Issuer payable
solely from the sources described herein. The Project is not security for the
Bonds.
[10] No recourse shall be had for the payment of the principal of, or
premium, if any, or interest on, any of the Bonds or for any claim based thereon
or upon any obligation, covenant or agreement in the Indenture contained,
against any past, present or future member, director, officer, employee or agent
of the Issuer, or through the Issuer, or any successor to the Issuer, under any
rule of law or equity, statute or constitution or by the enforcement of any
assessment or penalty or otherwise, and all such liability of any such member,
director, officer, employee or agent as such is hereby expressly waived and
released as a condition of and in consideration for the execution of the
Indenture and the issuance of any of the Bonds.
[11] The Owner of this Bond shall have no right to enforce the
provisions of the Indenture or to institute action to enforce the covenants
therein, or to take any action with respect to any event of default under the
Indenture, or to institute, appear in or defend any suit or other proceedings
with respect thereto, except as provided in the Indenture. If an Event of
Default as defined in the Indenture occurs and is continuing, the principal of
all Bonds then outstanding may be declared due and payable upon the conditions
and in the manner and with the effect provided in the Indenture.
[12] The Issuer, the Trustee and any agent of the Issuer or the Trustee
may treat the person in whose name this Bond is registered as the Owner hereof
for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Bond be overdue, and neither the Issuer, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Trustee shall not be required to transfer or exchange any Bond
after the mailing of notice calling such Bond or portion thereof for redemption,
nor during the period of fifteen days next preceding the mailing of such notice
of redemption.
[13] The Indenture prescribes the manner in which it may be discharged
and after which the Bonds shall no longer be secured by or entitled to the
benefits of the Indenture, except for the purposes of registration and exchange
of Bonds and of such payment, including a provision that under certain
circumstances the Bonds shall be deemed to be paid if Government Obligations as
defined in the Indenture maturing as to principal and interest in such amounts
and at such times as to insure the availability of sufficient moneys to pay the
principal of, and premium, if any, and interest on, the Bonds and all necessary
and proper fees, compensation and expenses of the Trustee shall have been
deposited with the Trustee.
-8-
<PAGE> 13
[14] Modifications or alterations of the Indenture, or of any
supplements thereto, may be made only to the extent and in the circumstances
permitted by the Indenture.
[15] Terms which are used herein as defined terms and which are not
otherwise defined herein shall have the meanings attributed to them in the
Indenture.
[FORM OF ASSIGNMENT]
The following abbreviations, when used in the inscription on the face
of this Bond, shall be construed as though they were written out in full
according to applicable laws or regulations:
UNIF GIFT MIN ACT--
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common ____________ Custodian ___________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors Act
of survivorship and not
____________________________
as tenants in common State
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
---------------------------------------------------------------------------
(Name and Address of Assignee)
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<PAGE> 14
the within Bond of The Industrial Development Authority of the City of Phoenix,
Arizona and does hereby irrevocably constitute and appoint __________________ to
transfer the said Bond on the books kept for registration thereof with full
power of substitution in the premises.
Dated:
-----------------
Signature Guaranteed:
- -----------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without alteration
or enlargement or any change whatever.
NOTICE: Guarantee to be made by a guarantor institution participating in the
Securities, Transfer Agents Medallion Program, or in such other program
acceptable to the Bond Registrar.
[END OF BOND FORM]
WHEREAS, the execution and delivery of the Bonds and of this Indenture
have been duly authorized and all things necessary to make the Bonds, when
executed by the Issuer and authenticated by the Trustee, valid and binding legal
obligations of the Issuer and to make this Indenture a valid and binding
agreement have been done;
NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSETH:
That the Issuer in consideration of the premises, the acceptance by the
Trustee of the trusts hereby created, the purchase and acceptance of the Bonds
by the purchasers thereof, one dollar duly paid to the Issuer by the Trustee at
or before the execution and delivery of these presents and of other good and
valuable considerations, the receipt of which is hereby acknowledged, and in
order to secure the payment of the principal of, and premium, if any, and
interest on, all Bonds outstanding hereunder from time to time, according to
their tenor and effect, and to secure the observance and performance by the
Issuer of all the covenants expressed or implied herein and in the Bonds, does
hereby pledge and assign unto the Trustee, and unto its successors and assigns
forever;
GRANTING CLAUSE FIRST
The Agreement, including all extensions and renewals of the term
thereof, if any, together with all right, title and interest of the Issuer
therein (except for the right of the Issuer to the payment of costs, expenses,
indemnification and counsel fees pursuant to Sections 2.7E, 4.7, 7.2 and 9.4 of
the Agreement and any rights of the Issuer to receive any notices, certificates,
requests, requisitions or other communications under the Agreement) including,
but without limiting the generality of the foregoing, the present and continuing
right to receive, receipt for, collect or make claim for any of the moneys,
income, revenues, issues, profits and other amounts
-10-
<PAGE> 15
payable or receivable thereunder, including payments made by the Company,
whether payable under the Agreement or otherwise, to bring actions and
proceedings thereunder or for the enforcement thereof, and to do any and all
things which the Issuer or any other person is or may become entitled to do
under the Agreement;
GRANTING CLAUSE SECOND
All payments to be received by the Issuer (except as provided in the
preceding paragraph) under the Agreement, together with all other Revenues, and
all moneys and earnings thereon held by the Trustee in the Bond Fund and the
Construction Fund under the terms of the Indenture; and
GRANTING CLAUSE THIRD
Any and all other property of each name and nature from time to time
hereafter by delivery or by writing of any kind pledged or assigned as and for
additional security hereunder, by the Issuer or by anyone on its behalf or with
its written consent, to the Trustee, which is hereby authorized to receive any
and all such property at any and all times and to hold and apply the same
subject to the terms hereof.
TO HAVE AND TO HOLD all and singular the Trust Estate, whether now
owned or hereafter acquired, unto the Trustee and its respective successors in
said trusts and assigns forever.
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for
the equal and proportionate benefit, security and protection of all present and
future owners of the Bonds, from time to time issued under and secured by this
Indenture without privilege, priority or distinction as to the lien or otherwise
of any of the Bonds over any of the other Bonds (except only as otherwise
expressly stated herein).
PROVIDED HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly cause to be paid, the principal of the Bonds and the interest and
premium, if any, due or to become due thereon, at the times and in the manner
mentioned in the Bonds, according to the true intent and meaning thereof, and
shall cause the payments to be made into the Bond Fund as required under Article
V hereof or shall provide, as permitted by Article VII hereof, for the payment
thereof, and shall well and truly keep, perform and observe all the covenants
and conditions pursuant to the terms of this Indenture to be kept, performed and
observed by it, and shall pay or cause to be paid to the Trustee all sums of
money due or to become due in accordance with the terms and provisions hereof,
then this Indenture and the rights hereby granted shall cease, determine and be
void; otherwise this Indenture to be and remain in full force and effect.
THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly
declared, that all Bonds issued and secured hereunder are to be issued,
authenticated and delivered and the Revenues hereby assigned and pledged are to
be dealt with and disposed of under, upon and subject to the terms, conditions,
stipulations, covenants, agreements, trusts, uses and purposes as
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hereinafter expressed, and the Issuer has agreed and covenanted, and does hereby
agree and covenant, with the Trustee and with the respective owners from time to
time of the Bonds, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. (A) For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(1) All references in this Indenture to designated
"Articles", "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Indenture.
(2) The words "herein", "hereof", "hereto", "hereby", and
"hereunder" and other words of similar import refer to this Indenture
as a whole and not to any particular Article, Section or other
subdivision.
(3) The terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular.
(4) All accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles as in effect from time to time.
(5) Every "request", "order", "demand", "application",
"appointment", "notice", "statement", "certificate", "consent" or
similar action hereunder by the Issuer shall, unless the form thereof
is specifically provided, be in writing signed by the Authorized Issuer
Representative.
(6) Every reference herein to the delivery of Bonds by the
Trustee, or similar references, shall mean that Bonds shall be
available to be picked up at the appointed time at the Corporate Trust
Office of the Trustee.
(7) All other terms used herein which are defined in the
Agreement shall have the same meanings assigned them in the Agreement
unless the context otherwise requires.
(B) For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
"Act" means Title 35, Chapter 5, Arizona Revised Statutes, and all acts
supplementary thereto or amendatory thereof.
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"Administrative Expenses" means the reasonable and necessary expenses
(including the reasonable value of employee services and fees of Counsel)
incurred by the Issuer in connection with the Bonds, the Agreement, this
Indenture and any transaction or event contemplated by the Agreement or this
Indenture.
"Agreement" means the Amended and Restated Airport Use Agreement with
respect to the Bonds of even date herewith by and between the Issuer, the City
of Phoenix, Arizona and the Company, as from time to time amended and
supplemented.
"Authorized Company Representative" means any person who, at the time,
shall have been designated as such by a written certificate furnished to the
Issuer and the Trustee containing the specimen signature of such person and
signed on behalf of the Company by any officer of the Company. Such certificate
may designate an alternate or alternates.
"Authorized Denominations" means $100,000 or any integral multiple
thereof.
"Authorized Issuer Representative" means any person at the time
designated to act on behalf of the Issuer by a written certificate furnished to
the Company and the Trustee containing the specimen signature of such person and
signed on behalf of the Issuer by its President, Vice President, Secretary or
Assistant Secretary. Such certificate may designate an alternate or alternates.
"Bond" or "Bonds" means any one or more of the bonds authorized,
authenticated and delivered under this Indenture.
"Bond Counsel" means the Counsel who renders the opinion as to the
tax-exempt status of interest on the Bonds or other nationally recognized
municipal bond counsel mutually acceptable to the Issuer, the Trustee and the
Company.
"Bond Fund" means the fund created by Section 5.02 hereof.
"Bondholder" or "Holder" or "Owner" or "Owner of Bonds" means the
Person or Persons in whose name or names a Bond shall be registered on books of
the Issuer kept for that purpose in accordance with the terms of this Indenture.
"Bond Registrar" means the Trustee.
"Book Entry Bond" means a Bond authorized to be issued to, and
restricted to being registered, in the name of, a Securities Depository as
provided in Section 2.09 hereof.
"Business Day" means a day on which banks located in the city in which
the Corporate Trust Office of the Trustee is located are not required or
authorized to remain closed and on which the New York Stock Exchange is not
closed.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and regulations promulgated or proposed thereunder.
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<PAGE> 18
"Company" means America West Airlines, Inc., a Delaware corporation,
and its successors and assigns and any surviving, resulting or transferee
corporation as permitted in Section 6.1 of the Agreement.
"Completion Date" means the date specified in the Completion
Certificate submitted in accordance with Section 5.8 of the Agreement.
"Construction Fund" means the trust fund by that name created pursuant
to Section 5.15 hereof.
"Corporate Trust Office" means the designated principal office of the
Trustee from which at any particular time its corporate trust business shall be
administered.
"Costs of Issuance" means all fees and reasonable costs and expenses
incurred in connection with the issuance of the Bonds, including:
1. Underwriter's fees;
2. counsel fees, including Bond Counsel, Underwriter's
counsel, Company's counsel and Issuer counsel, as well as any other
specialized counsel fees incurred in connection with the Bonds or the
Agreement;
3. financial advisor fees incurred in connection with the
issuance of the Bonds;
4. rating agency fees;
5. trustee fees and trustee counsel fees;
6. paying agent and certifying and authenticating agent fees
related to issuance of the Bonds;
7. accountant fees related to issuance of the Bonds;
8. printing costs of the Bonds and of any offering document;
9. publication costs associated with the financing
proceedings;
10. costs of engineering and feasibility studies necessary to
the issuance of the Bonds; and
11. initial fees and expenses of the Issuer.
"Cost of Issuance Fund" means the trust fund by that name created
pursuant to Section 5.14 hereof.
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<PAGE> 19
"Counsel" means an attorney at law or a firm of attorneys (who may be
an employee of or counsel to the Issuer or the Company or the Trustee) duly
admitted to the practice of law before the highest court of any state of the
United States of America.
"Dated Date" means June 1, 1999.
"Default" or "event of default" means an occurrence or event specified
in and defined by Section 8.01 hereof.
"DTC" means the Depository Trust Company, a limited purpose trust
company organized under the laws of the State of New York, and its successors
and assigns.
"Executive Officer" means the President of the Governing Body of the
Issuer.
"Extraordinary Services" and "Extraordinary Expenses" mean all services
rendered and all expenses (including fees of Counsel) incurred under the
Indenture and the Tax Agreement other than Ordinary Services and Ordinary
Expenses.
"Governing Body" means the Board of Directors of the Issuer.
"Government Obligations" means non-callable direct general obligations
of, or non-callable obligations the payment of the principal of and interest on
which are unconditionally guaranteed by, the United States of America.
"Improvements" has the definition set forth in the Agreement.
"Improvements Costs" means costs incurred after January 21, 1999
related to the acquisition, construction, and installation of the Improvements.
"Indenture" means this Indenture of Trust, including any indentures
supplemental hereto or amendatory hereof.
"Interest During Construction" means interest accrued on the Bonds from
the date of issuance of the Bonds to and including the Completion Date.
"Interest Payment Date" means June 1 and December 1 of each year,
commencing December 1, 1999.
"Issue Date" means June 29, 1999, the date of issuance and delivery of
the Bonds.
"Issuer" means The Industrial Development Authority of the City of
Phoenix, Arizona and any successor body to the duties or functions of the
Issuer.
"Master Use Agreement" means the Master Use Agreement contained in and
defined by Article 2 of the Agreement.
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<PAGE> 20
"Ordinary Services" and "Ordinary Expenses" mean those services
normally rendered and those expenses, including fees of Counsel, normally
incurred by a trustee, paying agent or bond registrar under instruments similar
to this Indenture and the Tax Agreement.
"Outstanding" or "outstanding" or "Bonds Outstanding", in connection
with the Bonds means, as of the time in question, all Bonds authenticated and
delivered under this Indenture, except:
A. Bonds theretofore cancelled or required to be cancelled
under Section 2.07 hereof;
B. Bonds which are deemed to have been paid in accordance with
Article VII hereof; and
C. Bonds in substitution for which other Bonds have been
authenticated and delivered pursuant to Article II hereof.
In determining whether the Owners of a requisite aggregate principal
amount of outstanding Bonds have concurred in any request, demand,
authorization, direction, notice, consent or waiver under the provisions of the
Indenture, Bonds which are owned of record by the Company or any affiliate
thereof or held by the Trustee for the account of the Company shall be
disregarded and deemed not to be Outstanding hereunder for the purpose of any
such determination (except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Bonds which the Trustee knows to be so owned or
held shall be disregarded) unless all Bonds are owned by the Company or any
affiliate thereof and/or held by the Trustee for the account of the Company, in
which case such Bonds shall be considered outstanding for the purpose of such
determination. For the purpose of this definition, an "affiliate" of any
specified Person means any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
Person and "control," when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Paying Agent" means the Trustee.
"Person" means natural persons, firms, partnerships, associations,
corporations, trusts and public bodies.
"Prior Bonds" has the meaning assigned to such term in the recitals to
this Indenture.
"Prior Indenture" has the meaning assigned to such term in the recitals
to this Indenture.
"Project Certificate" means the Certificate Re: Series 1999 Bonds and
use of Proceeds of Series 1989 Bonds, Series 1990 Bonds, Series 1994A Bonds and
Series 1994B Bonds, dated June 29, 1999, and executed by a Vice President of the
Company.
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<PAGE> 21
"Rebate Fund" means the Rebate Fund, if any, created and established
pursuant to the Tax Agreement and Section 5.13 hereof.
"Record Date" means the fifteenth (15th) day of the calendar month
immediately preceding an Interest Payment Date, or if such day shall not be a
Business Day, the immediately preceding Business Day.
"Recording Officer" means the Secretary of the Issuer.
"Resolution" means the resolution duly adopted and approved by the
Governing Body of the Issuer on May 20, 1999 authorizing the issuance and sale
of the Bonds and the execution of this Indenture and the Agreement.
"Revenues" means the amounts pledged hereunder to the payment of
principal of, and premium, if any, and interest on, the Bonds, consisting of the
following: (i) all amounts payable from time to time by the Company under
Section 4.5 of the Agreement, and all receipts of the Trustee credited under the
provisions of this Indenture against said amounts payable, and (ii) any portion
of the net proceeds of the Bonds deposited with the Trustee under Section
5.03(a) hereof.
"Securities Depository" means, with respect to a Book Entry Bond, DTC
or any person, firm, association or corporation constituting a "clearing agency"
(securities depository) registered under Section 17A of the Securities Exchange
Act of 1934, as amended, which may at any time be substituted in its place to
act as Securities Depository for the Bonds, or its successors, or any nominee
therefor.
"Series 1999 Improvements" means the improvements set forth on Exhibit
A-2 of the Agreement.
"State" means the State of Arizona.
"Tax Agreement" means the Tax Exemption Certificate and Agreement with
respect to the Bonds, dated as of the date of the delivery of the Bonds, among
the Company, the Issuer and the Trustee, as from time to time amended and
supplemented.
"Trust Estate" means the property conveyed to the Trustee pursuant to
the Granting Clauses hereof.
"Trustee" means Bank One, Arizona, N.A., as trustee hereunder, and any
successor trustee pursuant to Section 9.06 or 9.09 hereof at the time serving as
successor Trustee hereunder, and any co-trustee serving as such hereunder.
"Underwriter" means Salomon Smith Barney.
"Written Consent of the Issuer," "Written Order of the Issuer,"
"Written Request of the Issuer" and "Written Requisition of the Issuer" mean,
respectively, a written consent, order,
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request or requisition signed by or on behalf of the Issuer by an Authorized
Issuer Representative.
ARTICLE II
THE BONDS
SECTION 2.01. AUTHORIZED AMOUNT AND PURPOSE OF BONDS. No Bonds may be
issued under the provisions of this Indenture except in accordance with this
Article. The total principal amount of Bonds that may be issued hereunder is
hereby expressly limited to $26,300,000 except as provided in Section 2.06
hereof. The Bonds shall be issued for the purpose of refunding the outstanding
Prior Bonds, financing the Costs of the Series 1999 Improvements and providing
for the payment of costs of issuing the Bonds, as provided herein and in the
Agreement.
SECTION 2.02. ISSUANCE OF BONDS. The Issuer may issue the Bonds
following the execution of this Indenture; and the Trustee shall, at the
Issuer's written request, authenticate such Bonds and deliver them as specified
in such request. The Bonds shall be designated "The Industrial Development
Authority of the City of Phoenix, Arizona Airport Facilities Revenue Bonds
(America West Airlines, Inc. Project) Series 1999." The Bonds shall be
substantially in the form hereinabove set forth with such appropriate
variations, omissions and insertions as are permitted or required by this
Indenture. The Bonds shall be issuable as fully registered bonds without coupons
in Authorized Denominations. Unless the Issuer shall otherwise direct, the Bonds
shall be numbered R-1 and upwards.
Each Bond shall be dated as of June 1, 1999 and shall mature, subject
to prior redemption, upon the terms and conditions hereinafter set forth, on
June 1, 2019. The Bonds shall bear interest at the rate of six and one-quarter
percent (6.25%) per annum from and including the date thereof until payment of
the principal or redemption price thereof shall have been made or provided for
in accordance with the provisions hereof, whether at maturity, upon redemption
or otherwise. Interest on the Bonds shall be computed upon the basis of a
360-day year, consisting of twelve (12) thirty (30) day months. Each Bond shall
bear interest on overdue principal and, to the extent permitted by law, on
overdue interest at the rate borne by the Bonds. The Trustee shall insert the
date of authentication of each Bond in the place provided for such purpose in
the form of certificate of authentication of Trustee to be printed on each Bond.
The principal of, and premium, if any, and interest on, the Bonds shall
be payable in any coin or currency of the United States of America which, at the
respective dates of payment thereof, is legal tender for the payment of public
and private debts, and except as otherwise provided for Book Entry Bonds as
permitted by Section 2.09 hereof, such principal and premium, if any, shall be
payable at the Corporate Trust Office of the Trustee. Payment of interest on any
Interest Payment Date on any Bond shall be made to the Owner thereof as of the
close of business on the Record Date immediately prior thereto and except as
otherwise provided for Book Entry Bonds as permitted by Section 2.09 hereof,
shall be (i) made by check or draft mailed on the Interest Payment Date to such
Owner at his address as it appears on the registration books of the Issuer
maintained by the Trustee or at such other address as is furnished to the
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Trustee in writing by such Owner not later than the close of business on such
Record Date or (ii) transmitted by wire transfer to an account with a commercial
bank located within the United States of America if such Owner owns at least
$1,000,000 in aggregate principal amount of the Bonds and shall have provided
wire transfer instructions to the Trustee prior to the close of business on such
Record Date, except that, if and to the extent that there shall be a default in
the payment of the interest due on such Interest Payment Date, such defaulted
interest shall be paid to the Owners in whose names any such Bonds are
registered at the close of business on the fifth Business Day next preceding the
date of payment of such defaulted interest.
Interest on the Bonds shall be payable on each Interest Payment Date
for the period ending on the day immediately preceding such Interest Payment
Date and commencing on the immediately preceding Interest Payment Date, or if no
interest has been paid on the Bonds, on the date of the Bonds. Notwithstanding
the foregoing, if as shown by the records of the Trustee, interest on the Bonds
shall be in default, Bonds issued in exchange for Bonds surrendered for
registration of transfer or exchange shall bear interest from the date to which
interest has been paid in full on the Bonds, or if no interest has been paid on
the Bonds, from the date of the Bonds.
SECTION 2.03. OWNERSHIP, TRANSFER, EXCHANGE AND REGISTRATION OF BONDS.
The Issuer shall cause books for the registration and for the transfer of the
Bonds as provided herein to be kept at the Corporate Trust Office of the
Trustee, which is hereby constituted and appointed the Bond Registrar and
transfer agent for the Bonds. The Issuer shall prepare and deliver to the
Trustee, and the Trustee shall keep custody of, a supply of forms of Bonds duly
executed by the Issuer, as provided in Section 2.04 hereof, for use in the
transfer and exchange of Bonds. The Trustee is hereby authorized and directed to
complete such forms of Bonds as to principal amounts and registered owners, in
accordance with the provisions hereof, in effecting transfers and exchanges of
Bonds as provided herein.
Upon surrender for transfer of any Bond at the Corporate Trust Office
of the Trustee, duly endorsed for transfer or accompanied by a written
instrument or instruments of transfer in form satisfactory to the Trustee duly
executed by the Owner or his attorney duly authorized in writing, the Trustee
shall date and execute the certificate of authentication on and deliver in the
name of the transferee or transferees a new Bond or Bonds duly executed by the
Issuer of Authorized Denominations and for a like aggregate principal amount.
Any Bond or Bonds may be exchanged at the Corporate Trust Office of the
Trustee for a new Bond or Bonds of like aggregate principal amount of other
Authorized Denominations. Upon surrender of any Bond or Bonds for exchange, the
Trustee shall date and execute the certificate of authentication on and deliver
a new Bond or Bonds duly executed by the Issuer which the Bondholder making the
exchange is entitled to receive.
The Trustee shall not be required to transfer or exchange any Bond
after the mailing of notice calling such Bond or portion thereof for redemption,
nor during the period of fifteen days next preceding the mailing of such notice
of redemption.
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The person in whose name any Bond shall be registered shall be deemed
and regarded as the absolute owner thereof for all purposes, and payment of the
principal of, or premium, if any, or interest on, any Bond shall be made only to
or upon the written order of the registered Owner thereof or his legal
representative, but such registration may be changed as hereinabove provided.
All such payments shall be valid and effective to satisfy and discharge the
liability upon such Bond to the extent of the sum or sums so paid.
The Trustee shall require the payment by the Bondholder requesting
exchange or transfer (other than an exchange upon a partial redemption of a
Bond) of any tax, fee or other governmental charge required to be paid with
respect to such exchange or transfer, but otherwise no charge shall be made to
the Bondholder for such exchange or transfer.
SECTION 2.04. EXECUTION; LIMITED OBLIGATION. The Bonds shall be executed
on behalf of the Issuer with the manual or facsimile signature of its President
and attested with the manual or facsimile signature of its Secretary. All
authorized facsimile signatures shall have the same force and effect as if
manually signed. The Bonds, together with interest thereon, are not general
obligations of the Issuer but are special, limited obligations payable solely
from the Revenues, and shall be a valid claim of the respective Owners thereof
only against the Bond Fund and the Revenues, which Revenues are hereby pledged,
assigned and otherwise secured for the equal and ratable payment of the Bonds
and shall be used for no other purpose than to pay the principal of, premium, if
any, and interest on the Bonds, except as may be otherwise expressly authorized
in this Indenture or the Tax Agreement. The Bonds and interest and premium, if
any, thereon shall never constitute the debt or indebtedness of the Issuer
within the meaning of any provision or limitation of the Constitution of the
State or statutes and shall not constitute nor give rise to a pecuniary
liability of the Issuer or a charge against its general credit. The Issuer has
no taxing power. In case any official of the Issuer whose signature or facsimile
of whose signature shall appear on the Bonds shall cease to be such official
before the delivery of such Bonds, such signature or such facsimile shall
nevertheless be valid and sufficient for all purposes, the same as if he had
remained in office until delivery.
SECTION 2.05. AUTHENTICATION. No Bond shall be valid for any purpose
until the certificate of authentication on such Bond shall have been duly
executed by the Trustee, and such authentication shall be conclusive proof that
such Bond has been duly authenticated and delivered under this Indenture and
that the Owner thereof is entitled to the benefits of the trust hereby created.
The Trustee's certificate of authentication on any Bond shall be deemed to have
been executed by it if manually signed by an authorized signatory of the
Trustee, but it shall not be necessary that the same signatory sign the
certificate of authentication on all of the Bonds issued hereunder.
SECTION 2.06. MUTILATED, DESTROYED, LOST OR STOLEN BONDS. In the event
any Bond or temporary Bond is mutilated, lost, stolen or destroyed, the Trustee
may authenticate a new Bond duly executed by the Issuer of like date and
denomination as that mutilated, lost, stolen or destroyed; provided that, in the
case of any mutilated Bond, such mutilated Bond shall first be surrendered to
the Trustee, and in the case of any lost, stolen or destroyed Bond, there shall
be first furnished to the Trustee evidence of such loss, theft or destruction
satisfactory to the Trustee, together with indemnity to the Issuer, the Trustee
and the Company satisfactory to the
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Trustee. In the event any such Bond shall have matured or been redeemed, instead
of issuing a duplicate Bond, the Trustee on behalf of the Issuer may pay the
same without surrender thereof. The Issuer and the Trustee may charge the Owner
of such Bond with their reasonable fees and expenses in this connection. The
Issuer shall cooperate with the Trustee in connection with the issue of
replacement Bonds, but nothing in this Section shall be construed in derogation
of any rights which the Issuer, the Company or the Trustee may have to receive
indemnification against liability, or payment or reimbursement of expenses, in
connection with the issue of a replacement Bond. All Bonds shall be held and
owned upon the express condition that the foregoing provisions are, to the
extent permitted by law, exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other
rights or remedies.
SECTION 2.07. CANCELLATION AND DESTRUCTION OF SURRENDERED BONDS.
Whenever any Outstanding Bond shall be delivered to the Trustee for transfer,
exchange or cancellation pursuant to this Indenture, upon payment of the
principal amount represented thereby, or for replacement pursuant to Section
2.06 hereof, such Bond shall be promptly cancelled and cremated or otherwise
destroyed by the Trustee.
SECTION 2.08. DELIVERY OF THE BONDS. Upon the execution and delivery of
this Indenture, the Issuer shall execute and deliver to the Trustee and the
Trustee shall authenticate the Bonds and deliver them to the Underwriter as
directed by the Issuer as hereinafter in this Section provided.
Prior to the delivery by the Trustee of any of the Bonds there shall be
filed with the Trustee:
(1) A duly certified copy of the Resolution.
(2) Original executed counterparts of the Agreement, the Tax
Agreement and this Indenture.
(3) An opinion of Bond Counsel to the effect that the Bonds
have been validly issued under this Indenture and that all requirements
under this Indenture precedent to the delivery of the Bonds have been
satisfied.
(4) A request and authorization to the Trustee on behalf of
the Issuer and signed by the Executive Officer to authenticate and
deliver the Bonds to or as directed by the Underwriter, registered in
the names and in the Authorized Denominations specified to the Trustee
by the Underwriter, upon payment by the Underwriter of a sum specified
in such request to the Trustee (such sum to be applied in accordance
with the Written Order of the Issuer furnished to the Trustee on the
Issue Date), plus accrued interest, if any, on the Bonds to the date of
delivery (which accrued interest shall be deposited in the Bond Fund).
(5) Original executed Investor Letter(s) in the form attached
as Exhibit I hereto.
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SECTION 2.09. BOOK ENTRY SYSTEM. The Trustee and the Issuer (or the
Issuer with advice to the Trustee), at the direction of the Company, may from
time to time enter into, and discontinue, an agreement with a "clearing agency"
(securities depository) registered under Section 17A of the Securities Exchange
Act of 1934, as amended (the "Securities Depository"), which is the owner of the
Bonds, to establish procedures with respect to the Bonds not inconsistent with
the provisions of this Indenture; provided, however, that, notwithstanding any
other provisions of this Indenture, any such agreement may provide:
(a) that the Securities Depository is not required to present
a Bond to the Trustee in order to receive a partial payment of
principal;
(b) that different provisions for notice to such Securities
Depository may be set forth therein; and
(c) that a legend shall appear on each Bond so long as the
Bonds are subject to such agreement.
With respect to Bonds registered in the name of a Securities Depository
(or its nominee) neither the Trustee, the Issuer nor the Company shall have any
obligation to any of its members or participants or to any person on behalf of
whom an interest is held in the Bonds.
It is hereby acknowledged that the Issuer has entered into an agreement
(the "Letter of Representation") with DTC which applies to the Bonds, and while
the Letter of Representations is in effect, the procedures established by DTC
shall apply to the Bonds notwithstanding any other provisions of this Indenture
to the contrary. As long as DTC is the Securities Depository with respect to the
Bonds, the Trustee shall be a DTC Participant.
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
SECTION 3.01. OPTIONAL REDEMPTION. The Bonds shall be subject to
redemption, at the option of the Company, prior to maturity on or after June 1,
2009 in whole or in part on the dates set forth below, at the redemption prices
(expressed as percentages of the principal amount) set forth in the following
table, plus accrued interest, if any, to the redemption date:
<TABLE>
<CAPTION>
Redemption Dates Redemption Prices
---------------- -----------------
<S> <C>
June 1, 2009 and December 1, 2009 101%
June 1, 2010 and December 1, 2010 100.5%
June 1, 2011 and any Interest Payment Date thereafter. 100%
</TABLE>
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<PAGE> 27
SECTION 3.02. EXTRAORDINARY MANDATORY REDEMPTION OF BONDS.
(a) The Bonds shall be subject to mandatory redemption, in
whole or in part, at the principal amount thereof plus accrued interest
thereon, but without premium, from moneys transferred to the Bond Fund
from the Construction Fund pursuant to Section 5.16 hereof within 60
days of the date of such transfer.
(b) The Bonds shall be redeemed by the Issuer in full, at a
redemption price equal to the unpaid principal amount thereof plus
accrued interest to the redemption date, but without premium, within 60
days of and in the event of the cancellation of the Master Use
Agreement by the City pursuant to Section 2.8A of the Agreement.
(c) The Bonds shall be subject to mandatory redemption by the
Issuer, in full or in part, within 60 days of receipt by the Trustee of
a direction from the Company to redeem the Bonds under Section 4.14 of
the Agreement or any other User pursuant to a Use Agreement, at a
redemption price equal to the principal of and accrued interest on the
Bonds to be redeemed, without premium, upon the occurrence of any of
the following events:
(i) if all or a material part of the Improvements
shall be damaged or destroyed and the Company pursuant to the
Agreement or any other User pursuant to a Use Agreement shall
determine that it is not practicable or desirable to rebuild,
repair or restore that Improvements, or
(ii) if all or a material part of the Improvements
shall be condemned or such use or control thereof shall be
taken by eminent domain and the Company pursuant to a Use
Agreement or any other User pursuant to a Use Agreement shall
determine that it is not practicable or desirable to repair,
restore, relocate, modify or improve the Improvements to
substantially the same condition as existed prior to the
exercise of such power of eminent domain.
Bonds shall be redeemed pursuant to this subsection (c) only to the
extent moneys are received by the Trustee either from insurance
proceeds or from condemnation proceeds, as the case may be.
SECTION 3.03. MANDATORY REDEMPTION UPON A DETERMINATION OF TAXABILITY.
The Bonds shall be subject to mandatory redemption prior to maturity in whole,
or as hereafter provided in part, at any time prior to their maturity at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest, if any, to the redemption date, not more than one hundred eighty (180)
days after (i) receipt by the Company of written notice of the issuance of a
private letter ruling or a technical advice memorandum by the Internal Revenue
Service in a proceeding in connection with which the Company has had the
opportunity to participate or (ii) the Company receives written notice of a
final determination by any court of competent jurisdiction of the United States
in a proceeding to which the Company is a party or in which the Company has had
the opportunity to participate, in either case, to the effect that, as a result
of a failure by the Company to observe any covenant, agreement, representation
or warranty in the
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Agreement or the Project Certificate, the interest payable on the Bonds is
included in the gross income for federal income tax purposes of the Owners or
beneficial owners thereof (other than a person who is a "substantial user" of
the Project or a "related person" within the meaning of Section 147(a) of the
Code). Upon the occurrence of any event described in the first sentence of this
Section 3.03, the Bonds shall be redeemed in whole unless, in the opinion of
Bond Counsel, the redemption of a portion of the Outstanding Bonds would have
the result that interest payable on the Bonds remaining Outstanding after such
redemption would not be included in the gross income for federal income tax
purposes of any Owners or beneficial owners of the Bonds (other than a person
who is a "substantial user" of the Project or a "related person" within the
meaning of Section 147(a) of the Code), in which event only such portion of the
Outstanding Bonds shall be redeemed.
SECTION 3.04. NOTICE OF REDEMPTION. Upon receipt of notice given by the
Company pursuant to Sections 4.12, 4.14 and 4.16 of the Agreement, notice of the
call for any redemption of Bonds or any portions thereof pursuant to Sections
3.01, 3.02 or 3.03 hereof identifying the Bonds or portions thereof to be
redeemed, specifying the redemption date, the redemption price, the place and
manner of payment and that from the redemption date interest will cease to
accrue (provided that funds for the redemption of such Bonds or portions thereof
are on deposit with the Trustee on such redemption date) shall be given by the
Trustee by mailing a copy of the redemption notice by first-class mail to the
Owner of each Bond to be redeemed in whole or in part at the address shown on
the registration books; provided, however, except in the case of a conditional
notice of optional redemption as described in the next succeeding paragraph, the
Trustee shall not give any notice of redemption unless funds sufficient for such
redemption are then on deposit with the Trustee. Notice of redemption shall be
provided at least thirty (30) days prior to the date fixed for redemption to the
Owners of Bonds to be redeemed; provided, however, that failure to duly give
such notice, or any defect therein, shall not affect the validity of any
proceedings for the redemption of Bonds with respect to which no such failure or
defect occurred. Upon presentation and surrender of Bonds so called for
redemption in whole or in part at the place or places of payment, such Bonds or
portions thereof shall be redeemed.
With respect to any notice of optional redemption of Bonds, unless upon
the giving of such notice such Bonds shall be deemed to have been paid within
the meaning of Article VII hereof, such notice may state (if so directed by the
Company in writing) that such redemption shall be conditioned upon the receipt
by the Trustee on or prior to the date fixed for such redemption of moneys
sufficient to pay the principal of, and premium, if any, and interest on, such
Bonds to be redeemed, and that if such moneys shall not have been so received
said notice shall be of no force and effect and the Issuer shall not be required
to redeem such Bonds. In the event that such notice of redemption contains such
a condition and such moneys are not so received, the redemption shall not be
made and the Trustee shall within a reasonable time thereafter give notice, in
the manner in which the notice of redemption was given, that such moneys were
not so received.
Any notice mailed as provided in this Section shall be conclusively
presumed to have been duly given, whether or not the Owner receives the notice.
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In addition to the foregoing notice, further notice may be given by the
Trustee as set out below, but no defect in said further notice nor any failure
to give all or any portion of such further notice shall in any manner defeat the
effectiveness of a call for redemption if notice thereof is given as above
prescribed.
A. Each further notice of redemption given hereunder shall contain the
information required above for an official notice of redemption plus (i) the
CUSIP number of the Bonds; (ii) the Dated Date of the Bonds; (iii) the rate of
interest borne by the Bonds; (iv) the maturity date of the Bonds; and (v) any
other descriptive information needed to identify accurately the Bonds being
redeemed.
B. Each further notice of redemption shall be sent at least two days
before the date the redemption notice to the Owners is required to be given as
provided in the first paragraph of this Section 3.04, by registered or certified
mail or overnight delivery service, to all registered securities depositories
then in the business of holding substantial amounts of obligations of types
comprising the Bonds (such depositories now being Depository Trust Company of
New York, New York; Midwest Securities Trust Company of Chicago, Illinois;
Pacific Securities Depository Trust Company of San Francisco, California; and
Philadelphia Depository Trust Company of Philadelphia, Pennsylvania).
C. Reserved.
D. Each further notice of redemption shall be given at least two days
before the date the redemption notice to the Owners is required to be given as
provided in the first paragraph of this Section 3.04, by facsimile
communication, and notice by regular mail, to two of the following services
selected by the Company and at the address provided to the Trustee by the
Company:
(1) Financial Information, Inc.'s Financial Daily Called
Bond Service;
(2) Interactive Data Corporation's Bond Service;
(3) Kenny Information Service's Called Bond Service;
(4) Moody's Municipal and Government Called Bond Service;
or
(5) Standard & Poor's Called Bond Record.
The Company shall pay, or shall reimburse the Trustee for payment of,
all costs and expenses of redeeming Bonds.
SECTION 3.05. DEPOSIT OF FUNDS. For the redemption of any of the Bonds,
the Issuer shall cause to be deposited in the Bond Fund out of the Revenues
moneys sufficient to pay when due the principal of, and premium, if any, and
interest on, the Bonds or portions thereof to be redeemed on the redemption
date. Moneys in the Bond Fund which are available therefor shall be credited
against any moneys which the Issuer is required to cause to be so deposited in
the Bond Fund.
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SECTION 3.06. PARTIAL REDEMPTION OF BONDS. In case a Bond is of a
denomination larger than the minimum Authorized Denomination, all or a portion
of such Bond may be redeemed in an Authorized Denomination. Upon surrender of
any Bond for redemption in part only, the Issuer shall execute and the Trustee
shall authenticate and deliver to the Owner thereof, without cost to the Owner,
a new Bond or Bonds of Authorized Denominations in aggregate principal amount
equal to the unredeemed portion of the Bond surrendered.
SECTION 3.07. SELECTION OF BONDS FOR REDEMPTION. If less than all of the
Bonds are called for redemption, the Trustee shall select the Bonds or portions
thereof to be redeemed from the Bonds outstanding not previously called for
redemption, in such manner as in the Trustee's sole discretion it shall deem
appropriate and fair. If it is determined that one or more, but not all, of the
portions of principal amount represented by any such Bond is to be called for
redemption, then, upon notice of intention to redeem such portion or portions,
the Owner of such Bond shall forthwith surrender such Bond to the Trustee for
(a) payment to such Owner of the redemption price of the portion or portions of
principal amount called for redemption, and (b) delivery to such Owner of a new
Bond or Bonds in the aggregate principal amount of the unredeemed portion of the
principal amount of such Bond. New Bonds representing the unredeemed portion of
the principal amount of such Bond shall be issued to the Owner thereof, without
charge therefor. If the Owner of any such Bond shall fail to present such Bond
to the Trustee for payment and exchange as aforesaid, such Bond shall,
nevertheless, become due and payable on the date fixed for redemption to the
extent of the portion or portions of principal amount called for redemption (and
to that extent only) and interest with respect to such portion or portions will
cease to accrue.
ARTICLE IV
PAYMENT; FURTHER ASSURANCES
SECTION 4.01. PAYMENT OF PRINCIPAL OR REDEMPTION PRICE OF AND INTEREST
ON BONDS. The Issuer shall promptly pay or cause to be paid the principal of,
and premium, if any, and interest on, every Bond issued hereunder according to
the terms thereof, but shall be required to make such payment or cause such
payment to be made only out of Revenues. The Issuer hereby appoints the Trustee
to act as the Paying Agent for the Bonds and designates the Corporate Trust
Office of the Trustee as the place of payment of principal and premium, if any,
of the Bonds.
SECTION 4.02. PERFORMANCE OF COVENANTS; THE ISSUER. The Issuer covenants
that it will faithfully perform at all times any and all covenants,
undertakings, stipulations and provisions contained in this Indenture, in any
and every Bond executed, authenticated and delivered hereunder and in all of its
proceedings pertaining thereto; provided, however, that except for the matters
set forth in Section 4.01 hereof the Issuer shall not be obligated to take any
action or execute any instrument pursuant to any provision hereof until it shall
have been requested to do so by the Company, or shall have received the
instrument to be executed and at the Issuer's option shall have received from
the Company assurance satisfactory to Issuer that the Issuer shall be reimbursed
for its reasonable expenses incurred or to be incurred in connection with taking
such action or executing such instrument. The Bonds and interest and premium, if
any, thereon,
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and any obligation of the Issuer under the Agreement or this Indenture, shall
never constitute a debt or indebtedness of the Issuer within the meaning of any
constitutional or statutory provision or limitation and shall not constitute nor
give rise to a pecuniary liability of the Issuer or a charge against its general
credit. The Issuer has no taxing power.
SECTION 4.03. RIGHT TO PAYMENTS UNDER AGREEMENT; INSTRUMENTS OF FURTHER
ASSURANCE. The Issuer covenants that it will defend its right to the payment of
amounts due from the Company under the Agreement to the Trustee, for the benefit
of the Owners of the Bonds against the claims and demands of all persons
whomsoever. Notwithstanding the foregoing, the Issuer shall not be obligated to
take any action under this Section 4.03 unless the Issuer receives satisfactory
indemnification for the reimbursement of all expenses to which it may be put and
to protect it against all liability. The Issuer covenants that it will do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered, such indentures supplemental hereto and such further acts,
instruments and transfers as the Trustee may reasonably require for the better
assuring, transferring, conveying, pledging, assigning and confirming unto the
Trustee all and singular the rights assigned hereby and the amounts pledged
hereto, to the payment of the principal of, and premium, if any, and interest
on, the Bonds. The Issuer covenants and agrees that, except as herein and in the
Agreement and the Tax Agreement provided, it will not sell, convey, mortgage,
encumber or otherwise dispose of any part of the Revenues or its rights under
the Agreement.
No provision of this Indenture shall require the Issuer to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it believes that repayment of such funds or adequate indemnity
against such risk or liability is not assured to it.
SECTION 4.04. FINANCING STATEMENTS. The Issuer shall cause a financing
statement related to this Indenture to be filed at the time of execution and
delivery of the Bonds. The Company shall provide to the Trustee thirty days
prior to the sixth anniversary of such financing statement (or any continuation
statement with respect thereto) a certificate as to whether a continuation
statement under Arizona Revised Statutes Section 47-9403B is required to be
filed to continue the effectiveness of the financing statement and if a
continuation statement is required, the Company shall provide the completed
continuation statement to the Trustee. The Trustee and the Issuer shall, if
necessary, execute or join in the execution of the continuation statement and
file or join in the filing thereof at such time or times and in such place or
places as it may be advised by said certificate will preserve the effectiveness
of the financing statement until the principal and interest on the Bonds shall
have been paid or provided for. The Trustee shall, to the extent reasonably
possible, take such actions as may be specified in such certificate, but shall
have no further obligation or responsibility to take any other actions to
preserve the lien of this Indenture upon the Trust Estate or any part thereof.
SECTION 4.05. INSPECTION OF PROJECT BOOKS. The Issuer and the Trustee
covenant and agree that all books and documents in their possession relating to
the Project and the Revenues derived from the Project shall during regular
business hours be open to inspection by such accountants or other agencies as
the other party may from time to time designate.
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SECTION 4.06. RIGHTS UNDER AGREEMENT. The Agreement, a duly executed
counterpart of which has been filed with the Trustee, sets forth the covenants
and obligations of the Issuer and the Company, and reference is hereby made to
the same for a detailed statement of said covenants and obligations of the
Company thereunder, and the Issuer agrees that the Trustee in its name or in the
name of the Issuer may enforce all rights of the Issuer and all obligations of
the Company under and pursuant to the Agreement for and on behalf of the
Bondholders, whether or not the Issuer is in default hereunder. Nothing herein
contained shall be construed to prevent the Issuer from enforcing directly any
and all of its rights under Sections 2.7E, 4.7, 7.2 and 9.4 of the Agreement.
ARTICLE V
REVENUES AND FUNDS
SECTION 5.01. SOURCE OF PAYMENT OF BONDS. The Bonds and all payments
required of the Issuer hereunder are not general obligations of the Issuer but
are limited obligations as described in Section 2.04 hereof. The Revenues are
pledged and assigned to the payment of the principal of, and premium, if any,
and interest on, the Bonds. The payments provided in Section 4.5 of the
Agreement are to be remitted directly to the Trustee and deposited in the Bond
Fund. Such payments, sufficient in amount to insure the prompt payment of the
principal of, and premium, if any, and interest on, the Bonds, are pledged to
such payment.
SECTION 5.02. CREATION OF THE BOND FUND. The Trustee is authorized to
create a Bond Fund, which shall be used to pay the principal of, and premium, if
any, and the interest on, the Bonds.
SECTION 5.03. PAYMENTS INTO THE BOND FUND. There shall be deposited
into the Bond Fund from time to time the following:
(a) all accrued interest, if any, paid by the Underwriter;
(b) all payments specified in Sections 4.4 and 4.5 of the
Agreement; and
(c) all other moneys received by the Trustee under and
pursuant to any of the provisions of the Agreement or otherwise, when
accompanied by directions from the person depositing such moneys that
such moneys are to be paid into the Bond Fund.
The Issuer hereby covenants and agrees that so long as any of the Bonds
issued hereunder are outstanding it will cause to be deposited in the Bond Fund
sufficient amounts from Revenues promptly to meet and pay the principal of, and
premium, if any, and interest on, the Bonds as the same become due and payable.
Nothing herein shall be construed as requiring the Issuer to use any funds or
revenues from any source other than Revenues.
SECTION 5.04. USE OF MONEYS IN THE BOND FUND. Except as provided in
Sections 5.06, 5.09 and 9.03 hereof, moneys in the Bond Fund shall be used
solely for the payment of the
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principal of, and premium, if any, and interest on, the Bonds as the same shall
become due and payable at maturity, upon redemption or otherwise.
SECTION 5.05. CUSTODY OF THE BOND FUND. The Bond Fund shall be in the
custody of the Trustee, and the Issuer hereby authorizes and directs the Trustee
to withdraw sufficient funds from the Bond Fund to pay the principal of, and
premium, if any, and interest on, the Bonds as the same become due and payable
and to comply with Article VI of the Tax Agreement, which authorization and
direction the Trustee hereby accepts.
SECTION 5.06. NON-PRESENTMENT OF BONDS. In the event any Bond shall not
be presented for payment when the principal thereof becomes due, either at
maturity or otherwise, or on the date fixed for the redemption thereof, or in
the event any interest payment thereon is unclaimed, if moneys sufficient to pay
such Bond and premium, if any, or interest shall have been deposited in the Bond
Fund, all liability of the Issuer to the Owner thereof for the payment of such
Bond and premium, if any, or interest shall forthwith cease, determine and be
completely discharged, and thereupon it shall be the duty of the Trustee to hold
such moneys, without liability for interest thereon, for the benefit of the
Owner of such Bond who shall thereafter be restricted exclusively to such
moneys, for any claim of whatever nature on his part under this Indenture or on,
or with respect to, said Bond. Any moneys so deposited with and held by the
Trustee not so applied to the payment of Bonds and premium, if any, or interest,
if any, within one (1) year after the date on which the same shall have become
due shall be paid by the Trustee to the Company and thereafter Owners shall be
entitled to look only to the Company for payment, and then only to the extent of
the amount so repaid, and the Company shall not be liable for any interest
thereon and shall not be regarded as a trustee of such moneys and the Trustee
shall have no further responsibility with respect to such moneys.
SECTION 5.07. TRUSTEE'S FEES, CHARGES AND EXPENSES. The Trustee agrees
that the Issuer shall have no liability for any fees, charges and expenses of
the Trustee, and the Trustee agrees to look only to the Company for the payment
of all fees, charges and expenses of the Trustee as provided in the Agreement
and in this Indenture.
SECTION 5.08. MONEYS TO BE HELD IN TRUST. All moneys and securities held
by the Trustee in the Bond Fund, all moneys required to be deposited with or
paid to the Trustee for deposit into the Bond Fund under any provision hereof,
and all moneys withdrawn from the Bond Fund and held by the Trustee shall be
held by the Trustee in trust, and such moneys (other than as provided in
Sections 5.06 and 5.12 hereof and subject to the provisions of the Tax Agreement
as provided in Section 5.13 hereof) shall, while so held, constitute part of the
Trust Estate and be subject to the lien hereof.
SECTION 5.09. REPAYMENT TO THE COMPANY FROM THE BOND FUND. Any amounts
remaining in the Bond Fund after payment in full of the principal of, and
premium, if any, and interest on, the Bonds (or provision for payment thereof as
provided in this Indenture), the fees, charges and expenses of the Issuer and
the Trustee and all other amounts required to be paid under the Agreement and
this Indenture shall be paid to the Company as provided in Section 4.10 of the
Agreement, subject to the provisions of the Tax Agreement.
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SECTION 5.10. REVENUES TO BE PAID OVER TO TRUSTEE. The Issuer will cause
the Revenues to be paid to the Trustee for deposit in the Bond Fund in
accordance with the terms of this Indenture to effect payment of the principal
of, and premium, if any, and interest on, the Bonds as the same become due.
SECTION 5.11. PAYMENTS OF PRINCIPAL AND INTEREST. The Trustee shall pay
from Revenues received by the Trustee the principal of, and premium, if any, and
interest on, the Bonds as the same become due and payable.
SECTION 5.12. REVENUES TO BE HELD FOR ALL BONDHOLDERS; CERTAIN
EXCEPTIONS. Revenues and investments thereof shall, until applied as provided in
this Indenture, be held by the Trustee for the benefit of the Owners of all
Outstanding Bonds (except as provided by Section 5.06 hereof), except that any
portion of the Revenues representing principal of, and premium, if any, and
interest on, any Bonds previously called for redemption in accordance with
Article III of this Indenture shall be held for the benefit of the Owners of
such Bonds only and shall not be deposited or invested pursuant to Article VI
hereof, notwithstanding any provision of Article VI.
SECTION 5.13. TAX AGREEMENT. Notwithstanding anything in the Agreement
or this Indenture to the contrary, the Trustee is hereby authorized to deposit
moneys in the Bond Fund and to withdraw moneys from the Bond Fund, and to
establish and administer the Rebate Fund, if any, in order to comply with the
provisions of the Tax Agreement.
SECTION 5.14. COST OF ISSUANCE FUND. The Trustee is authorized to create
a Costs of Issuance Fund to be funded in the amount of S190,424.21 from Bond
proceeds. Amounts in such Fund shall be disbursed at the written direction of
the Company from time to time upon receipt by the Trustee of instructions to so
disburse in a certificate of the Company on the Issue Date and thereafter upon
receipt by the Trustee of a written requisition executed by an Authorized
Representative of the Company pursuant to and in accordance with Section 5.7 of
the Agreement. The Issuer shall direct the Trustee in writing on the date of
issuance of the Bonds as to whether such fund shall be created.
SECTION 5.15. CONSTRUCTION FUND.
(a) The Trustee is authorized to create a Construction Fund.
(b) The Trustee shall disburse moneys in the Construction Fund
to or upon the order of the Company from time to time upon receipt by
Trustee of a written requisition executed by an Authorized
Representative of the Company pursuant to and in compliance with
Section 5.7 of the Agreement.
(c) In paying any requisition under this Section 5.15, the
Trustee shall be entitled to rely as to the completeness and accuracy
of all statements in such requisition and in any document presented
therewith, execution thereof to be conclusive evidence of such
approval, and the Company has by the provisions of the Agreement
covenanted and agreed to indemnify and save harmless the Trustee from
any liability incurred in
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connection with the payment of any requisition so executed by an
Authorized Representative.
(d) The Trustee shall keep and maintain adequate records
pertaining to the Construction Fund and all disbursements therefrom
and, upon receipt of a Completion Certificate furnished pursuant to
Section 5.8 of the Agreement, the Trustee shall, if requested by the
Issuer or the Company, file an accounting thereof with the Issuer and
the Company.
SECTION 5.16. COMPLETION OF IMPROVEMENTS; TERMINATION OF CONSTRUCTION;
AMOUNTS REMAINING IN FUNDS. Any amounts in the Construction Fund in excess of
the amount required to pay the remaining costs of the construction of the Series
1999 Improvements as identified in the certificate delivered to the Trustee
pursuant to Section 5.8 of the Agreement, on the date of receipt of such
certificate, shall be transferred to a special escrow account in the Bond Fund
and used to redeem the Bonds pursuant to Section 3.02(a) hereof in the amount
not to exceed the amount transferred to such special escrow account.
Notwithstanding the preceding sentence, any amounts in the Construction Fund on
May 1, 2002 shall be transferred to a special escrow account in the Bond Fund
and used to redeem the Bonds pursuant to Section 3.02(a) unless the Trustee
receives an opinion of Bond Counsel to the effect that not transferring the
amounts remaining in the Construction Fund as prescribed will not cause the
interest on the Bonds to become taxable.
SECTION 5.17 DEPOSIT OF BOND PROCEEDS. The proceeds of the sale of the
Bonds shall be deposited by the Trustee as follows:
(a) $190,424.21 to the Costs of Issuance Fund;
(b) $9,680,851.18 to US Bank Trust National Association, to be
used to refund the Prior Bonds;
(c) $127,847.22 to the Bond Fund, representing accrued
interest;
(d) $425,600.95 to the Bond Fund, representing capitalized
interest; and
(e) the balance to the Construction Fund.
ARTICLE VI
INVESTMENT OF MONEYS
SECTION 6.01. INVESTMENT OF BOND FUND MONEYS. Subject to the provisions
of the Tax Agreement and Sections 5.06 and 5.12 hereof, any moneys held as part
of the Bond Fund, shall be invested and reinvested by the Trustee at the written
direction of the Company. Any such investments shall be held by or under the
control of the Trustee and shall be deemed at all times a part of the Bond Fund.
The interest accruing thereon, any profit realized from such investments
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and any loss resulting from such investments shall be credited or charged to
such fund in accordance with Section 3.5 of the Agreement. The Trustee shall
sell and reduce to cash a sufficient amount of such investments in the Bond Fund
whenever the cash balance in the Bond Fund is insufficient to pay the principal
of, and premium, if any, and interest on, the Bonds when due and whenever
required in order to comply with the provisions of the Tax Agreement.
SECTION 6.02. INVESTMENTS; ARBITRAGE. The Trustee may make any and all
investments permitted by the provisions of Section 6.01 hereof through its own
investment department or that of an affiliate. The Company has covenanted in
Section 6.7 of the Agreement that none of the proceeds of the Bonds or the
payments to be made under the Agreement, or any other funds which may be deemed
to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be
invested in such a way as to cause the Bonds to be treated as "arbitrage bonds"
within the meaning of Section 148(a) of the Code.
ARTICLE VII
DEFEASANCE
SECTION 7.01. DEFEASANCE. If the Issuer shall pay or cause to be paid,
or there shall be otherwise paid or provision for payment made to or for the
Owners of the Bonds the principal, premium, if any, and interest due or to
become due thereon at the times and in the manner stipulated therein, and if the
Issuer shall keep, perform and observe all and singular the covenants and
promises in the Bonds and in this Indenture expressed as to be kept, performed
and observed by it or on its part, and shall pay or cause to be paid to the
Trustee all sums of money due or to become due according to the provisions
hereof, then this Indenture and the lien, rights and interests created hereby
shall cease, determine and become null and void (except as to any surviving
rights of payment, registration, transfer or exchange of Bonds herein provided
for and except as to the payment of the fees, expenses or other amounts owed to
the Trustee and any Payment Agents hereunder, all of which shall survive the
release, discharge and satisfaction of the Indenture), whereupon the Trustee
upon written request of an Authorized Issuer Representative shall cancel and
discharge this Indenture, and execute and deliver to the Issuer such instruments
in writing as shall be requested by an Authorized Issuer Representative and
requisite to discharge this Indenture, and release, assign and deliver unto the
Issuer any and all of the estate, right, title and interest in and to any and
all rights assigned or pledged to the Trustee or otherwise subject to this
Indenture, except amounts in the Bond Fund required to be paid to the Company
under Section 5.09 hereof and except moneys or securities held by the Trustee
for the payment of the principal of and premium, if any, and interest on the
Bonds and except for any amounts required to be transferred to the Rebate Fund.
Any Bond or Authorized Denomination thereof shall be deemed to be paid
within the meaning of this Indenture when (a) payment of the principal of, and
premium, if any, on, such Bond or Authorized Denomination thereof, plus interest
thereon to the due date thereof (whether such due date is by reason of maturity
or upon redemption as provided herein) either (i) shall have been made or caused
to be made in accordance with the terms thereof or (ii) shall have been provided
for by irrevocably depositing with the Trustee in trust and irrevocably setting
aside
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exclusively for such payment (1) moneys sufficient to make such payment and/or
(2) Government Obligations maturing as to principal and interest in such amount
and at such time as will insure the availability of sufficient moneys to make
such payment, and (b) all necessary and proper fees, compensation and expenses
of the Trustee pertaining to any such deposit shall have been paid or the
payment thereof provided for to the satisfaction of the Trustee. At such times
as a Bond or Authorized Denomination thereof shall be deemed to be paid
hereunder, as aforesaid, such Bond or Authorized Denomination thereof shall no
longer be secured by or entitled to the benefits of this Indenture (except as to
any surviving rights to payment, registration of transfer, exchange or
replacement of Bonds herein provided for, and except for the purposes of any
such payment from such moneys or Government Obligations).
Notwithstanding the foregoing paragraph, in the case of a Bond or
Authorized Denomination thereof which by its terms may be redeemed prior to the
stated maturity thereof and which with respect to the foregoing is to be so
redeemed, no deposit under clause (a)(ii) of the immediately preceding paragraph
shall be deemed a payment of such Bond or Authorized Denomination thereof as
aforesaid until proper notice of redemption of such Bond or Authorized
Denomination thereof shall have been previously given in accordance with Article
III of this Indenture, or in the event said Bond or Authorized Denomination
thereof is not to be redeemed within the next succeeding sixty (60) days, until
the Company shall have given the Trustee on behalf of the Issuer, in form
satisfactory to the Trustee, irrevocable instructions to notify, as soon as
practicable, the Owner of such Bond or Authorized Denomination thereof in
accordance with Article III hereof, that the deposit required by (a)(ii) above
has been made with the Trustee and that said Bond or Authorized Denomination
thereof is deemed to have been paid in accordance with this Article and stating
the maturity or redemption date upon which moneys are to be available for the
payment of the principal of and the applicable premium, if any, on said Bond or
Authorized Denomination thereof, plus interest thereon to the due date thereof.
Notwithstanding any provision of any other Article of this Indenture
which may be contrary to the provisions of this Article, all moneys or
Government Obligations set aside and held in trust pursuant to the provisions of
this Article for the payment of Bonds or Authorized Denominations thereof
(including interest and premium thereon, if any) shall be applied to and used
solely for the payment of the particular Bonds or Authorized Denominations
thereof (including interest and premium thereon, if any) with respect to which
such moneys and Government Obligations have been so set aside in trust.
Anything in Article X hereof to the contrary notwithstanding, if moneys
or Government Obligations have been deposited or set aside with the Trustee
pursuant to this Article for the payment of Bonds or Authorized Denominations
thereof and the interest and premium, if any, thereon and such Bonds or
Authorized Denominations thereof and the interest and premium, if any, thereon
shall not have in fact been actually paid in full, no amendment to the
provisions of this Article shall be made without the consent of the Owner of
each of the Bonds affected thereby.
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ARTICLE VIII
DEFAULT PROVISIONS; REMEDIES
SECTION 8.01. DEFAULTS; EVENTS OF DEFAULT. If any of the following
events occurs, it is hereby defined as and declared to be and to constitute a
default or an event of default:
(a) Failure to make due and punctual payment of any
installment of interest on any Bond when the same shall have become due
and payable and the continuation of such failure for a period of two
(2) Business Days after such payment has become due and payable;
(b) Failure to make due and punctual payment of the principal
of and premium, if any, on any Bond at the stated maturity thereof, or
upon proceedings for the unconditional redemption thereof;
(c) The occurrence of an "event of default" under the
Agreement; and
(d) Failure on the part of the Issuer to perform or observe
any of its covenants, agreements or conditions in this Indenture or in
the Bonds contained and failure to remedy the same after notice thereof
pursuant to Section 8.10 hereof.
SECTION 8.02. ACCELERATION. Upon the occurrence of an event of default
under Section 8.01, the Trustee may, and upon the written request of the Owners
of not less than a majority in aggregate principal amount of Bonds then
outstanding shall, declare the principal of all Bonds then outstanding and the
interest accrued thereon immediately due and payable, and such principal and
interest shall thereupon become and be immediately due and payable. The Trustee
shall immediately thereafter give notice of such declaration to the Company and
the Issuer. After such declaration of acceleration, the Trustee shall
immediately declare all indebtedness payable under Section 4.5 of the Agreement
to be immediately due and payable in accordance with Section 9.2 of the
Agreement.
The above provisions are subject to waiver, rescission and annulment as
provided in Section 8.09 hereof.
SECTION 8.03. REMEDIES; RIGHTS OF BONDHOLDERS. Upon the occurrence and
continuation of an event of default, the Trustee may pursue any available remedy
at law or in equity by suit, action, mandamus or other proceeding to enforce the
payment of the principal of, and premium, if any, and interest on, the Bonds
then outstanding, and to enforce and compel the performance of the duties and
obligations of the Issuer as herein set forth. In addition, the Trustee may,
without notice to the Issuer or the Company, exercise any and all remedies
afforded the Issuer under Article IX of the Agreement in its name or the name of
the Issuer without the necessity of joining the Issuer.
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If an event of default shall have occurred and be continuing and if
requested so to do by the Owners of not less than a majority in aggregate
principal amount of Bonds then outstanding and upon being indemnified as
provided in Section 9.01(i) hereof, the Trustee shall be obligated to exercise
such one or more of the rights and powers conferred by this Section 8.03 and
Section 8.02 hereof as the Trustee being advised by Counsel shall deem most
expedient in the interests of the Bondholders.
No remedy by the terms of this Indenture conferred upon or reserved to
the Trustee (or to the Bondholders) is intended to be exclusive of any other
remedy, but each and every such remedy shall be cumulative and shall be in
addition to any other remedy given to the Trustee or to the Bondholders
hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right, power or remedy accruing
upon any event of default shall impair any such right, power or remedy or shall
be construed to be a waiver of any such event of default or acquiescence
therein; and every such right, power or remedy may be exercised from time to
time and as often as may be deemed expedient.
No waiver of any event of default hereunder, whether by the Trustee or
by the Bondholders, shall extend to or shall affect any subsequent event of
default or shall impair any rights or remedies consequent thereon.
SECTION 8.04. RIGHT OF BONDHOLDERS TO DIRECT PROCEEDINGS. Anything in
this Indenture to the contrary notwithstanding, the Owners of not less than a
majority in aggregate principal amount of Bonds then outstanding shall have the
right, at any time, by an instrument or instruments in writing executed and
delivered to the Trustee, to direct the time, method and place of conducting all
proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, or for the appointment of a receiver or any other
proceedings hereunder; provided, that such direction shall not be otherwise than
in accordance with the provisions of law and of this Indenture.
SECTION 8.05. APPLICATION OF MONEYS. All moneys received by the Trustee
pursuant to any right given or action taken under the provisions of this Article
shall, after payment of the costs and expenses of the proceedings resulting in
the collection of such moneys and of the fees, expenses, liabilities and
advances incurred or made by the Trustee and its Counsel, be deposited in the
Bond Fund and all such moneys and all other moneys then on deposit in the Bond
Fund (except as provided in Section 5.06 hereof and subject to the Tax
Agreement) shall be applied to the payment of the principal of, premium, if any,
and interest then due and unpaid upon the Bonds (except as provided in Section
5.06 hereof), without preference or priority of any kind, ratably, according to
the amounts due and payable on such Bonds for principal, premium, if any, and
interest, respectively, to the persons entitled thereto without any
discrimination or privilege.
Whenever moneys are to be applied pursuant to the provisions of this
Section, such moneys shall be applied at such times, and from time to time, as
the Trustee shall determine. Whenever the Trustee shall apply such moneys, it
shall fix the date (which shall be an Interest Payment Date unless it shall deem
another date more suitable) upon which such application is to be made and upon
such date interest on the amounts of principal to be paid on such date shall
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cease to accrue. The Trustee shall give such notice as it may deem appropriate
of the deposit with it of any such moneys and of the fixing of any such date.
Whenever all principal of, and premium, if any, and interest on, all Bonds have
been paid under the provisions of this Section 8.05 and all expenses and charges
of the Trustee have been paid, any balance remaining in the Bond Fund shall be
paid to the Company as provided in Section 5.09 hereof, subject to the
provisions of the Tax Agreement.
SECTION 8.06. REMEDIES VESTED IN TRUSTEE. All rights of action
(including the right to file proofs of claims) under this Indenture or under any
of the Bonds may be enforced by the Trustee without the possession of any of the
Bonds or the production thereof in any trial or other proceedings relating
thereto and any such suit or proceeding instituted by the Trustee shall be
brought in its name as Trustee without the necessity of joining as plaintiffs or
defendants any Owners of the Bonds, and any recovery of judgment shall be for
the equal and ratable benefit of the Owners of the outstanding Bonds.
SECTION 8.07. RIGHTS AND REMEDIES OF BONDHOLDERS. No Owner of any Bond
shall have any right to institute any suit, action or proceeding in equity or at
law for the enforcement of this Indenture or for the execution of any trust
thereof or for the appointment of a receiver or any other remedy hereunder,
unless (i) a default has occurred of which the Trustee is deemed to have notice
or has been notified as provided in Section 9.0l(g) hereof, (ii) such default
shall have become an event of default and be continuing, (iii) the Owners of not
less than a majority in aggregate principal amount of Bonds then outstanding
shall have made written request to the Trustee, either to proceed to exercise
the powers herein granted or to institute such action, suit or proceeding in its
own name, and shall have offered to the Trustee indemnity as provided in Section
9.01(i), and (iv) the Trustee shall for sixty (60) days after such notice,
request and offer of indemnity fail or refuse to exercise the powers herein
granted, or to institute such action, suit or proceeding in its own name; and
such notification, request and offer of indemnity are hereby declared in every
case at the option of the Trustee to be conditions precedent to the execution of
the powers and trusts of this Indenture, and to any action or cause of action
for the enforcement of this Indenture, or for the appointment of a receiver or
for any other remedy hereunder. No one or more Owners of the Bonds shall have
any right in any manner whatsoever to enforce any right hereunder except in the
manner herein provided, and all proceedings at law or in equity shall be
instituted, had and maintained in the manner herein provided and for the equal
and ratable benefit of the Owners of all Bonds then outstanding. Nothing in this
Indenture contained shall, however, affect or impair the right of any Bondholder
to enforce the payment of the principal of, and premium, if any, and interest
on, any Bond at and after the maturity thereof.
SECTION 8.08. TERMINATION OF PROCEEDINGS. In case the Trustee shall have
proceeded to enforce any right under this Indenture by the appointment of a
receiver or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason, or shall have been determined adversely, then and in
every such case the Issuer, the Trustee and the Bondholders shall be restored to
their former positions and rights hereunder, respectively, and all rights,
remedies and powers of the Trustee shall continue as if no such proceedings had
been taken.
SECTION 8.09. WAIVERS OF EVENTS OF DEFAULT. The Trustee may in its
discretion waive any event of default hereunder and rescind its consequences and
shall do so upon the written request
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of the Owners of not less than a majority in aggregate principal amount of all
Bonds then outstanding; provided, however, that there shall not be waived any
event of default in the payment of the principal of, or premium on, any
outstanding Bonds when due (whether at maturity or by redemption), or any event
of default in the payment when due of the interest on any such Bonds, unless
prior to such waiver and rescission, all arrears of principal of and interest,
with interest at the rate borne by the Bonds on overdue principal and (to the
extent permitted by law) on overdue installments of interest, and all arrears of
premium, if any, when due, together with the reasonable fees and expenses of the
Trustee and of the holders of such Bonds, including reasonable attorneys' fees
paid or incurred, shall have been paid or provided for; provided further, that
if the Owners of not less than a majority in aggregate principal amount of the
Bonds then outstanding shall have made the written request specified in the
first paragraph of Section 8.02 hereof, then only upon receipt by the Trustee of
the express written consent of the Owners of a majority in principal amount of
the Bonds then outstanding (which consents the Trustee shall have no duty or
obligation to solicit). In the case of any such waiver and rescission, or in
case any proceeding taken by the Trustee on account of any such default shall
have been discontinued or abandoned or determined adversely, then and in every
such case the Issuer, the Trustee and the Bondholders shall be restored to their
former positions and rights hereunder, respectively, but no such waiver and
rescission shall extend to any subsequent or other default, or impair any right
consequent thereon. All waivers under this Indenture shall be in writing and a
copy thereof shall be delivered to the Issuer and to the Company.
SECTION 8.10. OPPORTUNITY OF COMPANY TO CURE EVENTS OF DEFAULT. Anything
herein to the contrary notwithstanding, no default under Section 8.01(d) hereof
shall constitute an event of default until actual notice of such default by
registered or certified mail shall be given to the Issuer and the Company by the
Trustee or to the Issuer and the Company and the Trustee by the Owners of not
less than a majority in aggregate principal amount of all Bonds Outstanding, and
the Company shall have had sixty days after receipt of such notice to correct
said default or cause said default to be corrected, and shall not have corrected
said default or caused said default to be corrected within the applicable
period; provided, however, if said default be such that it cannot be corrected
within the applicable period, it shall not constitute an event of default if
corrective action is instituted within the applicable period and diligently
pursued until the default is corrected.
Whenever, so long as the Company is not in default under the Agreement,
after a reasonable request by the Company, the Issuer shall fail, refuse or
neglect to give any direction to the Trustee or to require the Trustee to take
any other action which the Issuer is required to have the Trustee take pursuant
to the provisions of the Agreement or this Indenture, the Company instead of the
Issuer may give any such direction to the Trustee or require the Trustee to take
any such action. Upon receipt by the Trustee of a written notice signed by the
Authorized Company Representative stating that the Company has made reasonable
request of the Issuer, and that the Issuer has failed, refused or neglected to
give any direction to the Trustee or to require the Trustee to take any such
action (subject to indemnification which the Trustee deems adequate), the
Trustee is hereby irrevocably empowered and directed to accept such direction
from the Company as sufficient for all purposes of this Indenture. The Company
shall have the direct right to cause the Trustee to comply with any of the
Trustee's obligations under this Indenture to the same extent that the Issuer is
empowered so to do.
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Certain actions or failures to act by the Issuer under this Indenture
may create or result in an event of default under this Indenture and the Issuer
hereby grants the Company full authority, to the extent permitted by law, for
the account of the Issuer to perform or observe any covenant or obligation of
the Issuer alleged in a written notice to the Issuer and the Company from the
Trustee or from the requisite percentage of Owners of the Bonds not to have been
performed or observed, in the name and stead of the Issuer with full power to do
any and all things and acts to remedy any default.
ARTICLE IX
THE TRUSTEE
SECTION 9.01. ACCEPTANCE OF THE TRUSTS. The Trustee hereby accepts the
trusts imposed upon it by this Indenture, represents and covenants that it is
fully empowered to accept said trusts, and agrees to perform said trusts, but
only upon and subject to the following express terms and conditions, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee:
(a) The Trustee may execute any of the trusts or powers
hereof and perform any of its duties by or through attorneys, agents,
receivers or employees and shall not be responsible for the acts of any
attorneys, agents or receivers appointed by it in good faith and
without negligence, shall not be responsible for the acts of any agents
over which the Trustee has no control and has no power to appoint or
remove and shall be entitled to advice of Counsel concerning all
matters of trusts hereof and the duties hereunder, and may in all cases
require that the Company pay such reasonable compensation to all such
attorneys, agents and receivers as may reasonably be employed by the
Trustee in connection with the trusts hereof. The Trustee may act upon
the opinion or advice of Counsel. The Trustee shall not be responsible
for any loss or damage resulting from any action or non-action in good
faith in reliance upon such opinion or advice or any misconduct or
negligence on the part of any agent or attorney appointed with due
care.
(b) Except for its certificate of authentication on the
Bonds, the Trustee shall not be responsible for any recital herein or
in the Bonds, or the validity, priority, recording, or re-recording,
filing, or refiling of this Indenture or any financing statement,
amendments to this Indenture, or continuation statements, or for
reviewing any annual reports, financial statements or audits, or for
insuring the Project or collecting any insurance moneys, or for the
validity of the execution by the Issuer of this Indenture or for any
supplements hereto or instruments of further assurance, or for the
sufficiency of the security for the Bonds issued hereunder or intended
to be secured hereby, for the value or title of the Project or as to
the maintenance of the security hereof. The Trustee makes no
representations as to the value or condition of the Trust Estate or any
part thereof, or as to the title of the Issuer thereto or as to the
security afforded thereby or hereby, or as to the validity or
genuineness of any securities at any time pledged and deposited with
the Trustee hereunder, or as to the validity or sufficiency of this
Indenture or of the Bonds. The Trustee shall not be accountable for the
use or application by the
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Company of the proceeds of the Bonds or of any money paid to the
Company or upon the order of the Company under any provision hereof.
The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on
the part of the Issuer or on the part of the Company under the
Agreement, except as hereinafter set forth, but the Trustee may require
of the Issuer or the Company full information and advice as to the
performance of the covenants, conditions and agreements aforesaid.
Except as otherwise provided in Sections 8.02 and 8.03 hereof, the
Trustee shall have no obligation to perform any of the rights or duties
of the Issuer under the Agreement. The Trustee shall not be responsible
or liable for any loss suffered in connection with any investment of
funds made by it in accordance with Article VI hereof including,
without limitation, any loss suffered in connection with the sale of
any investment pursuant to Article VI hereof.
(c) The Trustee shall not be accountable for the use of any
Bonds authenticated or delivered hereunder. The Trustee, in its
individual capacity, may become the owner of Bonds with the same rights
which it would have if it were not Trustee.
(d) The Trustee shall be protected in acting in good faith
upon any notice, request, resolution, consent, certificate, affidavit,
letter, telegram, fax or other paper or document, or oral communication
or direction, believed to be genuine and correct and to have been
signed or sent or given by the proper person or persons. Any action
taken by the Trustee pursuant to this Indenture upon the request or
authority or consent of any person who at the time of making such
request or giving such authority or consent is the owner of any Bond
shall be conclusive and binding upon all future owners of the same Bond
and upon Bonds issued in exchange therefor or upon transfer or in place
thereof.
(e) As to the existence or non-existence of any fact or as to
the sufficiency or validity of any instrument, paper or proceeding, the
Trustee shall be entitled to rely upon a certificate signed on behalf
of the Issuer by an Authorized Issuer Representative as sufficient
evidence of the facts therein contained, and prior to the occurrence of
a default of which the Trustee has been notified as provided in
subsection (g) of this Section, or subsequent to the waiver, rescission
or annulment of a default as provided in Article VIII hereof, shall
also be at liberty to accept a similar certificate to the effect that
any particular dealing, transaction or action is necessary or
expedient, but may at its discretion secure such further evidence
deemed necessary or advisable, but shall in no case be bound to secure
the same. The Trustee may accept a certificate signed on behalf of the
Issuer by the Recording Officer to the effect that a resolution or
ordinance in the form therein set forth has been adopted by the Issuer
as conclusive evidence that such resolution or ordinance has been duly
adopted, and is in full force and effect.
(f) The permissive right of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty and the
Trustee shall not be liable in the performance of its obligations
hereunder except for its negligence or willful misconduct.
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(g) The Trustee shall not be required to take notice or be
deemed to have notice of any default hereunder, except failure by the
Issuer to cause to be made any of the payments to the Trustee required
to be made by Article IV and all defaults under Section 8.01(a) or (b),
unless the Trustee shall be specifically notified in writing of such
default by the Issuer or the Owners of at least a majority in aggregate
principal amount of all Bonds then affected or outstanding.
(h) The Trustee shall not be required to give any bond or
surety in respect of the execution of its trusts and powers hereunder.
(i) Before taking any action under Article VIII hereof or
this Section at the request or direction of the Bondholders, the
Trustee may require that a satisfactory indemnity bond or other
assurances be furnished by the Bondholders, for the reimbursement of
all expenses to which it may be put and to protect it against all
liability, except liability which is adjudicated to have resulted from
its negligence or willful misconduct in connection with any action so
taken.
(j) All moneys received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which
they were received but need not be segregated from other funds except
to the extent required by law or this Indenture. The Trustee shall not
be under any liability for interest on any moneys received hereunder
except such as may be agreed upon.
(k) The Trustee, prior to the occurrence of an event of
default specified in Section 8.0l of this Indenture of which it is
deemed to have knowledge pursuant to clause (g) above and after the
curing of all events of default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth
in this Indenture and, in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture. In case an event of default has occurred (which has not been
cured or waived) of which it is deemed to have knowledge pursuant to
clause (g) above, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care
and skill in their exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
(l) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except
that:
(i) This subsection shall not be construed to limit
the effect of subsection (k) of this Section;
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(ii) The Trustee shall not be liable for any error of
judgment made in good faith by an officer of the Trustee
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) The Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Owners of a majority in
aggregate principal amount of the Bonds outstanding relating
to the time, method and place of conducting any proceeding or
any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture; and
(iv) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(m) Notwithstanding anything elsewhere in this Indenture
contained, the Trustee shall have the right, but shall not be required,
to demand, in respect of the authentication of any Bonds, the
withdrawal of any cash, the release of any property, or any action
whatsoever within the purview of this Indenture, any showings,
certificates, opinions, appraisals or other information, or corporate
action or evidence thereof, in addition to that by the terms hereof
required as a condition of such action by the Trustee, deemed desirable
for the purpose of establishing the right of the Issuer to the
authentication of any Bonds, the withdrawal of any cash, or as a
condition to the taking of any action by the Trustee.
SECTION 9.02. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at
all times be a Trustee hereunder which shall be a corporation organized and
doing business and authorized under such laws to exercise corporate trust
powers, authorized to accept and exercise the trusts herein provided, having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 9.02, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article, and shall immediately provide notice of such resignation by registered
or certified mail to the Issuer, the Company and the Owner of each Bond.
SECTION 9.03. FEES, CHARGES AND EXPENSES OF TRUSTEE. The Trustee shall
be entitled to payment and/or reimbursement from the Company for reasonable fees
for its Ordinary Services rendered hereunder and all advances, Counsel fees and
other Ordinary Expenses reasonably and necessarily made or incurred by the
Trustee in connection with such Ordinary Services hereunder and under the Tax
Agreement and, in the event that it should become necessary that the Trustee
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perform Extraordinary Services, it shall be entitled to reasonable extra
compensation therefor from the Company, and to reimbursement from the Company
for reasonable and necessary Extraordinary Expenses (including fees of Counsel)
in connection therewith; provided, that if such Extraordinary Services or
Extraordinary Expenses are occasioned by the negligence or misconduct of the
Trustee it shall not be entitled to compensation or reimbursement therefor. The
Trustee shall be entitled to payment and reimbursement from the Company for the
reasonable fees and charges of the Trustee as Bond Registrar and Paying Agent.
Upon the occurrence and continuation of an Event of Default hereunder, the
Trustee shall have a first lien with right of payment prior to payment on
account of interest or principal of, or premium, if any, on any Bond upon all
moneys in its possession under any provisions hereof for the foregoing advances,
fees, costs and expenses incurred.
SECTION 9.04. NOTICE TO BONDHOLDERS IF DEFAULT OCCURS. If a default
occurs of which the Trustee is by Section 9.01(g) hereof required to take notice
or if notice of default be given as in said Section 9.01(g) provided, the
Trustee shall, within fifteen (15) days thereafter (unless such default is cured
or waived), give notice of such default to each Owner of Bonds then outstanding,
provided that, except in the case of a default in the payment of the principal
of, or premium, if any, or interest on, any Bond, the Trustee may withhold such
notice to the Bondholders if and so long as the board of directors, the
executive committee, or a trust committee of directors and/or responsible
officers, of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Bondholders.
SECTION 9.05. INTERVENTION BY TRUSTEE. In any judicial proceeding to
which the Issuer is a party and which in the opinion of the Trustee and its
counsel has a substantial bearing on the interests of Owners of the Bonds, the
Trustee may intervene on behalf of Bondholders and, subject to the provisions of
Section 9.01(i), shall do so if requested in writing by the Owners of a majority
in aggregate principal amount of all Bonds then outstanding.
SECTION 9.06. SUCCESSOR TRUSTEE. Any corporation or association into
which the Trustee may be merged, or with which it may be consolidated, or to
which it may sell, lease or transfer its corporate trust business and assets as
a whole or substantially as a whole, shall be and become successor Trustee
hereunder and shall be vested with all the trusts, powers, rights, obligations,
duties, remedies, immunities and privileges hereunder as was its predecessor,
without the execution or filing of any instrument on the part of any of the
parties hereto.
SECTION 9.07. RESIGNATION BY THE TRUSTEE. The Trustee may at any time
resign from the trusts hereby created by giving sixty (60) days written notice
by registered or certified mail to the Issuer, the Company and the Owner of each
Bond, and such resignation shall take effect at the appointment of a successor
Trustee pursuant to the provisions of Section 9.09 hereof and acceptance by the
successor Trustee of such trusts. If no successor Trustee shall have been so
appointed and have accepted appointment within forty-five (45) days of the
giving of written notice by the resigning Trustee as aforesaid, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
SECTION 9.08. REMOVAL OF THE TRUSTEE. The Trustee may be removed at any
time, by an instrument or concurrent instruments in writing delivered to the
Trustee, the Issuer and the
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Company and signed by the Owners of a majority in aggregate principal amount of
Bonds then Outstanding, or (so long as no event of default is then existing
under Section 9.1 of the Agreement or under Section 8.01 of this Indenture) by
the Company by written instrument delivered to the Trustee and the Issuer, and
such removal shall only take effect at the appointment of a successor Trustee
pursuant to the provisions of Section 9.09 hereof and acceptance by the
successor Trustee of such trusts.
SECTION 9.09. APPOINTMENT OF SUCCESSOR TRUSTEE. In case the Trustee
hereunder shall:
(a) resign pursuant to Section 9.02 or 9.07 hereof;
(b) be removed pursuant to Section 9.08 hereof; or
(c) be dissolved, taken under the control of any public
officer or officers or of a receiver appointed by a court, or otherwise
become incapable of acting hereunder,
a successor shall be appointed by the Issuer at the direction of the Company;
provided, that if a successor Trustee is not so appointed within ten (10) days
after notice of resignation is mailed or instrument of removal is delivered as
provided under Sections 9.02, 9.07 or 9.08 hereof, respectively, or within ten
(10) days of Issuer's knowledge of any of the events specified in (c)
hereinabove, then the Owners of a majority in aggregate principal amount of
Bonds then outstanding, by an instrument or concurrent instruments in writing
signed by or on behalf of such Owners, may designate a successor Trustee. Every
such successor Trustee appointed pursuant to the provisions of this Section
shall meet the requirements of Section 9.02 hereof, shall be a trust company or
bank in good standing, shall be eligible to serve as Trustee under the Act, and
shall be willing to accept the trusteeship and all other terms and conditions of
this Indenture.
In case at any time the Trustee shall resign and no appointment of a
successor Trustee shall be made pursuant to the foregoing provisions of this
Article IX prior to the date specified in the notice of resignation as the date
when such resignation shall take effect, the Owner of any Bond may apply to any
court of competent jurisdiction to appoint a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee.
SECTION 9.10. CONCERNING ANY SUCCESSOR TRUSTEES. Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and also to the Issuer and the Company, an instrument in writing accepting such
appointment hereunder, and thereupon such successor shall become fully vested
with all the trusts, powers, rights, obligations, duties, remedies, immunities
and privileges of its predecessor; but, nevertheless, (l) such predecessor
shall, on the written request of the Issuer at the direction of the Company,
execute and deliver an instrument transferring to such successor Trustee all the
trusts, powers, rights, obligations, duties, remedies, immunities and privileges
of such predecessor hereunder and (2) such predecessor shall deliver all
securities and moneys held by it as Trustee hereunder (net of any amounts owing
to it hereunder) to its successor. Should any instrument in writing from the
Issuer be required by any successor Trustee for more fully and certainly vesting
in such successor the trusts, powers, rights, obligations, duties, remedies,
immunities and privileges hereby vested in the predecessor
-43-
<PAGE> 48
any and all such instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer at the expense of the Company. The
resignation of any Trustee and the instrument or instruments removing any
Trustee and appointing a successor hereunder, together with all other
instruments provided for in this Article, shall be filed or recorded by the
successor Trustee in each recording office, if any, where the Indenture or a
financing statement relating thereto shall have been filed or recorded.
SECTION 9.11. APPOINTMENT OF CO-TRUSTEE. It is the purpose of this
Indenture that there shall be no violation of any law of any jurisdiction
(including particularly the law of the State) denying or restricting the right
of banking corporations or associations to transact business as trustee in such
jurisdiction. It is recognized that in case of litigation under this Indenture
or the Agreement, and in particular in case of the enforcement thereof on
default, or in the case the Trustee deems that by reason of any present or
future law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein granted to the Trustee or hold title to the properties, in
trust, as herein granted, or take any action which may be desirable or necessary
in connection therewith, it may be necessary that the Trustee appoint an
additional individual or institution as a separate or co-trustee. The following
provisions of this Section are adapted to these ends.
In the event that the Trustee appoints an additional individual or
institution as a separate or co-trustee, each and every remedy, power, right,
claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by this Indenture to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in
such separate or co-trustee but only to the extent necessary to enable such
separate or co-trustee to exercise such powers, rights and remedies, and only to
the extent that the Trustee by the laws of any jurisdiction (including
particularly the State) is incapable of exercising such powers, rights and
remedies and every covenant and obligation necessary to the exercise thereof by
such separate or co-trustee shall run to and be enforceable by either of them.
Should any instrument in writing from the Issuer be required by the
separate or co-trustee so appointed by the Trustee for more fully and certainly
vesting in and confirming to him or it such properties, rights, powers, trusts,
duties and obligations, any and all such instruments in writing shall, on
request, be executed, acknowledged and delivered by the Issuer at the expense of
the Company; provided, that if an event of default shall have occurred and be
continuing, if the Issuer does not execute any such instrument within fifteen
(15) days after request therefor (which request shall contain notification of
such fifteen (15) day deadline), the Trustee shall be empowered as an
attorney-in-fact for the Issuer to execute any such instrument in the Issuer's
name and stead. In case any separate or co-trustee or a successor to either
shall die, become incapable of acting, resign or be removed, all the estates,
properties, rights, powers, trusts, duties and obligations of such separate or
co-trustee, so far as permitted by law, shall vest in and be exercised by the
Trustee until the appointment of a new trustee or successor to such separate or
co-trustee.
The Trustee shall be entitled to remove any co-trustee so appointed by
the Trustee upon written notice to such co-trustee, the Issuer and the Company.
-44-
<PAGE> 49
ARTICLE X
SUPPLEMENTAL INDENTURES
SECTION 10.01. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF
BONDHOLDERS. The Issuer and the Trustee may without the consent of or notice to
any of the Bondholders enter into an indenture or indentures supplemental to
this Indenture for any one or more of the following purposes:
A. to add to the covenants and agreements of, and
limitations and restrictions upon, the Issuer in this Indenture other
covenants, agreements, limitations and restrictions to be observed by
the Issuer which are not contrary to or inconsistent with this
Indenture as theretofore in effect;
B. to grant to or confer or impose upon the Trustee for the
benefit of the Bondholders any additional rights, remedies, powers,
authority, security, liabilities or duties which may lawfully be
granted, conferred or imposed and which are not contrary to or
inconsistent with this Indenture as heretofore in effect;
C. to cure any ambiguity or omission or to cure, correct or
supplement any defective provision of this Indenture in each case in
such manner as shall not adversely affect the Bondholders;
D. to evidence the appointment of a separate Trustee or a
co-trustee or to evidence the succession of a new Trustee hereunder;
E. to comply with the requirements of the Trust Indenture
Act of 1939, as from time to time amended;
F. to subject to this Indenture additional revenues,
properties or collateral;
G. to provide for the issuance of coupon bonds (provided,
however, that the Issuer and the Trustee have received an opinion of
Bond Counsel to the affect that issuance of such coupon bonds complies
with the applicable laws and will not adversely affect the exclusion
from gross income for federal income tax purposes of interest on any of
the Bonds);
H. to provide for the use or discontinuance of a book entry
system;
I. to maintain ratings on the Bonds;
J. to preserve the exemption from Federal income taxes of
interest on the Bonds, or any of them; or
-45-
<PAGE> 50
K. to modify, alter, amend or supplement this Indenture in
any other respect which is not adverse to the Bondholders and which
does not involve a change described in clauses (a), (b), (c) or (d) of
the first paragraph of Section 10.02 hereof and which, in the judgment
of the Trustee, is not to the prejudice of the Trustee.
SECTION 10.02. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS.
Exclusive of supplemental indentures covered by Section 10.01 hereof and subject
to the terms and provisions contained in this Section, and not otherwise, the
holders of not less than a majority in aggregate principal amount of the Bonds
then outstanding shall have the right, from time to time, anything contained in
this Indenture to the contrary notwithstanding, to consent to and approve the
execution by the Issuer and the Trustee of such other indenture or indentures
supplemental hereto for the purpose of modifying, amending, adding to or
rescinding, in any particular, any of the terms or provisions contained in this
Indenture; provided, however, that nothing in this Section contained shall
permit or be construed as permitting without the consent of the owners of 100%
in aggregate principal amount of the Bonds then outstanding (a) an extension of
the maturity date of the principal of or the interest on any Bond issued
hereunder, or (b) a reduction in the principal amount of, or premium, if any,
on, any Bond or the rate of interest thereon, or (c) a privilege or priority of
any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the
aggregate principal amount of the Bonds the owners of which are required to
consent to such supplemental indenture.
If at any time the Issuer shall request the Trustee to enter into any
such supplemental indenture for any of the purposes allowed by this Section, the
Trustee shall, at the request of the Issuer and upon being satisfactorily
indemnified with respect to expenses, cause notice of the proposed execution of
such supplemental indenture to be mailed in substantially the manner provided in
the first paragraph of Section 3.04 hereof with respect to redemption of Bonds.
Such notice shall briefly set forth the nature of the proposed supplemental
indenture and shall state that copies thereof are on file at the Corporate Trust
Office of the Trustee for inspection by all Bondholders. If, within sixty (60)
days or such longer period of time as shall be prescribed by the Issuer
following the mailing of such notice, the Owners of not less than a majority or
100%, as the case may be, in aggregate principal amount of the Bonds outstanding
at the time of the execution of any such supplemental indenture shall have
consented to and approved the execution thereof as herein provided, no Owner of
any Bond shall have any right to object to any of the terms and provisions
contained therein, or the operation thereof, or in any manner to question the
propriety of the execution thereof, or to enjoin or restrain the Trustee or the
Issuer from executing the same or from taking any action pursuant to the
provisions thereof. The Issuer shall have the right to extend from time to time
the period within which such consent and approval may be obtained from
Bondholders. Upon the execution of any such supplemental indenture as in this
Section permitted and provided, this Indenture shall be and be deemed to be
modified and amended in accordance therewith.
SECTION 10.03. CONSENTS TO SUPPLEMENTAL INDENTURES. Anything herein to
the contrary notwithstanding, a supplemental indenture under this Article X
which affects any rights or obligations of the Company shall not become
effective unless and until the Company shall have consented to the execution and
delivery of such supplemental indenture. The Company shall be given prior
written notice of the proposed execution and delivery of any supplemental
indenture
-46-
<PAGE> 51
whether or not its rights or obligations are affected. In this regard, the
Trustee shall cause notice of the proposed execution and delivery of any such
supplemental indenture together with a copy of the proposed supplemental
indenture to be mailed by certified or registered mail to the Company at least
fifteen (15) days prior to the date of the first mailing of notice of the
proposed execution of such supplemental indenture as hereinbefore in Section
10.02 provided. The Company shall be deemed to have consented to the execution
and delivery of any such supplemental indenture if the Trustee does not receive
at its Corporate Trust Office a letter of protest or objection thereto signed by
or on behalf of the Company on or before 4:30 o'clock P.M., New York time, of
the fifteenth day after the mailing of said notice and a copy of the proposed
supplemental indenture.
SECTION 10.04. RELIANCE ON OPINIONS OF COUNSEL. The Issuer and the
Trustee may rely on an opinion of Counsel to the effect that any supplemental
indenture entered into by the Issuer and the Trustee complies with the
provisions of this Article X and an opinion of Bond Counsel that any such
supplemental indenture does not adversely affect the exclusion from federal
gross income of interest on the Bonds.
ARTICLE XI
AMENDMENT OF AGREEMENT
SECTION 11.01. AMENDMENTS, ETC., TO AGREEMENT NOT REQUIRING CONSENT OF
BONDHOLDERS. The Issuer and the Company may, with the written consent of the
Trustee, but without the consent of or notice to any of the Bondholders, enter
into any amendment, change or modification of the Agreement (a) as may be
required by the provisions of the Agreement or this Indenture, (b) for the
purpose of curing any ambiguity or formal defect or omission in the Agreement,
(c) to preserve the exemption from Federal income taxes of interest on the
Bonds, or any of them, (d) to change Exhibit A to the Agreement in accordance
with the provisions of the Agreement or the Project Certificate or (e) in
connection with any other change therein which is not to the prejudice of the
Trustee or the Owners of the Bonds.
SECTION 11.02. AMENDMENTS, ETC., TO AGREEMENT REQUIRING CONSENT OF
BONDHOLDERS. Except for the amendments, changes or modifications as provided in
Section 11.01 hereof, the Issuer and the Company shall not enter into, and the
Trustee shall not consent to, any other amendment, change or modification of the
Agreement without mailing of notice to, and the written approval or consent of,
the Owners of not less than a majority in aggregate principal amount of the
Bonds at the time outstanding given and procured as provided in this Section;
provided, however, that nothing in this Section or Section 11.01 hereof shall
permit or be construed as permitting without the consent of the owners of 100%
in aggregate principal amount of the Bonds then outstanding (a) an extension of
the time of the payment of any amounts payable under Sections 4.4 and 4.5 of the
Agreement, or (b) a reduction in the amount of any payment or in the total
amount due under Sections 4.4 and 4.5 of the Agreement or (c) a reduction in the
aggregate principal amount of the Bonds required for consent to an amendment of
the Agreement. If at any time the Issuer and the Company shall request the
consent of the Trustee to any such proposed amendment, change or modification of
the Agreement, the Trustee
-47-
<PAGE> 52
shall, at the request of the Issuer and upon being satisfactorily indemnified
with respect to expenses, cause notice of such proposed amendment, change or
modification to be mailed to the Owners of Bonds in the same manner as provided
by the first paragraph of Section 3.04 hereof with respect to redemption of
Bonds. Such notice shall briefly set forth the notice of such proposed
amendment, change or modification and shall state that copies of the instrument
embodying the same are on file with the Trustee for inspection by all
Bondholders. If, within sixty (60) days, or such longer period as shall be
prescribed by the Issuer in its reasonable judgment, following the mailing of
such notice, the Owners of not less than a majority or 100%, as the case may be,
in aggregate principal amount of the Bonds outstanding at the time of the
execution of any such amendment, change or modification shall have consented to
and approved the execution thereof as herein provided, no Owner of any Bond
shall have any right to object to any of the terms and provisions contained
therein, or the operation thereof, or in any manner to question the propriety of
the execution thereof, or to enjoin or restrain the Company or the Issuer from
executing the same or from taking any action pursuant to the provisions thereof,
or the Trustee from consenting thereto. The Issuer shall have the right to
extend from time to time the period within which such consent and approval may
be obtained from Bondholders. Upon the execution of any such amendment, change
or modification as in this Section permitted and provided, the Agreement shall
be and be deemed to be modified, changed and amended in accordance therewith.
SECTION 11.03. RELIANCE ON OPINIONS OF COUNSEL. The Issuer and the
Trustee may rely upon an opinion of Counsel to the effect that any proposed
amendment, change or modification to the Agreement will comply with the
provisions of this Article XI and an opinion of Bond Counsel that any such
amendment, change or modification does not adversely affect the exclusion from
federal gross income of interest on the Bonds.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. CONSENTS, ETC., OF BONDHOLDERS. Any consent, approval,
direction or other instrument required by this Indenture to be signed and
executed by the Bondholders may be in any number of concurrent writings of
similar tenor and may be signed or executed by such Bondholders in person or by
agent appointed in writing. Proof of the execution of any such consent,
approval, direction or other instrument or of the writing appointing any such
agent, if made in the following manner, shall be sufficient for any of the
purposes of this Indenture, and shall be conclusive in favor of the Trustee with
regard to any action taken under such request or other instrument, namely:
(a) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the certificate of any
officer in any jurisdiction who by law has power to take
acknowledgments within such jurisdiction that the Person signing such
instrument or writing acknowledged before him the execution thereof, or
by affidavit of any witness to such execution or in any other manner
satisfactory to the Trustee;
-48-
<PAGE> 53
(b) The fact of ownership of Bonds and the amount or amounts,
numbers and other identification of such Bonds, and the date of
acquiring the same shall be proved by the registration books of the
Issuer maintained by the Trustee pursuant to Section 2.03 hereof.
SECTION 12.02. LIMITATION OF RIGHTS. With the exception of rights herein
expressly conferred, nothing expressed or mentioned in or to be implied from
this Indenture or the Bonds is intended or shall be construed to give to any
person other than the parties hereto, the Company and the Owners of the Bonds
any legal or equitable right, remedy or claim under or in respect to this
Indenture. This Indenture and all of the covenants, conditions and provisions
hereof are intended to be and being for the sole and exclusive benefit of the
parties hereto, the Owners of the Bonds and the Company as herein provided.
SECTION 12.03. SEVERABILITY. If any provision of this Indenture shall be
invalid, inoperative or unenforceable as applied in any particular case in any
jurisdiction or jurisdictions or in all jurisdictions, or in all cases because
it conflicts with any other provision or provisions hereof or any constitution
or statute or rule of public policy, or for any other reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative, or unenforceable
to any extent whatever. The invalidity of any one or more phrases, sentences,
clauses or Sections in this Indenture contained, shall not affect the remaining
portions of this Indenture, or any part thereof.
SECTION 12.04. NOTICES. Except as otherwise expressly provided herein,
all notices, certificates or other communications hereunder shall be
sufficiently given and shall be deemed given on the day on which the same have
been mailed by first class mail postage prepaid, or delivered by hand, or sent
by telecopy or similar facsimile transmission, as follows: if to the Issuer, c/o
Lewis and Roca, LLP., 40 North Central Avenue, Phoenix, Arizona 85004-4429, or
to telecopy number (602) 262-5311; if to the Company, at 4000 East Sky Harbor
Boulevard, Phoenix, Arizona 85034, or to telecopy number (602) 693-8953,
Attention: Treasurer; if to the Trustee, at Corporate Trust Services, AZ1-1128,
201 North Central Avenue, 26th Floor, Phoenix, Arizona 85004; provided, however,
that notice to the Trustee shall be deemed given when received by the Trustee. A
duplicate copy of each notice, certificate or other communication given
hereunder by either the Issuer or the Trustee to the other shall also be given
to the Company. The Issuer, the Company and the Trustee may, by notice given
hereunder, designate any further or different addresses to which subsequent
notices, certificates or other communications shall be sent.
SECTION 12.05. HOLIDAYS. Except as otherwise expressly set forth herein,
if the date for making any payment or the last date for performance of any act
or the exercising of any right, as provided in this Indenture, is not a Business
Day, such payment may be made or act performed or right exercised on the next
succeeding Business Day with the same force and effect as if done on the nominal
date provided in this Indenture.
-49-
<PAGE> 54
SECTION 12.06. COUNTERPARTS. This Indenture may be simultaneously
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
SECTION 12.07. APPLICABLE LAW. The power and authority of the Issuer to
issue the Bonds and the rights and obligations of the Issuer hereunder shall be
governed by and construed in accordance with the laws of the State.
SECTION 12.08. CAPTIONS. The captions or headings in this Indenture are
for convenience only and in no way define, limit, or describe the scope or
intent of any provisions or sections of this Indenture.
SECTION 12.09. NOTICE REGARDING CANCELLATION OF CONTRACTS. As required
by the provisions of Section 38-511, Arizona Revised Statutes, as amended,
notice is hereby given that political subdivisions of the State or any of their
departments or agencies may, within three (3) years of its execution, cancel any
contract, without penalty or further obligation, made by the political
subdivisions or any of their departments or agencies if any person significantly
involved in initiating, negotiating, securing, drafting or creating the contract
on behalf of the political subdivisions or any of their departments or agencies
is, at any time while the contract or any extension of the contract is in
effect, an employee or agent of any other party to the contract in any capacity
or a consultant to any other party of the contract with respect to the subject
matter of the contract. The cancellation shall be effective when written notice
from the chief executive officer or governing body of the political subdivision
is received by all other parties to the contract unless the notice specifies a
later time.
The Trustee covenants and agrees not to knowingly employ as an
employee, agent or, with respect to the subject matter of the Indenture, a
consultant, any person significantly involved in initiating, negotiating,
securing, drafting or creating this Indenture on behalf of the Issuer within
three (3) years from the execution hereof, unless a waiver is provided by the
Issuer.
-50-
<PAGE> 55
IN WITNESS WHEREOF, THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF
PHOENIX, ARIZONA, has caused these presents to be signed in its name and behalf
by its President and its corporate seal to be hereunto affixed and attested by
its Secretary, and to evidence its acceptance of the trusts hereby created Bank
One, Arizona, NA has caused these presents to be signed in its name and behalf
as of the first day of June, 1999.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE CITY OF PHOENIX, ARIZONA
By
President
Attest:
- ----------------------------------
Secretary
BANK ONE, ARIZONA, NA, as Trustee
By
Its
-------------------------
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<PAGE> 56
EXHIBIT I
INVESTOR LETTER
June 29, 1999
City of Phoenix
Phoenix, Arizona
The Industrial Development Authority
of the City of Phoenix, Arizona
Re: THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE CITY OF PHOENIX, ARIZONA
AIRPORT FACILITIES REVENUE BONDS
(AMERICA WEST AIRLINES, INC. PROJECT)
SERIES 1999
Ladies and Gentlemen:
The undersigned, [insert name of purchaser] (the "Purchaser"), has
purchased $_________ principal amount of the Bonds. In connection with such
purchase, The Industrial Development Authority of the City of Phoenix, Arizona
(the "Issuer") and the City of Phoenix, Arizona (the "City") require that the
Purchaser make certain representations as to the Purchaser's willingness to
accept the risks of investing in the Bonds, the Purchaser's investigation of
such risks, and such other matters. Accordingly, the Purchaser represents and
warrants to the Issuer, the City, and other addressees hereof as follows:
A. QUALIFICATION. The Purchaser is either a "qualified institutional
buyer" (a "Qualified Institutional Buyer") within the meaning of Rule 144A of
the Securities Act of 1933 (the "Securities Act") or a non-natural "accredited
investor" as defined in Rule 501 of Regulation D of the United States Securities
and Exchange Commission (an "Accredited Investor"). The Purchaser can bear the
economic risk of the purchase of the Bonds and has such knowledge and experience
in business and financial matters, including the analysis of the purchase of
similar investments, as to be capable of evaluating the merits and risks of an
investment in the Bonds on the basis of the information requested and reviewed
by us and our review as described herein.
B. NO REGISTRATION; TRANSFERABILITY. The Purchaser acknowledges that
the Bonds are not currently required to be, have not been, and are not intended
to be, registered under the Securities Act or registered or otherwise qualified
under the securities laws of any state or other jurisdiction, and that any sale
or other transfer of the Bonds may be only in accordance
EXHIBIT I
<PAGE> 57
with such laws. The Bonds are rated "B1" by Moody's Investors Service, Inc., and
their transferability is limited to Qualified Institutional Buyers or Accredited
Investors.
C. INDEPENDENT EVALUATION; WAIVER OF ISSUER'S DUE DILIGENCE; RELEASE.
The Purchaser has independently evaluated the factors associated with its
investment decision. The Purchaser has been given full and complete access to
and has been furnished with all information requested by the Purchaser regarding
America West Airlines, Inc. (the "Company"), and has conducted such other
investigations relating to the Issuer, the Project, the Company and the Bonds,
as in the opinion of the Purchaser was necessary in connection with its purchase
of the Bonds. The Purchaser acknowledges that the Issuer, the members of its
Board of Directors, its officers, Kutak Rock, its counsel and Villanueva &
Company, its financial advisor and the City and its City Council and agents of
any of the foregoing (each individually an "Issuer Party" and all collectively
the "Issuer Parties") have not undertaken to furnish information to the
Purchaser, or to ascertain the accuracy or completeness of any information that
may have been furnished to the Purchaser by or on behalf of the Issuer or the
Company relating to the operations, financial conditions or future prospects of
the Company or the Project and that none of the Issuer Parties have made any
representations concerning the accuracy or completeness of any information
supplied to the Purchaser or relating to the Company and the Project. The
Purchaser hereby waives any requirements of due diligence in investigation or
inquiry on the part of any of the Issuer Parties and all claims, actions, or
causes of action which the Purchaser may have directly or indirectly from or
relating to any action which the Issuer and its Board of Directors or the City
and its City Council took, or could have taken, in connection with the issuance
and sale of the Bonds to the Purchaser.
D. DISCLOSURE STATEMENT. The Purchaser has carefully read the Limited
Offering Memorandum relating to the Bonds in its entirety and understands the
risks described therein and understands and acknowledges that there may be other
risks in such investment which are not described therein. The Purchaser
acknowledges that the Bonds are a speculative investment and that there is a
high degree of risk in such investment.
E. SOPHISTICATION. The Purchaser is sufficiently knowledgeable and
experienced in financial and business matters, including the purchase and
ownership of municipal and other tax-exempt obligations, to be able to evaluate
the risks and merits of the investment represented by the purchase of the Bonds,
and is capable of and has made its own investigation of the Borrower and the
Project in connection with its decision to purchase the Bonds.
F. LEGAL AUTHORIZATION. The Purchaser is duly and legally authorized
to purchase the Bonds, and the Purchaser is duly and legally authorized to
execute this Investor Letter. The Purchaser has satisfied itself that the Bonds
are a lawful investment for it under all applicable laws.
G. SPECIAL LIMITED OBLIGATIONS. The Purchaser understands that the
Bonds are special limited obligations, and not general obligations of the Issuer
payable solely from the revenues received by Bank One, Arizona, NA, as trustee
(the "Trustee"). The Purchaser understands that the Bonds are not secured by any
obligations or the pledge of any monies received or to be received from taxation
or from the State of Arizona (the "State") or any
I-2
<PAGE> 58
political subdivision or taxing district thereof (including, without implied
limitation, the Issuer or the City), and that the Bonds will never represent or
constitute a general obligation, debt, or bonded indebtedness of the City, the
State, or any political subdivision thereof, and that no right will exist to
have taxes levied by the City, the State, or any political subdivision thereof,
for the payment of the principal of, premium, if any, and interest on the Bonds,
and that payment of the principal of, premium, if any, and interest on the Bonds
depends upon the general credit of the Company. The Purchaser understands that
the Issuer has no taxing power.
H. SURVIVAL. All representations of the Purchaser contained herein
shall survive the sale and delivery of the Bonds to the Purchaser as
representations of fact existing as of the date of execution and delivery of
this Investor Letter.
I. DEFINED TERMS. The initial capitalized terms not defined herein
shall the meaning ascribed to such terms in the Indenture of Trust which secures
the payment of the Bonds.
J. WAIVER OF DUE DILIGENCE. Notwithstanding anything to the contrary
herein, the Purchaser waives any requirement of due diligence and investigation
or inquiry on the part of any of the Issuer Parties (as defined in subparagraph
C hereof).
K. The Purchaser is purchasing the Bonds for the account of the
Purchaser and not with a view to resell or distribute the Bonds.
The above representations are provided solely for the benefit of the
addressees of this Investor Letter and may not be relied upon by or furnished to
any other person without our prior written consent.
----------------------
By
---------------------------------------
Its
------------------------------------
[Note: The signatory must be Chief Financial
Officer or other executive officer.]
I-3
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
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<CASH> 186,592
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0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,254
<EPS-BASIC> 1.12<F1>
<EPS-DILUTED> 1.06
<FN>
<F1>EPS PRIMARY REPRESENTS BASIC NET INCOME PER SHARE.
</FN>
</TABLE>
