<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1994
REGISTRATION NO. 33-54243
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICA WEST AIRLINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4512 86-0418245
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
MARTIN J. WHALEN
SENIOR VICE PRESIDENT
AMERICA WEST AIRLINES, INC.
4000 EAST SKY HARBOR BOULEVARD 4000 EAST SKY HARBOR BOULEVARD
PHOENIX, ARIZONA 85034 PHOENIX, ARIZONA 85034
(602) 693-0800 (602) 693-0800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL NUMBER,
EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
------------------------
With Copies to:
DAVID J. GRAHAM
ANDREWS & KURTH L.L.P.
4200 TEXAS COMMERCE TOWER
600 TRAVIS STREET
HOUSTON, TEXAS 77002
(713) 220-4200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective, which time is to be
determined by the Selling Securityholders. All of the Securities offered hereby
are offered for the account of the Selling Securityholders.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED PER SECURITY(1) PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------------------
Class A Common Stock, par value $.01 per share.... 1,200,000 Shares $7.47 $ 8,964,000 $ 3,091(2)
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Class B Common Stock, par value $.01 per share.... 14,775,000 Shares $7.63 $112,733,752 $ -- (3)
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Class B Common Stock, par value $.01 per
share(3)........................................ 4,153,846 Shares $7.63 $ 31,693,845 $ -- (3)
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Warrants to purchase Class B Common Stock......... 4,153,846 Warrants $ -- $ -- $ -- (3)
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% Senior Unsecured Notes due 2001............. $100,000,000 100% $100,000,000 $ -- (3)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Since there has been no prior market for these securities, the registration
fee has been calculated based on the price at which such securities were
acquired by the Selling Securityholders using the methodology of Rule
457(e).
(3) Registration fee previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
AMERICA WEST AIRLINES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-1 LOCATION OR CAPTION IN PROSPECTUS
- ------------------------------------------- -----------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus......................... Forepart of Registration Statement and
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed
Charges............................ Prospectus Summary; Investment
Considerations
4. Use of Proceeds...................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price...... Plan of Distribution
6. Selling Securityholders.............. Principal Stockholders; Selling
Securityholders
7. Plan of Distribution................. Outside Front Cover Page of Prospectus;
Plan of Distribution
8. Description of Securities to be
Registered......................... Outside Front Cover Page of Prospectus;
Description of Capital Stock; Description
of the Senior Notes; Description of
Warrants; Shares Eligible for Future Sale
9. Interests of Named Experts and
Counsel............................ Legal Matters; Experts
10. Information with Respect to the
Registrant......................... Outside Front Cover Page of Prospectus;
Prospectus Summary; Investment
Considerations; The Company; Use of
Proceeds; Dividend Policy;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Description of Capital Stock; Description
of the Senior Notes; Description of
Warrants; Shares Eligible for Future
Sale; Financial Statements
11. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................ Not Applicable
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED AUGUST 15, 1994
AMERICA WEST AIRLINES, INC.
1,200,000 SHARES CLASS A COMMON STOCK
14,265,473 SHARES CLASS B COMMON STOCK
$100,000,000 % SENIOR UNSECURED NOTES DUE 2001
4,153,846 CLASS B COMMON STOCK WARRANTS
------------------------
This Prospectus relates to (i) 1,200,000 shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock") of America West Airlines, Inc.
(the "Company"), (ii) 14,265,473 shares of Class B Common Stock, par value $.01
per share of the Company, ("Class B Common Stock", and together with the Class A
Common Stock, the "Common Stock"), (iii) $100 million principal amount of %
Senior Unsecured Notes due 2001 of the Company (the "Senior Notes"), and (iv)
4,153,846 warrants, each entitling the holder thereof to purchase one share of
Class B Common Stock for $ at any time prior to the fifth anniversary
of the date of issuance (the "Warrants," and together with the Common Stock and
the Senior Notes, the "Securities"). The Securities may be offered by the
Selling Securityholders (as defined herein) from time to time in transactions in
the over-the-counter market, on a national securities exchange or otherwise at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to such market prices or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the Securities
to or through underwriters, dealers or agents who may receive compensation in
the form of discounts, concessions or commissions from the Selling
Securityholders or the purchasers of the Securities for whom such underwriters,
dealers or agents may act. The Company will not receive any of the proceeds from
the sale of any of the Securities by the Selling Securityholders.
Holders of Class B Common Stock are entitled to one vote per share, and
holders of Class A Common Stock are entitled to 50 votes per share on all
matters submitted to a vote of common stockholders, except that voting rights of
holders who are not United States citizens are limited as described herein. The
Senior Notes bear interest payable semiannually in arrears. The Senior Notes may
be redeemed at the option of the Company (i) prior to September 1, 1997, at any
time, at a redemption price equal to 105% of the principal amount or from time
to time in part from the net proceeds from a public offering of its capital
stock at a redemption price equal to 105% of the principal amount, in each case
plus accrued and unpaid interest, if any, to the redemption date; and (ii) on or
after September 1, 1997 at any time in whole or from time to time in part, at
redemption prices described herein. In addition, Senior Notes may be subject to
mandatory redemption, at a redemption price of 104% of the aggregate principal
amount of Senior Notes so redeemed, plus accrued and unpaid interest thereon,
under certain circumstances following the consummation of a public offering of
the Company's capital stock. The Senior Notes will be effectively subordinated
to $480.9 million of secured indebtedness incurred by the Company to acquire
aircraft and other assets (the "Secured Debt"). Holders of the Secured Debt will
be senior to the holders of the Senior Notes with respect to the collateral
securing such indebtedness. See "Description of the Senior Notes." Prior to this
registration, there has been no public market for any of the Securities.
Application has been made to list the Class B Common Stock and the Warrants on
the New York Stock Exchange. The Company does not intend to file an application
to have either the Class A Common Stock or the Senior Notes listed on a national
exchange and does not expect an active trading market to develop for either the
Class A Common Stock or the Senior Notes.
The Selling Securityholders and any underwriters, dealers or agents
participating in the distribution of the Securities may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 as amended (the
"Securities Act"), and any profit on the sale of the Securities by the Selling
Securityholders and any commissions received by any such underwriters, brokers,
dealers or agents may be deemed to be underwriting commissions or discounts
under the Securities Act. Pursuant to the terms of the Registration Rights
Agreement (as hereinafter defined) the Company has agreed to indemnify the
Selling Securityholders against certain liabilities, including liabilities under
the Securities Act.
Underwriters, brokers, dealers or agents effecting transactions in the
Securities should confirm the registration thereof under the securities laws of
the state in which such transactions will occur, or the existence of any
exemption from registration.
SEE "INVESTMENT CONSIDERATIONS" FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Prospectus is , 1994
<PAGE> 4
AVAILABLE INFORMATION
America West Airlines, Inc. ("America West" or the "Company") is subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission"). Reports and other information concerning America West can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549; The Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference Room of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
America West has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to America West and the
Securities offered hereby, reference is made to the Registration Statement,
including the exhibits and schedules thereto. The Registration Statement can be
inspected at the Public Reference Room of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549.
The Company is a Delaware corporation. Its executive offices are located at
4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, and its telephone number
is (602) 693-0800.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements (including the notes thereto)
appearing elsewhere in this Prospectus, which should be read in its entirety.
Prospective investors should carefully consider matters discussed under the
caption "Investment Considerations."
THE COMPANY
America West Airlines, Inc. ("America West" or the "Company") is a major
United States air carrier providing passenger, cargo and mail service with its
primary markets in the western and southwestern regions of the United States.
The Company operates its route system through two principal hubs, Phoenix,
Arizona and Las Vegas, Nevada, and a mini-hub in Columbus, Ohio. As of July 31,
1994, America West operated a fleet of 85 jet aircraft and provided service to
45 destinations. Through alliance agreements with Mesa Airlines, Inc. ("Mesa"),
the Company provides connecting service to an additional 18 destinations. The
Company also has formed an alliance with Continental Airlines, Inc.
("Continental") to serve additional destinations.
The Company filed a voluntary petition for protection under Chapter 11 of
the federal bankruptcy code on June 27, 1991. The Company's plan of
reorganization (the "Plan") was confirmed by the United States Bankruptcy Court
for the District of Arizona (the "Bankruptcy Court") on August 10, 1994. The
Plan will become effective on the date (the "Effective Date") on which certain
conditions specified in the Plan are satisfied or waived, which the Company
expects to occur on or about August , 1994. In connection with its
reorganization in bankruptcy and related operational restructuring (the
"Reorganization"), the Company took significant steps to improve its operations,
including (i) reducing its fleet size from 123 aircraft in July 1991 to 85 at
July 31, 1994, facilitating a better matching of capacity to demand through
elimination of nonproductive routes; (ii) reducing the aircraft types operated
from five to three, resulting in reduced operating costs; (iii) implementing
certain enhancements to its revenue management system to optimize the level of
passenger revenues generated on each flight; (iv) eliminating Company operated
commuter service and introducing code sharing agreements to expand the scope of
service and attract a broader passenger base; and (v) implementing numerous cost
reduction programs, including a Company-wide pay reduction in August 1991 and
the reduction of aircraft lease rentals to fair market rates in the fall of
1992. As a result of these measures as well as a gradually improving economic
climate and a more stable environment relative to fare competition within the
airline industry, America West was one of only two major airlines to report a
profit in each quarter of 1993, realizing net income for 1993 of $37.2 million
and operating income of $121.1 million on revenues of $1.33 billion.
America West currently operates with one of the lowest cost structures
among major U.S. airlines, based on reported 1993 results. America West's
operating cost per available seat mile for 1993 was 7.01 cents, which was
approximately 25% lower than the average operating cost per available seat mile
of the nine largest other domestic airlines and was comparable to the costs
incurred by Southwest Airlines, Inc. ("Southwest Airlines"). The Company's
business strategy is to continue to offer competitive fares while maintaining an
incrementally higher level of service relative to low cost carriers generally.
These services include assigned seating, participation in computerized
reservation systems, interline ticketing, first class cabins on certain flights,
baggage transfer and various other services. Management believes that its
principal hub locations in Phoenix and Las Vegas not only provide a low cost
environment for a substantial portion of the Company's operations, but also
position the Company to benefit from an expanding market for leisure travel.
As a part of the Reorganization, the Company entered into certain
agreements (the "Alliance Agreements") with Continental and Mesa. With
Continental, the Company will implement certain code-sharing arrangements,
coordinate certain flight schedules, share ticket counter space, link frequent
flyer programs, and coordinate ground handling operations. With Mesa, America
West modified and extended two code-sharing agreements that establish Mesa as a
feeder carrier for the Company at its hubs in Phoenix and Columbus. The
code-sharing agreements provide for coordinated flight schedules, passenger
handling and computer reservations under the America West flight designator
code, thereby allowing passengers to
3
<PAGE> 6
purchase one air fare for their entire trip. Mesa connects 13 cities to the
Company's Phoenix hub, operates under the name "America West Express" and has
begun to incorporate the color scheme and commercial logo of America West on
certain aircraft utilized on these routes. Mesa serves five destinations from
the Company's Columbus mini-hub operations. Management believes the Alliance
Agreements will contribute significantly to the Company's passenger revenue and
operating results.
Pursuant to the Reorganization, the Company will substantially reduce its
outstanding debt and increase its liquidity through the infusion of new capital.
In addition, the Company has reached agreements with certain key suppliers of
aircraft. At June 30, 1994, prior to the Reorganization, the Company's long-term
debt including current maturities and estimated liabilities subject to Chapter
11 proceedings aggregated approximately $880 million. Such liabilities at June
30, 1994, adjusted to give pro forma effect to the consummation of the Plan,
would aggregate approximately $638 million.
Pursuant to the Reorganization, pre-existing equity interests of the
Company will be cancelled, the Company's obligations to other prepetition
creditors will be restructured and general unsecured nonpriority prepetition
creditors ("Prepetition Creditors") will receive, in full satisfaction of their
claims, 25,669,348 shares of Class B Common Stock and $9,828,145 cash. Holders
of the Company's pre-existing common equity interests will receive, on a pro
rata basis, 2,250,000 shares of Class B Common Stock and Warrants to purchase
6,230,769 shares of Class B Common Stock. In addition, pursuant to the exercise
of subscription rights, holders of pre-existing equity interests will receive
1,615,179 shares of Class B Common Stock for an aggregate purchase price of
$14,357,326 ($8.889 per share), including holders of pre-existing preferred
equity interests who will receive 250,000 shares of Class B Common Stock for an
aggregate purchase price of $2,222,250.
Also pursuant to the Reorganization, the Company will receive approximately
$214.9 million in cash upon the issuance to AmWest Partners, L.P. ("AmWest"),
and to certain assignees of AmWest (as described below), of (i) 1,200,000 shares
of Class A Common Stock, (ii) 13,365,473 shares of Class B Common Stock, (iii)
Warrants to purchase 2,769,231 shares of Class B Common Stock and (iv) $100
million of Senior Notes. Certain funds managed or advised by Fidelity Management
Trust Company and its affiliates (collectively, "Fidelity") and Lehman Brothers
Inc. ("Lehman") will purchase a portion of the Securities that otherwise would
be issued to AmWest pursuant to assignments by AmWest to those parties. Pursuant
to these assignments, Lehman will acquire shares of Class B Common
Stock and Warrants to purchase additional shares of Class B Common
Stock in consideration of payment to the Company of approximately $7.7 million,
and Fidelity will acquire shares of Class B Common Stock, Warrants to
purchase additional shares of Class B Common Stock and $100 million of
Senior Notes. AmWest is a Texas limited partnership including as investors Mesa,
Continental and TPG Partners, L.P. ("TPG"). TPG is a Delaware limited
partnership which is acquiring aggregate beneficial ownership of % of the
voting securities of America West. The general partner of AmWest is AmWest
GenPar, Inc., a Texas corporation. The controlling persons of AmWest GenPar also
control TPG. See "Investment Considerations -- Concentration of Voting Power;
Influence of AmWest or its Partners" and "Principal Stockholders." AmWest has
advised the Company that it expects to distribute to its partners the securities
acquired by it pursuant to the Reorganization. Pursuant to the Reorganization,
Lehman, Fidelity and TPG will receive additional shares of Class B Common Stock
for their existing claims and interests. These shares are not subject to the
Registration Statement of which this Prospectus is a part.
4
<PAGE> 7
THE OFFERING
The principal terms of the Common Stock, Senior Notes and Warrants are
summarized below. For a more complete description, see "Description of Capital
Stock," "Description of the Senior Notes" and "Description of Warrants,"
respectively. The Selling Securityholders will receive all of the proceeds from
the sale of the Securities offered hereby, and the Company will not receive any
proceeds from the Offering.
Common Stock:
Securities Offered............... 1,200,000 shares of Class A Common Stock
14,775,000 shares of Class B Common Stock
Common Stock outstanding(1)...... 1,200,000 shares of Class A Common Stock
43,800,000 shares of Class B Common Stock
Total.................. 45,000,000 shares of Common Stock
Voting Rights.................... Class A and Class B Common Stock have
identical economic rights and privileges
and rank equally, share ratably, and are
identical in all respects as to all matters
other than voting rights. The Class A
Common Stock votes together with the Class
B Common Stock on all matters except as
otherwise required by law. Each share of
Class B Common Stock has one vote; each
share of Class A Common Stock has 50 votes.
Listing.......................... The Company has made application to list
the Class B Common Stock on the New York
Stock Exchange. The Company does not intend
to apply for listing of the Class A Common
Stock on any securities exchange or
authorization quotation on the NASDAQ
System. The Company does not expect that an
active trading market for the Class A
Common Stock will develop.
Trading Symbol for Class B Common
Stock "AWA"
- ---------------
(1) Excluding 10,384,615 shares of Class B Common Stock reserved for issuance
upon exercise of outstanding Warrants and 125,000 shares of Class B Common
Stock to be issued in connection with a reorganization success bonus.
Senior Notes:
Securities Offered............... $100,000,000 aggregate principal amount of
Senior Notes
Maturity......................... The seventh anniversary of the date of
issuance
Interest Rate.................... The Senior Notes will bear interest at a
rate of % per annum. Interest will
accrue from the date of issuance thereof
and will be payable semi-annually in
arrears on each March 1 and September 1,
commencing March 1, 1995.
Ranking.......................... The Senior Notes will rank senior in right
of payment to all existing and future
subordinated Indebtedness (defined in the
Indenture) of the Company and will rank
pari passu in right of payment with all
other Indebtedness of the Company. Certain
Indebtedness, however, including the
Secured Debt, will be effectively senior in
right of payment to the Senior Notes with
respect to assets that constitute
collateral securing such other
Indebtedness.
Optional Redemption.............. The Senior Notes offered hereby may be
redeemed at the option of the Company (i)
prior to September 1, 1997, (A) at any time
at a redemption price of 105% of the
principal amount of the Senior Notes plus
accrued and
5
<PAGE> 8
unpaid interest, if any, to the
redemption date or (B) from time to time in
part from the net proceeds of a public
offering of its capital stock at a
redemption price equal to 105% of the
principal amount, plus accrued and unpaid
interest, if any, to the redemption date
except for amounts mandatorily redeemed; and
(ii) on or after September 1, 1997 at any
time in whole or from time to time in part,
at a redemption price equal to the following
percentage of the principal amount redeemed,
plus accrued and unpaid interest to the date
of redemption, if redeemed during the
12-month period beginning on the anniversary
of the date of issuance falling within the
years indicated below:
<TABLE>
<S> <C> <C>
1997.. 105.0%
1998.. 103.3%
1999.. 101.7%
2000.. 100.0%
</TABLE>
Mandatory Redemption............. In the event that, prior to
, 1997, the Company
consummates a Public Offering Sale and
immediately prior to such consummation the
Company has cash and cash equivalents, not
subject to any restriction on disposition,
of at least $100,000,000, then the Company
shall redeem Senior Notes at a redemption
price equal to 104% of the aggregate
principal amount of the Senior Notes so
redeemed, plus accrued and unpaid interest
to the redemption date. The aggregate
redemption price and accrued and unpaid
interest of the Senior Notes to be so
redeemed shall equal the lesser of (a) 50%
of the net offering proceeds of such Public
Offering Sale and (b) the excess, if any,
of (i) $20,000,000 over (ii) the amount of
any net offering proceeds of any prior
Public Offering Sale received prior to
, 1997 and applied to so
redeem Senior Notes.
Principal Covenants.............. The Indenture contains numerous covenants
including covenants governing the
disposition of the proceeds of certain
underwritten public offerings of Common
Stock of the Company, limiting certain
Restricted Payments, limiting certain
transactions with Affiliates, limiting
certain sales of assets, limiting certain
investments and allowing a Holder
repurchase rights upon a change of control.
Listing.......................... The Company does not intend to apply for
listing of the Senior Notes on any
securities exchange or authorization for
quotation on the NASDAQ system. The Company
does not expect that an active trading
market will develop for the Senior Notes.
Warrants:
Securities Offered............... 4,153,846 Warrants, each entitling the
holder to purchase one share of Class B
Common Stock at a price (the "Exercise
Price") of $ per share.
Warrants to be Outstanding after
the Offering..................... 10,384,615 Warrants
Expiration....................... The Warrants are exercisable by the holders
at any time on or prior to the fifth
anniversary of the Effective Date.
Redemption....................... The Warrants are not redeemable.
6
<PAGE> 9
Anti-Dilution.................... The number of shares of Class B Common
Stock purchasable upon exercise of each
Warrant will be adjusted upon, among other
things, (i) issuance of a dividend in or
other distribution of Common Stock to
holders of Common Stock; (ii) a
combination, subdivision or
reclassification of the Class B Common
Stock; and (iii) rights issuances.
Voting Rights.................... Warrant holders have no voting rights.
Trading Symbol................... "AWAws"
7
<PAGE> 10
SUMMARY FINANCIAL DATA
The summary financial data set forth below presents historical and pro
forma financial information of the Company. The financial information at June
30, 1994 and 1993 and for the six months then ended has been derived from the
unaudited condensed financial statements of the Company which, in the opinion of
management, include all adjustments, consisting only of normal adjustments,
necessary for a fair presentation of the results for the periods. The results
for the six months ended June 30, 1994 are not necessarily indicative of the
results to be expected for the full year. The summary information should be read
in conjunction with the financial statements and related notes thereto appearing
elsewhere in this Prospectus, "Unaudited Pro Forma Condensed Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------------- --------------------------------
1993 1994
------------------------- ---------------------
PRO PRO
1991 1992 HISTORICAL FORMA(A) 1993 HISTORICAL FORMA(A)
---------- ---------- ---------- ------------ -------- ---------- --------
(IN THOUSANDS, EXCEPT RATIO AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues................... $1,413,925 $1,294,140 $1,325,364 $1,325,364 $641,515 $708,615 $708,615
Operating expenses................... 1,518,582 1,368,952 1,204,310 1,206,240 599,168 626,719 629,799
Operating income (loss).............. (104,657) (74,812) 121,054 119,124 42,347 81,896 78,816
Income (loss) before income taxes.... (222,016) (131,761) 37,924 54,147 12,647 36,782 50,001
Income tax expense................... -- -- 759 34,323 253 1,471 26,010
Net income (loss).................... (222,016) (131,761) 37,165 19,824 12,394 35,311 23,991
Earnings (loss) per share:
Primary.......................... (10.39) (5.58) 1.50 0.44 0.52 1.30 0.53
Fully diluted.................... (10.39) (5.58) 1.04 0.44 0.36 0.92 0.53
Shares used for computation:
Primary.......................... 21,534 23,914 27,525 45,125 29,669 28,704 45,125
Fully diluted.................... 21,534 23,914 41,509 45,125 42,804 40,607 45,125
Ratio of earnings to fixed
charges(b)......................... -- -- 1.28 1.37 1.18 1.56 1.71
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1994
YEAR ENDED -------------------------
DECEMBER 31, PRO
1993 HISTORICAL FORMA(A)
------------ ---------- ----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............................................... $ (124,375) $ (106,760) $ 38,514
Total assets............................................................... 1,016,743 1,100,541 1,703,739
Long-term debt, less current maturities.................................... 620,992 604,420 578,922
Total stockholders' equity (deficiency).................................... (254,262) (215,338) 587,500
</TABLE>
- ---------------
(a) Pro Forma information gives effect to the consummation of the Plan,
including adjustments for fresh start reporting. Pro forma statement of
operations data for the year ended December 31, 1993 and the six-month
period ended June 30, 1994 is presented as if the Plan were consummated on
January 1, 1993; balance sheet data at June 30, 1994 is presented as if the
Plan were consummated on such date. See "Unaudited Pro Forma Condensed
Financial Information." These amounts are presented for informational
purposes only and do not purport to represent what the Company's financial
position or results of operations would have been if consummation of the
Plan had occurred on such dates.
(b) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income (loss) before taxes plus fixed charges less capitalized
interest. "Fixed charges" consist of interest expense including amortization
of debt issuance costs, capitalized interest and a portion of rent expense
which is deemed to be representative of an interest factor. For the years
ended December 31, 1992 and 1991, earnings were insufficient to cover fixed
charges by $131,761,000 and $228,680,000, respectively.
8
<PAGE> 11
INVESTMENT CONSIDERATIONS
HISTORY OF LOSSES
The Company experienced significant operating losses in each year of the
three year period ended December 31, 1992, and the Company operated as a
debtor-in-possession under Chapter 11 of the federal bankruptcy code from June
27, 1991 to the Effective Date. Although the Company's results of operations
improved in 1993, the airline industry has been extremely competitive and
generally unprofitable in recent years. In the long term, the Company's
viability is dependent upon its ability to sustain profitable results of
operations, and there can be no assurance that such results can be sustained.
ADVERSE INDUSTRY CONDITIONS AND COMPETITION
The airline industry is highly competitive. Overall industry profit margins
have traditionally been low and, in each year of the three year period ended
December 31, 1992, were substantially negative. Airlines compete in the areas of
pricing, scheduling (frequency and flight times), on-time performance, frequent
flyer programs and other services. Many of America West's competitors are
carriers with substantially greater financial resources.
The airline industry is susceptible to price discounting, which involves
the offering of discount or promotional fares to passengers. Any such fares
offered by one airline are normally matched by competing airlines, which results
in lower industry yields. In 1992 American Airlines introduced a new fare
structure followed by a deeply discounted summer sale. These steps were
generally matched by other U.S. airlines, including America West, and resulted
in substantially depressed industry yields and significant 1992 losses for most
of the major U.S. airlines. American Airlines and the rest of the domestic
airline industry subsequently abandoned that pricing structure, and fare levels
increased in 1993 from 1992 levels. Nonetheless, significant industry-wide
discounts could be re-implemented at any time, and the introduction of broadly
available, deeply discounted fares by a major U.S. airline would likely result
in lower yields for the entire industry and could have a material adverse effect
on the Company's operating results.
Several of the Company's markets, including those in New York City, Texas,
Southern California, Washington, D.C., Chicago and Las Vegas, are served by
larger carriers and are highly competitive. On many routes, and in particular
those routes between Phoenix and California, fare competition has made it
difficult for the Company to raise fares except on a selective basis. Intense
fare competition with respect to certain markets has adversely affected
passenger yield and, as a result, profitability.
In recent years several new carriers have entered the industry, typically
with low cost structures. Aircraft, skilled labor and gates at most airports
continue to be available to start-up carriers. In some cases, new entrants have
initiated or triggered further price discounting. The entry of additional new
carriers on many of the Company's routes (as well as increased competition from
established carriers) could negatively impact America West's results of
operations.
INCREASES IN FUEL PRICES
Fuel costs constituted approximately 14% of America West's total operating
expenses during 1993. A one cent per gallon change in fuel price would affect
the Company's annual operating results by approximately $3 million at present
consumption levels. Accordingly, either a substantial increase in fuel prices or
the lack of adequate fuel supplies in the future would likely have a material
adverse effect on the operations of the Company. Moreover, fuel price increases
or supply shortages, such as those that occurred during the Persian Gulf war,
can occur at any time as a result of, among other things, geopolitical
developments.
The Company purchases fuel on standard trade terms under master agreements
and has been able to obtain fuel sufficient to meet its requirements at
competitive prices. The Company does not currently hedge its fuel costs. In
August 1993, the United States government increased taxes on fuel, including
aircraft fuel, by 4.3 cents per gallon. Airlines are exempt from this tax
increase until October 1, 1995. When implemented, this new tax will increase the
Company's annual operating expenses by approximately $13 million based upon its
9
<PAGE> 12
1993 fuel consumption levels. There can be no assurance that the U.S. government
will not impose additional taxes on fuel in the future or that such taxes will
not materially affect the Company's results of operations.
LEVERAGE
Although the Reorganization will improve the Company's financial position,
the Company will be highly leveraged after the Effective Date. This high degree
of leverage will pose substantial risks to holders of the Securities and could
have a material adverse effect on the marketability, price and future value of
such Securities. This high degree of leverage will increase the reorganized
Company's vulnerability to adverse general economic and airline industry
conditions and to increased competitive pressures.
CONCENTRATION OF VOTING POWER; INFLUENCE OF AMWEST AND ITS PARTNERS
At the Effective Date, it is anticipated that AmWest and its partners will
own approximately 30.5% of the shares of Class B Common Stock to be outstanding
immediately after the Effective Date and 100% of the Class A Common Stock, and
thereby will control approximately 70.6% of the voting power of America West
(71.4% assuming the exercise of Warrants issued to such holders). As a result,
AmWest or its partners will be able to elect a majority of its designees to the
Board of Directors and otherwise to control the Company by, among other things,
taking or approving actions to (i) amend the America West charter or effect a
merger, sale of assets or other major corporate transaction; (ii) defeat any
takeover attempt; (iii) determine the amount of dividends, if any, paid to
itself and the other holders of Common Stock; and (iv) otherwise control the
outcome of virtually all matters submitted for a vote of the stockholders of the
Company. Two of the partners of AmWest, Mesa and Continental, are engaged in the
airline industry and are parties to certain agreements with the Company. In
addition, the control persons of AmWest GenPar, Inc., the general partner of
AmWest, also control both Air Partners L.P., a special purpose partnership
formed in 1992 to participate in the funding of the reorganization of
Continental and a significant shareholder in Continental, and TPG, a Delaware
limited partnership which is acquiring aggregate beneficial ownership of %
of the combined voting securities of America West. See "Principal Stockholders."
As a result, there can be no assurance that the interests of Continental, Mesa
or TPG will not differ from the interests of the Company or that either party
will not seek to influence the Company in a manner that serves its interests.
Pursuant to the terms of the Stockholders' Agreement among the Company,
AmWest and certain other stockholders or their representatives, AmWest has
agreed to certain limitations on its ability to control the Company, including,
that for a three-year period beginning with the Effective Date, the Company
shall have a 15-member Board of Directors, six members of which may be
designated by parties other than AmWest or its partners (including three
Creditors' Committee Directors, one Equity Committee Director, one Independent
Company Director and one GPA Director, as such terms are defined in the
Stockholders' Agreement). The Stockholders' Agreement also contains other
restrictions on AmWest's ability to effect certain transactions involving the
Company. See "Principal Stockholders -- Stockholders' Agreements."
LIMITED TRADING MARKET; SHARES ELIGIBLE FOR FUTURE SALE
There has been no trading market in the Securities prior to the Effective
Date. There can be no assurance regarding the development of an active market
for these Securities. Accordingly, there is no assurance that a holder of such
Securities will be able to sell such Securities in the future or as to the price
at which any such sale may occur. If a market should develop, it is anticipated
that such market may be volatile, at least for an initial period of time after
the Effective Date, and that certain of the recipients of the Securities in the
Reorganization may prefer to liquidate their investments rather than to hold
their investments on a long-term basis.
Substantially all of the 43,800,000 outstanding shares of Class B Common
Stock and (assuming no exercise of the outstanding warrants) will be freely
tradeable, subject to certain restrictions with respect to shares held by AmWest
or its partners or assignees. These shares include 14,265,473 shares of Class B
Common Stock to be issued to the Selling Securityholders that are covered by the
Registration Statement of which this Prospectus is a part, 25,669,348 shares of
Class B Common Stock to be distributed to prepetition creditors and 2,250,000
shares of Class B Common Stock to be issued to pre-existing common equity
holders. In addition, at the Effective Date, the Company will issue Warrants to
purchase 10,384,615 shares of Class B
10
<PAGE> 13
Common Stock. The Warrants will be immediately exercisable, and the Company
believes that substantially all of the shares of Class B Common Stock issuable
upon such exercise will be freely tradeable.
LIMITATION ON VOTING BY FOREIGN OWNERS
The Company's Restated Certificate of Incorporation provides that no more
than 25% of the voting interest of the Company may be owned or controlled by
persons who are not U.S. citizens and that the voting rights of such persons are
subject to automatic suspension to the extent required to ensure that the
Company is in compliance with applicable laws relating to ownership or control
of a U.S. carrier. United States law currently requires that no more than 25% of
the voting stock of the Company (or any other domestic airline) may be owned
directly or indirectly by persons who are not citizens of the United States. See
"Description of Capital Stock -- Limitation on Voting by Foreign Owners."
LABOR NEGOTIATIONS
The Company historically has operated without collective bargaining
agreements covering any of its employees. In October 1993, however, the Air Line
Pilots Association ("ALPA") was certified as the bargaining representative of
the Company's flight deck crew members, and formal negotiations of a collective
bargaining agreement have commenced. In addition, elections will be held during
September, 1994 on a proposal by the Association of Flight Attendants ("AFA") to
represent the Company's customer service representatives and the Company
anticipates that an election will be held during 1994 with respect to a proposal
by the Transportation Workers Union ("TWU") to represent the Company's fleet
service personnel. On August 1, 1994 the International Brotherhood of Teamsters
(the "Teamsters") filed an application to represent the Company's mechanics and
related personnel. The Company cannot predict whether either the AFA, TWU or the
Teamsters will be certified to represent any of the Company's employees.
Furthermore, there can be no assurance that a future collective bargaining
agreement with any of the ALPA, AFA or TWU will not contain wage increases, work
rules or other provisions that could materially affect the Company's operations
or financial performance. See "Business -- Employees."
GOVERNMENT REGULATION
The Company is subject to the Federal Aviation Act of 1958, as amended (the
"Aviation Act"), under which the Department of Transportation (the "DOT") and
the Federal Aviation Administration (the "FAA") exercise regulatory authority.
This regulatory authority includes (i) the determination and periodic review of
the fitness (including financial fitness) of air carriers; (ii) the
certification and regulation of the flight equipment; (iii) the approval of
personnel who may engage in flight, maintenance and operations activities; and
(iv) the approval of flight training activities and the enforcement of minimum
air safety standards set forth in FAA regulations. In accordance with the
Airline Deregulation Act of 1978, domestic airline fares and routes are no
longer subject to significant regulation. The DOT maintains authority over
international aviation, subject to review by the President of the United States,
and has jurisdiction over consumer protection policies, computer reservation
system issues and unfair trade practices.
In the last several years, the FAA has issued a number of maintenance
directives and other regulations relating to, among other things, retirement of
older aircraft, collision avoidance system, airborne windshear avoidance
systems, noise abatement and increased inspections and maintenance procedures to
be conducted on older aircraft. Additional laws and regulations have been
proposed from time to time which could significantly increase the cost of
airline operations by imposing additional requirements or restrictions on
operations. Laws and regulations have been considered from time to time that
would prohibit or restrict the ownership and transfer of airline routes or
slots. There is no assurance that laws and regulations currently enacted or
enacted in the future will not adversely affect the Company's ability to
maintain its current level of operating results. See "Business -- Government
Regulations."
11
<PAGE> 14
FUTURE CAPITAL REQUIREMENTS
After giving effect to the Reorganization on a pro forma basis, as of June
30, 1994, America West had $638.4 million of long-term indebtedness (including
current maturities) and $587.5 million of stockholders' equity. As of such date,
the Company had $284.9 million of cash and cash equivalents on a pro forma
basis. America West does not have available lines of credit or significant
unencumbered assets. America West is more leveraged and has significantly less
liquidity than certain of its competitors, several of whom have available lines
of credit or significant unencumbered assets. Accordingly, the Company may be
less able than certain of its competitors to withstand a prolonged economic
recession.
As of June 30, 1994, the Company had significant capital commitments,
including firm commitments and options for a substantial number of new aircraft
with a cost aggregating approximately $2.7 billion, a total which is subject to
change pending the outcome of current negotiations. Upon the Effective Date, the
Company will have an obligation to lease up to eight aircraft pursuant to put
rights held by a third party. The Company will require substantial capital from
external sources to meet these financial commitments. The Company has no current
financing arrangements for most of its aircraft purchase commitments and 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 financing will be obtained for all aircraft and other capital
requirements. A default by the Company under any such commitment could have a
material adverse effect on the Company.
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
The reports of the Company's independent certified public accountants
covering the December 31, 1993 financial statements and schedules contain an
explanatory paragraph that states that the Company's Chapter 11 proceeding,
significant losses, accumulated deficit and highly leveraged capital structure
raise substantial doubt about its ability to continue as a going concern. The
financial statements and schedules do not include any adjustments that might
result from the outcome of these uncertainities. These reports do not cover the
pro forma financial statements included elsewhere in this Prospectus and,
accordingly, do not address the impact of consummation of the Plan on the
Company.
12
<PAGE> 15
THE COMPANY
GENERAL
America West is a major United States air carrier providing passenger,
cargo and mail service, with its primary markets in the western and southwestern
regions of the United States. The Company operates its route system through two
principal hubs, Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub in
Columbus, Ohio. As of July 31, 1994, America West operated a fleet of 85 jet
aircraft and provided service to 45 destinations. Through alliances with Mesa,
the Company provides connecting service to an additional 18 destinations. The
Company also has formed an alliance with Continental to serve additional
destinations.
America West currently operates with one of the lowest cost structures
among the major U.S. airlines, based on reported 1993 results. America West's
operating cost per available seat mile for 1993 was 7.01 cents, which was
approximately 25% lower than the average operating cost per available seat mile
of the nine largest other domestic airlines and was comparable to the costs
incurred by Southwest Airlines. The Company's business strategy is to continue
to offer competitive fares while maintaining an incrementally higher level of
service relative to low cost carriers generally. These services include assigned
seating, participation in computerized reservation systems, interline ticketing,
first class cabins on certain flights, baggage transfer and various other
services. Management believes that its principal hub locations in Phoenix and
Las Vegas not only provide a low cost environment for a substantial portion of
the Company's operations, but also position the Company to benefit from an
expanding market for leisure travel.
The Company's principal offices are located at 4000 East Sky Harbor
Boulevard, Phoenix, Arizona 85034. The Company's telephone number is (602)
693-0800.
BACKGROUND TO THE REORGANIZATION
America West commenced operations in 1983 with three aircraft serving four
destinations from Phoenix, Arizona. America West's original route structure
consisted primarily of shorter-haul routes in the southwestern market, which
brought it into direct competition with certain low fare airlines, particularly
Southwest Airlines. Throughout the 1980s, America West financed rapid expansion
of its fleet, with corresponding significant increases in debt and lease
obligations. In addition, in the late 1980s, the Company entered the long-haul
and, on a very limited basis, international markets. The Company introduced
several aircraft types into its fleet in order to pursue this strategy. By July
1991, the Company operated a fleet of 123 aircraft serving 54 destinations in
the continental United States, Hawaii, Canada and Japan.
The Company experienced a significant net loss for the last six months of
1990, as revenues were lower than anticipated and fuel costs were higher than
anticipated. The Persian Gulf conflict, which began in August of 1990, the fear
of terrorism and the deepening national recession produced depressed traffic
levels, higher fuel prices and fierce price competition in the airline industry.
Beginning in February 1991, the Company undertook a series of actions designed
to improve its cash position and reduce costs, including significant fare
promotions and pay reductions. In June 1991, however, the Company faced a severe
liquidity crisis and filed for protection under Chapter 11 of the United States
Bankruptcy Code.
During the bankruptcy case, the Company operated as a debtor-in-possession
and implemented an operational restructuring pursuant to which it has:
- Reduced its fleet size from 123 aircraft in July 1991 to 85 at July 31,
1994, facilitating a better matching of capacity to demand through
elimination of nonproductive routes.
- Reduced the aircraft types operated from five to three, resulting in
reduced operating costs, including those related to maintenance, training
and parts inventories.
- Implemented certain enhancements to its revenue management system to
optimize the level of passenger revenues generated on each flight.
- Eliminated Company operated commuter service and introduced code-sharing
agreements to expand the Company's scope of service and attract a broader
passenger base.
13
<PAGE> 16
- Implemented numerous cost reduction programs, including a Company-wide
pay reduction in August 1991 and reduction of aircraft lease rentals to
fair market rates in the summer of 1992.
These programs, combined with a gradually improving economic climate and a
more stable environment relative to fare competition within the airline
industry, enabled the Company to realize operating income of $121.1 million in
1993, compared to operating losses of $74.8 million and $104.7 million for 1992
and 1991, respectively.
THE PLAN OF REORGANIZATION
On August 10, 1994, the order of the Bankruptcy Court confirming the Plan
became final. The Plan will be consummated on the Effective Date when certain
conditions specified in the Plan are satisfied or waived. The Company expects
that the Effective Date will occur on or about August , 1994.
Pursuant to the Plan, after giving effect to various elections made by
general unsecured creditors and the exercise of certain subscription rights by
certain holders of pre-existing equity interests, the following will occur upon
the Effective Date:
- AmWest (together with Lehman and Fidelity, as assignees of AmWest) will
invest $214.9 million in consideration for the issuance of securities by
the Company, consisting of (i) 1,200,000 shares of Class A Common Stock
at a price of $7.467 per share; (ii) 13,365,473 shares of Class B Common
Stock, including 12,259,821 shares at a price of $7.467 per share and
1,105,652 shares at $8.889 per share (representing shares acquired as a
result of cash elections made by unsecured creditors as described below);
(iii) 2,769,231 Warrants to purchase shares of Class B Common Stock; and
(iv) $100 million principal amount of Senior Notes.
- The general unsecured creditors of the Company will be issued an
aggregate of 25,669,348 shares of Class B Common Stock and cash
aggregating $9,828,145 (such cash representing $8.889 per share paid to
unsecured creditors electing to receive cash in lieu shares of Class B
Common Stock).
- Holders of preferred equity interests of the Company prior to the
Reorganization will receive their pro rata share of (i) $500,000 and (ii)
250,000 shares of Class B Common Stock (representing shares acquired
pursuant to certain subscription rights at a price of $8.889 per share).
- Holders of common equity interests in the Company prior to the
Reorganization will be issued 3,615,179 shares of Class B Common Stock
(1,365,179 of which shares are to be issued in exchange for cash,
aggregating $12,135,076, provided by such equity holders upon the
exercise of rights to subscribe for such shares at a price of $8.889 per
share), and will receive 6,230,769 Warrants to purchase shares of Class B
Common Stock.
- In exchange for certain concessions principally arising from cancellation
of the right of Guinness Peat Aviation ("GPA") affiliates to put to
America West 10 Airbus A320 aircraft at specified rates, GPA, or certain
affiliates thereof, will receive (i) 900,000 shares of Class B Common
Stock; (ii) 1,384,615 Warrants; (iii) a cash payment of approximately
$30.5 million; (iv) the right to require the Company to lease up to eight
aircraft of types operated by the Company on terms that the Company
believes to be more favorable than those currently applicable to the put
aircraft, which right must be exercised prior to June 30, 1999; and (v)
the right to designate one director of the Company.
- Approximately $77.6 million of debtor-in-possession ("D.I.P.") financing
will be repaid in full in cash.
- Continental, Mesa and America West will enter into certain Alliance
Agreements relating to code-sharing, schedule coordination and certain
other relationships and agreements.
- The Company's Board of Directors will be reconstituted to include 15
members, of which nine shall be designated by AmWest, three shall be
designated by the Official Committee of Unsecured Creditors (the
"Creditors' Committee") and one shall be designated by each of the
Official Committee of Equity Security Holders (the "Equity Committee"),
GPA and the pre-Reorganization Board of Directors.
14
<PAGE> 17
- The Plan also provides for many other matters, including the satisfaction
of certain other prepetition claims in accordance with negotiated
settlement agreements, the disposition of the various types of claims
asserted against the Company, the adherence to the Company's aircraft
lease agreements, the amendment of the Company's aircraft purchase
agreements and release of the Company's employees from all currently
existing obligations arising under the Company's stock purchase plan in
consideration for the cancellation of the shares of Company stock
securing such obligations.
The foregoing is a summary of the material aspects of the Plan. A complete
copy of the Plan has been filed as an exhibit to the Registration Statement.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Securities
by the Selling Securityholders.
DIVIDEND POLICY
The Company does not anticipate paying cash dividends in the foreseeable
future. The Company expects that it will retain all available earnings generated
by the Company's operations for the development and growth of its business. Any
future determination as to the payment of dividends will be made in the
discretion of the Board of Directors of the Company and will depend upon the
Company's operating results, financial condition, capital requirements, general
business conditions and such other factors as the Board of Directors deems
relevant. The Company expects that certain loan agreements including the
Indenture covering the Senior Notes will restrict the payment of cash dividends
on the Common Stock under certain circumstances. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
15
<PAGE> 18
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
at June 30, 1994, and as adjusted to give pro forma effect to the consummation
of the Plan at that date. The presentation does not purport to represent what
the Company's actual capitalization would have been had such transactions in
fact been consummated on such date. The table should be read in conjunction with
the Company's financial statements and the related notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Unaudited Pro Forma Condensed Financial Information" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1994
-------------------------
PRO
HISTORICAL FORMA
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities:
Estimated liabilities subject to Chapter 11 proceedings........... $ 379,814 $ --(2)
Long-term debt, including current maturities...................... 500,018 538,371(3)
% Senior Unsecured Notes due 2001............................... -- 100,000(4)
---------- ----------
Total long-term debt, including current maturities........ 879,832 638,371
Stockholders' equity (deficiency)(1):
Preferred stock................................................... 18 --
Common stock...................................................... 6,424 --
NewAWA Class A Common Stock....................................... -- 12(4)
NewAWA Class B Common Stock....................................... -- 438(4)
Additional paid in capital........................................ 200,013 587,050(4)
Accumulated deficit............................................... (403,315) --
---------- ----------
(196,860) 587,500
Less deferred compensation and notes receivable -- employee
stock purchase plans........................................... 18,478 --(5)
---------- ----------
Total stockholders' equity (deficiency)................... (215,338) 587,500
---------- ----------
Total capitalization................................................ $ 664,494 $1,225,871
========= =========
</TABLE>
- ---------------
(1) Does not include 10,384,615 shares of Class B Common Stock reserved for
issuance upon exercise of the Warrants.
(2) Reflects cancellation of liabilities subject to Chapter 11 proceedings.
(3) Reflects additional long-term debt issued in connection with settlement of
claims.
(4) Reflects issuance of % Senior Notes due 2001, excluding estimated fees and
issuance costs, issuance of Class A and Class B Common Stock, the settlement
of claims and recording of equity value of the reorganized Company.
(5) Reflects forgiveness of employee notes receivable and the write-off of
related deferred compensation under employee stock purchase plans.
16
<PAGE> 19
SELECTED FINANCIAL DATA
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" for, and as of the end of, each of the
years in the five-year period ended December 31, 1993, are derived from the
financial statements of the Company, which financial statements have been
audited by KPMG Peat Marwick, independent certified public accountants. The
financial statements as of December 31, 1993 and 1992, and for each of the years
in the three-year period ended December 31, 1993, and the report thereon, are
included elsewhere in this Prospectus.
The selected data should be read in conjunction with the financial
statements for the five-year period ended December 31, 1993, the related notes
and the independent auditors' report, which contains an explanatory paragraph
that states that the Company's Chapter 11 proceeding, significant losses,
accumulated deficit and highly leveraged capital structure raise substantial
doubt about its ability to continue as a going concern, appearing elsewhere in
this Prospectus. The financial statements and the selected data do not include
any adjustments that might result from the outcome of these uncertainties. As a
result of the Company filing a voluntary petition to reorganize under Chapter 11
of the U.S. Bankruptcy Code on June 27, 1991 and operating as a
debtor-in-possession thereafter, the selected financial data for periods prior
to June 27, 1991 are not comparable to periods subsequent to such date. The
selected data presented below for the six-month periods ended June 30, 1994 and
1993 and as of June 30, 1994 are derived from the unaudited condensed financial
statements of the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
UNAUDITED
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------------------------- -------------------------
1989 1990 1991 1992 1993 1993 1994
-------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues......... $993,409 $1,315,804 $1,413,925 $1,294,140 $1,325,364 $ 641,515 $ 708,615
Operating expenses......... 945,293 1,347,435 1,518,582 1,368,952 1,204,310 599,168 626,719
Operating income (loss).... 48,116 (31,631) (104,657) (74,812) 121,054 42,347 81,896
Income (loss) before income
taxes and extraordinary
items.................... 20,040 (76,695) (222,016) (131,761) 37,924 12,647 36,782
Income tax expense......... 7,237 -- -- -- 759 253 1,471
Income (loss) before
extraordinary items...... 12,803 (76,695) (222,016) (131,761) 37,165 12,394 35,311
Extraordinary items(a)..... 7,215 2,024 -- -- -- -- --
Net income (loss).......... 20,018 (74,671) (222,016) (131,761) 37,165 12,394 35,311
Earnings (loss) per share:
Primary:
Before extraordinary
items................ 0.61 (4.26) (10.39) (5.58) 1.50 0.52 1.30
Extraordinary
items(a)............. 0.39 0.11 -- -- -- -- --
Net earnings (loss).... 1.00 (4.15) (10.39) (5.58) 1.50 0.52 1.30
Fully diluted............ 1.00 (4.15) (10.39) (5.58) 1.04 0.36 0.92
Shares used for
computation:
Primary.................. 20,626 18,396 21,534 23,914 27,525 29,669 28,704
Fully diluted............ 20,626 18,396 21,534 23,914 41,509 42,804 40,607
Ratio of earnings to fixed
charges(b)............... 1.12 -- -- -- 1.28 1.18 1.56
BALANCE SHEET DATA:
Working capital
deficiency............... $(18,884) $ (94,671) $ (51,158) $ (201,567) $ (124,375) $ (188,171) $ (106,760)
Total assets............... 835,885 1,165,256 1,111,144 1,036,441 1,016,743 1,031,371 1,100,541
Long-term debt, less
current maturities....... 474,908 620,701 726,514 647,015 620,992 634,435 604,420
Total stockholders' equity
(deficiency)............. 87,203 21,141 (166,510) (294,613) (254,262) (279,626) (215,338)
</TABLE>
- ---------------
(a) Includes extraordinary items of $2,024,000 in 1990 resulting from the
purchase and retirement of convertible subordinated debentures and, in 1989,
income tax benefits resulting from the utilization of net operating loss
carryforwards amounting to $7,215,000.
(b) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income (loss) before taxes and extraordinary items plus fixed
charges less capitalized interest. "Fixed charges" consist of interest
expense including amortization of debt issuance cost, capitalized interest
and a portion of rent expense which is deemed to be representative of an
interest factor. For the years ended December 31, 1992, 1991 and 1990,
earnings were insufficient to cover fixed charges by $131,761,000,
$228,680,000 and $83,070,000, respectively.
17
<PAGE> 20
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed balance sheet and unaudited pro
forma condensed statement of operations are based on the statements of America
West included elsewhere in this Prospectus, as adjusted to give effect to the
consummation of the Plan. The unaudited pro forma condensed statements of
operations have been prepared as if the Reorganization had occurred on January
1, 1993. The unaudited pro forma condensed balance sheet has been prepared
assuming the consummation of the Plan had occurred on June 30, 1994.
The unaudited pro forma condensed financial information and accompanying
notes should be read in conjunction with the Company's financial statements and
the notes thereto appearing elsewhere in this Prospectus. The Unaudited Pro
Forma Condensed Financial Information is presented for informational purposes
only and does not purport to represent what the Company's financial position or
results of operations would actually have been if the consummation of the Plan
had occurred on such date or at the beginning of the period indicated, or to
project the Company's financial position or results of operations at any future
date or for any future period.
18
<PAGE> 21
AMERICA WEST AIRLINES, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, PRO FORMA ADJUSTMENTS JUNE 30,
1994 --------------------------- 1994
(HISTORICAL) DEBIT CREDIT (PRO FORMA)
------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 176,922 $ 99,000(1e) $ 77,561(1b) $ 284,927
114,857(1d) 63,891(1a)
35,600(2)
Accounts receivable, net.......................... 78,207 -- 4,400(2) 73,807
Expendable spare parts and supplies, net.......... 28,622 -- 4,425(3a) 24,197
Prepaid expenses.................................. 32,888 -- -- 32,888
------------ ---------- ---------- -----------
Total current assets....................... 316,639 249,457 150,277 415,819
------------ ---------- ---------- -----------
Property and equipment, net, and equipment purchase
deposits.......................................... 709,154 -- 145,654(3a) 546,595
16,905(1a)
Restricted cash..................................... 50,468 -- 31,200(2) 19,268
Other assets........................................ 24,280 1,000(1e) 501(3a) 24,779
Reorganization value in excess of amounts allocable
to identifiable assets............................ -- 697,278(3c) -- 697,278
------------ ---------- ---------- -----------
$1,100,541 $ 947,735 $ 344,537 $1,703,739
=========== ========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Current maturities of long-term debt.............. $ 118,621 $ 77,561(1b) $ 18,389(1a) $ 59,449
Accounts payable.................................. 71,463 10,215(1a) 10,000(1a) 71,248
Air traffic liability............................. 166,383.... -- -- 166,383
Accrued compensation and vacation benefits........ 12,525 -- -- 12,525
Accrued interest.................................. 7,812 -- -- 7,812
Accrued taxes..................................... 27,304 -- -- 27,304
Other accrued liabilities......................... 19,291 674(1a) 13,967(3b) 32,584
------------ ---------- ---------- -----------
Total current liabilities.................. 423,399 88,450 42,356 377,305
------------ ---------- ---------- -----------
Estimated liabilities subject to Chapter 11
proceedings....................................... 379,814 472,870(1a) 93,056(1a) --
Long-term debt, less current maturities............. 381,397 -- 100,000(1e) 578,922
97,525(1a)
Manufacturers' and other deferred credits........... 71,366 71,366(3a) 132,859(3b) 132,859
Other liabilities................................... 59,903 32,750(3a) -- 27,153
Stockholders' equity (deficiency):
Preferred stock................................... 18 18(1f) -- --
Common stock...................................... 6,424 6,424(1f) -- --
NewAWA class A common stock....................... -- -- 12(1d) 12
NewAWA class B common stock....................... -- -- 438(1d) 438
Additional paid in capital........................ 200,013 200,013(1f) 587,050(1d) 587,050
Retained earnings (deficit)....................... (403,315) -- 403,315(1f) --
------------ ---------- ---------- -----------
(196,860) 206,455 990,815 587,500
------------ ---------- ---------- -----------
Less deferred compensation and notes receivable --
employee stock purchase plans................... 18,478 -- 18,478(1c) --
------------ ---------- ---------- -----------
(215,338) 206,455 1,009,293 587,500
------------ ---------- ---------- -----------
$1,100,541 $ 871,891 $1,475,089 $1,703,739
=========== ========== ========== ============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
19
<PAGE> 22
AMERICA WEST AIRLINES, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED PRO FORMA YEAR ENDED
DECEMBER 31, ADJUSTMENTS DECEMBER 31,
1993 -------------------- 1993
(HISTORICAL) DEBIT CREDIT (PRO FORMA)
------------ ------- ------- ------------
<S> <C> <C> <C> <C>
Operating revenues:
Passenger................................. $1,246,564 $ -- $ -- $1,246,564
Cargo..................................... 40,161 -- -- 40,161
Other..................................... 38,639 -- -- 38,639
------------ ------- ------- ------------
Total operating revenues.......... 1,325,364 -- -- 1,325,364
------------ ------- ------- ------------
Operating expenses:
Salaries and related costs................ 305,429 -- -- 305,429
Rentals and landing fees.................. 274,708 -- 2,487(6) 272,221
Aircraft fuel............................. 166,313 -- -- 166,313
Agency commissions........................ 106,368 -- -- 106,368
Aircraft maintenance materials and
repairs................................ 31,000 -- -- 31,000
Depreciation and amortization............. 81,894 34,864(7a) 29,973(7b) 86,785
Other..................................... 238,598 -- 474(6) 238,124
------------ ------- ------- ------------
Total operating expenses.......... 1,204,310 34,864 32,934 1,206,240
------------ ------- ------- ------------
Operating income.................. 121,054 34,864 32,934 119,124
------------ ------- ------- ------------
Nonoperating income (expense):
Interest income........................... 728 -- 4,629(8) 5,357
Interest expense.......................... (54,192) 11,408(5) -- (65,600)
Loss on disposition of property and
equipment.............................. (4,562) -- -- (4,562)
Reorganization expense, net............... (25,015) -- 25,015(4) --
Other, net................................ (89) 83(5) -- (172)
------------ ------- ------- ------------
Total nonoperating expenses,
net............................. (83,130) 11,491 29,644 (64,977)
------------ ------- ------- ------------
Income before income taxes........ 37,924 46,355 62,578 54,147
------------ ------- ------- ------------
Income tax expense.......................... 759 33,564(9) -- 34,323
------------ ------- ------- ------------
Net income.................................. $ 37,165 $79,919 $62,578 $ 19,824
========== ======= ======= ==========
Earnings per share:
Primary................................... $ 1.50 $ 0.44
========== ==========
Fully diluted............................. $ 1.04 $ 0.44
========== ==========
Shares used for computation:
Primary................................... 27,525 45,125
========== ==========
Fully diluted............................. 41,509 45,125
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
20
<PAGE> 23
AMERICA WEST AIRLINES, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
SIX MONTHS ENDED
ENDED PRO FORMA JUNE 30,
JUNE 30, ADJUSTMENTS 1994
1994 -------------------- (PRO
(HISTORICAL) DEBIT CREDIT FORMA)
---------- ------- ------- ----------
<S> <C> <C> <C> <C>
Operating revenues:
Passenger.................................. $665,044 $ -- $ -- $665,044
Cargo...................................... 21,489 -- -- 21,489
Other...................................... 22,082 -- -- 22,082
---------- ------- ------- ----------
Total operating revenues.............. 708,615 -- -- 708,615
---------- ------- ------- ----------
Operating expenses:
Salaries and related costs................. 162,484 -- -- 162,484
Rentals and landing fees................... 132,835 -- 1,230(6) 131,605
Aircraft fuel.............................. 75,794 -- -- 75,794
Agency commissions......................... 59,931 -- -- 59,931
Aircraft maintenance materials and
repairs.................................. 18,902 -- -- 18,902
Depreciation and amortization.............. 43,198 17,452(7a) 12,194(7b) 48,456
Other...................................... 133,575 -- 948(6) 132,627
---------- ------- ------- ----------
Total operating expenses.............. 626,719 17,452 14,372 629,799
---------- ------- ------- ----------
Operating income...................... 81,896 17,452 14,372 78,816
---------- ------- ------- ----------
Nonoperating income (expense):
Interest income............................ 344 -- 3,436(8) 3,780
Interest expense........................... (26,068) 5,354(5) -- (31,422)
Loss on disposition of property and
equipment................................ (1,270) -- -- (1,270)
Reorganization expense, net................ (18,258) -- 18,258(4) --
Other, net................................. 138 41(5) -- 97
---------- ------- ------- ----------
Total nonoperating expenses, net...... (45,114) 5,395 21,694 (28,815)
---------- ------- ------- ----------
Income before income taxes............ 36,782 22,847 36,066 50,001
---------- ------- ------- ----------
Income tax expense.............................. 1,471 24,539(9) -- 26,010
---------- ------- ------- ----------
Net income...................................... $ 35,311 $47,386 $36,066 $ 23,991
=========== ======= ======= ===========
Earnings per share:
Primary.................................... $ 1.30 $ 0.53
=========== ===========
Fully diluted.............................. $ 0.92 $ 0.53
=========== ===========
Shares used for computation:
Primary.................................... 28,704 45,125
=========== ===========
Fully diluted.............................. 40,607 45,125
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
21
<PAGE> 24
AMERICA WEST AIRLINES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following notes set forth the explanations and assumptions used and
adjustments made in preparing the unaudited pro forma condensed balance sheet as
of June 30, 1994, and the unaudited pro forma condensed statements of operations
for the year ended December 31, 1993 and for the six months ended June 30, 1994.
The unaudited pro forma condensed financial statements reflect the
adjustments described under "Pro Forma Adjustments" below, which are based on
the assumptions and preliminary estimates described therein, which are subject
to change. These statements do not purport to be indicative of the financial
position and results of operations of America West as of such dates or for such
periods, nor are they indicative of future results. Furthermore, these unaudited
pro forma condensed financial statements do not reflect anticipated changes
which may occur as the result of activities before and after the Effective Date
of the Plan and other matters. (For the purposes of the pro forma financial
statements, the "Effective Date" is assumed to be June 30, 1994 for the pro
forma balance sheet, and January 1, 1993 for the pro forma statements of
operations.)
The unaudited pro forma condensed financial statements should be read in
conjunction with the financial statements and the notes thereto included
elsewhere in this Prospectus.
PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed balance sheet and unaudited pro forma
condensed statements of operations reflect the following pro forma adjustments
based on the assumptions described below:
Balance Sheet Pro Forma Adjustments
1. To record the effects of the consummation of the Plan:
a. Estimated additional liabilities from settlement of certain claims;
payment of certain claims; issuance of new debt to settle claims;
cancellation of liabilities subject to Chapter 11 proceedings; and accrual
and payment for reorganization expenses including success bonuses;
b. Repayment of the debtor-in-possession loan;
c. Forgiveness of employee notes receivable and the write-off of
related deferred compensation under employee stock purchase plans.
d. Issuance of Class A and Class B Common Stock to AmWest and its
assignees for gross proceeds of $114.9 million and to settle claims; and
record equity value of the reorganized Company;
e. Issuance of $100 million of % Senior Notes, including
estimated fees and issuance costs of $1 million; and
f. Cancellation of all pre-existing ownership interests and
elimination of the accumulated deficit.
2. To record the release of restricted cash and holdbacks related to credit
card transactions.
3. To record estimated "fresh start" adjustments pursuant to Statement of
Position 90-7, Financial Reporting by Entities in Reorganization under the
Bankruptcy Code ("SOP 90-7"), issued by the American Institute of Certified
Public Accountants:
a. Adjusting assets and liabilities to fair market value. Such fair
market values were estimated by America West's management based on its
reviews of various appraisals performed on certain of its owned facilities,
aircraft, rotable spare parts (including spare engines) and flight
simulators; and on management's estimates as to the fair values for other
of its fixed assets such as ground support, maintenance and other
equipment. Additionally, such estimated market values (including the fair
market lease rates for leased aircraft) are deemed to reflect the fair
market values of those assets, and certain other intangible
22
<PAGE> 25
AMERICA WEST AIRLINES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
assets and liabilities (i.e., deferred heavy aircraft maintenance and other
aircraft-related maintenance accruals, leasehold improvements, deferred
manufacturers' and other credits, and rent leveling provisions) are assumed
to be written off at the Effective Date. America West has engaged
independent parties to prepare valuations of certain of its fixed assets
and leased aircraft rental rates. Based on the results of these valuations,
these fair market values and lease rates will be adjusted accordingly.
b. Adjusting operating leases (principally aircraft operating leases)
to fair market lease rates; and
c. Recording reorganization value in excess of amounts allocable to
identifiable assets ("Excess Reorganization Value"). The reorganization
value of America West at the Effective Date is based on a valuation
analysis prepared by an independent third party. This valuation is, in
turn, based on, among other considerations: historical financial results of
America West, financial projections of America West through 1997 prepared
by management, multiples based on a comparison of qualitative and
quantitative data for selected publicly-traded companies engaged in
businesses comparable to the business of America West, certain economic and
industry information relevant to the business of America West and
discussions with management regarding the current operations and prospects
of America West. Many of the analytical assumptions upon which this
valuation is based are beyond the control of America West and there may be
material variations between such assumptions and the actual facts.
Statements of Operations Pro Forma Adjustments
4. To eliminate reorganization expense, net. Reorganization costs incurred
subsequent to the Effective Date and not accrued at the Effective Date will be
reflected as reorganization expenses in the statement of operations in the
succeeding period.
5. To record interest expense and amortize debt issuance costs for the
Senior Notes, assuming an interest rate of 11.5%, and to adjust interest expense
for the payoff of the D.I.P. loan and the amortization of certain debt, given
that all such transactions began at the Effective Date.
6. To adjust lease rent expense (principally aircraft operating leases) to
fair market rents.
7. To adjust depreciation and amortization to be reflective of pro forma
balance sheet amounts:
a. Amortization of Excess Reorganization Value of approximately $697
million on a straight-line basis over a period of 20 years, and subject to
certain adjustments as discussed at note 9 below; and
b. Reduced depreciation and amortization primarily due to the
write-down of fixed assets to fair value.
8. To reclass interest income recorded previously as offsets to
Reorganization expenses and record interest income on additional cash and cash
equivalents due to the consummation of the Plan.
9. To adjust income tax expense for the effects of the consummation of the
Plan, including limitations on the uses of net operating loss carryforwards due
to a statutory ownership change. Pro forma tax expense exceeds the U.S.
statutory tax rate of 35% primarily as a result of amortization of Excess
Reorganization Value and state and local taxes.
It is estimated that the Company will have available at the consummation of
the Plan net future deductible temporary differences, primarily net operating
loss carryforwards. These deferred tax benefits have not been reflected in the
accompanying pro forma balance sheet. The realization of these benefits on a pro
forma basis are reported as a reduction in Excess Reorganization Value rather
than as a reduction in the tax provision in the statements of operations.
23
<PAGE> 26
AMERICA WEST AIRLINES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
The analysis of the impact of the consummation of the Plan on the provision
for income taxes has not been finalized. When such analysis is completed, the
actual results could differ from the estimates included in the pro forma
financial statements.
10. Pro forma earnings per share have been computed based on the estimated
weighted average number of common shares outstanding during the applicable
period assuming that the Plan was effective on January 1, 1993. However, since
the exercise price of the Warrants will not be determined until a later date,
the earnings per share computation is presented without the effect of the
exercise of the Warrants for both primary and fully diluted earnings per share.
24
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
On August 10, 1994, the United States Bankruptcy Court for the District of
Arizona (the "Bankruptcy Court") confirmed the Company's Plan of Reorganization
(the "Plan"). The Company currently anticipates that the Plan will be effective
after expiration of the Bankruptcy Code 10-day appeal period, on or about August
23, 1994 (the "Effective Date").
In connection with the confirmation hearing on August 10, 1994, the Company
filed certain motions with the Bankruptcy Court to secure approval to pay the
following confirmation bonuses or success fees:
-- $9.3 million to be paid based upon length of service to non-officer
employees.
-- $1.2 million to be paid to officers and other members of management.
-- 125,000 shares of stock in the reorganized Company to be issued to the
Company's Chairman and Chief Executive Officer.
A hearing on these motions has been scheduled for August 24, 1994.
On June 27, 1991 the Company filed a voluntary petition in the United
States Bankruptcy Court for the District of Arizona (the "Bankruptcy Court") to
reorganize under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"). The Company operated as a debtor-in-possession ("D.I.P.")
under the supervision of the Bankruptcy Court until the Effective Date of the
Plan.
Due to the bankruptcy case, current economic conditions and the competitive
nature of the airline industry, no measure of comparability can be drawn from
past results in order to measure those that may occur in the future. Among the
uncertainties which have affected the Company's operations in the past and might
adversely impact the Company's future operations are (i) general economic
conditions; (ii) changes in the cost of fuel, labor, capital and other operating
items; (iii) increased level of competition resulting in significant discounting
of fares; and (iv) changes in capacity, load factors and yields or reduced
levels of passenger traffic due to war or terrorist activities.
On the Effective Date of the Plan, America West will adopt fresh start
reporting in accordance with SOP 90-7, resulting in adjustment of the Company's
common stockholders' equity and the carrying values of assets and liabilities.
Accordingly, the Company's post-reorganization balance sheet and statement of
operations will not be prepared on a consistent basis of accounting with the
pre-reorganization balance sheet and statements of operations. In connection
with the Reorganization, the Company will receive a significant capital
infusion, a substantial amount of prepetition liabilities will be converted to
equity or otherwise discharged and significant adjustments will be made to
reflect the resolution of or provision for certain contingent liabilities.
IMPACT OF FRESH START REPORTING ON RESULTS OF OPERATIONS
The fresh start reporting adjustments, primarily related to the adjustment
of the Company's assets and liabilities to fair market values, will have a
significant effect on the Company's future operating results. The more
significant adjustments relate to decreased depreciation expense, increased
amortization expense relating to reorganization value in excess of amounts
allocable to identifiable assets, reduced aircraft rent expense and increased
interest expense.
RESULTS OF OPERATIONS
For the Six Months Ended June 30, 1994 as Compared to the Six Months Ended
June 30, 1993
For the six months ended June 30, 1994, the Company realized a net income
of $35.3 million ($1.30 per common share on a primary basis) compared to $12.4
million ($.52 per common share on a primary basis) for
25
<PAGE> 28
the comparable period of 1993. The results for the six months include
Reorganization expenses of $18.3 million and $1.9 million for 1994 and 1993,
respectively. The continuation of the positive trend in operating results, which
commenced during the fourth quarter of 1992, is attributable to several factors
which include improved economic and competitive fare conditions, the
stabilization of fuel prices as well as the benefits derived from the reduction
in fleet size from 104 aircraft to 85 aircraft, the implementation of numerous
cost reduction and revenue enhancement programs, the elimination of the
Company's commuter operation and the introduction of code sharing agreements.
Passenger revenues for the six months ended June 30, 1994 increased 10.1%
to $665.0 million compared to the 1993 period. Although average passenger yield
declined by 4.6% during the period, RPMs increased by 15.3% more than offsetting
the decline in yield. Passenger revenues per ASM increased 5.9% to 7.55 cents
for the six months of 1994 on the strength of the increase in revenue passenger
miles.
Revenues from sources other than passenger fares increased during the first
six months of 1994 to $43.6 million compared to $37.7 million for 1993. This
improvement of 16% was due primarily to increases in freight and mail revenues.
The following table details certain key operating statistics for the six
month periods ended June 30, 1994 and 1993.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------------
PERCENTAGE
1994 1993 INCREASE OR (DECREASE)
----- ----- ----------------------
<S> <C> <C> <C>
Number of Aircraft (end of period)........... 85 85 --
ASMs (millions).............................. 8,804 8,467 4.0
RPMs (millions).............................. 6,139 5,324 15.3
Load Factor (percent)........................ 69.7 62.9 10.8
Yield (cents/RPM)............................ 10.82 11.34 (4.6)
Revenue Per ASM (cents):
Passenger.................................. 7.55 7.13 5.9
Total...................................... 8.05 7.58 6.2
</TABLE>
Operating expense per ASM increased to 7.12 cents for the first six months
of 1994 compared to 7.08 cents for the same period of the prior year. The table
below sets forth the major categories of operating expense per ASM for the
applicable periods.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------
1994 1993
---- ----
(IN CENTS/ASM)
<S> <C> <C>
Salaries and Related Costs........................................... 1.85 1.77
Rentals and Landing Fees............................................. 1.51 1.66
Aircraft Fuel........................................................ .86 .99
Agency Commissions................................................... .68 .62
Aircraft Maintenance Materials and Repairs........................... .21 .17
Depreciation and Amortization........................................ .49 .47
Other................................................................ 1.52 1.40
---- ----
7.12 7.08
==== ====
</TABLE>
The changes in the components of operating expense per ASM between 1994 and
1993 are explained as follows:
-- For the six month period of 1994 salaries and related costs have
increased primarily due to performance and employment award
distributions under the transition pay program which was instituted in
the second quarter of 1993 and the new pay program instituted in the
second quarter of 1994.
-- Rentals and landing fees decreased due to the reduction in airport rent
expense at New York's JFK and Phoenix's Sky Harbor International and the
return of certain administrative office space, as part
26
<PAGE> 29
of the Company's facilities consolidation program. In addition, rentals
and landing fees have decreased for the first six months of 1994
compared to the 1993 period due to the return of a wet leased aircraft
that serviced the Hawaii market through March 31, 1993.
-- Aircraft fuel expense decreased due to the decline in the average price
per gallon to 53.66 cents in 1994 from 62.87 cents for 1993.
-- The increase in the level of agency commission expense is primarily due
to the significant increase in passenger revenue per ASM from 7.13 cents
for 1993 to 7.55 cents for 1994.
-- The level of aircraft maintenance materials and repairs expense has
increased primarily as a result of higher aircraft utilization. Average
daily utilization of the aircraft fleet has increased from 10.7 hours
per day for 1993 to 11.1 hours per day for 1994. This higher level of
utilization has resulted in increases to engine and engine component
repair expense and to increases in line maintenance materials usage.
-- The increase in depreciation and amortization expense is primarily
attributable to increased heavy engine overhauls on a scheduled basis.
-- The increase in other operating expenses of 13% is primarily due to
increased media advertising costs as well as expenses related to
increased traffic such as credit card discount fees, booking fees,
telephone charges, catering expenses and single/multiple use supplies.
Non-operating expenses (net of non-operating income) amounted to $45.1
million and $29.7 million for 1994 and 1993, respectively. Interest expense for
1994 was $26.1 million, slightly below the $27.6 million for the same period of
1993. In conformity with SOP 90-7, the Company has ceased accruing and paying
interest on unsecured pre-petition long-term debt. Interest expense for 1994
would have been $33.9 million, if the Company had continued to accrue interest
on such debt.
During the first six months, the Company incurred expenses of $18.3 million
in 1994 and $1.9 million in 1993 in connection with the Reorganization. Such
expenses for 1994 include increased professional fees and charges of $7.5
million related to the termination of the Kawasaki Put Agreement and the
settlement of an administrative claim. Reorganization related expenses are
expected to significantly affect future results.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes," (SFAS 109). Since
there was no cumulative effect of this change in accounting method, prior year
financial statements have not been restated.
For the Years Ended December 31, 1993, 1992 and 1991
The Company realized net income of $37.2 million ($1.50 per common share)
for 1993 compared to net losses of $131.8 million ($5.58 per common share) and
$222 million ($10.39 per common share) for 1992 and 1991, respectively. The
results for 1993 include reorganization expenses of $25 million and losses
aggregating $4.6 million primarily resulting from the disposition of surplus
spare aircraft parts and equipment. During 1992, the Company recorded
restructuring charges of $31.3 million, reorganization expenses of $16.2 million
and a gain of $15 million from the sale of its Honolulu to Nagoya, Japan route,
while the 1991 results were affected by reorganization expenses of $58.4
million. The Company was only one of two major U.S. airlines to report a profit
in each quarter of 1993.
27
<PAGE> 30
The Company began to realize significant improvement in its operating
results commencing the fourth quarter of 1992. During 1993, the level of
operating income improved each quarter as shown in the table below.
<TABLE>
<CAPTION>
1993 QUARTERLY RESULTS (UNAUDITED)
----------------------------------------------------
1ST 2ND 3RD 4TH YEAR
------ ------ ------ ------ --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Total Operating Revenues............. $316.6 $324.9 $335.1 $348.8 $1,325.4
Total Operating Expenses............. 299.4 299.7 302.1 303.1 1,204.3
------ ------ ------ ------ --------
Operating Income..................... $ 17.2 $ 25.2 $ 33.0 $ 45.7 $ 121.1
====== ====== ====== ====== =======
</TABLE>
The improvement in operating results for 1993 compared to 1992 and 1991 is
attributable to several factors, the most significant of which are noted below.
-- A gradually improving economic climate, and a more stable environment
relative to fare competition within the airline industry.
-- The reduction in fleet size from 123 aircraft in July 1991 to the
current fleet of 85 aircraft has facilitated a better matching of
capacity to demand. In addition, the consolidation of the fleet from
five to three aircraft types has enabled the Company to further reduce
its level of costs including those related to maintenance, training and
inventories of parts.
-- In addition to reducing or eliminating certain routes as part of the
aircraft fleet downsizing, the Company implemented certain enhancements
to its revenue management system in an effort to optimize the level of
passenger revenues generated on each flight. Such enhancements enable
the Company to more effectively allocate seats within various fare
categories.
-- The implementation of numerous cost reduction programs since 1991,
including a Company-wide pay reduction in August of 1991 and reductions
of aircraft lease rentals to fair market rates in the fall of 1992.
-- The elimination of the Company's commuter operation and the introduction
of three code-sharing agreements have enabled the Company to expand its
scope of service and attract a broader passenger base.
The effect of these programs and the other factors described above resulted
in operating income of $121.1 million for 1993, compared to operating losses of
$74.8 million and $104.7 million for 1992 and 1991, respectively.
Total operating revenues were $1.3 billion in 1993, an increase of 2.4%
compared to the prior year and 6.3% less than 1991, primarily due to the
significant reduction in capacity. On April 1, 1993, the Company ceased service
to Hawaii. Passenger revenues for 1993, 1992 and 1991 were $1.2 billion, $1.2
billion and $1.3 billion, respectively. Summarized below are certain capacity
and traffic statistics for the years ended December 31, 1993, 1992 and 1991 and
the percentage change in such statistics from 1991 and 1992, respectively, to
1993.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------
1992 1991
1993 1992 1991 TO 1993 TO 1993
---------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Aircraft (end of period)............... 85 87 101 (2.3) (15.8)
ASMs (in thousands).................... 17,190,489 19,271,353 20,627,472 (10.8) (16.7)
RPMs (in thousands).................... 11,220,753 11,780,568 13,030,279 (4.8) (13.9)
Load Factor (percent).................. 65.3 61.1 63.2 6.9 3.3
Passenger Enplanements (in
thousands)........................... 14,740 15,173 16,907 (2.9) (12.8)
Average Journey Miles.................. 970 990 962 (2.0) .8
Average Stage Length................... 645 631 598 2.2 7.9
Yield (cents/RPM)...................... 11.11 10.31 10.22 7.8 8.7
Revenue Per ASM (cents):
Passenger............................ 7.25 6.30 6.46 15.1 12.2
Total................................ 7.71 6.72 6.85 14.7 12.6
</TABLE>
28
<PAGE> 31
In spite of the significant decline in capacity in 1993 compared to the two
previous years, passenger revenues per ASM improved by 15.1 percent and 12.2
percent compared to 1992 and 1991, respectively. This improvement was primarily
attributable to the combination of the following factors.
-- An improved climate relative to the economy and industry fare
competition.
-- The reduction in aircraft fleet size in conjunction with the
implementation of enhancements to the Company's revenue management
systems.
-- The elimination of "fare simplification" in 1993 and 50 percent-off
sales that occurred on an industry-wide basis in the second and third
quarters of 1992.
-- The 50 percent-off sale conducted by the Company on a system-wide basis
in February 1991.
Revenues from sources other than passenger fares decreased during 1993 to
$78.8 million compared to $79.3 million and $81.7 million for 1992 and 1991,
respectively. Freight and mail revenues comprised 51.0%, or $40.2 million, of
other revenues for 1993. This represents a decrease of 4.6% compared to 1992 and
8.0 percent compared to 1991. For the years 1993, 1992 and 1991, the Company
carried 110.7 million, 116.4 million and 119.8 million pounds of freight and
mail, respectively. The decline in freight and mail revenues during the last
three years is a direct result of capacity reductions, the most significant of
which relate to the cessation of service to Hawaii and Nagoya, Japan. The
balance of other revenues includes revenues generated from pilot training,
contract services provided to other airlines for maintenance and ground
handling, reduced rate fares, alcoholic beverage and headset sales, and service
charges assessed for refunds, reissues and prepaid ticket advices.
In spite of the significant reductions in capacity which have occurred
since the filing for protection under Chapter 11, operating expense per ASM has
declined to 7.01 cents for 1993 from 7.10 cents for 1992 and 7.36 cents for
1991. The table below sets forth the major categories of operating expense per
ASM for 1993, 1992 and 1991 and the percentage change in such expenses from 1991
and 1992, respectively, to 1993:
<TABLE>
<CAPTION>
PERCENT CHANGE
-----------------
1992 TO 1991 TO
1993 1992 1991 1993 1993
---- ---- ---- ------- -------
(IN CENTS)
<S> <C> <C> <C> <C> <C>
Salaries and Related Costs....................... 1.78 1.68 1.86 6.0 (4.3)
Rentals and Landing Fees......................... 1.60 1.76 1.70 (9.1 ) (5.9)
Aircraft Fuel.................................... .97 .97 1.08 -- (10.2)
Agency Commissions............................... .62 .55 .62 12.7 --
Aircraft Maintenance Materials and Repairs....... .18 .20 .20 (10.0 ) (10.0)
Depreciation and Amortization.................... .48 .45 .47 6.7 2.1
Restructuring Charges............................ -- .16 -- (100.0 ) --
Other............................................ 1.38 1.33 1.43 3.8 (3.5)
---- ---- ---- ------- -------
7.01 7.10 7.36 (1.3 ) (4.8)
==== ==== ==== ======= =======
</TABLE>
The changes in the components of operating expense per ASM should be
considered in relation to the decline in available seat miles of 10.8% and 16.7%
from 1992 and 1991, respectively, and are explained as follows:
-- The 6.0% increase in salaries and related costs compared to 1992 is a
result of the decline in capacity as well as the implementation of a
transition pay program in the second quarter of 1993. The transition pay
program was designed to restore a portion of the 10% wage reduction that
was effected Company-wide on August 1, 1991 (officers and other
management personnel received wage reductions of 10% to 25% commencing
in February 1991). The program, which was in effect for four fiscal
quarters, provided for the following payments on a quarterly basis to
all active employees during the quarter.
29
<PAGE> 32
a. Commencing the second quarter of 1993, performance award
distributions were made based upon the Company meeting or exceeding
its operating income target for a given quarter as incorporated in
its business plan. The aggregate award for 1993 amounted to
approximately $6.5 million including applicable payroll taxes.
b. Commencing the third quarter of 1993, employment award
distributions were made based on the greater of .5 percent of an
employee's annual base wage, or $125, whichever is higher, on a
quarterly basis. The aggregate award for 1993 amounted to
approximately $2.6 million including applicable payroll taxes.
The favorable variance compared to the 1991 level was primarily
attributable to the reduction in payroll costs related to the decline in
capacity as well as overhead and the Company-wide wage reduction instituted in
August 1991.
-- Rentals and landing fees decreased due to the reduction in fleet size to
85 aircraft as well as the reduction in rental rates to fair market
rates for certain aircraft commencing in August 1992 for a period of two
years.
-- Aircraft fuel decreased due to the decline in the average price per
gallon to 61.05 cents from 62.70 cents for 1992 and 67.10 cents for
1991.
-- The increase in the level of agency commission expense is primarily due
to the significant increase in passenger revenue per ASM from 6.30 cents
and 6.46 cents for 1992 and 1991, respectively, to 7.25 cents for 1993.
-- The decrease in aircraft maintenance materials and repairs is primarily
due to the change in the composition of the aircraft fleet.
-- Restructuring charges incurred in 1992 consisted of the following:
<TABLE>
<CAPTION>
(IN MILLIONS OF DOLLARS)
------------------------
<S> <C>
Write-off for certain assets related to station closures or route
restructuring................................................... $ 9.5
Provision for spare parts for aircraft types no longer in
service......................................................... 12.7
Provision for employee severance.................................. 2.3
Loss on return of aircraft........................................ 6.8
------
$ 31.3
================
</TABLE>
The restructuring charges were necessitated by aircraft fleet reductions
and other operational changes. The Company reduced its fleet to 87 aircraft at
the end of 1992, as well as eliminated two of five aircraft types it operated.
Additionally, employee headcount was reduced by approximately 1,500 employees
and service was terminated to ten cities through the end of 1992.
-- The increase in depreciation and amortization is primarily attributable
to increased heavy engine overhauls.
-- Other operating expenses decreased 7.1 percent compared to 1992 and was
lower by 18.9% compared to 1991. The decrease compared to the prior year
is primarily attributable to the 10.8% decline in capacity.
Non-operating expenses (net of non-operating income) for 1993, 1992 and
1991 were $83.1 million, $56.9 million and $117.4 million, respectively.
Interest expense decreased to $54.2 million in 1993 from $55.8 million in 1992
and $61.9 million in 1991. In conformity with Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code,"
issued by the American Institute of Certified Public Accountants, the Company
has ceased accruing and paying interest on unsecured pre-petition long-term
debt. Had the Company continued to accrue interest on such debt, interest
expense for 1993, 1992 and 1991 would have been $73.0 million, $73.9 million and
$79.3 million, respectively. See Financial Statements and Supplementary
Data -- Notes 3a and 4 of Notes to Financial Statements.
30
<PAGE> 33
The Company incurred expenses of $25 million in 1993, $16.2 million in 1992
and $58.4 million in 1991 in connection with its efforts to reorganize under
Chapter 11. Such expenses for 1993 include net charges aggregating $18.2 million
in accruals for unsecured claims and settlements of administrative claims
primarily relating to leased aircraft which were returned to the lessors.
Reorganization related expenses are expected to significantly affect future
results and to continue until such time as the Company has obtained approval for
its plan of reorganization.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Since
there was no cumulative effect of this change in accounting, prior year
financial statements have not been restated.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1994, the Company had a working capital deficiency of $106.8
million, which declined from $124.4 million at December 31, 1993, primarily due
to an increase in cash and receivables resulting from improved operating
results. At June 30, 1994, cash and cash equivalents were $176.9 million,
compared to $99.6 million at December 31, 1993.
On the Effective Date (estimated currently to be August 23, 1994), the
Company expects unrestricted and restricted cash balances to be approximately
$287 million and $21 million, respectively (compared to $25 million and $41
million, respectively, prior to the Chapter 11 filing). The estimates of
unrestricted cash include approximately $214.9 million relating to the issuance
of the Class A Common Stock, the Class B Common Stock and the Senior Notes. Such
projected cash balances are also net of estimated Plan confirmation payments of
approximately $141 million, including approximately $78 million of outstanding
D.I.P. financing.
Upon implementation of the Plan, the Company's total estimated long-term
debt (including related current maturities and liabilities subject to
compromise) will be reduced from approximately $957 million to approximately
$634 million. On the Effective Date, stockholders' equity is expected to be
$587.5 million. Accordingly, on a pro forma basis, the Company's ratio of debt
to equity is anticipated to be 1.08 to 1.
After the Effective Date, the Company will be substantially less leveraged
and will possess significantly greater liquidity than during the several years
prior to filing its Chapter 11 petition. It is anticipated that such projected
financial condition in conjunction with its current low cost structure will
enable the Company to better withstand future negative events, such as an
economic downturn, escalating fuel prices and intense fare competition, as well
as gain access to traditional market sources for its future financing
requirements. Substantial obligations relating to long-term aircraft and airport
terminal facilities leases will continue to exist.
During 1993, the Company incurred capital expenditures of $54.3 million,
primarily relating to aircraft modifications and heavy airframe and engine
overhauls. The Company anticipates capital expenditures for 1994 to aggregate
$82 million primarily for rotable spare parts, aircraft modifications and major
overhauls. The Company expects to fund these capital expenditures with cash
provided by operations.
At June 30, 1994, the Company had on order a total of 49 aircraft of the
types the Company currently operates, of which 29 are firm orders and 20 are
option orders. The current estimated aggregate cost for the acquisition of the
49 aircraft is approximately $2.7 billion (which amount may change as a result
of current negotiations and does not reflect any deliveries the Company may take
pursuant to put arrangements more fully discussed below). All of these aircraft
are to be purchased from Boeing or AVSA. For a more complete description of the
Company's rights and obligations with respect to the purchase of aircraft, see
"Business -- Aircraft."
With respect to the agreements with Boeing, the B737-300 purchase contract
has been affirmed in the Company's bankruptcy proceedings. With timely notice to
the manufacturer, all or some of these deliveries may be converted to B737-400
aircraft. Existing purchase agreements for B757-200 and B747-400 aircraft have
neither been affirmed nor rejected. All Boeing purchase agreements require a
24-month reconfirmation notice for the delivery of each aircraft. As of June 30,
1994, ten B737-300 and nine B757-200 delivery positions have expired due to the
lack of reconfirmation by the Company, leaving 14 and 11 delivery positions
31
<PAGE> 34
for B737-300s and B757-200s, respectively. The failure to reconfirm such
delivery positions exposes the Company to loss of pre-delivery deposits and
other claims which may be asserted in the bankruptcy proceeding. The Company
also has a pre-petition executory contract under which the Company holds
delivery positions for four B747-400 aircraft under firm order and four B747-400
aircraft under option order. This executory contract allows the Company, with
the giving of adequate notice, to substitute B737-400 aircraft for those
delivery positions. The Company is currently renegotiating all of its aircraft
purchase agreements with Boeing to finalize the details of this amendment.
With respect to the purchase of aircraft from AVSA, a single executory
contract for the purchase of 24 A320 aircraft has neither been affirmed nor
rejected by the Company. As part of the investment by AmWest, the A320 purchase
agreement was amended to provide the Company with greater flexibility and
reduced pricing. Under the modified terms, delivery dates of the aircraft will
fall in the years 1998 through 2000 with an option to further defer deliveries.
In addition, if new A320 aircraft are delivered as a result of the renegotiated
put agreement (see discussion below), the Company will have the right to cancel
on a one-for-one basis up to a maximum of eight non-consecutive aircraft
deliveries, subject to certain conditions. Negotiations are currently continuing
between AVSA and the Company.
During 1994, leases relating to four Boeing 737-200 aircraft, two Airbus
A320 aircraft and two Boeing 757 aircraft are scheduled to expire. The Company
has negotiated extensions of the leases for all but one of the Airbus A320
aircraft for terms ranging from one to three years. One Airbus A320 aircraft was
returned to the lessor and was replaced by a Boeing 757 aircraft which has been
leased for a term of three years. In June 1994, the Company renegotiated a put
agreement for ten A320 aircraft. The new agreement reduced the number of put
aircraft from ten to eight and rescheduled the deliveries to start not earlier
than June 30, 1995 and end on June 30, 1999. Under the new agreement, new or
used A320 aircraft, B737-300 or B757-200 aircraft may be put to the Company but
at a rate of no more than two in 1995 and with respect to each ensuing year
during the put period, of no more than three. In addition, no more than five
used aircraft may be put to the Company and for every new A320 aircraft put to
the Company, the Company has the right to reduce the AVSA A320 purchase contract
on a one-for-one basis. During each January of the put period, the Company will
negotiate the type and delivery dates of the put aircraft for that year. The
puts will require 150-day notice and will be leased at fair market rates, for
terms ranging from three to 18 years, depending on the type and condition of the
aircraft. As part of the renegotiated agreement, certain financial concessions
were granted to the put holder.
Following the implementation of the Plan, the net operating loss
carryforwards (and other tax attributes) of the Company may be subject to the
limitations imposed by section 382 of the Internal Revenue Code ("Section 382").
Under Section 382, if a corporation undergoes an ownership change, the
amount of its pre-change losses that may be utilized to offset future taxable
income generally will be subject to an annual limitation. The issuance of Class
B Common Stock pursuant to the Plan will constitute an ownership change of the
Company.
Subject to certain exceptions, the Senior Note Indenture limits the
declaration or payment of dividends and certain other transactions (defined in
the Indenture as Restricted Payments). Such Restricted Payments are not
permitted if a Default or an Event of Default has occurred and is continuing,
and otherwise such payments are limited generally to 50% (or 75% if the Senior
Notes receive certain investment grade ratings) of Adjusted Consolidated Net
Income, as defined in the Indenture, plus proceeds of certain capital stock
issuances plus $25 million. At December 31, 1993, on a pro forma basis, the
Company would have had available approximately $37 million for dividends or
other Restricted Payments under such test (assuming the Effective Date was
January 1, 1993, the 50% test were applicable, no capital stock was issued for
any reason and there was no default under the Indenture). For a more detailed
description of these restrictions, see "Description of the Senior
Notes -- Certain Covenants."
32
<PAGE> 35
BUSINESS
America West is a major United States air carrier providing passenger,
cargo and mail service, with its primary markets in the western and southwestern
regions of the United States. The Company operates its route system through two
principal hubs, Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub in
Columbus, Ohio. As of July 31, 1994 America West operated a fleet of 85 jet
aircraft and provided service to 45 destinations. Through alliances with Mesa,
the Company provides connecting service to an additional 18 destinations. The
Company has also formed an alliance with Continental to serve additional
destinations.
The Company filed a voluntary petition for protection under Chapter 11 of
the Bankruptcy Code on June 27, 1991. The Company's plan of reorganization (the
"Plan") was confirmed by the United States Bankruptcy Court for the District of
Arizona (the "Bankruptcy Court") on August 10, 1994. The Plan will become
effective on the date (the "Effective Date") on which certain conditions
specified in the Plan are satisfied or waived, which the Company expects to
occur on or about August , 1994. In connection with its reorganization in
bankruptcy and related operational restructuring (the "Reorganization"), the
Company took significant steps to improve its operations, including (i) reducing
its fleet size from 123 aircraft in July 1991 to 85 in May 1994, facilitating a
better matching of capacity to demand through elimination of nonproductive
routes; (ii) reducing the aircraft types operated from five to three to reduce
operating costs; (iii) implementing certain enhancements to its revenue
management system to optimize the level of passenger revenues operated on each
flight; (iv) eliminating Company operated commuter service and introducing code-
sharing agreements to expand the scope of service and attract a broader
passenger base; and (v) implementing numerous cost reduction programs, including
a Company-wide pay reduction in August 1991 and the reduction of aircraft lease
rentals to fair market rates in the fall of 1992. As a result of these measures
as well as a gradually improving economic climate and a more stable environment
relative to fare competition within the airline industry, America West was one
of only two major airlines to report a profit in each quarter of 1993, realizing
net income for 1993 of $37.2 million and operating income of $121.1 million on
revenues of $1.33 billion.
BUSINESS STRATEGY
The Company's business strategy is to continue to offer competitive fares
while providing an incrementally higher level of service relative to low cost
carriers generally. The principal features of the Company's business strategy
are as follows.
Maintain Competitive Pricing While Providing Differentiated
Service. America West currently operates with one of the lowest cost structures
among the major U.S. airlines, based on reported 1993 results. The Company's
operating cost per ASM for 1993 was 7.01 cents, which was approximately 25% less
than the average operating cost per ASM of the nine largest other domestic
airlines and was comparable to the cost structure of Southwest Airlines, which
operates in the Company's principal market areas. Management believes that the
Company can continue to offer fares that are competitive with those offered by
low cost carriers in the Company's markets, while providing a differentiated
level of service generally. Passenger services provided by America West include
assigned seating, participation in computerized reservation systems, interline
ticketing, first class cabins on certain flights, baggage transfer and various
other services. The Company believes that these features distinguish America
West from certain low cost carriers in the Company's markets, including
Southwest Airlines, and enable the Company to attract passengers without
competing solely on the basis of fares.
Achieve Growth in Revenue Passenger Miles. Management believes the
Company's pricing and service strategies, together with a gradual improvement of
general economic activity, will enable the Company to achieve growth in revenue
passenger miles in its existing markets and to expand into certain other North
American markets. Management believes that growth in existing markets will be
achieved in part due to the location of the Company's principal hubs. Both
Phoenix and Las Vegas are experiencing population growth in excess of national
averages, and these hubs are well situated to benefit from an expanding market
for leisure travel.
33
<PAGE> 36
Expand Service through Alliances. As a part of the Reorganization, the
Company entered into Alliance Agreements with Continental and Mesa. With
Continental, the Company agreed to implement certain code-sharing arrangements,
coordinate certain flight schedules to maximize connections between the two
airlines, share ticket counter space, link frequent flyer programs, and
coordinate ground handling operations. With Mesa, America West has entered into
two code-sharing agreements that establish Mesa as a feeder carrier for the
Company at its hubs in Phoenix and Columbus. The code-sharing agreements provide
for coordinated flight schedules, passenger handling and computer reservations
under the America West flight designator code, thereby allowing passengers to
purchase one air fare for their entire trip. Mesa connects 13 cities to the
Company's Phoenix hub, operates under the name "America West Express" and has
begun to incorporate the color scheme and commercial logo of America West on
certain aircraft utilized on these routes. Mesa serves five destinations from
the Company's Columbus mini-hub operations. Management believes the Alliance
Agreements will contribute significantly to the Company's growth in revenue
passenger miles and operating results.
Maintain a Cost Effective Fleet. In connection with its Reorganization,
the Company substantially reduced its aircraft fleet to the current level,
reduced the aircraft types from five to three and renegotiated lease rates for
certain aircraft to fair market rates. As of June 30, 1994, the Company's fleet
consisted of 56 Boeing 737s, 17 Airbus 320s and 12 Boeing 757s, with an average
age of approximately 8.6 years. The fleet enables the Company to achieve low
fuel costs compared to industry averages and to enjoy operational efficiencies
due to the limited number of aircraft types. Current plans provide for an
increase in the Company's fleet from 85 to 105 aircraft by 1997 through the
acquisition of additional aircraft of the types currently operated by the
Company.
OPERATIONS
Hub Operations. The Company operates primarily through hub airports in
Phoenix and Las Vegas and, to a lesser extent, through its mini-hub in Columbus,
Ohio. The Company schedules banks of flights timed to arrive at the hub from one
direction at approximately the same time and to depart toward the opposite
direction a short time later. The hub system allows the Company to transport
passengers between a large number of destinations with substantially more
frequent service than if each route were served directly.
The Company is the leading airline serving Phoenix Sky Harbor International
Airport with approximately 40% of all enplanements and an average of 149 daily
departures during 1993. In Las Vegas, the Company is the second largest carrier
with approximately 26% of all enplanements during 1993. In both markets the
Company's principal competitor is Southwest Airlines, which handled
approximately 30% and 29% of enplanements in Phoenix and Las Vegas,
respectively, in 1993. America West offers fares comparable to or below those of
its competitors on most routes. America West is able to use pricing as a part of
its strategy because of its ability to provide service generally comparable to
the full service airlines while maintaining a lower cost structure than these
competitors. In selected markets, America West has chosen not to match Southwest
Airlines' fares, but differentiates itself from Southwest Airlines in these and
other markets by providing assigned seating, interline ticketing, baggage
transfer and various other services typically offered by a full service carrier.
The Company established a mini-hub at Columbus, Ohio in December 1991. As
of July 31, 1994, the Company provided non-stop jet service to 11 destinations
from Columbus. During 1993, the Company enplaned approximately 18% of the
Columbus traffic compared to approximately 21% and 12% for USAir and Delta,
respectively.
The success of the Company's hub system depends on its ability to attract
passengers traveling to and from its hubs, as well as passengers traveling
through the hubs to the Company's other destinations. The Company believes that
several factors have contributed to the success of its operations in Phoenix and
Las Vegas. First, the rate of population growth in these two cities has exceeded
the national average in recent periods. Second, Phoenix and Las Vegas are
popular vacation destinations and, therefore, benefit from the fact that a
growing percentage of airline travelers are leisure or non-business travelers.
Third, the Company believes that certain costs of operating in Phoenix and Las
Vegas are less than in certain other geographic regions. Finally, these hub
operations allow the Company to serve a number of relatively high density routes
34
<PAGE> 37
that involve short-and medium-haul service without competing directly in the
more intensely competitive long-haul markets against larger carriers.
Hub operations involve certain inefficiencies that are primarily associated
with the need to maintain terminal resources adequate to deal with periods of
peak demand when numerous aircraft converge at the hub, even though this demand
occurs only a few times per day. As a result, certain carriers have emphasized
or announced intentions to initiate "point-to-point" flights not integrated with
hub operations that can potentially serve specific routes at lower cost than
comparable hub operations. Although the Company continually evaluates its
operating strategy in light of changing market conditions, the Company's current
strategy is to increase utilization of its existing hub facilities by increasing
frequency of service on existing routes served by its hub operations and
identifying selected markets into which the Company can expand utilizing its
existing hub operations. An important part of the Company's strategy involves
code-sharing arrangements with regional carriers that serve its hub airports and
alliances with major carriers that complement the Company's operations.
Regional/Commuter Service. A number of passengers served by the Company's
operations arrive at its hub airports via regional or commuter service airlines
that serve the surrounding areas. These airlines typically utilize turboprop
rather than jet aircraft and focus on flights less than 200 miles in length and
90 minutes in duration. In order to maximize the number of enplanements of
passengers from these commuter airlines, America West has entered into two
code-sharing agreements with Mesa designed to establish Mesa as a feeder carrier
for the Company at its hubs in Phoenix and Columbus. The code-sharing agreements
provide for coordinated flight schedules, passenger handling and computer
reservations under the America West flight designator code, thereby allowing
passengers to purchase one air fare for their entire trip. Mesa connects 13
cities to the Company's Phoenix hub, operates under the name "America West
Express" and has begun to incorporate the color scheme and commercial logo of
America West on aircraft utilized on these routes. Mesa services five
destinations from the Company's Columbus mini-hub operation. In connection with
the Reorganization, the Company and Mesa agreed to extend the terms of these
code-sharing agreements until 1999.
Alliance Agreements. In connection with its Reorganization, the Company
agreed to form an alliance with Continental pursuant to which the Company and
Continental agreed to implement certain code-sharing arrangements, coordinate
certain flight schedules, share ticket counter space, link frequent flyer
programs, and coordinate ground handling operations for mutual benefit. These
arrangements will be implemented in phases, commencing in the third quarter of
1994. The Company believes that it will realize substantial benefits from such
agreements, which are intended to increase the number of America West
enplanements of Continental passengers and vice versa. In addition, the Company
will be able to offer its existing customers connections to a greater number of
destinations served by Continental, which may permit the Company to further
increase its market share in its hub markets.
COMPETITION AND MARKETING
The airline industry is highly competitive and susceptible to price
discounting, and America West must compete with carriers that are much larger
and have substantially greater resources. See "Investment
Considerations -- Adverse Industry Conditions and Competition." Generally, the
passenger carrier industry is segmented into markets based on the length of trip
and level of service, including long-haul domestic and international routes,
medium-haul (two to three hours) and short-haul (less than two hours) routes
serviced by jet aircraft, and commuter routes served by turboprop aircraft.
America West services primarily short-haul and medium-haul routes connected to
its hub operations, engages only to a limited extent in long-haul flights, which
are dominated by larger carriers, and does not engage in regional commuter
flights, which are primarily served by smaller non-jet carriers. America West
competes primarily with Southwest Airlines at its Phoenix and Las Vegas hub
operations and with USAir and Delta at its Columbus mini-hub.
As is the case with other carriers, most tickets for travel on America West
are sold by travel agents through computer reservation systems that have been
developed and are controlled by other airlines. Travel agents generally receive
commissions based on the price of tickets sold. Accordingly, airlines compete
not only
35
<PAGE> 38
with respect to the price of tickets sold but also with respect to the amount of
commissions paid. Airlines often pay additional commissions in connection with
special revenue programs. Federal regulations have been promulgated that are
intended to diminish preferential schedule displays and other practices with
respect to the reservation systems that place the Company and other similarly
situated users at a competitive disadvantage to the airlines controlling the
systems.
The Company has implemented certain measures to increase leisure travel
utilizing America West flights. In 1987 the Company developed America West
Vacations, which is a tour packaging division that arranges vacation packages
that include hotel accommodations, air fare and ground transportation in certain
markets. During 1993, this division sold approximately 500,000 room nights and
over 315,000 round trip tickets and generated approximately $126 million in
gross revenues. In 1993, the Company became the preferred commercial air carrier
of the MGM Grand Hotel Casino and Theme Park ("MGM") in Las Vegas. Pursuant to
an agreement with MGM, America West will develop joint marketing programs that
target travel agents and consumers, which management believes will enhance
America West's presence in the Las Vegas market.
The Company also has an exclusive arrangement with the Phoenix Suns
professional basketball team pursuant to which the arena in which the team plays
is named "America West Arena," and the Company's name and logo appear throughout
the facility, including on the basketball court. As a result of this
association, the Company receives media exposure at no additional expense during
national and local telecasts of Phoenix Suns basketball games, as well as during
other events at the arena.
FLIGHTFUND
All major airlines have established frequent flyer programs to encourage
travel on that particular carrier. America West offers the FlightFund program
that allows members to earn mileage credits by flying America West and certain
other carriers and by using the services of other program participants such as
bank credit cards, hotels and car rental firms. In addition, the Company
periodically offers special short-term promotions that allow members to earn
additional free travel awards or mileage credits. When a FlightFund member
accumulates mileage credits of 20,000 miles, the Company issues mileage award
certificates that can be redeemed for various travel awards, including first
class upgrades and tickets on America West or other airlines participating in
America West's frequent flyer program. Travel is valid up to one year from the
date of ticketing. Most travel awards are subject to blackout dates and capacity
controlled seating. Mileage award certificates automatically expire after two
years if issued prior to April 1, 1993 and after three years for certificates
issued after that date.
FlightFund awards may also be redeemed for flights to certain international
destinations and Hawaii. America West is required to purchase space on other
airlines to accommodate such award redemption. In addition, America West has
entered into barter agreements with certain hotels and rental car agencies that
permit the Company to award discounts at such hotels and rental agencies to
FlightFund members in exchange for providing air travel to such hotels and
travel agencies.
The Company accounts for the FlightFund program under the incremental cost
method whereby travel awards are valued at the incremental cost of carrying one
additional passenger. Costs including passenger food, beverages, supplies, fuel,
liability insurance, purchased space on other airlines and denied boarding
compensation are accrued as frequent flyer program participants accumulate
mileage to their accounts. Such unit costs are based upon expenses expected to
be incurred on a per passenger basis. No profit or overhead margin is included
in the accrual for these incremental costs.
FlightFund's current membership is approximately 1.6 million participants.
At December 31, 1993, 1992 and 1991, the Company estimated that approximately
238,000, 238,000 and 235,000 travel awards were expected to be redeemed.
Correspondingly, the Company had an accrued liability of $7.4 million, $7.3
million and $6.2 million for 1993, 1992 and 1991, respectively. The accrual is
based upon the Company's estimates of mileage earned that will eventually be
redeemed for a travel award.
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<PAGE> 39
The number of FlightFund travel awards redeemed for round-trip travel for
the years ended December 31, 1993, 1992 and 1991, was approximately 99,000,
106,000 and 160,000, respectively, representing 2.8%, 3.0% and 3.0% of total
revenue passenger miles for each respective period. The Company does not believe
that the usage of free travel awards results in any significant displacement of
revenue passengers due to the Company's ability to manage frequent flyer travel
by use of blackout dates and limited seat availability.
AIRCRAFT
In connection with its restructuring, the Company reduced the size of its
fleet from 123 in 1991 to 85 in 1993. The Company also reduced the different
types of aircraft in the fleet from five to three. At June 30, 1994, the Company
operated a fleet of 56 Boeing 737s, 17 Airbus A320s and 12 Boeing 757s.
The table below sets forth certain information regarding the Company's
aircraft fleet at June 30, 1994:
<TABLE>
<CAPTION>
AVERAGE
REMAINING
NUMBER OF AVERAGE LEASE
AIRCRAFT TYPE STATUS AIRCRAFT AGE (YRS.) TERM (YRS.)
- -------------- ------ --------- ---------- -----------
<S> <C> <C> <C> <C>
B737-100 Owned 1 24.8 --
B737-200 Owned 5 15.3 --
B737-200 Leased 17 14.5 6.2
B737-300 Leased 22 7.1 8.5
B737-300 Owned 11 5.7 --
B757-200 Leased 10 8.1 10.0
B757-200 Owned 2 4.8 --
A320 Leased 17 4.5 17.1
--
TOTAL 85 8.6 10.3
========
</TABLE>
Each of the aircraft that is designated as owned serves as collateral for a
loan pursuant to which the aircraft was acquired by the Company or serves as
collateral for a non-purchase money loan.
From 1994 through 1997, leases are scheduled to terminate on six aircraft
(four Boeing 737-200s and two Boeing 757-200s). In addition, leases for two
Airbus A320-200s were scheduled to terminate during 1994; however, the Company
extended one such lease for an additional twelve months. The other Airbus A320
aircraft was returned to the lessor in May 1994 and was replaced by a Boeing 757
aircraft which has been leased for a term of three years. In addition, certain
of the aircraft lessors have the right to call their respective aircraft upon
(in most cases) 180 days' prior notice to the Company. The Company, in turn
(with some exceptions), may retain such aircraft via a right of first refusal by
agreeing to the bona fide terms offered by a third party interested in leasing
or purchasing the aircraft. The Company does not believe that such call rights,
which were granted in exchange for concessions on payment terms relating to such
aircraft, will materially affect the Company's operations.
At June 30, 1994, the Company had on order a total of 49 aircraft of the
types the Company currently operates, of which 29 are firm orders and 20 are
optional orders. The table below details such deliveries.
<TABLE>
<CAPTION>
FIRM ORDERS
---------------------------------------------- OPTION
1994 1995 1996 1997 THEREAFTER TOTAL ORDERS TOTAL
---- ---- ---- ---- ---------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Boeing:
737-300........................ -- -- 2 2 -- 4 10 14
757-200........................ -- -- 1 -- -- 1 10 11
Airbus:
A320-200....................... -- -- -- -- 24 24 -- 24
---- ---- ---- ---- ------- ----- ----- ----
TOTAL..................... -- -- 3 2 24 29 20 49
==== ==== ==== ==== ======= ==== ===== ====
</TABLE>
37
<PAGE> 40
At June 30, 1994 the estimated aggregate cost for delivery positions under
the existing contracts for the acquisition of B737s, B757s and A320 aircraft
from manufacturers listed in the above table is approximately $2.7 billion. The
table does not include any deliveries under put arrangements more fully
discussed below nor does it include orders for B747-400 aircraft.
With respect to various contracts with Boeing presented in the table above,
a purchase agreement to acquire B737-300 aircraft has been affirmed in the
Company's bankruptcy proceedings. With timely notice to the manufacturer, all or
some of these deliveries may be converted to B737-400 aircraft. Existing
purchase agreements for B757-200 and B747-400 aircraft have neither been
affirmed nor rejected. Boeing purchase agreements carry a 24-month
reconfirmation notice for the delivery of each aircraft. As of June 30, 1994,
ten B737-300 and nine B757-200 delivery positions have expired due to the lack
of reconfirmation by the Company, leaving 14 and 11 delivery positions as
reflected in the table above. The failure to reconfirm such delivery positions
exposes the Company to loss of pre-delivery deposits and other claims which may
be asserted in the bankruptcy proceeding. The Company also has a pre-petition
executory contract under which the Company holds delivery positions for four
B747-400 aircraft under firm order and four B747-400 aircraft under option
order. This executory contract allows the Company, with the giving of adequate
notice, to substitute B737-400 aircraft for those delivery positions. The
Company is currently renegotiating all of its aircraft purchase agreements with
Boeing.
With respect to the purchase of aircraft from AVSA presented in the table
above, a single executory contract for the purchase of 24 A320 aircraft has
neither been affirmed nor rejected by the Company. As part of the investment by
AmWest, the A320 purchase agreement was amended to provide the Company with
greater flexibility and reduced pricing. Under the modified terms, delivery
dates of the aircraft will fall in the years 1998 through 2000 with an option to
further defer deliveries. In addition, if new A320 aircraft are delivered as a
result of the renegotiated put agreement (see discussion below), the Company
will have the right to cancel on a one-for-one basis up to a maximum of eight
non-consecutive aircraft deliveries subject to certain conditions. Negotiations
are currently continuing between AVSA and the Company to finalize the details of
this amendment.
In June 1994, the Company renegotiated a put agreement for ten A320
aircraft. The new put agreement reduced the number of aircraft from ten to eight
and rescheduled the deliveries to start not earlier than June 30, 1995 and end
on June 30, 1999. Under the new agreement, new or used A320 aircraft, B737-300
or B757-200 aircraft may be put to the Company but at a rate of no more than two
in 1995 and with respect to each ensuing year during the put period, of no more
than three. In addition, no more than five used aircraft may be put to the
Company and for every new A320 aircraft put to the Company, the Company has the
right to reduce the AVSA A320 purchase contract on a one-for-one basis. During
each January of the put period, the Company will negotiate the type and delivery
dates of the put aircraft for that year. The puts will require 150-day notice
and will be leased at fair market rates, for terms ranging from three to 18
years, depending on the type and condition of the aircraft. As part of the
renegotiated agreement, certain cash payments will be made and certain
securities will be issued to the put holder pursuant to the Plan.
In connection with the Company's $78 million D.I.P. financing agreement,
the Company in December 1991, terminated its agreement with a D.I.P. lender to
lease 24 aircraft and replaced it with a put agreement to lease up to ten of the
aircraft. In September 1992, the put agreement was amended and the number of put
aircraft was reduced from ten to four with the aircraft scheduled for delivery
in 1994. In June 1994, the Company reached a settlement for the cancellation of
the right to "put" four aircraft to the Company for $4.5 million of which $2.5
million was paid in June 1994 and $2.0 million will be paid on the Effective
Date.
FACILITIES
America West's principal facilities are associated with its hub operations
in Phoenix, Las Vegas and Columbus. The Company operates from Terminal 4 of
Phoenix Sky Harbor International Airport pursuant to a lease agreement that
included 28 gates and approximately 258,200 square feet at December 31, 1993.
The Company also leases approximately 25,000 square feet of additional space at
the airport for administrative offices and pilot training. Since 1988, the
Company has owned a 660,000 square foot maintenance and
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<PAGE> 41
technical support facility that includes four hangar bays, hangar shops, two
flight simulator bays, and warehouse and commissary facilities.
In Las Vegas, the Company leases approximately 80,000 square feet of space
at McCarran International Airport, which includes seven gates and adjoining
holding room areas. At the Company's Columbus, Ohio mini-hub, the Company leases
30,000 square feet and two gates and has the ability to sublease additional
gates from other airlines as the need arises.
Space for ticket counters, gates and back offices has also been obtained at
each of the other airports served by the Company, either by lease from the
airport operator or by sublease from another airline. Some of the Company's
airport sublease agreements include requirements that the Company purchase
various ground services at the airport from the lessor airline at rates in
excess of what it would cost the Company to provide those services itself.
The Company owns the 68,000 square foot America West Corporate Center at
222 South Mill Avenue in Tempe, Arizona. The Company currently leases
approximately 500,000 square feet of general office and other space in Phoenix
and Tempe, Arizona.
EMPLOYEES
Management believes that the Company's dedicated labor force has
contributed significantly to its successful reorganization. At December 31,
1993, the Company employed 8,102 full-time and 3,117 part-time employees, the
equivalent of 10,544 full-time employees. During 1993, the Company had 1,630,400
available seat miles per full-time equivalent employee and 1,064,200 revenue
passenger miles per full-time equivalent employee, based on the number of
full-time equivalent employees at year end. The Company's payroll and related
costs, which amounted to 1.78 cents per available seat mile for the year ended
December 31, 1993, is below the industry average.
On October 26, 1993, the Air Line Pilots Association ("ALPA") was certified
by the National Mediation Board as the bargaining representative of the
Company's flight deck crew members. Formal negotiations commenced in April 1994
and are continuing. Both sides have exchanged preliminary proposals. In February
1989, the Association of Flight Attendants ("AFA") lost an election to represent
the Company's customer service representatives ("CSRs"). In June, 1994, the
National Mediation Board accepted AFA's new petition to represent the Company's
CSRs and ballots are scheduled to be mailed to all eligible flight attendants in
August 1994. The ballot count will be held September 15, 1994. In April 1994,
the Transportation Workers Union ("TWU") filed a petition to represent the
Company's fleet service personnel. The Company anticipates that elections with
respect to the proposals will be held during 1994.
The International Brotherhood of Teamsters (the "Teamsters") filed an
application to represent the Company's mechanics and related personnel on August
1, 1994. As of August 12, 1994 the National Mediation Board had not determined
whether it will order an election.
The Company cannot predict whether either the AFA, TWU or the Teamsters
will be certified to represent any of the Company's employees or the effect, if
any, that a future collective bargaining agreement with any of the ALPA, AFA or
TWU will have on the Company's operations or financial performance.
The Company has arranged a program of insurance of the types and in the
amounts it believes customary in the airline industry, including coverage for
public liability, passenger liability, property damage, aircraft loss or damage,
cargo liability and workers' compensation. The Company believes such insurance
is adequate as to both risks covered and coverage amounts.
GOVERNMENT REGULATIONS
Noise Abatement. The Airport Noise and Capacity Act of 1990 provides, with
certain exceptions, that after December 31, 1999, no person may operate certain
large civilian turbo-jet aircraft in the United States that do not comply with
Stage 3 noise levels, which is the FAA designation for the quietest commercial
jets. These regulations will require carriers to gradually phase out their
noisier jets (such as the Boeing 737-200),
39
<PAGE> 42
either replacing them with quieter Stage 3 jets or equipping them with hush kits
to comply with noise abatement regulations, over a five-year period commencing
December 31, 1994. As of December 31, 1993, 73 percent of America West's fleet
was in compliance with the FAA noise abatement regulations, and the Company
expects that it will meet the thresholds imposed by such regulations through
scheduled retirement of its older aircraft.
Numerous airports, including those serving Boston, Denver, Los Angeles,
Minneapolis-St. Paul, New York City, San Diego, San Francisco, San Jose, Orange
County, Washington, D.C., Burbank and Long Beach have imposed restrictions such
as curfews, limits on aircraft noise levels, mandatory flight paths, runway
restrictions and limits on number of average daily departures, which limit the
ability of air carriers to provide service to or increase service at such
airports. The Port Authority of New York and New Jersey is considering a
phaseout of Stage 2 aircraft on a more accelerated basis than that of the FAA
requirement. The Company's Boeing 757-200s, 737-300s and Airbus A320s all comply
with current FAA Stage 3 noise regulations, as well as the more stringent noise
abatement requirements of the airports listed above.
PFC Charges. During 1990, Congress enacted legislation to permit airport
authorities, with prior approval from the DOT, to impose passenger facility
charges ("PFCs") as a means of funding local airport projects. These charges,
which are intended to be collected by the airlines from their passengers, are
limited to $3.00 per enplanement, and to no more than $12.00 per round trip. As
a result of competitive pressure, the Company and other airlines have been
limited in their abilities to pass on the cost of the PFCs to passengers through
fare increases.
Environmental Matters. The Company is subject to regulation under major
environmental laws administered by state and federal agencies, including the
Clean Air Act, Clean Water Act and Comprehensive Environmental Response
Compensation and Liability Act of 1980. In some locations there are also county
and sanitary sewer district agencies which regulate the Company. The Company
believes that it is in substantial compliance with applicable environmental
regulations.
Aging Aircraft Maintenance. The FAA issued several Airworthiness
Directives ("AD") in 1990 mandating changes to the older aircraft maintenance
programs. These ADs were issued to ensure that the oldest portion of the
nation's fleet remains airworthy. The FAA is requiring that these aircraft
undergo extensive structural modifications. These modifications are required
upon the accumulation of 20 years time in service, prior to the accumulation of
a designated number of flight cycles or prior to 1994 deadlines established by
the various ADs, whichever occurs later. Only one of the Company's 85 aircraft
is currently affected by these aging aircraft ADs. The Company constantly
monitors its fleet of aircraft to ensure safety levels which meet or exceed
those mandated by the FAA or the DOT.
Safety. America West is subject to the jurisdiction of the FAA with
respect to aircraft maintenance and operations, including equipment, dispatch,
communications, training, flight personnel and other matters affecting air
safety. The FAA has the authority to issue new or additional regulations. To
ensure compliance with its regulations, the FAA requires the Company to obtain
operating, airworthiness and other certificates which are subject to suspension
or revocation for cause. In addition, a combination of FAA and Occupational
Safety and Health Administration regulations on both federal and state levels
apply to all of America West's ground-based operations.
Slot Restrictions. At New York City's JFK and LaGuardia Airports,
Chicago's O'Hare International Airport and Washington's National Airport, which
have been designated "High Density Airports" by the FAA, there are restrictions
on the number of aircraft that may land and take-off during peak hours. In the
future, these take-off and landing time slot restrictions and other restrictions
on the use of various airports and their facilities may result in further
curtailment of services by, and increased operating costs for, individual
airlines, including America West, particularly in light of the increase in the
number of airlines operating at such airports. In general, the FAA rules
relating to allocated slots at the High Density Airports contain provisions
requiring the relinquishment of slots for nonuse and permits carriers, under
certain circumstances, to sell, lease or trade their slots to other carriers.
40
<PAGE> 43
On January 1, 1993, the FAA implemented new slot use standards that require
that all slots must be used on 80% of the dates during each two-month reporting
period. Previously, slots were required to be used at a 65% use rate. Failure to
satisfy the 80% use rate will result in loss of the slot. The slot would revert
to the FAA and be reassigned through a lottery arrangement.
The Company currently utilizes two slots at New York City's JFK airport,
four slots at New York City's LaGuardia airport, four slots at Chicago's O'Hare
airport and six slots at Washington's National airport. Four of the slots at
Washington's National airport are temporary and the Company's right to utilize
such slots expires in September 1994; however, the Company currently expects
that its right to utilize such slots will be renewed. The average utilization
rates by the Company of all the foregoing slots range from 86% to 100%.
CRAF Program. In time of war or during a national emergency, United States
air carriers may be required to provide airlift services to the Military Airlift
Command under the Civil Reserve Air Fleet Program (the "CRAF Program"). During
the Middle East conflict in 1990-91, two of America West's aircraft participated
in the CRAF Program.
LEGAL PROCEEDINGS
On June 27, 1991, the Company filed a voluntary petition in the United
States Bankruptcy Court for the District of Arizona to reorganize under Chapter
11 of the United States Bankruptcy Code. The Company's plan of reorganization
was confirmed on August 10, 1994, and will become effective on the Effective
Date, which the Company anticipates will be on or about August , 1994. The
Bankruptcy Court retains jurisdiction over the Company for limited purposes.
In August 1991, the Securities and Exchange Commission informally requested
that the Company provide the Commission with certain information and
documentation underlying disclosures made by the Company in annual and quarterly
reports filed with the Commission by the Company in 1991. The Company has
cooperated with the Commission's informal inquiry. On March 29, 1994, the
Company's Board of Directors approved the submission of an offer of settlement
for the purpose of resolving the inquiry through the entry of a consent decree
pursuant to which the Company would, while neither admitting nor denying any
violation of the securities laws, agree to comply with its future reporting
obligations under Section 13 of the Exchange Act. The Company was advised on May
6, 1994 that the Commission agreed to accept the Company's offer of settlement.
In order to implement the settlement, on May 12, 1994 the Commission issued an
"Order Instituting Proceedings Pursuant to Section 21C of the Exchange Act and
Opinion and Order of the Commission" (the "Order") finding the Company's Form
10-K for the year ending December 31, 1990, violated Section 13(a) of the
Exchange Act and Rule 13a-1 thereunder, and that the Company's Form 10-Q for the
first quarter of 1991 violated Section 13(a) of the Exchange Act and Rule 13a-13
thereunder, and ordering that the Company cease and desist from violating
Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 promulgated under
the Exchange Act. The Order provides that the Company neither admits nor denies
any violation of the securities laws.
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<PAGE> 44
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Information respecting the names, ages, terms, positions with the Company
and business experience of the executive officers and the directors of the
Company as of July 1, 1994, is set forth below. Each director has served
continuously with the Company since his first election.
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE POSITION SINCE EXPIRES(3)
- ---------------------------------- --- ------------------------------------ -------- ----------
<S> <C> <C> <C> <C>
William A. Franke................. 57 Chairman of the Board and Chief 1992 1994
Executive Officer
A. Maurice Myers.................. 54 President, Chief Operating Officer 1994 1994
and Director
Thomas P. Burns................... 52 Senior Vice President -- Sales and N/A N/A
Marketing Programs
Thomas F. Derieg.................. 54 Senior Vice President -- Operations N/A N/A
Martin J. Whalen.................. 53 Senior Vice N/A N/A
President -- Administration and
General Counsel
Raymond T. Nakano................. 49 Vice President and Controller N/A N/A
Frederick W. Bradley, Jr.(1)(2)... 67 Director 1992 1992
O. Mark De Michele(2)............. 60 Director 1986 1993
Samuel L. Eichenfield(2).......... 57 Director 1992 1992
Richard C. Kraemer(1)............. 50 Director 1992 1993
James T. McMillan(1)(2)........... 68 Director 1993 1993
John R. Norton III(1)............. 65 Director 1992 1992
John F. Tierney(1)................ 49 Director 1993 1993
Declan Treacy(2).................. 38 Director 1993 1994
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) The Company has not held a meeting of its stockholders since May 1991 to
elect directors. Accordingly, each director, including those directors with
terms expiring in 1992, 1993 and 1994, shall serve until either their
resignation or the later of (i) his term expiration or (ii) such time as
his successor is duly elected and qualified.
William A. Franke was named Chairman of the Board of Directors in September
1992. On December 31, 1993, Mr. Franke was also elected to serve as the
Company's Chief Executive Officer. In addition to his responsibilities at
America West, Mr. Franke serves as president of the financial services firm,
Franke & Co., a company he has owned since May 1987. From November 1989 until
June 1990, Mr. Franke served as the Chairman of Circle K Corporation's executive
committee with the responsibility for Circle K Corporation's restructure. In May
1990, the Circle K Corporation filed a voluntary petition to reorganize under
Chapter 11 of the Bankruptcy Code. From June 1990 until August 1993, Mr. Franke
served as the chairman of a special committee of directors overseeing the
reorganization of the Circle K Corporation. Mr. Franke has also served in
various other capacities at Circle K Corporation since 1990. Mr. Franke was also
involved in the restructuring of the Valley National Bank of Arizona (now Bank
One Arizona). Mr. Franke also serves as a director of Phelps Dodge Corp. and
Central Newspapers Inc.
A. Maurice Myers was named President and Chief Operating Officer on
December 31, 1993 and was named to the Board of Directors in 1994. Prior to
joining America West, Mr. Myers was the president and chief executive officer of
Aloha Airgroup, Inc., an aviation services corporation which owns and operates
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<PAGE> 45
Aloha Airlines and Aloha Island Air. Mr. Myers joined Aloha in 1983 as vice
president of marketing and became its president and chief executive officer in
June 1985. Mr. Myers is a member of the boards of directors of Air Transport
Association of America and Hawaiian Electric Industries.
Thomas P. Burns has served as Senior Vice President -- Sales and Marketing
since August 1987. Mr. Burns joined the Company in April 1985 as Vice
President -- Sales. Mr. Burns was employed for 25 years by Continental Airlines
in various sales and passenger service positions. From 1982 to 1983, he was
employed as North American manager of sales for UTA, a French airline. Mr. Burns
returned to Continental from 1983 through March 1985, where he served as
director of international sales prior to joining the Company.
Thomas F. Derieg has been Senior Vice President -- Operations since joining
the Company in June 1994. For the preceding seven years, Mr. Derieg served as
Senior Vice President -- Operations at Aloha Airlines, Inc. in Honolulu, Hawaii.
Mr. Derieg served in the U.S. Air Force from 1963 to 1969, and from 1970 to 1987
held a variety of positions in areas of operations and maintenance in the air
transportation industry.
Martin J. Whalen has been Senior Vice President -- Administration and
General Counsel of the Company since July 1986. From 1980 until July 1986, Mr.
Whalen was employed by McDonnell Douglas Helicopter Company and its
predecessors, most recently as vice president of administration. He also held
positions in labor relations, personnel and legal affairs at Hughes Airwest and
Eastern Airlines.
Raymond T. Nakano has served as Vice President and Controller since April
of 1985. Prior to joining America West, Mr. Nakano was employed by Continental
Airlines, Inc. for eight years in various accounting positions, most recently as
Senior Director, General Accounting.
Frederick W. Bradley, Jr. has served as a member of the Board of Directors
since September 1992. Immediately prior to joining the Board of Directors, Mr.
Bradley was a senior advisor with Simat, Helliesen & Eichner, Inc. Mr. Bradley
formerly served as senior vice president of Citibank/Citicorp's Global Airline
and Aerospace business. Mr. Bradley joined Citibank/Citicorp in 1958. In
addition, Mr. Bradley serves as a member of the board of directors of Shuttle,
Inc. (USAir Shuttle) and the Institute of Air Transport, Paris, France. Mr.
Bradley also serves as chairman of the board of directors of Aircraft Lease
Portfolio Securitization 92-1 Ltd. and as president of IATA's International
Airline Training Fund of the United States.
O. Mark De Michele has served as a member of the Board of Directors since
1986 and is president, chief executive officer and a director of Arizona Public
Service Company. Mr. De Michele joined Arizona Public Service Company in 1978 as
vice president of corporate relations, and also served as its chief operating
officer and an executive vice president. Mr. De Michele is also a member of the
board of directors of the Pinnacle West Capital Corporation.
Samuel L. Eichenfield has served as a member of the Board of Directors
since September 1992 and is chairman of the board of directors and chief
executive officer of GFC Financial Corporation. Mr. Eichenfield has also served
as chief executive officer of Greyhound Financial Corporation, a subsidiary of
GFC Financial Corporation, since joining GFC in 1987.
Richard C. Kraemer has served as a member of the Board of Directors since
September 1992 and is president and chief operating officer of UDC Homes, Inc.
Mr. Kraemer is also a member of the UDC Homes, Inc. board of directors. Prior to
joining UDC Homes, Inc. in 1975, Mr. Kraemer held a variety of positions at
American Cyanamid Company.
James T. McMillan has served as a member of the Board of Directors since
December 1993. Mr. McMillan joined McDonnell Douglas Finance Corporation as its
president in 1968 and retired as its chairman of the board in 1991. Mr. McMillan
also served in various capacities for the McDonnell Douglas Corporation from
August 1954 until August 1990, most recently as a senior vice president and
group executive.
John R. Norton III has served as a member of the Board of Directors since
September 1992 and was former Deputy Secretary of the United States Department
of Agriculture from 1985 to 1986. Mr. Norton is currently a principal of J.R.
Norton Company, an agricultural and real estate concern. Mr. Norton is also a
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<PAGE> 46
member of the board of directors of Aztar Corp., Pinnacle West Capital
Corporation, Arizona Public Service Company and Terra Industries, Inc.
John F. Tierney has served as a member of the Board of Directors since
December 1993. Mr. Tierney is the assistant chief executive and finance director
of GPA Group plc, an Irish aircraft leasing concern, and has served GPA Group
plc in such capacity since 1981. See "Compensation Committee Interlocks and
Insider Participation" and "Certain Relationships and Related Transactions."
Declan Treacy has served as a member of the Board of Directors since
December 1993. Mr. Treacy is the General Manager -- Corporate Finance of GPA
Group plc, an Irish aircraft leasing concern, and has served GPA Group plc in
such capacity since 1988. See "Compensation Committee Interlocks and Insider
Participation" and "Certain Relationships and Related Transactions."
Since September 1992, certain of the debtor-in-possession lenders have had
the right to appoint and approve the membership of the Company's Board of
Directors pursuant to a management letter agreement, as amended and restated,
between the Company and such lenders. Under the terms of such letter agreement,
GPA has the right to appoint two members to the Board of Directors and the
remaining D.I.P. lenders (except Kawasaki) have the right to appoint five
members to the Board of Directors. One member of the Board must be a member of
America West management and two members must be independent.
In connection with the Reorganization, the Company, AmWest, GPA and certain
stockholders' representatives entered into a Stockholders' Agreement with
respect to certain matters involving the Company, including the election of
directors. See "Principal Stockholders -- Stockholders' Agreements."
During the year ended December 31, 1993, the Board of Directors of the
Company met on 29 occasions. During the period in which he served as director,
each of the directors attended 75% or more of the meetings of the Board of
Directors and of the meetings held by committees of the Board on which he
served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors, which met ten times
during 1993, reviews all aspects of compensation of executive officers of the
Company and makes recommendations on such matters to the full Board of
Directors. In addition, the Compensation Committee reviews and approves all
compensation and employee benefit plans, the Company's organizational structure
and plans for the development of successors to corporate officers and other key
members of management.
The Audit Committee, which met nine times during 1993, makes
recommendations to the Board concerning the selection of outside auditors,
reviews the financial statements of the Company and considers such other matters
in relation to the internal and external audit of the financial affairs of the
Company as may be necessary or appropriate in order to facilitate accurate and
timely financial reporting.
The Company does not maintain a standing nominating committee or other
committee performing similar functions. See "Principal
Stockholders -- Stockholders' Agreements."
44
<PAGE> 47
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1993, 1992 and 1991, of those persons who were,
at December 31, 1993 (i) the chief executive officer and (ii) the other four
most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------ ALL OTHER
NAME YEAR SALARY(2) COMPENSATION(3)
- ----- ----- ------------ ---------------
<S> <C> <C> <C>
William A. Franke(1)..................................... 1993 $450,000 $ -0-
Chairman of the Board and 1992 $131,250 -0-
Chief Executive Officer 1991 N/A N/A
Thomas P. Burns.......................................... 1993 $127,204 $2,182
Senior Vice President -- Sales and Marketing 1992 $123,200 $2,182
1991 $125,767 N/A
Alphonse E. Frei(4)...................................... 1993 $161,896 $2,182
Senior Vice President -- Finance and 1992 $156,800 $2,182
Chief Financial Officer 1991 $160,067 N/A
Don Monteath(5).......................................... 1993 $161,896 $2,182
Senior Vice President -- Operations 1992 $156,800 $2,182
1991 $160,067 N/A
Martin J. Whalen......................................... 1993 $138,368 $2,016
Senior Vice President -- Administration and 1992 $134,000 $2,016
General Counsel 1991 $137,200 N/A
Michael J. Conway(6)..................................... 1993 $440,250 $2,182
Former Chief Executive Officer and President 1992 $432,000 $2,182
1991 $444,000 N/A
</TABLE>
- ---------------
(1) Mr. Franke was elected Chairman of the Board on September 17, 1992 and was
elected Chief Executive Officer on December 31, 1993.
(2) Includes amounts paid pursuant to the Company's transition pay program.
(3) Consists of Company contributions to the Company's 401(k) Plan on behalf of
the Named Officer.
(4) Mr. Frei retired effective July 1, 1994.
(5) Mr. Monteath resigned from the Company in February 1994.
(6) Mr. Conway was replaced as the President and Chief Executive Officer on
December 31, 1993.
OPTION PLAN INFORMATION
The following table sets forth with respect to the executive officers named
in the Summary Compensation Table the unexercised options held as of the end of
1993 pursuant to the Company's then existing Restated Nonstatutory Stock Option
Plan ("NSOP") and Incentive Stock Option Plan ("ISO").
45
<PAGE> 48
AGGREGATE OPTIONS AND OPTION VALUES
AT DECEMBER 31, 1993
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS HELD
NAME 1993 FISCAL YEAR-END AT 1993 FISCAL YEAR-END(1)
- ---- -------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C> <C>
William A. Franke....................... NSOP 0/0 $0
ISO 0/0
Thomas P. Burns......................... NSOP 109,640/0 $0
ISO 17,300/0
Alphonse E. Frei........................ NSOP 191,560/0 $0
ISO 20,000/0
Don Monteath............................ NSOP 206,560/0 $0
ISO 21,000/0
Martin J. Whalen........................ NSOP 143,480/0 $0
ISO 12,033/0
Michael J. Conway....................... NSOP 717,400/0 $0
ISO 28,000/0
</TABLE>
- ---------------
(1) All of the outstanding options held by the executive officers in the table
above had a fair market value lower than their exercise price at December
31, 1993.
During the fiscal year ended December 31, 1993, none of the Named Officers
exercised any options. All options held by the Named Officers immediately prior
to the Effective Date had exercise prices greater than the fair market value of
the Common Stock at such time and were cancelled for no additional consideration
in connection with the Reorganization.
TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has made certain employment termination arrangements in keeping
with its practice under its July 21, 1991 termination of employment guidelines
("Guidelines"), as amended. The Guidelines provide for severance payments based
on three-weeks' pay for each year of full-time service with the Company for up
to one year, continued group medical coverage through the allowance period and
travel privileges on Company flights during the allowance period. Each of the
executives named in the table above is eligible for the benefits under the
Guidelines.
In connection with the termination of employment of Mr. Michael J. Conway
as an officer of the Company, the Company agreed to pay Mr. Conway $503,000 in
termination allowances, payable as an initial severance payment in the amount of
$304,200, an additional $163,800 in six monthly installments of $27,300 each,
and a $35,000 transition expense allowance. The Company also agreed to continue
the payment until December 31, 1994, of premiums aggregating approximately
$33,000 on certain life insurance policies owned by Mr. Conway. The foregoing
payments were in addition to continuation of medical insurance benefits and
certain other fringe benefit arrangements.
In connection with the termination of employment of Mr. Don Monteath as an
officer of the Company, the Company agreed to pay Mr. Monteath a severance
payment of $168,862. This payment was in addition to continuation of medical
insurance benefits and certain other fringe benefit arrangements.
DIRECTOR COMPENSATION
Each non-employee director at December 31, 1993, is compensated as follows:
an annual retainer of $25,000 plus $1,000 for each Board meeting attended,
$1,000 for each committee meeting attended and reimbursement for expenses
incurred in attending the meetings. Directors are also entitled to certain air
travel benefits. No personal travel by directors was reported to the Company in
1993.
46
<PAGE> 49
OTHER ARRANGEMENTS
Mr. Franke, Chairman of the Board of Directors, is also the president of
the financial services firm, Franke & Co. In order to assist Mr. Franke with
certain costs associated with his service as Chairman and Chief Executive
Officer, the Company pays Franke & Co. an office overhead allowance of $4,167
per month in exchange for which Franke & Co. provides Mr. Franke's secretarial
and administrative support.
Effective January 1, 1994, Mr. A. Maurice Myers left his position as
president and chief executive officer of Aloha Airlines, Inc. to join the
Company as President and Chief Operating Officer. The employment agreement
between the Company and Mr. Myers provides an initial two-year term at a base
salary of $375,000 per year. Mr. Myers also received a $100,000 transition
allowance. The Company loaned Mr. Myers approximately $320,000 to exercise
options to acquire stock of Aloha Airlines, Inc. The loan is secured by the
stock purchased by Mr. Myers but is otherwise nonrecourse to Mr. Myers. The loan
bears interest at a rate based on the rate of imputed interest under the
Internal Revenue Code. The loan matures within a specified period following
expiration of the employment agreement or other termination of employment or, if
earlier, on the date that is 180 days after the first date on which the pledged
stock becomes eligible for sale by Mr. Myers on a national securities exchange
or automated quotation system. In addition, the Company has agreed to assist Mr.
Myers in purchasing a residence in Phoenix, Arizona with a nonrecourse loan of
up to $200,000 secured by such residence. In connection with the confirmation of
the Plan, the Company has submitted for Bankruptcy Court approval a payment to
Mr. Myers of a reorganization success bonus in the amount of $400,000. The
Company has also agreed to provide to Mr. Myers certain retirement benefits,
reduced for vested accrued benefits payable under plans maintained by his former
employer. If Mr. Myers' employment with the Company is terminated or his
responsibilities are materially altered following a change in control, he is
entitled to receive a severance payment equal to 200% of his base salary and,
for a period of 12 months, medical and life insurance coverages as provided
immediately prior to such termination. Mr. Myers is entitled to participate in
any incentive plans or other fringe benefits provided by the Company to other
key employees.
During 1993, the Company paid approximately $47,000 for consulting services
to Juan O'Callaghan, a former director of the Company.
The Company and Mr. Franke entered into a Key Employee Protection Agreement
on June 27, 1994 pursuant to which the Company agreed to pay to Mr. Franke a
Severance Payment (as defined in the agreement) if a Change of Control (as
defined in the agreement) occurs in connection with a plan of reorganization and
if for any reason (including voluntary resignation or involuntary removal, but
excluding death) Mr. Franke ceases to serve as Chairman of the Company at any
time within 180 days after the date of confirmation of such a plan of
reorganization. A Change of Control (as defined in the agreement) would occur,
generally, (i) if individuals who constitute the Board of Directors of the
Company immediately prior to confirmation of a plan of reorganization cease to
constitute a majority of the Board (except that any individual who becomes a
director after the date of the agreement whose election or nomination was
approved by a majority of directors then comprising the incumbent Board is to be
considered as though he were a member of the incumbent Board), or (ii) if an
individual, entity or group (within the meaning of the Securities Exchange Act
of 1934, as amended) acquires beneficial ownership of 51% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors. Under the agreement,
the Severance Payment would be a lump sum amount equal to 200% of the sum of Mr.
Franke's annual base salary in effect immediately prior to the date of
termination and the administrative expense allowance then in effect. The Key
Employee Protection Agreement also provides for certain other benefits,
including medical and life insurance, accrued vacation pay for a 12 month period
and certain travel privileges consistent with the Company's policy for retired
executives.
In connection with the confirmation of the Plan, the Company filed certain
motions with the Bankruptcy Court to secure approval to pay the reorganization
success bonuses of (i) $9.2 million to be paid to non-officer employees; (ii)
$1.2 million to be paid to officers and other members of management; and (iii)
125,000 shares of stock in the reorganized Company to be issued to William A.
Franke. A hearing on these motions has been scheduled for August 24, 1994.
47
<PAGE> 50
PROPOSED SLATE OF DIRECTORS
Following the Effective Date, the Company's Board of Directors will be
elected in accordance with the provisions of a stockholders' agreement. See
"Principal Stockholders -- Stockholders' Agreements." In connection with the
confirmation of the Plan, the Company submitted to the Bankruptcy Court the
names and certain information with respect to the following persons who are
expected to serve on the post-Reorganization Board of Directors.
DIRECTOR NOMINATED BY THE COMPANY'S BOARD
William A. Franke who currently serves as Chairman of the Board of
Directors and Chief Executive Officer of America West.
DIRECTORS NOMINATED BY AMWEST
Julia Chang Bloch is the group executive vice president, corporate
relations of BankAmerica Corporation and has held that position since June 1993.
Ms. Bloch served as the U.S. Ambassador to Nepal from September 1989 through May
1993. Ms. Bloch is a board member of the American Refugee Committee and the
Himalaya Foundation, and serves as a trustee of the Asian Art Museum and the
Asia Society.
Frederick W. Bradley, Jr. has been a member of America West's Board of
Directors since September 1992. Immediately prior to joining the Board of
Directors, Mr. Bradley was a senior advisor with Simat, Helliesen & Eichner,
Inc. Mr. Bradley formerly was a senior vice president of Citibank/Citicorp's
Global Airline and Aerospace business. Mr. Bradley joined Citibank/Citicorp in
1958. In addition, Mr. Bradley is a member of the board of directors of Shuttle,
Inc. (USAir Shuttle) and the Institute of Air Transport, Paris, France. Mr.
Bradley also is chairman of the board of directors of Aircraft Lease Portfolio
Securitization 92-1 Ltd. and is president of IATA's International Airline
Training Fund of the United States.
James G. Coulter is the managing director of Air Partners, L.P., and a
partner and director of Colony Advisors, Inc. He has held those positions since
September 1992. Since 1993, Mr. Coulter has also been a managing director of TPG
Partners, L.P. (a private investment firm). From April 1993 through August 1994,
Mr. Coulter was a member of the board of directors of Continental Airlines, Inc.
From 1986 to August 1992, Mr. Coulter was vice president of Keystone, Inc.
(formerly Robert M. Bass Group, Inc., a private investment firm based in Fort
Worth, Texas).
John F. Fraser is the chairman of the board of Federal Industries Ltd. Mr.
Fraser was chairman and chief executive officer of Federal Industries Ltd. from
March 1991 to May 1992, and president and chief executive officer of Federal
Industries Ltd. May 1978 - March 1991. Mr. Fraser was a member of the Board of
Directors of Continental Airlines, Inc. from August 1993 through August 1994.
Mr. Fraser is a director of Air Canada, Montreal, Bank of Montreal, Coca-Cola
Beverages Limited, Ford Motor Company of Canada, Limited, Inter-City Products
Corporation, Investors Group Inc., Shell Canada Limited, and The Thomson
Corporation.
John L. Goolsby has been the president of The Hughes Corporation and the
Summa Corporation (the principal operating companies of the Howard Hughes
Estate) since 1988, and has been the chief executive officer of those companies
since 1990. In addition to serving on the board of directors of the Hughes and
Summa Corporations, Mr. Goolsby serves as a director of Nevada Power Company,
Bank of America Nevada, Las Vegas Chamber of Commerce, and the Boulder Dam Area
Council of the Boy Scouts of America, and serves as a trustee of The Donald W.
Reynolds Foundation and the UNLV Foundation.
Richard C. Kraemer has been a member of America West's board of directors
since September 1992 and is president, chief executive officer and chief
operating officer of UDC Homes, Inc. Mr. Kraemer is also a member of the board
of directors of UDC Homes, Inc. Prior to joining UDC Homes, Inc. in 1975, Mr.
Kraemer held a variety of positions at American Cyanamid Company.
A. Maurice Myers who currently serves as President and Chief Operating
Officer of America West and is a member of the current Board of Directors.
48
<PAGE> 51
Larry L. Risley has been the president, chief executive officer and
chairman of the board of directors of Mesa Airlines, Inc. since the founding of
the company in 1983. From 1979 to 1982, Mr. Risley was president of Mesa
Aviation Services, Inc.
Richard P. Schifter has been a managing director of TPG Partners, L.P. (a
private investment firm) since July 1994. Mr. Schifter is of counsel to the
Washington D.C. based law firm of Arnold & Porter, where he was an associate
from 1979 to 1986, and a partner from 1986 to July 1994.
DIRECTOR NOMINATED BY GPA
John F. Tierney who is currently a member of America West's Board of
Directors.
DIRECTOR NOMINATED BY THE EQUITY COMMITTEE
Adam M. Aron is president and chief executive officer of Kloster Cruise
Limited, and is also president of Norwegian Cruise Line and Royal Cruise Line,
two divisions of Kloster. Prior to his current positions, Mr. Aron was senior
vice president for marketing for United Airlines. Mr. Aron is a member of The
Council on Foreign Relations and serves as a trustee of Chicago's Goodman
Theatre and on the Steering Committee for the Summit of the Americas Conference.
DIRECTORS NOMINATED BY THE CREDITORS' COMMITTEE
Harrison J. Goldin is a senior partner with Goldin Associates, a law firm.
A graduate of Yale Law School, he is a former New York state senator and
controller.
Raymond Troubh is a financial consultant. A graduate of Yale Law School, he
was a law clerk to the U.S. Supreme Court.
Stephen Bollenbach is president and chief executive of Host Marriott Corp.,
one of the country's leading hospitality companies.
49
<PAGE> 52
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors reviews all
aspects of compensation of executive officers of the Company and makes
recommendations on such matters to the full Board of Directors. The Compensation
Committee also reviews and approves all compensation and employee benefit plans,
the Company's organizational structure and plans for the development of
successors to corporate officers and other key members of management. During
1993, Frederick W. Bradley, Jr., Richard C. Kraemer, James T. McMillan, John R.
Norton, III and John F. Tierney served on the Compensation Committee.
Both Mr. Tierney and Declan Treacy were elected to the Board of Directors
pursuant to a certain management letter agreement, as amended and restated,
between the Company and its debtor-in-possession lenders, including GPA. See
"Management -- Directors and Executive Officers". Both Mr. Tierney and Mr.
Treacy are executives of GPA. The management letter agreement will terminate as
of the Effective Date and GPA's representation on the Company's Board will be
determined pursuant to the Stockholders' Agreement and a voting agreement to be
entered between GPA and AmWest which collectively provide that GPA shall be
allocated one seat on the Company's Board of Directors for so long as it owns at
least 2% of the voting equity securities of the Company determined on a
fully-diluted basis.
GPA has been and will continue to be a major supplier of leased aircraft
and engines to the Company and has provided financing for the Company prior to
and during the bankruptcy proceedings. In September 1990, GPA and the Company
entered into an agreement (the "Aircraft Finance Agreement") pursuant to which
(i) GPA provided a cash advance to the Company of $60.2 million and (ii) the
Company agreed to sublease 16 A320-200's and three spare engines and committed
to lease 10 additional A320-200's. Under the Aircraft Finance Agreement, the
monthly rental rates for each of the initial 12 aircraft is approximately
$307,000 (including adjustments in connection with certain security arrangements
and repayment of certain advances) and the monthly rental rates for each of the
remaining four aircraft averages approximately $345,000. The Company's
obligations under the Aircraft Finance Agreement are secured by a $17.6 million
letter of credit.
In June of 1991, GPA and the Company restructured the Aircraft Finance
Agreement by eliminating the Company's obligations with respect to the 10
additional A320-200 aircraft, increasing the payments on the initial 12 aircraft
to repay advances on the cancelled aircraft as reflected above, and entering
into a put agreement (the "1991 Put Agreement"). Under the 1991 Put Agreement,
GPA is entitled to put 10 A320 aircraft to the Company over a three-year period.
Specified lease terms range from 18 to 23 years for a leveraged lease and seven
to 18 years for a single investor lease. Applicable rental rates are based on a
rental factor (.925% per month for a leveraged lease and 1.14% per month for a
single investor lease) multiplied by the cost of the aircraft to GPA. Rental
factors are subject to a 10-year reset provision based on changes in Treasury
rates in the case of leveraged leases and six-month adjustments based on LIBOR
rates in the case of single investor leases.
In September 1991, after commencement of the Company's bankruptcy
proceedings, affiliates of GPA provided the Company $35 million of D.I.P.
financing. An additional $35 million was provided in September 1992. As of June
30, 1994, the aggregate outstanding principal balance of D.I.P. financing
provided by GPA was $54.4 million. The D.I.P. financing provided by GPA bears
interest at 350 basis points over the 90-day LIBOR rate and, along with the
other debtor-in-possession financing, is secured by substantially all of the
assets of the Company. Pursuant to the Plan and in accordance with a settlement
agreement to be entered into as of the Effective Date (the "Settlement
Agreement"), the Company will repay to GPA the outstanding balance under the
D.I.P. loan. In addition, GPA will receive 900,000 shares of Class B Common
Stock, 1,384,615 Warrants and a cash payment of $30.525 million, and the 1991
Put Agreement will be replaced with a new put agreement. The new put agreement
will reduce the number of aircraft from 10 to eight and reschedule the
deliveries to start not earlier than June 30, 1995 and to end on June 30, 1999,
unless otherwise agreed to by the Company. Under the new agreement, A320
aircraft with A-5 engines, B737-300 aircraft or B757-200 aircraft may be put to
the Company, but at a rate of no more than two in 1995 and no more than three in
each ensuing year during the put period. No more than five used aircraft may be
put to the Company,
50
<PAGE> 53
and for every A320 aircraft (which may only be new aircraft) put to the Company,
the Company has the right to reduce the AVSA A320 purchase contract delivery on
a one-for-one basis. During each January of the put period, the Company and GPA
will negotiate the type and delivery dates of the put aircraft for that year.
The puts will require 150-day notice and will be leased at fair market rates,
for terms ranging from three to 18 years, depending on the type and condition of
the aircraft.
Lease payments from America West to GPA under the Aircraft Finance
Agreement and the 1991 Put Agreement totaled $20,784,669 in 1991, $63,812,425 in
1992 and $63,073,184 in 1993. As of December 31, 1993, the Company was obligated
to pay approximately $1.136 billion over the terms of the 16 aircraft leases
under the Aircraft Finance Agreement. Payments by the Company to GPA under the
D.I.P. financing totalled $1,026,000 in 1991, $3,328,608 in 1992 and $16,298,189
in 1993.
CERTAIN TRANSACTIONS
In September 1993, in connection with an extension of its
debtor-in-possession financing, the Company repaid $8.3 million of indebtedness
to Ansett Worldwide Aviation U.S.A., an affiliate of Transpacific Enterprises,
Inc., which was then a substantial stockholder of the Company. As of December
31, 1993, the Company leased or subleased 11 Boeing 737 aircraft from affiliates
of Transpacific Enterprises, Inc. and was obligated to pay $232 million over the
remaining terms of the leases.
As part of the Reorganization, the Company entered into Alliance Agreements
with Continental and Mesa. See "Business -- Business Strategy" and
"Business -- Operations."
Each of the transactions described above were the result of significant
negotiation among the parties thereto and were concluded on what the Company
believes to be terms no less favorable than would have been obtained had the
transactions been entered into with non-affiliated third parties. For a
description of certain transactions or arrangements between the Company and its
officers or directors, see "Management -- Other Arrangements."
51
<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the outstanding
Class A Common Stock and Class B Common Stock of the Company by (i) each person
who is known to the Company to beneficially own more than 5% of the outstanding
common stock of America West, (ii) each director of America West, (iii) each of
the executive officers of America West named in the Summary Compensation Table
and (iv) all executive officers and directors of America West as a group, in
each case as of the Effective Date.
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------ ------------------------ CLASS A AND B
---------------------
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED COMBINED VOTING POWER
------------------------ ------------------------ ---------------------
BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE PERCENTAGE
- ------------------------------ --------- ---------- ---------- ---------- ---------------------
<S> <C> <C> <C> <C> <C>
AmWest Partners, L.P.
201 Main Street
Suite 2420
Fort Worth, Texas 76102..... 1,200,000 100% (1) % %
TPG Partners, L.P.(2)(3)(4)
201 Main Street
Suite 2420
Fort Worth, Texas 76102..... 774,495 64.5% 7,075,303(5) 15.5% 43.3%
Continental Airlines, Inc.(2)
2929 Allen Parkway
Houston, Texas 77019........ 325,505 27.1% 2,320,820(6) 5.2% 17.8%
Mesa Airlines, Inc.(2)
2525 30th Street
Farmington, New Mexico
87401....................... 100,000 8.3% 2,993,982(7) 6.7% 7.6%
Lehman Brothers Inc.
200 Vessey Street
American Express Tower
World Financial Center
New York, NY
10285-1800.................. -- -- (8)
FMR Corp.
82 Devonshire St.
Boston, MA 02109............ -- -- (9)
William A. Franke............. -- -- -- --
A. Maurice Myers.............. -- -- -- --
Thomas P. Burns............... -- -- (10) *
Thomas F. Derieg.............. -- -- -- --
Martin J. Whalen.............. -- -- (11) *
Raymond T. Nakano............. -- -- -- --
Frederick W. Bradley, Jr...... -- -- -- --
Michael J. Conway(10)......... -- -- (12) *
O. Mark De Michele............ -- -- (13) *
Samuel L. Eichenfield......... -- -- -- --
Richard C. Kraemer............ -- -- -- --
James T. McMillan............. -- -- -- --
John R. Norton, III........... -- -- -- --
John F. Tierney............... -- -- -- --
Declan Treacy................. -- -- -- --
All executive officers and
directors as a group (17
persons).................... -- -- 42,998(14) *
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 2,769,231 shares of Class B Common Stock that may be acquired upon
exercise of Warrants. For a more complete description of AmWest Partners,
L.P., please see "Summary" and "Risk Factors -- Concentration of Voting
Power; Influence of AmWest and its Partners."
52
<PAGE> 55
(2) Represents shares allocated to investors upon the dissolution of AmWest.
(3) TPG is a Delaware limited partnership whose general partner is TPG GenPar,
L.P., a Delaware limited partnership. The general partner of TPG GenPar,
L.P. is TPG Advisors, Inc., a Delaware corporation. The executive officers
and directors of TPG Advisors are: David Bonderman (director and
President), James Coulter (director and Vice President), William Price
(director and Vice President) and James O'Brien (Vice President, Treasurer
and Secretary). No other persons control TPG, TPG GenPar or TPG Advisors.
(4) Mr. Bonderman is also Director and Chairman of the Board of Continental.
Mr. Bonderman and Mr. Coulter, through their control positions in Air
Partners, L.P., a special purpose partnership formed in 1992 to participate
in the funding of the reorganization of Continental and a significant
shareholder in Continental, may be deemed to beneficially own a significant
percentage of Continental's common stock.
(5) Includes 1,922,135 shares of Class B Common Stock that may be acquired upon
the exercise of Warrants.
(6) Includes 807,836 shares of Class B Common Stock that may be acquired upon
the exercise of Warrants.
(7) Includes 804,724 shares of Class B Common Stock that may be acquired upon
the exercise of Warrants.
(8) Includes shares of Class B Common Stock that may be acquired upon
the exercise of Warrants.
(9) Includes shares of Class B Common Stock that may be acquired upon
the exercise of Warrants. All shares are owned directly by Fidelity
Copernicus Fund, L.P. ("Copernicus"), Belmont Capital Partners II, L.P.
("Belmont II") or Belmont Fund, L.P. ("Belmont I"), each of which is a
private investment limited partnership. Fidelity Management Trust Company
("FMTC") serves as investment adviser to Belmont I and Belmont II and
Fidelity Management & Research Company ("FMRC") serves as investment
adviser to Copernicus. Each of FMTC and FMRC is a wholly owned subsidiary
of FMR Corp. ("FMR"). Through shared voting and dispositive power over the
shares held by Belmont I and Belmont II, FMTC may be deemed to beneficially
own the shares held by such entities. Through shared voting and dispositive
power over the shares held by Copernicus, FMRC may be deemed to
beneficially own the shares held by such entity. In addition, FMR, as
controlling person of FMTC, FMRC and certain general partners of Belmont I,
Belmont II and Copernicus, may be deemed to beneficially own the shares
held by each of Belmont I, Belmont II and Copernicus. FMR disclaims
beneficial ownership of such shares. Edward C. Johnson III, through his
controlling interest in FMR, may be deemed to beneficially own the shares
held by each of Belmont I, Belmont II and Copernicus. Mr. Johnson disclaims
beneficial ownership of such shares.
(10) Includes shares of Class B Common Stock that may be acquired upon
exercise of Warrants.
(11) Includes shares of Class B Common Stock that may be acquired upon
exercise of Warrants.
(12) Represents America West's estimates. Mr. Conway was replaced as the
Company's President and Chief Executive Officer on December 31, 1993 and
resigned as a member of the Board of Directors effective January 31, 1994.
(13) Includes shares of Class B Common Stock that may be acquired upon
exercise of Warrants.
(14) Includes shares of Class B Common Stock that may be acquired upon
exercise of Warrants.
53
<PAGE> 56
STOCKHOLDERS' AGREEMENTS
As of the Effective Date, the Company, AmWest, GPA and certain designated
stockholder representatives will enter into an agreement (the "Stockholders'
Agreement") with respect to certain matters involving the Company. The material
provisions of the Stockholders' Agreement are summarized below. The following
description, however, is only a summary and is qualified in its entirety by
reference to the Stockholders' Agreement, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
The Stockholders' Agreement provides that for a period lasting until the
first annual meeting after the third anniversary of the Effective Date (the
"Third Annual Meeting"), America West's Board of Directors will consist of 15
members including (i) nine members designated by AmWest; (ii) one member
designated by GPA for as long as GPA retains at least two percent of the voting
equity securities of the Company; and (iii) five independent directors (the
"Independent Directors") initially including (a) three designated by the
Creditors' Committee, (b) one member designated by the Equity Committee, and (c)
one director designated by the pre-Reorganization Board of Directors from among
the executive officers of the Company. Until the Third Annual Meeting, AmWest
and GPA will vote all shares of the Common Stock owned by them in favor of the
reelection of the initially designated Independent Directors for as long as such
Independent Directors continue to serve.
In addition to the voting and other provisions of the Stockholders'
Agreement, AmWest and GPA have agreed that (i) AmWest will vote in favor of
GPA's nominee to the Company's Board of Directors, and (ii) GPA will vote in
favor of AmWest's nine nominees to the Company's Board of Directors for so long
as (a) AmWest owns at least 5% of the voting equity securities of the Company,
and (b) GPA owns at least 2% of the voting equity securities of the Company.
The Stockholders' Agreement also provides that no director nominated by
AmWest will be an employee or officer of Continental. All directors who are
selected by or who are directors of Continental or Mesa and all directors who
are employees or officers of Mesa shall recuse themselves from voting on or
receiving information on any matters involving negotiations or direct
competition between Mesa and America West or Continental and America West,
whichever the applicable case may be.
Until the Third Annual Meeting, approval by at least the three Independent
Directors or the affirmative vote of the holders of a majority of the voting
power of each class of Common Stock (excluding those shares owned by AmWest or
any of its Affiliates, as defined in the Stockholders' Agreement, but not,
however, excluding any shares owned, controlled or voted by Mesa or any of its
transferees that are not otherwise Affiliates of AmWest) is required to approve
(i) any merger or consolidation of the Company with or into AmWest or any of its
Affiliates; (ii) certain transactions involving issuances of voting securities
by the Company that result in AmWest or any of its Affiliates acquiring an
increased percentage ownership of such voting securities; and (iii) any
transaction or series of transactions having the same effect as (i) or (ii)
above.
Under the terms of the Stockholders' Agreement, neither AmWest nor any
partner or Affiliate of AmWest or of any partner of AmWest may sell or otherwise
transfer any Common Stock (other than to an Affiliate of the transferor) if,
after giving effect thereto or to any related transaction, the total number of
shares of Class B Common Stock beneficially owned by the transferor is less than
twice the number of shares of Class A Common Stock beneficially owned by the
transferor, except in certain circumstances.
In addition, the Stockholders' Agreement provides that for a period of
three years after the Effective Date, AmWest shall not sell, in a single
transaction or related series of transactions, shares of Common Stock
representing 51% or more of the combined voting power of shares of Common Stock
then outstanding other than (i) pursuant to or in connection with a tender or
exchange offer for all shares of Common Stock and for the benefit of all holders
of Class B Common Stock on a pro rata basis at the same price per share and on
the same economic terms, (ii) to any Affiliate of AmWest, (iii) to any Affiliate
of AmWest's partners, (iv) pursuant to a bankruptcy or insolvency proceeding,
(v) pursuant to judicial order, legal process, execution or attachment or (vi)
in a Public Offering as defined in the Stockholders' Agreement.
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<PAGE> 57
SELLING SECURITYHOLDERS
The Selling Securityholders are the partners of AmWest, GPA and Fidelity.
AmWest is a limited partnership including Mesa and Continental. Pursuant to
partial assignments of the Investment Agreement by AmWest, Fidelity and Lehman
also purchased Securities from the Company through subscription agreements
between AmWest and those parties. Pursuant to the Reorganization Plan, AmWest
and such parties invested $214.9 million into the Company in exchange for the
Securities offered hereby. It is contemplated that prior to, on, or after the
Effective Date AmWest will distribute the Securities held by it to its partners,
and such Securities will be held directly by the partners of AmWest.
The following table sets forth the name of each Selling Securityholder,
assuming the distribution of the Securities held by AmWest to its partners, and
the amount of the Securities (other than the Senior Notes) owned by each such
Selling Securityholder which are subject to being offered hereby. In addition,
Fidelity holds $100 million principal amount of the Senior Notes all of which
may be offered and sold pursuant to this Prospectus.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
CLASS A CLASS B NUMBER OF
COMMON STOCK COMMON STOCK(1) WARRANTS
------------ --------------- ---------
<S> <C> <C> <C>
TPG Partners, L.P.(2)............................. 733,333
Continental Airlines, Inc......................... 366,667
Mesa Airlines, Inc................................ 100,000
GPA Group plc..................................... 0 2,284,615 1,384,615
Fidelity Copernicus Fund, L.P.(2)................. 0
Belmont Capital Partners II, L.P.(2).............. 0
Belmont Fund, L.P.(2)............................. 0
Lehman Brothers Inc............................... 0
------------ --------------- ---------
TOTAL................................... 1,200,000 18,419,319 4,153,846
</TABLE>
- ---------------
(1) Includes in each case a number of shares that may be acquired upon exercise
of Warrants equal to the number of Warrants held by such person and offered
pursuant to this Prospectus.
(2) Does not include shares issued pursuant to the Plan of Reorganization for
preexisting claims and interests.
SHARES ELIGIBLE FOR FUTURE SALE
At the Effective Date, assuming no exercise of outstanding warrants to
purchase Common Stock, America West will have 45,000,000 shares of Common Stock
outstanding, including 1,200,000 shares of Class A Common Stock and 43,800,000
shares of Class B Common Stock; the offer and sale of 15,975,000 of such shares
of Common Stock is registered under the Securities Act pursuant to the
Registration Statement of which this Prospectus forms a part. In addition, at
the Effective Date, America West will have 10,384,615 shares of Class B Common
Stock reserved for issuance upon the exercise of Warrants; the offer and sale of
4,153,846 of such shares is registered pursuant to the Registration Statement of
which this Prospectus forms a part.
At the Effective Date, substantially all of the outstanding shares of
Common Stock and shares of Common Stock issuable upon exercise of the Warrants
(except to the extent such shares may have been acquired by an underwriter) will
be freely tradeable without restriction or further registration under the
Securities Act, either because such shares were issued or are issuable pursuant
to the exemption provided by Section 1145 of the Bankruptcy Code and such shares
are not "restricted securities" as defined in Rule 144 under the Securities Act
or because the offer and resale of such shares is registered pursuant to the
Registration Statement of which this Prospectus forms a part. To the extent
shares of Common Stock are owned or purchased by "affiliates" of the Company as
such term is defined in Rule 144 and are not registered
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<PAGE> 58
pursuant to the Registration Statement of which this Prospectus forms a part,
such restricted shares may generally be sold in compliance with Rule 144.
In general under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons deemed to be affiliates, whose
restricted securities have been fully paid for and held for at least two years
from the later of the date of acquisition from America West or an affiliate
thereof, may sell such securities in brokers' transactions or directly to market
makers, provided the number of shares sold in any three-month period does not
exceed the greater of 1% of the then outstanding shares of the Common Stock or
the average weekly trading volume in the public market during the four calendar
weeks immediately preceding the filing of the seller's Form 144. Sales under
Rule 144 are also subject to certain notice requirements and availability of
current public information concerning America West. Pursuant to Rule 144(k),
after three years have elapsed from the later of the acquisition of the
restricted securities from America West or an affiliate thereof, such shares may
be sold without limitation by persons who have not been affiliates of America
West for at least three months.
AmWest, Fidelity, Lehman and GPA have certain rights pursuant to agreements
with the Company to have the offering and sale of Securities held by them
registered with the Commission under the Securities Act. Under such agreements,
the Company may be required to effect such registration for a period of years
from the Effective Date.
Prior to this offering, there has been no market for the Common Stock of
America West. Future sales of substantial amounts of Common Stock in the public
market could adversely affect prevailing market prices.
DESCRIPTION OF THE SENIOR NOTES
The Senior Notes will be issued under an Indenture dated as of
, 1994 (the "Indenture") between the Company and American Bank
National Association, as trustee (the "Trustee"). The material provisions of the
Senior Notes and the Indenture are summarized below. The statements under this
caption relating to the Senior Notes and the Indenture are summaries only,
however, and do not purport to be complete. Such summaries make use of terms
defined in the Indenture and are qualified in their entirety by express
reference to the Indenture, which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. All section
references under this heading are references to sections of the Indenture.
GENERAL
Each Senior Note will mature on September 1, 2001, and will bear interest
at the rate per annum stated on the cover page hereof from the date of issuance,
payable semiannually in arrears on March 1 and September 1 of each year,
commencing March 1,1995, to the person in whose name the Senior Note is
registered at the close of business on the record date next preceding such
interest payment date. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. The Company will pay the principal on the Senior Notes
to each Holder who surrenders such Senior Notes to a Paying Agent on or after
September 1, 2001 or, in the event of a redemption of the Senior Notes, on or
after the Redemption Date, as described below. The Company will pay principal
and interest in U.S. legal tender by Federal funds bank wire transfer or (in the
case of payment of interest) by check to the persons who are registered Holders
at the close of business on the Record Date next preceding the applicable
interest payment date. The aggregate principal amount of the Senior Notes that
may be issued will be limited to $100,000,000.
The Senior Notes will be transferable and exchangeable at the office of the
Registrar and any co-registrar and will be issued in fully registered form,
without coupons, in denominations of $1,000 and any whole multiple thereof;
provided, however, that any Global Security representing all or a portion of the
Senior Notes may not be transferred except as a whole by the Depository in
certain circumstances unless and until it is exchanged in whole or in part for
Senior Notes in a non-global form. The Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection with certain transfers and exchanges.
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<PAGE> 59
RANKING
The Senior Notes will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with the Company's existing and future
senior unsecured obligations.
OPTIONAL REDEMPTION
The Company, at its option on notice to the Holders, may redeem the Senior
Notes (i) prior to September 1, 1997 (A) at any time in whole but not in part,
at a Redemption Price equal to 105% of the aggregate principal amount of the
Senior Notes, plus accrued and unpaid interest thereon to the Redemption Date,
or (B) from time to time in part from the Net Offering Proceeds received by the
Company prior to , 1997 from a Public Offering Sale at a Redemption
Price equal to 105% of the aggregate principal amount of the Senior Notes so
redeemed, plus accrued and unpaid interest thereon to the Redemption Date; and
(ii) on and after September 1, 1997 at any time in whole or from time to time in
part, at a Redemption Price equal to the applicable percentage of the aggregate
principal amount of the Senior Notes so to be redeemed, set forth below, plus
accrued and unpaid interest thereon to the Redemption Date if redeemed during
the 12 calendar months beginning on of the years indicated below:
1997: 105.0%
1998: 103.3%
1999: 101.7%
2000: 100.0%
MANDATORY REDEMPTION
If the Company shall consummate a Public Offering Sale at any time or from
time to time prior to , 1997, it shall, promptly after each Public
Offering Sale so consummated at a time when, immediately prior to such
consummation, the Company shall have on hand cash and Cash Equivalents, not
subject to any restriction on disposition, of at least $100,000,000, then the
Company shall redeem Senior Notes at a redemption price equal to 104% of the
aggregate principal amount of the Senior Notes so redeemed, plus accrued and
unpaid interest to the redemption date. The aggregate redemption price and
accrued and unpaid interest of the Senior Notes to be redeemed shall equal the
lesser of (x) 50% of such Net Offering Proceeds or (y) the excess, if any, of
$20,000,000 over (ii) the amount of any Net Offering Proceeds of any prior
Public Offering Sale received prior to , 1997, and applied to redeem
Senior Notes as described therein.
The Senior Notes will not be entitled to the benefit of any sinking fund or
other mandatory redemption provisions.
CERTAIN COVENANTS
Limitations on Restricted Payments. Under the terms of the Indenture,
neither the Company nor any subsidiary shall: (i) declare or pay any dividends
on or make any distributions in respect of Capital Stock of the Company (other
than dividends or distributions payable solely in shares of Capital Stock (other
than redeemable stock) or in options, warrants or other rights to purchase
Capital Stock (other than Redeemable Stock)) to holders of Capital Stock of the
Company, (ii) purchase, redeem or otherwise acquire or retire for value (other
than through the issuance solely of Capital Stock (other than Redeemable Stock))
or warrants, rights or options to acquire Capital Stock other than Redeemable
Stock; (iii) redeem, repurchase, defease (including, but not limited to, in
substance or legal defeasance), or otherwise acquire or retire for value (other
than through the issuance solely of Capital Stock (other than Redeemable Stock)
or warrants, rights or options to acquire Capital Stock (other than Redeemable
Stock)) (collectively, a "prepayment"), directly or indirectly (including by way
of amendment of the terms of any Indebtedness in connection with any retirement
or acquisition of such Indebtedness) other than at scheduled maturity thereof or
by any scheduled repayment or scheduled sinking fund payment, any indebtedness
of the Company which is subordinated in right of payment to the Senior Notes or
which matures after the maturity date of the Senior Notes except out of the
proceeds of Refinancing Indebtedness); if, at the time of such transaction
described in clause (i), (ii) or (iii) (such transactions being hereinafter
collectively referred to as "Restricted Payments") and after giving
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<PAGE> 60
effect thereto, either the aggregate amount expended by the Company and its
Subsidiaries for all Restricted Payments (the amount of any Restricted Payment
if other than cash to be the fair market value of the property included in such
payment as determined in good faith by the Board of Directors as evidenced by a
Board Resolution) from and after the Closing Date shall exceed the sum of (A)
50% (or if the Senior Notes at the time of the proposed Restricted Payment are
rated Investment Grade by at least one rating agency of recognized standing
selected by the Company, 75%) of the aggregate Adjusted Consolidated Net Income
(or if such Adjusted Consolidated Net Income is a loss, minus 100% of such loss)
of the Company and its Subsidiaries for the period from the Closing Date and
through the day immediately prior to the day on which the Restricted Payment
occurs, calculated on a cumulative basis as if such period were a single
accounting period; (B) the aggregate net proceeds received by the Company after
the Closing Date (including the fair market value of non-cash proceeds as
determined in good faith by the Board of Directors as evidenced by a Board
Resolution) from any Person other than a Subsidiary, as a result of the issuance
of (or contribution to capital on) Capital Stock (other than any Redeemable
Stock) or warrants, rights or options to acquire Capital Stock (other than any
Redeemable Stock); (C) the aggregate net proceeds received by the Company after
the Closing Date from any Person other than a Subsidiary as a result of the
issuance of Capital Stock (other than Redeemable Stock) upon conversion or
exchange of Indebtedness or upon exercise of options, warrants or other rights
to acquire such Capital Stock and (D) $25,000,000. For purposes of any
calculation that is required to be made in respect of, or after the declaration
of a dividend by the Company, such dividend shall be deemed to be paid at the
date of declaration and shall be included in determining the aggregate amount of
Restricted Payments, and the subsequent payment of such dividend shall not be
treated as an additional payment.
For the purposes of the preceding covenant, the net proceeds from the
issuance of shares of Capital Stock of the Company upon conversion of debt
securities shall be deemed to be an amount equal to the net book value of such
debt securities (plus the additional amount required to be paid upon such
conversion, if any), less any cash payment on account of fractional shares; the
"net book value" of a security shall be the net amount received by the Company
on the issuance of such security, as adjusted on the books of the Company to the
date of conversion.
Notwithstanding the foregoing, if no Default or Event of Default shall have
occurred or be continuing at the time the Indenture shall not prohibit (i) the
purchase, redemption or other acquisition or retirement for value of any shares
of the Company's Capital Stock or the prepayment of any indebtedness of the
Company which is subordinated in right of payment to the Senior Notes or which
matures after the maturity date of the Senior Notes by any exchange for, or out
of and to the extent the Company has received cash proceeds from the
substantially concurrent sale or issuance (other than to a Subsidiary) of,
shares of Capital Stock (other than any Redeemable Stock of the Company) or
warrants, rights or options to acquire Capital Stock (other than any Redeemable
Stock); or (ii) the purchase or redemption of shares of Capital Stock of the
Company (including options on any such shares or related stock appreciation
rights or similar securities) held by officers or employees of the Company or
its Subsidiaries (or their estates or beneficiaries under their estates) upon
death, disability, retirement, termination of employment or pursuant to the
terms of any Plan or any other agreement under which such shares of stock or
related rights were issued, provided that the aggregate amount of such purchases
or redemptions of such Capital Stock shall not exceed $3,000,000 in any one
fiscal year of the Company.
Limitation on Transactions with Affiliates. Neither the Company nor any
Subsidiary of the Company shall, directly or indirectly (i) sell, lease,
transfer or otherwise dispose of any of its properties or assets, or issue
securities to, (ii) purchase any property, assets or securities from, (iii) make
any Investment in, or (iv) enter into or suffer to exist any contract or
agreement with or for the benefit of, an Affiliate or Holder of 5% or more of
any class of Capital Stock (and any Affiliate of such Holder) of the Company (an
"Affiliate Transaction"), other than (x) certain permitted Affiliate
Transactions and (y) Affiliate Transactions (including lease transactions) which
are on fair and reasonable terms no less favorable to the Company or such
Subsidiary, as the case may be, as those as might reasonably have been
obtainable at such time from an unaffiliated party; provided that if an
Affiliate Transaction or series of related Affiliate Transactions involves or
has a value in excess of $10 million, the Company or such Subsidiary, as the
case may be, shall not enter into such Affiliate Transaction or series of
related Affiliate Transactions unless a majority of the disinterested members of
the
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<PAGE> 61
Board of Directors of the Company or such Subsidiary shall reasonably and in
good faith determine that such Affiliate Transaction is fair to the Company or
such Subsidiary, as the case may be, or is on terms no less favorable to the
Company or such Subsidiary, as the case may be, than those as might reasonably
have been obtainable at such time from an unaffiliated party.
(b) The preceding paragraph shall not apply to (i) any agreement as in
effect as of the Closing Date, or any amendment thereto (including pursuant to
any amendment thereto) so long as any such amendment is not disadvantageous to
the Holders in any material respect or any transaction contemplated thereby
(including pursuant to any amendment thereto); (ii) any transaction between the
Company and any Wholly Owned Subsidiary or between Wholly Owned Subsidiaries,
provided such transactions are not otherwise prohibited by this Indenture; (iii)
reasonable and customary fees and compensation paid to, and indemnity provided
on behalf of, officers, directors, employees or consultants of the Company or
any Subsidiary, as determined by the Board of Directors of the Company or any
Subsidiary or the senior management thereof in good faith; (iv) any Restricted
Payments not prohibited in Section 4.13; (v) any payments or other transactions
pursuant to any tax sharing agreement between the Company and any other Person
with which the Company is required or permitted to file a consolidated tax
return or with which the Company is or could be part of a consolidated group for
tax purposes; and (vi) transactions with Continental, Mesa and their respective
Affiliates as contemplated by Alliance Agreements.
Limitation on Asset Sales. Subject to certain provisions of the Indenture,
in the event and to the extent that on any date the Company or any of its
Subsidiaries shall receive Net Cash Proceeds from one or more Asset Sales (other
than Asset Sales by the Company or any Subsidiary to the Company or another
Subsidiary) then the Company shall, or shall cause such Subsidiary to, within 12
months after such date apply an amount equal to such Net Cash Proceeds (A) and
to repay Indebtedness of the Company or Indebtedness of any Subsidiary, in each
case owing to a Person other than the Company or any of its Subsidiaries, and/or
(B) as an investment (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement), in property or assets
of a nature or type or that are used in a business (or in a Person having
property and assets of a nature or type, or engaged in a business) similar or
related to the nature or type of the property and assets of, or the business of,
the Company and its Subsidiaries existing on the date thereof (as determined in
good faith by the Board of Directors of the Company or such Subsidiary, as the
case may be, whose determination shall be conclusive and evidenced by a Board
Resolution). The amount of such Net Cash Proceeds required to be applied (or to
be committed to be applied) during such 12-month period as set forth in clause
(A) or (B) of the preceding sentence shall constitute "Excess Proceeds."
If on the first Business Day following any 12-month period referred to in
the preceding paragraph, the aggregate amount of Excess Proceeds from all Asset
Sales subject to application but not previously applied during such 12-month
period as provided in clause (A) or (B) of the preceding paragraph, exceeds
$15,000,000, the Company, within 10 Business Days thereafter, shall make an
offer to purchase on a pro rata basis from all Holders (an "Excess Proceeds
Offer"), and shall purchase from Holders accepting such Excess Proceeds Offer,
the maximum principal amount (expressed as an integral multiple of $1,000) of
Senior Notes that may be purchased from funds in an amount equal to all such
outstanding Excess Proceeds at a purchase price equal to 100% of the principal
amount of the Senior Notes so purchased plus accrued and unpaid interest thereon
to the date of purchase ("Excess Proceeds Payment"). Upon completion of an
Excess Proceeds Offer (or upon termination of such offer if no repurchases are
required), the amount of such Excess Proceeds relating thereto shall be equal to
zero.
Change of Control. Upon a Change of Control, each Holder shall have the
right to require the Company to repurchase all or any part of such Holder's
Senior Notes at a repurchase price equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase. Within 30
days following any Change of Control, the Company shall mail a notice to each
Holder stating: (i) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase all or any part of such
Holder's Senior Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase; (ii) the circumstances and relevant facts regarding such Change of
Control; (iii) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed; and (iv) the
instructions that the Company determines that a Holder
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<PAGE> 62
must follow to have its Senior Notes repurchased. Holders electing to have a
Senior Note purchased will be required to surrender the Senior Note, with an
appropriate form duly completed, to the Company at the address specified in the
notice at least 10 business days prior to the purchase date. Holders will be
entitled to withdraw their election as specified in the notice.
Limitation on Investments. The Company shall not, and shall not permit any
Subsidiary to make any Investment other than (i) Investments consisting of
non-cash proceeds from Asset Sales as contemplated by the Indenture; (ii)
Investments consisting of cash equivalents; (iii) accounts receivable if
credited or acquired in the ordinary course of business; (iv) payroll advances
and advances for business and travel expenses in the ordinary course of
business; (v) Investments by the Company in its Subsidiaries in the ordinary
course of its business; (vi) Investments by any Subsidiary of the Company in the
Company or in any Subsidiary; (vii) Investments by the Company for the purpose
of acquiring businesses reasonably related to the business of the Company, in an
aggregate amount not exceeding $5 million in any fiscal year; (viii) Investments
made by way of endorsement of negotiable instruments received by the Company or
any Subsidiary in the ordinary course of business; (ix) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business owing to the Company or any Subsidiary; (x) Investments by the Company
for the purpose of receivables financing; and (xi) in addition to any other
permitted investments, any other Investments by the Company in an aggregate
amount not exceeding $1 million at any time.
LIMITATIONS ON MERGERS AND CONSOLIDATION
The Indenture provides that the Company will not consolidate with or merge
into any other corporation, or transfer, lease or convey its properties and
assets substantially as an entirety (the "Properties") to any Person, unless:
(i) the corporation formed by such consolidation or merger or the Person that
acquires by transfer, lease or conveyance the Properties (collectively, the
"Successor"), is a corporation organized and existing under the laws of the
United States of America or any State thereof or the District of Columbia and
the Successor assumes by supplemental indenture in a form satisfactory to the
Trustee the Company's obligation for the due and punctual payment of the
principal of and interest on all the Senior Notes according to their tenor and
the performance of every covenant of the Indenture on the part of the Company to
be performed or observed; and (ii) immediately before and after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, lease or transfer and such Supplemental Indenture comply
with Article Six of the Indenture and that all conditions precedent set forth in
the Indenture relating to such transaction have been complied with.
CERTAIN DEFINITIONS
The following is a summary of certain defined terms to be used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms and for the definitions of other capitalized terms used herein and
not defined below.
"Adjusted Consolidated Net Income" means, for any Person for any period,
the aggregate net income (or loss) of such Person and its consolidated
Subsidiaries for such period determined in occurrence with GAAP; provided that
the following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication): (i) the net income (or loss) of any Person (other
than a Subsidiary of such first Person) in which any other Person (other than
such first Person or any of its Subsidiaries) has a joint or shared interest,
except to the extent of the amount of dividends or other distributions actually
paid to and received by such first Person or any of its Subsidiaries during such
period out of funds legally available therefor, (ii) the net income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of such first
Person or any of its Subsidiaries or all or substantially all of the property
and assets of such Person are acquired by such first Person or any of its
Subsidiaries, (iii) the net income (or loss) of any Subsidiary of such Person
that is subject to a Payment Restriction, except to the extent of the amount of
cash dividends or other distributions actually paid to, and received by, such
person or any of its Subsidiaries during such period from such Subsidiary out of
funds legally available therefor, (iv) any gains or losses (on an after-tax
basis) attributable to Asset Sales, and (v) all extraordinary gains and
extraordinary losses.
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"Affiliates" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transactions) in one transaction
or a series of related transactions by the Company or any of its Subsidiaries to
any Person other than the Company or any of its Subsidiaries of (i) all or any
of the Capital Stock of any Subsidiary of the Company, (ii) all or substantially
all of the property and assets of an operating unit or business of the Company
or any of its Subsidiaries or (iii) any other property and assets of the Company
or any of its Subsidiaries outside the ordinary course of business of the
Company or such Subsidiary and, in each case, that is not governed by the
provisions of Article Six of the Indenture applicable to mergers, consolidations
and transfers of all or substantially all of the property and assets of the
Company; provided that none of (A) sales or other dispositions of inventory,
receivables and other current assets, (B) sale or other dispositions of surplus
equipment, spare parts, expandable inventories, furniture or fixtures in an
aggregate amount not to exceed $10,000,000 in any fiscal year of the Company,
(C) sale leasebacks of aircraft and engines passenger loading bridges or other
flight or ground equipment, flight simulators, or the Company's reservation
facility located at 222 South Mill Avenue, Tempe, Arizona; or (D) $20,000,000 of
other sales in any fiscal year of the Company shall be included within the
meaning of "Asset Sale".
"Change of Control" means (i) the acquisition at any time by any Person
(other than one or more Permitted Holders), of "beneficial ownership" (within
the meaning of Section 13(d) under the Exchange Act and the rules and
regulations promulgated thereunder) in excess of 50% of the total voting power
of the voting stock of the Company; (ii) the sale, lease, transfer or other
disposition, of all or substantially all of the assets of the Company to any
Person (other than one or more Permitted Holders) as an entirety or
substantially as an entirety in one transaction or a series of related
transactions; (iii) the merger or consolidation of the Company, with or into
another corporation, or the merger of another corporation into the Company, or
any other transaction, with the effect that a Person (other than one or more
Permitted Holders), has "beneficial ownership" (within the meaning of Section
13(d) under the Exchange Act and the rules and regulations promulgated
thereunder) in excess of 50% of the voting stock of the Company, or such other
corporation, as the case may be (including indirect ownership through another
Person other than one or more Permitted Holders); or (iv) the liquidation or
dissolution of the Company. For purposes of this definition, the term Person
includes a "person" within the meaning of Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder.
"Commodity Agreement" means any agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in the
prices of commodities used by the Company or any of its Subsidiaries in the
ordinary course of its business.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to or
under which the Company or any of its Subsidiaries is a party or a beneficiary
on the date of the Indenture or becomes a party or a beneficiary thereafter.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, Senior Notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all obligations
of such Person to pay the deferred and unpaid purchase price of property or
services, except trade payables, (v) all obligations of such Person to the
extent capitalized on the balance sheet of such Person as lessee under
Capitalized Leases, (vi) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of
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determination and (B) the stated principal amount of such Indebtedness, (vii)
all Indebtedness of other Persons guaranteed by such Person to the extent such
Indebtedness is guaranteed by such Person, (viii) to the extent not otherwise
included in this definition, obligations under Currency Agreements, Interest
Risk Agreement and Commodity Agreements. The amount of Indebtedness of any
Person of any date shall be the outstanding balance on such date of all
unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations at such date; provided that the amount outstanding at any time of
any Indebtedness issued with original issue discount is the full amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness of such time as determined in conformity with
GAAP.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business consistent with past practices that are recorded as accounts receivable
on the balance sheet of such Person or its Subsidiaries) or other extension of
credit or capital contribution by such Person to any other Person (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others; provided, that any transfer of
aircraft to a limited partnership or other entity in connection with the
transaction in which the aircraft are leased to the Company shall not be an
Investment), or any purchase or acquisition by such person of Capital Stock,
bonds, notes, debentures or other similar instruments issued by any other
Person.
"Interest Rate Agreement" means any interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement designed to protect the Company or any of
its Subsidiaries against fluctuations in interest rates to or under which the
Company or any of its Subsidiaries is a party or a beneficiary on the date of
the Indenture or becomes a party or a beneficiary thereafter.
"Investment Grade" means a rating of BBB- or higher by S&P or BaaB or
higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the
event that the Company shall select any other rating agency, the equivalent of
such ratings by such rating agency shall be used.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest); provided that in no event shall a true operating
lease be deemed to constitute a Lien hereunder.
"Material Subsidiary" means each Subsidiary that is either (a) a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the
Securities Act and the Exchange Act (as such regulation is in effect on the dtae
hereof) or (b) material to the financial condition or results of operations of
the Company and its Subsidiaries taken as a whole.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds of
such Asset Sale in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company) and proceeds
from the conversion of other property received when converted to cash or Cash
Equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale
without regard to the consolidated results of operations of the Company and its
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such Asset Sale other than pursuant to this Agreement, and (iv)
appropriate amounts to be provided by the Company or any Subsidiary of the
Company as a reserve against any liabilities associated with such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP.
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"Payment Restriction" means, with respect to a Subsidiary of any Person,
any encumbrance, restriction or limitation, whether by operation of the terms of
its charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such Subsidiary
to (a) pay dividends or make other distributions on its Capital Stock or make
payments on any obligation, liability or Indebtedness owed to such Person or any
other Subsidiary of such Person, (b) make loans or Advances to such Person or
any other Subsidiary of such Person, or (c) transfer any of its property or
assets to such Person or any other Subsidiary of such Person, or (ii) such
Person or other Subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or (c) property or
assets.
"Permitted Holders" means AmWest Partners, L.P., TPG Partners L.P.,
Continental Airlines, Inc., Mesa Airlines, Inc., funds or accounts managed or
advised by Fidelity Management Trust Company and its affiliates, and their
respective successors and affiliates.
"Public Offering Sale" means an underwritten public offering of Capital
Stock of the Company pursuant to which the Company agreed to issue and sell and
the Purchasers named in such agreement agreed to purchase, an aggregate of
$100,000,000 in principal amount of Securities.
"Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise (i) is required to be redeemed prior to the
Stated Maturity of the Securities, (ii) may be required to be redeemed at the
option of the holder of such class or series of Capital Stock at any time prior
to the Stated Maturity of the Securities or (iii) is convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
indebtedness having a scheduled maturity prior to the Stated Maturity of the
Securities; provided that any Capital Stock that would not constitute Redeemable
Stock but for provisions thereof offering holders thereof the right to require
the Company to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" occurring prior to the Stated Maturity of the Securities shall not
constitute Redeemable Stock if the asset sale provisions contained in such
Capital Stock specifically provide that in respect of any particular asset sale
proceeds, the Company will not repurchase or redeem any such Capital Stock
pursuant to such provisions prior to the Company's repurchase of such Securities
as are required to be repurchased from Holders accepting an Excess Proceeds
Offer pursuant to the provisions of Section 4.15.
"Refinancing Indebtedness" means any Indebtedness of the Company or any
Subsidiary issued in exchange for, or the net proceeds of which are applied
entirely to substantially concurrently repay, refinance, refund or replace,
outstanding Indebtedness of the Company or any of its Subsidiaries (the
"Refinanced Indebtedness"), to the extent such Indebtedness
(a) is issued in a principal amount (or if such Indebtedness is issued
at an original issue discount, is issued at an original issue price) not
exceeding the outstanding principal amount (or, if such Refinanced
Indebtedness was issued at an original issue discount, not exceeding the
outstanding accreted principal amount) of such Refinanced Indebtedness, and
(b) if the Refinanced Indebtedness is Indebtedness of the Company and
ranks by its terms junior in right of payment to the Securities, (i) does
not have a final scheduled maturity and is not subject to any principal
payments, including but not limited to payments upon mandatory or optional
redemption, prior to the dates of analogous payments under the Refinanced
Indebtedness, and (ii) has subordination provisions effective to
subordinate such Indebtedness to the Securities at least to the extent that
such Refinanced Indebtedness is subordinated to the Securities, and
(c) if the Refinanced Indebtedness is Indebtedness of the Company and
ranks by its terms pari passu in right of payment with the Securities, (i)
is pari passu or subordinated in right of payment to the Securities, (ii)
does not have a final scheduled maturity and is not subject to any
principal payments, including but not limited to payments upon mandatory or
optional redemption, prior to the dates of analogous payments under the
Refinanced Indebtedness, and (iii) is not secured by any Lien on any
property of the Company or any Subsidiary in addition to Liens securing the
Refinanced Indebtedness.
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EVENTS OF DEFAULT
An Event of Default, with respect to the Senior Notes, means any one of the
following events shall have occurred and be continuing: (i) default by the
Company for 30 days in payment of any interest on the Senior Notes; (ii) default
by the Company in any payment of principal of or premium, if any, on the Senior
Notes when such payment becomes due and payable; (iii) default by the Company in
performance of any other covenant or agreement in the Indenture or under the
Senior Notes, which shall not have been remedied within 30 days after receipt of
written notice from the Trustee or from the holders of at least 25% in principal
amount of the Senior Notes then outstanding; (iv) upon an event of default
resulting in the acceleration of the maturity of any issue or issues of
Indebtedness of the Company and/or one or more Subsidiaries of any principal
amount of $10 million or more in the aggregate, and such default shall be
continuing for a period of 30 days without the Company or such Subsidiary, as
the case may be, discharging the Indebtedness or effecting a cure of such
default; (v) a judgment or order not covered by insurance for the payment of
money in excess of $10 million having been rendered against the Company or any
Subsidiary and such judgment or order shall continue unsatisfied and unstayed
for a period of 60 days; or (vi) certain events involving bankruptcy, insolvency
or reorganization of the Company or any Material Subsidiary; (vii) failure by
the Company to make at the final (but not any interim) fixed maturity of one or
more issues of Indebtedness a principal payment or principal payments
aggregating 10 million or more, which failure shall not have been remedied
within 30 days of the payment default that causes the aggregate amount of such
indebtedness to exceed $10 million, or (viii) the cessation of the full force
and effect of the Indenture, except as permitted therein. The Trustee may
withhold notice to the holders of the Senior Notes of any default or Event of
Default (except in payment of principal of, or premium, if any, or interest on
the Notes) if the Trustee considers it in the interest of the holders of the
Senior Notes to do so.
If an Event of Default occurs and is continuing with respect to the
Indenture, the Trustee or the Holders of not less than 25% in principal amount
of the Senior Notes outstanding may, and at the request of the Holders, the
Trustee shall declare the principal of and premium, if any, and accrued but
unpaid interest on all the Senior Notes to be due and payable. Upon such a
declaration, such principal, premium, if any, and interest will be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company or any Material
Subsidiary occurs and is continuing, the principal of and premium, if any, and
interest on all the Senior Notes will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders
of the Senior Notes. If an Event of Default relating to item (iv) in the
preceding paragraph occurs, such acceleration will be automatically rescinded if
the Event of Default is cured by the Company or waived by the holders of the
relevant Indebtedness within 30 days after the occurrence of the Event of
Default. Under certain circumstances, the holders of a majority in principal
amount of the outstanding Senior Notes may rescind any such acceleration with
respect to the Senior Notes and its consequences.
The Indenture provides that no Holder may pursue any remedy under the
Indenture unless (i) the Trustee shall have received written notice from the
Holder of a continuing Event of Default, (ii) the Trustee shall have received a
request from holders of at least 25% in principal amount of the Senior Notes to
pursue such remedy, (iii) the Trustee shall have been offered indemnity
reasonably satisfactory to it, (iv) the Trustee shall have failed to act for a
period of 60 days after receipt of such notice and offer of indemnity, and (v)
during such 60-day period, a majority of the Holders do not give the Trustee
directions inconsistent with the initial request; however, such provision does
not affect the right of a holder of a Note to sue for enforcement of any overdue
payment thereon.
The holders of a majority in principal amount of the Senior Notes then
outstanding have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee under the
Indenture, subject to certain limitations specified in the Indenture. The
Indenture will require the annual filing by the Company with the Trustee of a
written statement as to compliance with the covenants contained in the
Indenture.
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MODIFICATION AND WAIVER
The Indenture provides that supplements and amendments to the Indenture or
the Senior Notes may be made by the Company, and the Trustee with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Senior Notes then outstanding; provided that no such amendment or waiver
may, without the consent of each Holder affected, (i) reduce the principal
amount of Senior Notes whose Holders must consent to an amendment, supplement or
waiver, (ii) reduce the principal of or change the fixed maturity of any Senior
Note, or alter the provisions with respect to the redemption of the Senior Notes
in a manner adverse to the Holders, (iii) reduce the rate of or change the time
for payment of interest on any Senior Note, (iv) make any Senior Note payable in
money other than U.S. Legal Tender, (v) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders to
receive payments of principal of, or premium, if any, or interest on, the Senior
Notes, (vi) waive a redemption payment with respect to any Senior Notes, or
(vii) make any change in certain sections of the Indenture.
The Indenture provides that supplements and amendments to the Indenture may
be made by the Company and the Trustee without the consent of any Holder to: (i)
cure any ambiguity, correct or supplement any provision therein which may be
inconsistent with any other provision therein, or to make any other provisions
with respect to matters or questions arising under the Indenture which shall not
be inconsistent with the provisions of the Indenture, provided that such
amendment does not adversely affect the rights of the Holders, (ii) evidence the
succession of another corporation to the Company, and provide for the assumption
by such successor of the Company's obligations to the Holders under the
Indenture and the Senior Notes, (iii) to provide for uncertificated Senior Notes
in addition to or in place of certificated Senior Notes, (iv) make any change
that would provide additional rights or benefits to holders, or not adversely
affect the legal rights of the Holder under the Indenture or (v) comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act of 1939.
The Indenture provides that the holders of a majority in aggregate
principal amount of the Senior Notes then outstanding may waive any existing
Default or Event of Default under the Indenture or the Senior Notes, except a
default or Event of Default in the payment of principal, or premium, if any, or
interest.
DISCHARGE AND TERMINATION
The Indenture provides that the Indenture shall cease to be of further
effect (subject to certain exceptions) when (i) all outstanding Senior Notes
theretofore authenticated and delivered (other than destroyed, lost or stolen
Senior Notes that have been replaced or paid) have been delivered to the Trustee
for cancellation or (ii) (A) the Senior Notes mature within one year or all of
them are to be called for redemption within one year under arrangements
satisfactory to the Trustee, (B) the Company irrevocably deposits in trust with
the Trustee during such one-year period, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust funds
solely for the benefit of the Holders, money or U.S. Government Obligations
sufficient to pay principal and interest on the Senior Notes to maturity or
redemption, as the case may be, and to pay all other sums payable by it under
the Indenture or the Senior Notes, (C) no Event of Default with respect to the
Senior Notes shall have occurred and be continuing on the date of such deposit,
(D) such deposit will not result in a breach or violation of, or constitute a
default under, the Indenture or any other agreement or instrument to which the
Company is a party or by which either is bound and (E) the Company has delivered
to the Trustee any required Officers' Certificate and Opinion of Counsel.
GOVERNING LAW
The Indenture and each Senior Note are governed by, and construed in
accordance with, the laws of the State of New York, except as may otherwise be
required by mandatory provisions at law, but without giving effect to principles
of conflicts of law.
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THE TRUSTEE
American Bank National Association will be the Trustee under the Indenture.
Its address is 101 East 5th Street, St. Paul, MN 55101.
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Trust Indenture Act of 1939), it must eliminate such conflict or resign.
The Indenture provides that in case an Event of Default shall occur (and be
continuing), the Trustee will be required to use the degree of care and skill of
a prudent man in the conduct of his own affairs. The Trustee will be under no
obligation to exercise any of its powers under the Indenture at the request of
any of the holders of the Senior Notes, unless such holders shall have offered
the Trustee indemnity reasonably satisfactory to it.
AUTHENTICATION
Two officers of the Company will sign each Senior Note on behalf of the
Company, in each case by manual or facsimile signature. The Company's seal will
be reproduced on each Senior Note and may be in facsimile form. A Senior Note
will not be valid until the Trustee or an Authenticating Agent manually signs
the certificate of authentication on the Senior Note. Each Senior Note will be
dated the date of its authentication.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 1,200,000 shares of
Class A Common Stock, $.01 par value (the "Class A Common Stock "), 100,000,000
shares of Class B Common Stock, $.01 par value (the "Class B Common Stock"),
(such classes of Common Stock referred to collectively as the "Common Stock")
and 48,800,000 shares of preferred stock, $.01 par value (the "Preferred
Stock"). As of the Effective Date, there were 1,200,000 outstanding shares of
Class A Common Stock and 43,800,000 outstanding shares of Class B Common Stock.
The material terms of the Company's capital stock are summarized below. The
following description is a summary only, however, and is not intended to be
complete and is qualified by reference to the provisions of the Company's
Restated Certificate of Incorporation (the "Certificate of Incorporation") and
bylaws and the agreements referred to in this summary description, copies of
each of which have been filed as exhibits to the Registration Statement of which
this Prospectus is a part. As used in this section, except as otherwise stated
or required by context, each reference to AmWest includes any successor by
merger, liquidation, consolidation or similar transaction and any wholly owned
subsidiary of such entity or such successor.
COMMON STOCK -- ALL CLASSES
Holders of Common Stock of all classes participate equally as to any
dividends or distributions on the Common Stock, except that dividends payable in
shares of Common Stock, or securities to acquire Common Stock, are paid in
Common Stock, or securities to acquire Common Stock, of the same class as that
held by the recipient of the dividend. Upon any liquidation, dissolution or
winding up of the Company, holders of Common Stock of all outstanding classes
are entitled, subject to the rights of preferred Stockholders, if any, to
receive pro rata all of the assets of the Company available for distribution to
the stockholders. Holders of Common Stock have no preemptive, subscription,
conversion or redemption rights (other than conversion rights of AmWest and GPA
described below), and are not subject to further calls or assessments. Holders
of Common Stock have no right to cumulate their votes in the election of
directors. The Common Stock votes together as a single class, subject to the
right to a separate class vote in certain instances required by law.
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CLASS B COMMON STOCK AND CLASS A COMMON STOCK
The holders of Class B Common Stock are entitled to one vote per share, and
the holders of Class A Common Stock are entitled to fifty votes per share, on
all matters submitted to a vote of common stockholders, except that voting
rights of non-U.S. citizens are limited as set forth below under "-- Limitation
on Voting by Foreign Owners."
As set forth under the heading "Principal Stockholders," AmWest currently
owns in the aggregate 100% of the outstanding Class A Common Stock and % of
the outstanding Class B Common Stock, which collectively represent approximately
% of the total voting power of the outstanding Common Stock. In addition,
AmWest holds Warrants to acquire an additional 2,769,231 shares of Class B
Common Stock that, if exercised, would increase AmWest's voting control to %.
See "Principal Stockholders -- Stockholders' Agreement" below for a discussion
of arrangements regarding the composition of the Board of Directors of the
Company.
Holders of Class A Common Stock may at any time elect to convert such
shares into an equal number of shares of Class B Common Stock. Class B Common
Stock is not convertible into Class A Common Stock.
PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Company is
authorized to issue 48,800,000 shares of Preferred Stock. The Company's Board of
Directors by resolution may authorize the issuance of the Preferred Stock as a
class, in one or more series, having the number of shares, designations,
relative voting rights, dividend rights, liquidation and other rights
preferences, and limitations that the Board of Directors fixes without any
stockholder approval. No shares of Preferred Stock have been issued.
LIMITATION ON VOTING BY FOREIGN OWNERS
The Certificate of Incorporation defines "Foreign Ownership Restrictions"
as "applicable statutory, regulatory and interpretive restrictions regarding
foreign ownership or control of U.S. air carriers (as amended or modified from
time to time)." Such restrictions currently require that no more than 25% of the
voting stock of the Company be owned or controlled, directly or indirectly, by
persons who are not U.S. citizens ("Foreigners") for purposes of the Foreign
Ownership Restrictions, and that the Company's president and at least two-thirds
of its directors be U.S. citizens. The Certificate of Incorporation provides
that no shares of capital stock may be voted by or at the direction of
Foreigners, unless such shares are registered on a separate stock record (the
"Foreign Stock Record"). The Company's bylaws further provide that no shares
will be registered on the Foreign Stock Record if the amount so registered would
exceed the Foreign Ownership Restrictions. Registration on the Foreign Stock
Record is made in chronological order based on the date the Company receives a
written request for registration.
LIMITATION OF DIRECTOR LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation and Restated Bylaws
(collectively, the "Charter Documents") provide, to the fullest extent permitted
by Delaware law as it may from time to time be amended, that no director shall
be liable to the Company or any stockholder for monetary damages for breach of
fiduciary duty as a director. Delaware law currently provides that such waiver
may not apply to liability (i) for any breach of the director's duty of loyalty
to the Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law (governing
distributions to stockholders), or (iv) for any transaction from which the
director derived any improper personal benefit. The Charter Documents further
provide that the Company will indemnify each of its directors and officers to
the full extent permitted by Delaware law and may indemnify certain other
persons as authorized by law.
Additionally, America West has entered into written agreements with each
person who served as a director or executive officer of America West as of the
date of the Investment Agreement providing for similar indemnification of such
person and that no recourse or liability whatsoever with respect to the
Investment
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Agreement, the Plan or consummation of the transactions contemplated thereby
shall be had by or in the right of America West against such person.
DELAWARE BUSINESS COMBINATION STATUTE
Pursuant to the Plan, the Company has elected not to be governed by Section
203 of the Delaware General Corporation Law ("DGCL"). In general, Section 203 of
the DGCL prohibits a Delaware corporation from entering into a "business
combination" with an "interested stockholder" for a period of three years unless
certain exceptions are applicable. Pursuant to the statute, the Company's
election not to be governed by Section 203 will not become effective until the
first anniversary date of the Effective Date.
By opting out of Section 203, America West may be foregoing certain
"anti-takeover" protections that may otherwise be available to it under Section
203 in the event of an unsolicited takeover offer from a party other than
AmWest. However, given the limited protections provided by Section 203, the
significant holdings of Common Stock by AmWest after the Effective Date and
certain other factors, the Company does not believe that the protections
afforded by Section 203 are very significant or that an unsolicited takeover
offer is likely to occur.
With respect to a possible "business combination" or takeover attempt by
AmWest or its affiliates involving the Company, the protective provisions of
Section 203 would not apply to such a transaction because the Board of Directors
of the Company has previously approved of the transactions contemplated by the
Investment Agreement and otherwise described herein prior to the date such
agreement was entered into and prior to the date that AmWest acquired any shares
of Common Stock. However, pursuant to the Stockholders' Agreement, AmWest will
be precluded from consummating any "Business Combination" (as defined in the
Stockholders Agreement) with the Company for a three-year period commencing on
the Effective Date, unless such transaction is recommended or approved in
advance by at least three Independent Directors or a majority of the Common
Stock of the Company not held by AmWest and its affiliates.
DESCRIPTION OF WARRANTS
GENERAL
The Warrants will be issued under a Warrant Agreement dated on or about
August , 1994 (the "Warrant Agreement") between the Company and First
Interstate of California, N.A. as warrant agent (the "Warrant Agent"). The
material terms of the Warrants and the Warrant Agreement are summarized below.
The statements under this caption relating to the Warrants and the Warrant
Agreement are summaries only, however, and do not purport to be complete. Such
summaries make use of terms defined in the Warrant Agreement and are qualified
in their entirety by express reference to the Warrant Agreement, which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. All section references under this heading are references to sections of
the Warrant Agreement.
Each of the 4,153,846 Warrants offered hereby entitles the registered
holder to purchase from the Company one share of Class B Common Stock for
$ , subject to adjustment as provided in the Warrant Agreement, at any
time after the Effective Date and before the fifth anniversary of the Effective
Date (the "Expiration Date"). (Section 3.01)
CERTAIN TERMS OF THE WARRANTS
Exercise of Warrants. Warrants may be exercised by surrendering the
Warrant Certificate evidencing such Warrants at the Warrant Agent's Office with
the Election to Exercise form duly completed and executed. Surrendered Warrant
Certificates must be accompanied by payment in full to the Warrant Agent for the
account of the Company (i) in cash, (ii) by certified or official bank check or
(iii) by any combination of (i) or (ii) the Warrant Price for each share of
Class B Common Stock as to which Warrants are exercised and any applicable taxes
that the Company is not required to pay as set forth in Sections 4.08 or 6.01.
(Section 3.02(a)).
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The Company will not be required to issue fractional shares of Class B
Common Stock upon the exercise of the Warrants. In lieu thereof, the Company, at
its option, may purchase the fraction for an amount in cash equal to the
then-current market value of the fraction (as defined in Section 4.01(d)) or
issue scrip of the Company that is non-dividend bearing and non-voting and
exchangeable in combination with other similar scrip for the number of full
shares of Class B Common Stock represented thereby. (Section 3.03)
The Company has the right, except as limited by law or other agreement, to
purchase or otherwise acquire Warrants at such times, in such manner and for
such consideration as it may deem appropriate. (Section 3.04)
The Company will, at all times, reserve and keep available free of
preemptive rights out of its authorized and unissued Class B Common Stock, the
full number of shares of Class B Common Stock, if any, issuable if all
outstanding Warrants then exercisable were to be exercised. Any shares of Class
B Common Stock issued upon a Warrant holder's exercise of any Warrant shall be
validly authorized and issued, fully paid, non-assessable, free of preemptive
rights and free from all taxes (other than those required to be paid by the
holder or its transferees) liens, charges, security interests and claims created
or incurred by the Company in respect of the issuance thereof. (Sections
3.02(b); 4.06)
Adjustment of Warrant Price. The Warrant Price and the number of shares of
Class B Common Stock purchasable upon exercise of each Warrant are subject to
adjustment in certain events, including (a) the payment of a dividend in Common
Stock or certain combinations, subdivisions, or reclassifications of the Common
Stock, (b) the issuance to holders of Common Stock (without any charge to such
holders) of rights, options or warrants entitling the holders thereof to
purchase Common Stock (or securities convertible into Common Stock) at a price
per share less than the then-current market price per share, and (c) certain
distributions by the Company to holders of Common Stock of evidences of its
indebtedness or assets (excluding any cash dividend or distribution out of
retained earnings), all as described in the Warrant Agreement. The Company is
not required to make any adjustment to the Warrant Price unless such adjustment
could require an increase or decrease of at least $ in the Warrant Price
then subject to adjustment; provided, however, that any adjustments that are not
made for this reason must be carried forward and taken into account in any
subsequent adjustment. (Section 4.01) The Company may, at its option, reduce the
Warrant Price at any time.
Rights Upon Consolidation, Merger, Sale, Transfer or Reclassification. In
the event of certain consolidations with or mergers of the Company into another
corporation or in the event of certain leases, sales or conveyances of the
property of the Company to another corporation, the holder of each outstanding
Warrant shall have the right to receive, upon exercise of the Warrant, the kind
and amount of shares, securities, property or cash receivable upon such
consolidation, merger, lease, sale or conveyance by a holder of one share of
Class B Common Stock. (Section 4.05(a))
In the event of any liquidation, dissolution or winding up of the affairs
of the Company, each holder of a Warrant may receive, upon exercise of such
Warrant in accordance with the Warrant Agreement, the same kind and amount of
any stock, securities or assets as may be issuable, distributable or payable on
any such dissolution, liquidation, or winding up with respect to each share of
Class B Common Stock of the Company. (Section 4.05(b))
In the event of certain reclassifications or changes of the shares of Class
B Common Stock issuable upon exercise of the Warrants or in the event of the
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation in which the holders of the shares of
Common Stock thereafter receive shares, other securities, property or cash for
such shares of Common Stock, each holder of a Warrant shall have the right to
receive, upon exercise of the Warrant, the kind and amount of shares, other
securities, property or cash receivable upon such reclassification or change.
(Section 4.05(c))
Rights as Warrantholders. A holder of Warrants does not have any rights
whatsoever as a stockholder of the Company, either at law or equity, including
but not limited to the right to vote at, or to receive notice of, any meeting of
stockholders of the Company. The consent of any holder is not required with
respect to any action or proceeding of the Company nor do holders, by reason of
the ownership or possession of a Warrant,
69
<PAGE> 72
have any right to receive any cash dividends, stock dividends, allotments or
rights, or other distributions paid, allotted or distributed or distributable to
the stockholders of the Company. A holder of a Warrant shall not have any rights
unless the right is expressly conferred by the Warrant Agreement or by a Warrant
Certificate held by the holder. (Section 5.01)
PLAN OF DISTRIBUTION
Selling Securityholders may sell their Securities in transactions through
such underwriters, brokers, dealers or agents as may be approved by the Company
from time to time or through privately negotiated transactions; provided,
however, that pursuant to the Stockholders' Agreement, certain of the Selling
Securityholders have agreed that (i) they will not dispose of any Common Stock
(other than to an affiliate of the transferor) if, after giving effect thereto
and to any concurrent transaction, the total number of shares of Class B Common
Stock owned by the transferor is less than 200% of the total number of shares of
Class A Common Stock beneficially owned by the transferor; provided, however,
that the preceding will not prohibit any person from transferring or otherwise
disposing of all shares of Common Stock owned by such person; (ii) all of the
Securities issued to the Selling Securityholders shall bear the legend that the
Securities may not be sold, transferred or otherwise disposed of except in
accordance with applicable securities laws and the terms of the Plan; and (iii)
AmWest has agreed that subject to certain exceptions it will not, prior to
August , 1997, sell in a single transaction or related transaction 51% or more
of the combined voting power of all shares of Common Stock then outstanding
unless other holders of Common Stock shall have been given a reasonable
opportunity to participate therein on a pro rata basis and at the same price per
share and on the same economic terms and conditions applicable to AmWest. See
"Principal Stockholders -- Stockholders' Agreement."
The distribution of the Securities may be effected from time to time in one
or more transactions (which may involve crosses or block transactions) (i) in
the over-the-counter market, (ii) in transactions otherwise than in the
over-the-counter market or (iii) through the writing of options on the
Securities (whether such options are listed on an options exchange or
otherwise). Any of such transactions may be effected at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. If the Selling Securityholders effect such
transactions by selling Securities to or through underwriters, dealers or
agents, such underwriters, dealers or agents may receive compensation in the
form of discounts, concessions or commissions from the Selling Securityholders
or commissions from purchasers of Securities for whom they may act as agent
(which discounts, concessions or commissions as to a particular underwriters,
dealers or agents might be in excess of those customary in the types of
transactions involved). The Selling Securityholders and any underwriters,
brokers, dealers or agents that participate in the distribution of the
Securities might be deemed to be underwriters and any profit on the sale of
Securities by them and any discounts, concessions or commissions received by any
such underwriters, brokers, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. The Company will not receive
any of the proceeds from the sale of any of the Securities by the Selling
Securityholders.
At the time a particular offer of Securities is made, a Prospectus
Supplement, to the extent required, will be distributed which will set forth the
aggregate amount and type of Securities being offered, the names of the Selling
Securityholders, the purchase price, the amount of expenses of the offering and
the terms of the offering, including the name or names of any underwriters,
brokers, dealers or agents, any discounts, commissions and other items
constituting compensation from the Selling Securityholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
Under the Exchange Act and applicable rules and regulations promulgated
thereunder, any person engaged in a distribution of any of the Securities may
not simultaneously engage in market making activities with respect to the
Securities for a period, depending upon certain circumstances, of either two
days or nine days prior to the commencement of such distribution. In addition
and without limiting the foregoing, the Selling Securityholders will be subject
to applicable provisions of the Exchange Act and the rules and regulations
promulgated thereunder, including without limitation Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of any of the
Securities by the Selling Securityholders.
70
<PAGE> 73
Under the securities laws of certain states, the Securities may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states the Securities may not be sold unless the Securities have been
registered or qualify for sale in such state or an exemption from registration
or qualification is available and is complied with.
Prior to this offering, there has been no public market for the Securities.
Application has been made to list the Class B Common Stock and the Warrants on
the New York Stock Exchange. No assurance can be given as to whether an active
trading market will develop for the Securities. All of the foregoing may affect
the marketability of the Securities and the ability of broker-dealers to engage
in market making activities with respect to the Securities. See "Investment
Considerations -- Limited Trading Market; Shares Eligible for Future Sale."
LEGAL MATTERS
The validity of the shares of Common Stock and certain legal matters
relating to the Senior Notes and Warrants offered hereby will be passed upon for
the Company by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The financial statements and schedules of America West Airlines, Inc., as
of December 31, 1993 and 1992, and for each of the years in the three-year
period ended December 31, 1993, have been included herein and in the
registration statement in reliance upon the reports of KPMG Peat Marwick,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The reports of KPMG Peat Marwick covering the December 31, 1993 financial
statements and schedules contain an explanatory paragraph that states that the
Company's Chapter 11 proceeding, significant losses, accumulated deficit and
highly leveraged capital structure raise substantial doubt about its ability to
continue as a going concern. The financial statements and schedules do not
include any adjustments that might result from the outcome of these
uncertainties.
71
<PAGE> 74
AMERICA WEST AIRLINES, INC., D.I.P.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONDENSED FINANCIAL STATEMENTS AS OF JUNE 30, 1994 (UNAUDITED)
Condensed Balance Sheets as of June 30, 1994 (unaudited)............................ F-2
Condensed Statements of Operations and Accumulated Deficit for the six months ended
June 30, 1994 (unaudited) and 1993 (unaudited)................................... F-4
Condensed Statements of Cash Flows for the six months ended June 30, 1994
(unaudited) and 1993 (unaudited)................................................. F-5
Notes to Condensed Financial Statements............................................. F-6
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993
Independent Auditors' Report........................................................ F-20
Balance Sheets as of December 31, 1993 and 1992..................................... F-21
Statements of Operations for the Years ended December 31, 1993, 1992 and 1991....... F-23
Statements of Cash Flows for the Years ended December 31, 1993, 1992 and 1991....... F-24
Statements of Stockholders' Equity (Deficiency) for the Years ended December 31,
1993, 1992 and 1991.............................................................. F-25
Notes to Financial Statements....................................................... F-26
</TABLE>
F-1
<PAGE> 75
AMERICA WEST AIRLINES, INC., D.I.P.
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 176,922 $ 99,631
Accounts receivable, less allowance for doubtful accounts of
$3,756,000 in 1994 and $3,030,000 in 1993.................... 78,207 65,744
Expendable spare parts and supplies, less allowance for
obsolescence of $7,754,000 in 1994 and $7,231,000 in 1993.... 28,622 28,111
Prepaid expenses................................................ 32,888 34,939
--------- ---------
Total current assets.................................... 316,639 228,425
--------- ---------
Property and equipment:
Flight equipment................................................ 895,662 872,104
Other property and equipment.................................... 183,765 180,607
--------- ---------
1,079,427 1,052,711
Less accumulated depreciation and amortization............... 422,109 385,776
---------- ---------
657,318 666,935
Equipment purchase deposits..................................... 51,836 51,836
---------- ---------
709,154 718,771
---------- ---------
Restricted cash................................................... 50,468 46,296
Other assets...................................................... 24,280 23,251
---------- ---------
$1,100,541 $1,016,743
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
F-2
<PAGE> 76
AMERICA WEST AIRLINES, INC., D.I.P.
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt............................. $ 118,621 $ 125,271
Accounts payable................................................. 71,463 62,957
Air traffic liability............................................ 166,383 118,479
Accrued compensation and vacation benefits....................... 12,525 11,704
Accrued interest................................................. 7,812 8,295
Accrued taxes.................................................... 27,304 14,114
Other accrued liabilities........................................ 19,291 11,980
----------- ----------
Total current liabilities................................ 423,399 352,800
----------- ----------
Estimated liabilities subject to Chapter 11 proceedings............ 379,814 381,114
Long-term debt, less current maturities............................ 381,397 396,350
Manufacturers' and deferred credits................................ 71,366 73,592
Other liabilities.................................................. 59,903 67,149
Commitments contingencies and subsequent events
Stockholders' deficiency:
Preferred stock, $.25 par value. Authorized 50,000,000 shares:
Series C 9.75 percent convertible preferred stock, issued and
outstanding 73,099 shares; $1.33 per share cumulative dividend
(liquidation preference $1,000,000)........................... 18 18
Common stock, $.25 par value. Authorized 90,000,000 shares;
issued and outstanding 25,694,469 shares in 1994 and
25,291,102 in 1993............................................ 6,424 6,323
Additional paid-in capital....................................... 200,013 197,010
Accumulated deficit.............................................. (403,315) (438,626)
----------- ----------
(196,860) (235,275)
Less deferred compensation and notes receivable -- employee stock
purchase plans................................................... 18,478 18,987
----------- ----------
Total stockholders' deficiency........................... (215,338) (254,262)
----------- ----------
$ 1,100,541 $1,016,743
=========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
F-3
<PAGE> 77
AMERICA WEST AIRLINES, INC., D.I.P.
CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
Operating revenues:
Passenger......................................................... $ 665,044 $ 603,790
Cargo............................................................. 21,489 18,971
Other............................................................. 22,082 18,754
----------- -----------
Total operating revenues.................................. 708,615 641,515
----------- -----------
Operating expenses:
Salaries and related costs........................................ 162,484 149,990
Rentals and landing fees.......................................... 132,835 140,555
Aircraft fuel..................................................... 75,794 83,553
Agency commissions................................................ 59,931 52,093
Aircraft maintenance materials and repairs........................ 18,902 14,619
Depreciation and amortization..................................... 43,198 39,879
Other............................................................. 133,575 118,479
----------- -----------
Total operating expenses.................................. 626,719 599,168
----------- -----------
Operating income.......................................... 81,896 42,347
----------- -----------
Nonoperating income (expenses):
Interest income................................................... 344 411
Interest expense.................................................. (26,068) (27,563)
Loss on disposition of property and equipment..................... (1,270) (613)
Reorganization expense, net....................................... (18,258) (1,892)
Other, net........................................................ 138 (43)
----------- -----------
Total nonoperating expenses, net.......................... (45,114) (29,700)
----------- -----------
Income before income taxes................................ 36,782 12,647
----------- -----------
Income taxes........................................................ 1,471 253
----------- -----------
Net income.......................................................... 35,311 12,394
Accumulated deficit at beginning of period.......................... (438,626) (475,791)
----------- -----------
Accumulated deficit at end of period................................ $ (403,315) $ (463,397)
========== ==========
Earnings per share:
Primary........................................................... $ 1.30 $ 0.52
========== ==========
Fully diluted..................................................... $ 0.92 $ 0.36
========== ==========
Shares used for computation:
Primary........................................................... 28,704 29,669
========== ==========
Fully diluted..................................................... 40,607 42,804
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
F-4
<PAGE> 78
AMERICA WEST AIRLINES, INC., D.I.P.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 35,311 $ 12,394
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization................................... 43,198 39,879
Amortization of manufacturers' and deferred credits............. (2,225) (2,451)
Loss on disposition of property and equipment................... 1,270 613
Reorganization items............................................ 3,703 --
Other........................................................... (283) (247)
Changes in operating assets and liabilities:
Increase in accounts receivable, net............................... (12,463) (8,227)
Decrease (increase) in spare parts and supplies, net............... (511) 2,941
Increase in prepaid expenses....................................... 2,051 2,666
(Decrease) increase in other assets and restricted cash............ (5,201) 2,078
Increase (decrease) in accounts payable............................ 8,923 (10,331)
Increase in air traffic liability.................................. 45,467 33,312
Increase in accrued compensation and vacation benefits............. 821 195
Increase in accrued interest....................................... 5,130 5,013
Increase in accrued taxes.......................................... 13,190 8,168
Increase in other accrued liabilities.............................. 7,141 1,984
Decrease in other liabilities...................................... (6,337) (6,901)
-------- --------
Net cash provided by operating activities....................... 139,185 81,086
Cash flows from investing activities:
Purchases of property and equipment................................ (34,981) (23,586)
Proceeds from disposition of property.............................. 269 619
-------- --------
Net cash used in investing activities........................... (34,712) (22,967)
Cash flows from financing activities:
Repayment of debt.................................................. (27,182) (39,532)
-------- --------
Net cash used in financing activities........................... (27,182) (39,532)
-------- --------
Net increase in cash and cash equivalents....................... 77,291 18,587
-------- --------
Cash and cash equivalents at beginning of period..................... 99,631 74,383
-------- --------
Cash and cash equivalents at end of period........................... $176,922 $ 92,970
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
F-5
<PAGE> 79
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1994
1. REORGANIZATION UNDER CHAPTER 11, LIQUIDITY AND FINANCIAL CONDITION
On August 10, 1994, the United States Bankruptcy Court for the District of
Arizona (the "Bankruptcy Court") confirmed the Company's Plan of Reorganization
("Plan"). The Company currently anticipates that the Plan will be effective
after expiration of the Bankruptcy Code 10-day appeal period on or about August
23, 1994 (the "Effective Date").
In connection with the confirmation hearing on August 10, 1994, the Company
filed certain motions with the Bankruptcy Court to secure approval to pay the
following confirmation bonuses or success fees:
-- $9.3 million to be paid based upon length of service to non-officer
employees.
-- $1.2 million to be paid to officers and other members of management.
-- 125,000 shares of stock in the reorganized Company to be issued to the
Company's Chairman and Chief Executive Officer.
A hearing on these motions has been scheduled for August 24, 1994.
HISTORICAL CHAPTER 11 EVENTS AND EVENTS LEADING TO PLAN CONFIRMATION
On June 27, 1991, the Company filed a voluntary petition in the United
States Bankruptcy Court for the District of Arizona to reorganize under Chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code"). The Company is
currently operating as a debtor-in-possession ("D.I.P.") under the supervision
of the Bankruptcy Court. As a debtor-in-possession, the Company is authorized to
operate its business but may not engage in transactions outside its ordinary
course of business without the approval of the Bankruptcy Court.
Subject to certain exceptions under the Bankruptcy Code, the Company's
filing for reorganization automatically enjoined the continuation of any
judicial or administrative proceedings against the Company. Any creditor actions
to obtain possession of property from the Company or to create, perfect or
enforce any lien against the property of the Company are also enjoined. As a
result, the creditors of the Company are precluded from collecting pre-petition
debts without the approval of the Bankruptcy Court.
The Company had the exclusive right for 120 days after the Chapter 11
filing on June 27, 1991 to file a plan of reorganization and 60 additional days
to obtain necessary acceptances of such plan. Such periods were extended at the
discretion of the Bankruptcy Court, but only on a showing of good cause. On May
17, 1994, the Company filed a Disclosure Statement with the Bankruptcy Court
which includes its Plan of Reorganization. On June 28, 1994, the Bankruptcy
Court approved the adequacy of the Disclosure Statement and set into motion a
balloting process for the approval of the Plan of Reorganization. Subject to
certain exceptions set forth in the Bankruptcy Code, acceptance of a Plan of
Reorganization requires approval of the Bankruptcy Court and the affirmative
vote (i.e. 50 percent of the number and 66 2/3 percent of the dollar amount) of
each class of creditors and equity holders whose claims are impaired by the
plan. (See "Plan of Reorganization" for further discussion of the contents of
the Plan of Reorganization).
Certain pre-petition liabilities have been paid after obtaining the
approval of the Bankruptcy Court, including certain wages and benefits of
employees, insurance costs, obligations to foreign vendors and governmental
agencies, travel agent commissions and ticket refunds. The Company has also been
allowed to honor all tickets sold prior to the date it filed for reorganization.
In addition, the Company is authorized to pay pre-petition liabilities to
essential suppliers of fuel, food and beverages and to other vendors providing
critical goods and services. Subsequent to filing and with the approval of the
Bankruptcy Court, the Company assumed certain executory contracts of essential
suppliers.
F-6
<PAGE> 80
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Parties to executory contracts may, under certain circumstances, file
motions with the Bankruptcy Court to require the Company to assume or reject
such contracts. Unless otherwise agreed, the assumption of a contract will
require the Company to cure all prior defaults under the related contract,
including all pre-petition liabilities. Unless otherwise agreed, the rejection
of a contract is deemed to constitute a breach of the agreement as of the moment
immediately preceding the Chapter 11 filing, giving the other party to the
contract a right to assert a general unsecured claim for damages arising out of
the breach.
February 28, 1992 was set as the last date for the filing of proofs of
claim under the Bankruptcy Code and the Company's creditors have submitted
claims for liabilities not paid and for damages incurred. There may be
differences between the amounts at which any such liabilities are recorded in
the financial statements and the amount claimed by the Company's creditors. In
connection with the confirmation of the Company's Plan of Reorganization, the
Bankruptcy Court will be requested to fix the total amount of allowed claims as
well as the total amount of disputed claims that may become allowed claims.
The Company has incurred and will continue to incur significant costs
associated with the reorganization. The amount of these costs, which are being
expensed as incurred, is expected to significantly affect the results of
operations.
As a result of its filing for protection under Chapter 11 of the Bankruptcy
Code, the Company is in default of substantially all of its debt agreements. All
outstanding pre-petition unsecured debt of the Company has been presented in
these financial statements within the caption Estimated Liabilities Subject to
Chapter 11 Proceedings.
Additional liabilities subject to the proceedings may arise in the future
as a result of the rejection of executory contracts, including leases, and from
the determination by the Bankruptcy Court (or agreement by parties in interest)
of allowed claims for contingencies and other disputed amounts. Conversely, the
assumption of executory contracts and unexpired leases may convert liabilities
shown as subject to Chapter 11 proceedings to post-petition liabilities.
Substantially all of the aircraft, engines and spare parts in the Company's
fleet are subject to lease or secured financing agreements that entitle the
Company's aircraft lessors and secured creditors to rights under Section 1110 of
the Bankruptcy Code. Pursuant to Section 1110, the Company had 60 days from the
date of its Chapter 11 filing, or until August 26, 1991, to bring its
obligations to these aircraft lessors and secured creditors current and/or reach
other mutually satisfactory negotiated arrangements. In September 1991, as a
condition to the borrowings under the initial $55 million D.I.P. facility, the
Company arranged for rent, principal and interest payment deferrals from a
majority of its aircraft providers as a condition to the assumption of the
related lease or secured borrowing by the Company. As a result of these
arrangements, the Company was able to assume the executory contracts associated
with 83 aircraft in its fleet without having to bring its obligations to these
aircraft providers current. In addition, as part of the initial D.I.P. facility,
the Company assumed and brought current certain agreements for 16 Airbus A320
aircraft, three CFM engines, a Boeing 757-200 and a Boeing 737-300.
Twenty-two aircraft were deemed surplus to the Company's needs and the
associated executory contracts were rejected. Included in 1991 reorganization
costs was $35.2 million in write-offs of leasehold improvements, security
deposits, accrued maintenance, accrued rents and other costs to return the
aircraft which were subject to the rejected aircraft agreements. In certain
cases, final agreements were reached with such aircraft providers and no further
claims by such providers will be pursued as a result of the rejections. In other
instances, the aircraft providers have filed claims in the normal course of the
bankruptcy and as of June 30, 1994, significant claims for rejected aircraft
have not yet been settled.
Due to the uncertain nature of many of the potential claims, the Company is
unable to project the magnitude of such claims with any degree of certainty.
However, the claims (pre-petition claims and administrative claims) that have
been filed against the Company are in excess of $2 billion. Such aggregate
F-7
<PAGE> 81
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
amount includes claims of all character, including, but not limited to,
unsecured claims, secured claims, claims that have been scheduled but not filed,
duplicative claims, tax claims, claims for leases that were assumed, and claims
which the Company believes to be without merit; however, claims filed for which
an amount was not stated, are not reflected in such amount. The Company is
unable to estimate the potential amount of such unstated claims; however, the
amount of such claims could be material.
The Company is in the process of reviewing and seeking allowance or
disallowance, as appropriate, of the general unsecured claims asserted against
the Company. In many instances, such allowance process will include the
commencement of Bankruptcy Court proceedings in order to determine the amount at
which such claims should be allowed. The Company has accrued its estimate of
claims that will be allowed or the minimum amount at which it believes the
asserted general unsecured claims will be allowed if there is no better estimate
within the range of possible outcomes. However, the ultimate amount of allowed
claims will be different and such differences could be material. In its
Disclosure Statement, the Company estimates the range of allowed general
unsecured claims to be from a low of approximately $300 million to a high of
approximately $360 million. This range does not include, nor can the Company
currently estimate, claims which may arise and be allowed as a result of the
renegotiation of certain aircraft purchase agreements.
The Bankruptcy Code requires that all administrative claims be paid on the
effective date of a plan of reorganization unless the respective claimants
agreed to different treatment. The Company is actively negotiating with
claimants to achieve mutually acceptable dispositions of these claims. Since the
commencement of the bankruptcy proceeding, claims alleging administrative
expense priority totaling more than $153 million have been filed. As of June 30,
1994, $115 million of the filed claims have been allowed and settled for $50.2
million in the aggregate. Additionally, the Company has obtained Bankruptcy
Court approval of an agreement which settled the remaining $38 million filed
administrative expense claim (which relates to a rejected lease of a Boeing
737-300 aircraft) for $5 million. Pursuant to an order dated May 18, 1994, the
Bankruptcy Court fixed July 1, 1994 as the bar date for filing such
administrative claims. In response to the notice of this bar date, certain
claims were filed asserting status as non-ordinary course administrative expense
claims. These include claims for administrative rent, breach of return
conditions on aircraft, guarantees and obligations under tax indemnity
agreements. The amount of such asserted claims, if allowed, could be material;
however, the Company is optimistic that the claims, except to the extent
previously known and provided for by the Company, will be either disallowed,
withdrawn or negotiated to a mutually acceptable amount.
PLAN OF REORGANIZATION
On December 8, 1993 and February 16, 1994, the Bankruptcy Court entered
certain orders which provided for a procedure through which interested parties
could submit proposals to participate in a plan of reorganization for America
West. The Bankruptcy Court also set February 24, 1994 as the date for America
West to select a "Lead Plan Proposal" from the proposals submitted.
On February 24, 1994, America West selected as its Lead Plan Proposal an
investment proposal submitted by AmWest Partners, L.P., a limited partnership
("AmWest"), which includes TPG Partners, L.P., Continental Airlines, Inc. and
Mesa Airlines, Inc. Certain funds managed or advised by Fidelity Management
Trust Company and its affiliates and Lehman Brothers, Inc. are participating in
the proposal as assignees of AmWest. On March 11, 1994, the Company and AmWest
entered into an Investment Agreement which was filed with the Bankruptcy Court
on March 11, 1994 (the "Original Investment Agreement"). The Original Investment
Agreement was superseded by a Revised Investment Agreement dated as of March 11,
1994 and filed with the Bankruptcy Court on March 28, 1994 (the "Revised
Investment Agreement"). The Revised Investment Agreement was superseded by a
Second Revised Investment Agreement dated as of April 7, 1994 and filed with the
Bankruptcy Court on April 8, 1994 (the "Second Revised Investment Agreement").
The Second Revised Investment Agreement was superseded by a Third Revised
Investment
F-8
<PAGE> 82
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Agreement dated as of April 21, 1994 and filed with the Bankruptcy Court on
April 26, 1994 (the "Third Revised Investment Agreement"). The Third Revised
Investment Agreement is substantially identical to the Second Revised Investment
Agreement except for a change in the configuration of the expanded 15-member
board of directors of the Company. The Third Revised Investment Agreement
substantially incorporates the terms of the AmWest investment proposal. It
provides that AmWest will purchase from America West equity securities
representing a 33.5 percent ownership interest (subject to adjustment) in the
Company for $114.8 million and $100 million in new senior unsecured debt
securities. The Third Revised Investment Agreement also provides that, in
addition to the 33.5 percent ownership interest in the Company, AmWest would
also obtain 71.2 percent of the total voting interest (subject to adjustment) in
America West after the Company is reorganized. The terms of the Third Revised
Investment Agreement have been incorporated into a Plan of Reorganization which
was filed with the Bankruptcy Court on May 17, 1994. By Order dated June 28,
1994, the Bankruptcy Court approved the Company's Disclosure Statement, finding
that it contained adequate information as required by Section 1125 of the
Bankruptcy Code. The Bankruptcy Court also entered an order fixing August 3,
1994 as the last date for filing objections to confirmation of the Plan of
Reorganization, voting to accept or reject the Plan and making any available
elections under the Plan. In addition, the Court fixed August 10, 1994 as the
hearing date for confirmation of the Plan of Reorganization. Consummation of the
Plan of Reorganization is subject to satisfaction of the closing conditions
specified therein, including (among others) the accuracy of certain
representations and warranties of the Company and the absence of any material
adverse change in the Company's condition (financial or otherwise), business,
assets, properties, operations or relations with employees or labor unions since
December 31, 1993.
In addition to the interest in the reorganized America West that would be
acquired by AmWest pursuant to the Plan of Reorganization, the Plan also
provides for the following:
1. The D.I.P. financing would be repaid in full with cash on the date the
Plan of Reorganization is effective ("Effective Date") or on such other terms as
may be agreed to.
2. On the Effective Date, unsecured creditors would receive 59.5 percent of
the new common equity in the reorganized Company. In addition, unsecured
creditors would have the right to elect to receive cash at $8.889 per share up
to an aggregate maximum amount of $100 million, through a purchase by AmWest of
the shares otherwise allocable to such unsecured creditors making the election
under the Plan of Reorganization.
3. Holders of common stock equity interests would receive 5 percent of the
new common equity of the Company. In addition, such holders of equity interests
would have the right to subscribe to purchase up to 1,615,179 shares of the new
Class B common stock of the Company for $8.889 per share from AmWest, and would
also receive warrants entitling them to purchase 6,230,769 shares of the
reorganized Company's common stock. With respect to establishing the price of
the warrants, the Bankruptcy Court will be requested to fix the total amount of
allowed unsecured claims as well as the total amount of disputed claims that may
become allowed claims. In turn, the aggregate amount established by the
Bankruptcy Court would be multiplied by 1.1 and the resultant product divided by
the number of shares of new common equity to be issued to unsecured creditors
(26,775,000 shares) to establish the price. Holders of preferred stock equity
interests would receive $500,000 cash and the right to subscribe to the purchase
of the first 250,000 shares of the over-subscription stock otherwise allocable
to holders of common stock equity interests.
4. In exchange for certain concessions principally arising from
cancellation of the right of Guinness Peat Aviation ("GPA") affiliates to put to
America West 10 Airbus A320 aircraft at fixed rates, GPA, or certain affiliates
thereof, would receive (i) 2.0 percent of the new common equity in the
reorganized Company, (ii) warrants to purchase up to 1,384,615 shares of the
reorganized Company's common stock on the same terms as the AmWest warrants,
(iii) $30.5 million in cash, and (iv) the right to require the Company to lease
from GPA prior to June 30, 1999 up to eight aircraft of types operated by the
Company on terms which the Company believes to be more favorable than those
currently applicable to the put aircraft. (See Note 8(c) for further discussion
of the new put agreement.)
F-9
<PAGE> 83
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
5. Continental Airlines, Inc., Mesa Airlines, Inc. and America West would
enter into certain alliance agreements which would include code-sharing,
schedule coordination and certain other relationships and agreements. A
condition precedent to the Effective Date of the Plan of Reorganization is that
these agreements be in form and substance satisfactory to America West,
including the Company's reasonable satisfaction that such alliance agreements
when fully implemented will result in an increase in pre-tax income of not less
that $40 million per year.
6. The expansion of the Company's board of directors to 15 members for a
period not less than three years following effective date. Nine members would be
designated by AmWest and other members reasonably acceptable to AmWest would
include three members designated by the Creditors' Committee, one member
designated by the Equity Committee, one member designated by the Company's
current board of directors and one member designated by GPA.
7. The pre-petition executory contract for the purchase of 24 A320-200
aircraft between the Company and AVSA would be amended to provide the Company
with greater flexibility, reduced pricing and enhanced terms for the acquisition
of the aircraft than is presently provided in the contract. Under the modified
terms, delivery dates of the aircraft would fall in the years 1998 through 2000
with an option to further defer deliveries. In addition, if A320 aircraft are
delivered as a result of the new GPA Put Agreement (see item 4 above), the
Company would have the right to cancel on a one-for-one basis, up to a maximum
of eight non-consecutive aircraft deliveries hereunder, subject to certain
conditions. In exchange for these modifications, the contract, as modified,
would be assumed and certain promissory notes relating thereto would be
reinstated on the Effective Date of the Plan of Reorganization.
8. The Plan of Reorganization also provides for many other matters,
including the disposition of the various types of claims asserted against the
Company, the adherence to the Company's aircraft lease agreements, the
renegotiation, assumption as modified or rejection of certain pre-petition
aircraft purchase agreements and release of the Company's employees from all
obligations presently existing under the notes issued in connection with the
Company's employee stock purchase plan, concurrent with abandonment of such
notes by the Company and the cancellation of the shares of Company stock
securing such notes.
In connection with the selection of AmWest's proposal as the Lead Plan
Proposal and pursuant to an order of the Bankruptcy Court, America West and
AmWest entered into an Interim Procedures Agreement setting forth, among other
things, the rights and obligations of AmWest and America West pending
Confirmation of the Plan of Reorganization. After a series of hearings, and
certain modifications, a Third Revised Interim Procedures Agreement (the
"Interim Procedures Agreement") was approved by the Bankruptcy Court on May 4,
1994. Among other terms governing the relationship of America West and AmWest
and its partners until the Effective Date of the Plan of Reorganization, the
Interim Procedures Agreement provides, subject to certain exceptions, that
America West is prohibited from directly soliciting additional investment
proposals. However, the Interim Procedures Agreement provides that, until an
order approving a Disclosure Statement is entered, America West may consider
unsolicited proposals subject to certain rights of AmWest to match any
alternative proposal. If America West accepts any such alternative proposal, or
a competing plan of reorganization proposed by another party in interest is
confirmed by the Bankruptcy Court, the Interim Procedures Agreement provides
that AmWest may apply to the Bankruptcy Court, on a substantial contribution
basis consistent with Section 503(b) of the Bankruptcy Code for recovery of an
additional amount not to exceed $4 million as reasonable compensation for its
actions in connection with the proposed investment in America West and the
benefits it provided to America West and its constituents in connection
therewith and with the Chapter 11 Case, provided, however, that making the
proposed investment will not, in and of itself, entitle AmWest to any additional
payment. Further, should America West breach the Interim Procedures Agreement at
any time, AmWest has agreed that any damages it may be entitled to recover shall
be limited to an amount not to exceed $4 million, subject to the approval of the
Bankruptcy Court. Upon the entry of an order by the Bankruptcy Court approving
the Disclosure Statement, America
F-10
<PAGE> 84
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
West has agreed not to consider any other proposals. (An order approving the
Disclosure Statement was entered by the Bankruptcy Court on June 28, 1994.)
The Interim Procedures Agreement also provides that America West will
reimburse AmWest for all out-of-pocket and third-party expenses actually
incurred by AmWest through February 28, 1994, subject to a cap of $550,000. The
Interim Procedures Agreement also provides for America West to reimburse AmWest
for expenses covered under the Interim Procedures Agreement and incurred by
AmWest on and after March 1, 1994 in an amount of up to $300,000 per month,
provided that any unused portion of such $300,000 for any month shall accumulate
and be carried forward and be available in any subsequent month, through the
Effective Date of the Plan of Reorganization. On the Effective Date, America
West will be obligated to reimburse AmWest for all expenses covered under the
Interim Procedures Agreement, irrespective of the foregoing monthly limitations.
All such fees will be subject to final approval of the Bankruptcy Court.
On June 28, 1994, the Bankruptcy Court entered an order fixing August 3,
1994, as the last date for filing objections to confirmation of the Plan of
Reorganization, voting to accept or reject the Plan of Reorganization and making
any applicable elections available under the Plan. Additionally, the Court fixed
August 10, 1994, as the hearing date for confirmation of the Plan of
Reorganization. The Plan of Reorganization must be approved by the Bankruptcy
Court and by specified majorities of each class of creditors and equity holders
whose claims are impaired by the Plan. Alternatively, absent the requisite
approvals, the Company may seek Bankruptcy Court approval of its Reorganization
Plan under Section 1129(b) of the Bankruptcy Code, assuming certain tests are
met.
If at any time the Creditors Committee, the Equity Committee or any
creditor of the Company or equity holder of the Company believes that the
Company is or will not be in a position to sustain operations, such party can
move in the Bankruptcy Court to compel a liquidation of the Company's estate by
conversion to Chapter 7 bankruptcy proceedings or otherwise. In the event that
the Company is forced to sell its assets and liquidate, it is unlikely that
unsecured creditors or equity holders will receive any value for their claims or
interests.
The Company anticipates that the reorganization process will result in the
restructuring, cancellation and/or replacement of the interest of its existing
common and preferred stockholders. Because of the "absolute priority rule" of
Section 1129 of the Bankruptcy Code, which requires that the Company's creditors
be paid in full (or otherwise consent) before equity holders can receive any
value under a plan of reorganization, the Company previously disclosed that it
anticipated that the reorganization process would result in the elimination of
the Company's existing equity interests. Due to recent events, including
sustained improvement in the Company's operating results as well as general
improvement in the condition of the United States' economy and airline industry,
existing holders of equity interests are anticipated to receive 5 percent of the
new common equity under the proposed Plan of Reorganization.
The accompanying financial statements have been prepared on a going concern
basis which assumes continuity of operations and realization of assets and
liquidation of liabilities in the ordinary course of business. The financial
statements do not include any adjustments as a result of the effects of the Plan
of Reorganization.
Fresh Start Reporting (pro forma)
In connection with its emergence from Chapter 11 protection, which is
anticipated to occur on or about August 23, 1994, the Company will be adopting
fresh start reporting in accordance with SOP 90-7 of the American Institute of
Certified Public Accountants. The pro forma effects of the Company's Plan of
F-11
<PAGE> 85
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Reorganization and fresh start reporting on the Company's condensed balance
sheet as of June 30, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1994 JUNE 30, 1994
------------- FRESH START AND OTHER -------------
ASSETS ADJUSTMENTS (NET)
- ----------------------------------------------- (HISTORICAL) --------------------- (PRO FORMA)
<S> <C> <C> <C>
Cash and cash equivalents...................... $ 176,922 $ 108,005 $ 284,927
Other current assets........................... 139,717 (8,825) 130,892
------------- --------------------- -------------
Total current assets...................... 316,639 99,180 415,819
Property and equipment (net)................... 709,154 (162,559) 546,595
Other assets................................... 74,748 (30,701) 44,047
Reorganization value in excess of amounts
allocable to identifiable assets............. -- 697,278 697,278
------------- --------------------- -------------
Total assets.............................. $ 1,100,541 $ 603,198 $ 1,703,739
========== ================ ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<S> <C> <C> <C>
Current maturities of long-term debt........... $ 118,621 $ (59,172) $ 59,449
Other current liabilities...................... 304,778 13,078 317,856
------------- --------------------- -------------
Total current liabilities................. 423,399 (46,094) 377,305
Estimated liabilities subject
to Chapter 11 proceedings.................... 379,814 (379,814) --
Long-term debt................................. 381,397 197,525 578,922
Other liabilities.............................. 131,269 28,743 160,012
Stockholders' equity (deficiency).............. (215,338) 802,838 587,500
------------- --------------------- -------------
Total liabilities and stockholders' equity
(deficiency)................................. $ 1,100,541 $ 603,198 $ 1,703,739
========== ================ ==========
</TABLE>
The pro forma fresh start reporting common equity value was estimated by
the Company with the assistance of its financial advisors. The significant
factors used in estimating this value were analyses of publicly available
information of other companies believed to be comparable to the Company,
industry, economic and overall market conditions and historical and estimated
performance of the airline industry and certain financial analyses. There may be
differences between the amounts estimated above and those actually recorded when
fresh start reporting is applied as of the Effective Date, and such differences
may be material.
Under fresh start reporting, the pro forma reorganization value of the
Company has been assumed to be allocated to the reorganized Company's assets and
liabilities on a basis substantially consistent with the purchase method of
accounting. Pro forma reorganization value not attributable to specific assets
of the reorganized Company has been included as "Reorganization value in excess
of amounts allocable to identifiable assets" in the pro forma condensed balance
sheet above. The pro forma fresh start reporting adjustments relate primarily to
the adjustment of the reorganized Company's assets and liabilities to fair
market values as well as reflecting the issuance of new stock and debt and the
discharge of certain pre-petition liabilities under the Plan. The ultimate
amount of such adjustments, when actually recorded, will likely have a
significant effect on the reorganized Company's future operations.
F-12
<PAGE> 86
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of elections made and subscription rights exercised in
connection with the balloting for the Plan of Reorganization, the Company
expects the allocation of its common shares, post-emergence, excluding success
bonuses, to approximate the following (in thousands):
<TABLE>
<CAPTION>
PERCENT OF
CLASS A CLASS B TOTAL TOTAL
------- ------- ------ --------
<S> <C> <C> <C> <C>
AmWest.............................................. 1,200 13,366 14,566 32.4%
Unsecured Creditors................................. -- 25,669 25,669 57.0%
Common Equity Interests............................. -- 3,615 3,615 8.0%
Preferred Equity Interests.......................... -- 250 250 .6%
GPA................................................. -- 900 900 2.0%
------- ------- ------ --------
1,200 43,800 45,000 100.0%
====== ====== ======= ========
</TABLE>
The allocation as discussed above is based upon the preliminary balloting
results as of August 3, 1994 and is subject to change.
Estimated Liabilities Subject to Chapter 11 Proceedings and Reorganization
Expense
Under Chapter 11, certain claims against the Company in existence prior to
the filing of the petitions for relief under the Code are stayed while the
Company continues business operations as debtor-in-possession. These
pre-petition liabilities are expected to be settled as part of the plan of
reorganization and are classified as "Estimated liabilities subject to Chapter
11 proceedings".
Estimated liabilities subject to Chapter 11 proceedings as of June 30, 1994
consisted of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
1994
--------------
(IN THOUSANDS)
<S> <C>
Long-term debt (including convertible subordinated debentures
of $138.9 million)................................................... $223,023
Accounts payable and accrued liabilities............................... 112,919
Accrued interest....................................................... 18,153
Accrued taxes.......................................................... 25,719
-----------
$379,814
===========
</TABLE>
The debt balance included above consists of unsecured and secured
obligations and other obligations that have not been affirmed by the Company
through the Bankruptcy Court.
F-13
<PAGE> 87
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
Reorganization expense is comprised of items of income, expense, gain or
loss that were realized or incurred by the Company as a result of reorganization
under Chapter 11 of the Federal Bankruptcy Code. Such items consisted of the
following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Provisions for pre-petition and
administrative claims........................................ $ 8,680 $ --
Professional fees.............................................. 11,656 2,827
D.I.P. financing issuance costs................................ 209 --
Interest income................................................ (2,549) (1,025)
Other.......................................................... 262 90
------- -------
$18,258 $ 1,892
======= =======
</TABLE>
2. PER SHARE DATA
Primary earnings per share is based upon the weighted average number of
shares of common stock outstanding and dilutive common stock equivalents (stock
options and warrants). Primary earnings per share reflect net income adjusted
for interest on borrowings effectively reduced by the proceeds from the assumed
conversion of common stock equivalents.
Fully diluted earnings per share is based on the average number of shares
of common stock and dilutive common stock equivalents outstanding adjusted for
conversion of outstanding convertible preferred stock and convertible
debentures. Fully diluted earnings per share reflect net income adjusted for
interest on borrowings effectively reduced by the proceeds from the assumed
conversion of common stock equivalents.
3. LONG-TERM DEBT
On June 13, 1994, the Company filed a motion seeking authorization to amend
the terms and extend the maturity of approximately $77.6 million of the D.I.P.
financing to the earlier of December 31, 1994, or the Effective Date of the
Plan. On June 28, 1994, the Bankruptcy Court granted the extension of the D.I.P.
financing. One of the D.I.P. lenders has elected to be repaid as of June 30,
1994 (the prior maturity date), in the approximate amount of $1 million.
Accordingly, the outstanding principal amount of the extended D.I.P. financing
will be approximately $77.6 million. While there are certain fees to be paid in
the event that the D.I.P. financing is not fully repaid prior to September 30,
1994, there is an interest rate reduction to 90-day LIBOR plus 250 basis points
for the period July 1, 1994 through September 30, 1994, unless the extended
D.I.P. financing is not repaid by such date. Under the terms of the amended
D.I.P. financing, the Company is required to notify the lenders if the
unrestricted cash balance of the Company exceeds $175 million. Subsequent to
June 30, 1994, the Company notifed the D.I.P. lenders that the Company's
unrestricted cash exceeded $175 million. The amended D.I.P. financing contains a
minimum unencumbered cash balance requirement of $74 million and certain other
covenants with which the Company was in compliance at June 30, 1994.
4. COMMON STOCK
In May 1994, the Company entered into a settlement agreement with the
Patrician Corporation for its preferred dividend claim and issued 336,277 shares
of common stock. In return, Patrician agreed not to bring litigation seeking to
compel the issuance of such shares, or, in the alternative, to either rescind
its prior
F-14
<PAGE> 88
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
conversion of the Series B preferred stock into common stock, or assert a claim
for such dividends senior to Common equity.
5. EMPLOYEE STOCK PURCHASE PLANS
Under the Plan of Reorganization, the remaining obligations of
approximately $17.6 million under notes issued in connection with the Employee
Stock Purchase Plan will be forgiven on the Effective Date in return for the
cancellation of the shares held as security for such obligations. Such notes
will be abandoned by the Company as provided for in the Bankruptcy Code.
As of June 30, 1994, 7,486,427 shares of common stock had been sold under
the plans. No shares were sold during the second quarter of 1994. At June 30,
1994, the unamortized deferred compensation and outstanding receivable balance
relating to such plans amounted to $875,000 and $17,603,000, respectively.
6. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Cash paid for interest and income taxes during the six months ended June
30, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest (net of amounts capitalized)............................ $20,615 $22,356
Income taxes..................................................... $ 1,207 $ 55
</TABLE>
In addition, during the six months ended June 30, 1994 and 1993, the
Company had the following non-cash financing and investing activities:
<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Equipment acquired through capital leases........................ $ 138 $ 43
Conversion of long-term debt to common stock..................... $ -- $ 1,918
Accrued interest reclassified to long-term debt.................. $ 4,268 $ 9
Notes payable issued to seller................................... $ -- $ 574
</TABLE>
7. INCOME TAX
For the six months ended June 30, 1994, the Company recorded income tax
expense as follows based upon its estimate of its annual effective rate:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
---------------
1994 1993
------ ----
(IN THOUSANDS)
<S> <C> <C>
Current taxes
Federal........................................................... $1,163 $215
State............................................................. 308 38
------ ----
$1,471 $253
====== ====
Deferred taxes...................................................... $ -- $ --
====== ====
</TABLE>
For the quarter and six months ended June 30, 1994, income tax expense is
solely attributable to income from continuing operations. The difference in
income taxes at the federal statutory rate ("expected taxes") to those reflected
in the financial statements (the "effective rate") primarily results from the
benefit of net operating loss carryforwards resulting in an effective tax rate
of 4 percent.
F-15
<PAGE> 89
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
As of June 30, 1994, to the best of the Company's knowledge, it has not
undergone a statutory "ownership change" (as defined in Section 382 of the
Internal Revenue Code) that would result in any material limitation of the
Company's ability to use its net operating loss and business tax credit
carryforwards in future tax years. Should an "ownership change" occur prior to
the Effective Date of a plan of reorganization, the Company's ability to utilize
said carryforwards would be significantly restricted. Further, the net operating
loss and business tax credit carryforwards may be limited as a result of the
Company's reorganization under the United States Bankruptcy Code.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109). Since
there was no cumulative effect of this change in accounting method, prior year
financial statements have not been restated.
8. COMMITMENTS AND CONTINGENCIES
(a) Leases
During 1991, the Company restructured its lease commitment for Airbus A320
aircraft with the lessors. As a result of the restructuring, the Company's
obligation to lease ten A320 aircraft was canceled and the basic rental rate for
twelve aircraft was revised to provide for the repayment to the lessor over the
then remaining lease term of certain advanced credits received by the Company
which relate to the ten canceled aircraft.
In the third quarter of 1991, the Company requested a deferral of rent and
other periodic payments from its aircraft providers. The deferral was requested
in an effort to conserve cash and improve the Company's liquidity position. As a
condition of securing the $78 million D.I.P. financing, the Company was required
to obtain from most aircraft providers rent, principal and interest payment
deferrals in excess of $100 million covering the six-month period of June
through November 1991. These deferrals will generally be repaid with interest at
10.5 percent over the remaining term of the lease or secured borrowing with
repayment commencing generally in December 1991. At June 30, 1994 and December
31, 1993, the remaining unpaid deferrals are reported as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable.............................................. $ 5,744 $ 5,744
Other liabilities............................................. 20,071 22,912
Long-term debt................................................ 17,547 18,671
------- -------
$43,362 $47,327
======= =======
</TABLE>
In the third quarter of 1992, the Company requested an additional deferral
of rent and other periodic payments from its aircraft providers. The deferral
was requested to assure sufficient liquidity to sustain operations while
additional debtor-in-possession financing was obtained. The 1992 deferrals are
generally scheduled to be repaid either without interest during the first
quarter of 1993 or with interest over a period of seven years. At June 30, 1994
and December 31, 1993, the remaining unpaid deferrals are reported as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable.............................................. $ 1,823 $ 1,823
Other liabilities............................................. 6,922 8,513
Long-term debt................................................ 20,064 21,539
------- -------
$28,809 $31,875
======= =======
</TABLE>
F-16
<PAGE> 90
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
As of June 30, 1994, the Company had 66 aircraft under operating leases
with remaining terms ranging from one year to 25 years. The Company has options
to purchase most of the aircraft at fair market value at the end of the lease
term. Certain of the agreements require security deposits and maintenance
reserve payments. The Company also leases certain terminal space, ground
facilities and computer and other equipment under noncancelable operating
leases.
Future minimum rental payments for years ending December 31 under
noncancelable operating leases with initial terms of more that one years are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1994........................................... $ 194,379
1995........................................... 186,978
1996........................................... 184,152
1997........................................... 171,357
1998........................................... 160,759
Thereafter..................................... 1,333,187
----------
$2,230,812
==========
</TABLE>
Rent expense (excluding landing fees) was approximately $118.3 million and
$126.1 million for the six months ended June 30, 1994 and 1993, respectively.
Collectively, the operating lease agreements require security deposits with
lessors of $8.1 million and bank letters of credit of $17.7 million. The letters
of credit are collateralized by $17.6 million in restricted cash.
(b) Revenue Bonds
Special facility revenue bonds issued by a municipality have been used to
fund the acquisition of leasehold improvements at the airport which have been
leased by the Company. Under the operating lease agreements, which commenced in
1990, the Company is required to make rental payments sufficient to pay
principal and interest when due on the bonds. The Company ceased rental payments
in June 1991. The principal amount of such bonds outstanding at December 31,
1992 and 1991 was $40.7 million. In October 1993, the Company and the bondholder
agreed to reduce the outstanding balance of the bonds to $22.5 million and
adjust the related operating lease payments sufficient to pay principal and
interest on the reduced amount effective upon the confirmation of a plan of
reorganization. The remaining principal balance of $18.2 million will be
accorded the same treatment under the plan of reorganization as a pre-petition
unsecured claim. The Company also agreed to make adequate protection payments in
the amount of $150,000 per month from August 1993 to plan confirmation.
(c) Aircraft Acquisitions
At June 30, 1994, the Company had on order a total of 49 aircraft of the
types the Company currently operates, of which 29 are firm orders and 20 are
option orders. The table below details such deliveries.
<TABLE>
<CAPTION>
FIRM ORDERS
-------------------------------------------------------- OPTION
1994 1995 1996 1997 THEREAFTER TOTAL ORDERS TOTAL
---- ---- ---- ---- ---------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Boeing: 737-300 -- -- 2 2 -- 4 10 14
757-200 -- -- 1 -- -- 1 10 11
Airbus: A320-200 -- -- -- -- 24 24 -- 24
-- --
---- ---- --- --- --- ---
Total -- -- 3 2 24 29 20 49
==== ==== === === === === === ===
</TABLE>
F-17
<PAGE> 91
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
At June 30, 1994, the estimated aggregate cost for delivery positions under
existing contracts for the acquisition of B737's, B757's and A320 aircraft from
manufacturers listed in the above table is approximately $2.7 billion. The table
does not include any deliveries under put arrangements more fully discussed
below nor does it include orders for B747-400 aircraft.
With respect to various contracts with Boeing, a purchase agreement to
acquire B737-300 aircraft has been affirmed in the Company's bankruptcy
proceedings. With timely notice to the manufacturer, all or some of these
deliveries may be converted to B737-400 aircraft. Existing purchase agreements
for B757-200 and B747-400 aircraft have not been affirmed nor rejected. All
Boeing purchase agreements require a 24-month reconfirmation notice for the
delivery of each aircraft. As of June 30, 1994, ten B737-300 and nine B757-200
delivery positions have expired due to the lack of reconfirmation by the
Company, leaving 14 and 11 delivery positions, respectively, as reflected above.
The failure to reconfirm such delivery positions exposes the Company to loss of
pre-delivery deposits and other claims which may be asserted in the bankruptcy
proceeding. The Company also has a pre-petition executory contract under which
the Company holds delivery positions for four B747-400 aircraft under firm order
and four B747-400 aircraft under option order. This executory contract allows
the Company, with the giving of adequate notice, to substitute B737-400 aircraft
for those delivery positions. The Company is currently renegotiating all of its
aircraft purchase agreements with Boeing.
With respect to the purchase of aircraft from AVSA presented in the table
above, a single executory contract for the purchase of 24 A320 aircraft has not
been affirmed nor rejected by the Company. As part of the investment by AmWest,
the A320 purchase agreement was amended to provide the Company with greater
flexibility and reduced pricing. Under the modified terms, delivery dates of the
aircraft will fall in the years 1998 through 2000 with an option to further
defer deliveries. In addition, if new A320 aircraft are delivered as a result of
the renegotiated put agreement (see below), the Company will have the right to
cancel on a one-for-one basis, up to a maximum of eight non-consecutive aircraft
deliveries hereunder, subject to certain conditions. Negotiations are currently
continuing between AVSA and the Company to finalize the details of this
amendment.
In June 1994, the Company renegotiated a put agreement for ten A320
aircraft. The new agreement reduced the number of put aircraft from ten to eight
and rescheduled the deliveries to start not earlier than June 30, 1995 and end
on June 30, 1999. Under the new agreement, new or used A320-200 aircraft,
B737-300 or B757-200 aircraft may be put to the Company but at a rate of no more
than two in 1995, and with respect to each ensuing year during the put period,
of no more than three. In addition, no more than five used aircraft may be put
to the Company and for every new A320 aircraft put to the Company, the Company
has the right to reduce the AVSA A320 purchase contract on a one-for-one basis.
During each January of the put period, the Company will negotiate the type and
delivery dates of the put aircraft for that year. The puts will require 150-day
notice and will be leased at fair market rates for terms ranging from three to
eighteen years, depending on the type and condition of the aircraft. As part of
the renegotiated agreement, certain cash payments and securities will be issued
to the put holder pursuant to the Plan of Reorganization (see Note 1).
In connection with the $78 Million D.I.P. Facility, in December 1991, the
Company terminated its agreement with a D.I.P. lender to lease 24 aircraft and
replaced it with a put agreement to lease up to ten of the aircraft. In
September 1992, the put agreement was amended and the number of put aircraft was
reduced from ten to four with aircraft scheduled for delivery in 1994. In June
1994, the Company reached a settlement for the cancellation of the right to put
four aircraft to the Company for $4.5 million of which $2.5 million was paid in
June 1994 and $2.0 million will be paid on the Effective Date of the Plan of
Reorganization.
(d) Concentration of Credit Risk
The Company does not believe it is subject to any significant concentration
of credit risk. At June 30, 1994, approximately 82 percent of the Company's
receivables related to tickets sold to individual passengers
F-18
<PAGE> 92
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
through the use of major credit cards or to tickets sold by other airlines and
used by passengers on America West. These receivables are short-term, generally
being settled shortly after sale or in the month following usage. Bad debt
losses, which have been minimal in the past, have been considered in
establishing allowances for doubtful accounts.
F-19
<PAGE> 93
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
America West Airlines, Inc., D.I.P.:
We have audited the accompanying balance sheets of America West Airlines, Inc.,
D.I.P. (the "Company") as of December 31, 1993 and 1992, and the related
statements of operations, cash flows and stockholders' equity (deficiency) for
each of the years in the three-year period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurances about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of America West Airlines, Inc.,
D.I.P. as of December 31, 1993 and 1992, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1993 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 1 to the
financial statements, on June 27, 1991 the Company filed a voluntary petition
seeking to reorganize under Chapter 11 of the federal bankruptcy laws. This
event and circumstances relating to this event, including the Company's
significant losses, accumulated deficit and highly leveraged capital structure,
raise substantial doubt about its ability to continue as a going concern.
Although the Company is currently operating as debtor-in-possession under the
jurisdiction of the Bankruptcy Court, the continuation of the business as a
going concern is contingent upon, among other things, the ability to (1) file a
Plan of Reorganization which will gain approval of the creditors and
stockholders and confirmation by the Bankruptcy Court, (2) maintain compliance
with all debt covenants under the debtor-in-possession financing agreements, (3)
achieve satisfactory levels of future operating results and cash flows and (4)
obtain additional debt and equity. Also, as discussed in note 1 to the financial
statements, as part of the Company's bankruptcy proceeding there is uncertainty
as to the amount of claims that will be allowed and as to a number of disputed
claims which are materially in excess of amounts reflected in the accompanying
financial statements. The accompanying financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
KPMG PEAT MARWICK
Phoenix, Arizona
March 18, 1994
F-20
<PAGE> 94
AMERICA WEST AIRLINES, INC., D.I.P.
BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
ASSETS
<TABLE>
<CAPTION>
1993 1992
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 4)................................ $ 99,631 $ 74,383
Accounts receivable, less allowance for doubtful accounts of
$3,030,000 in 1993 and $2,542,000 in 1992 (note 11)............ 65,744 64,817
Expendable spare parts and supplies, less allowance for
obsolescence of $7,231,000 in 1993 and $6,921,000 in 1992...... 28,111 34,431
Prepaid expenses.................................................. 34,939 37,807
---------- ----------
Total current assets...................................... 228,425 211,438
---------- ----------
Property and equipment (notes 2, 4, 11 and 12):
Flight equipment.................................................. 872,104 841,239
Other property and equipment...................................... 180,607 189,755
---------- ----------
1,052,711 1,030,994
Less accumulated depreciation and amortization................. 385,776 328,870
---------- ----------
666,935 702,124
Equipment purchase deposits....................................... 51,836 52,431
---------- ----------
718,771 754,555
---------- ----------
Restricted cash (note 11)........................................... 46,296 40,612
Other assets (note 12).............................................. 23,251 29,836
---------- ----------
$1,016,743 $1,036,441
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 95
AMERICA WEST AIRLINES, INC., D.I.P.
BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
1993 1992
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt (note 4).................... $ 125,271 $ 156,656
Accounts payable (note 11)....................................... 62,957 90,629
Air traffic liability............................................ 118,479 107,496
Accrued compensation and vacation benefits....................... 11,704 13,004
Accrued interest................................................. 8,295 15,647
Accrued taxes.................................................... 14,114 15,765
Other accrued liabilities........................................ 11,980 13,808
---------- ----------
Total current liabilities................................ 352,800 413,005
---------- ----------
Estimated liabilities subject to Chapter 11 proceedings (notes 2
and 4)........................................................... 381,114 348,322
Long-term debt, less current maturities (notes 4 and 11)........... 396,350 411,989
Manufacturers' and deferred credits (note 11)...................... 73,592 84,694
Other liabilities (note 11)........................................ 67,149 73,044
Commitments, contingencies and subsequent events (notes 1, 2, 4, 6,
7, 9, 11 and 12)
Stockholders' deficiency (notes 1, 4, 6, 7, 8, 9 and 12):
Preferred stock, $.25 par value. Authorized 50,000,000 shares:
Series B 10.5% convertible preferred stock, issued and
outstanding 291,149 shares in 1992; $5.41 per share
cumulative dividend (liquidation preference $15,000,000)..... -- 73
Series C 9.75% convertible preferred stock, issued and
outstanding 73,099 shares; $1.33 per share cumulative
dividend (liquidation preference $1,000,000)................. 18 18
Common stock, $.25 par value. Authorized 90,000,000 shares;
issued and outstanding 25,291,102 shares in 1993 and
23,967,663 shares in 1992..................................... 6,323 5,992
Additional paid-in capital....................................... 197,010 195,407
Accumulated deficit.............................................. (438,626) (475,791)
---------- ----------
(235,275) (274,301)
Less deferred compensation and notes receivable -- employee stock
purchase plans (note 6)....................................... 18,987 20,312
---------- ----------
Total stockholders' deficiency........................... (254,262) (294,613)
---------- ----------
$1,016,743 $1,036,441
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 96
AMERICA WEST AIRLINES, INC., D.I.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Operating revenues:
Passenger............................................ $1,246,564 $1,214,816 $1,332,191
Cargo................................................ 40,161 42,077 43,651
Other................................................ 38,639 37,247 38,083
---------- ---------- ----------
Total operating revenues..................... 1,325,364 1,294,140 1,413,925
---------- ---------- ----------
Operating expenses:
Salaries and related costs........................... 305,429 324,255 383,833
Rentals and landing fees............................. 274,708 338,391 349,563
Aircraft fuel........................................ 166,313 186,042 223,347
Agency commissions................................... 106,368 106,661 128,134
Aircraft maintenance materials and repairs........... 31,000 38,366 41,649
Depreciation and amortization........................ 81,894 86,981 97,803
Restructuring charges (note 13)...................... -- 31,316 --
Other................................................ 238,598 256,940 294,253
---------- ---------- ----------
Total operating expenses..................... 1,204,310 1,368,952 1,518,582
---------- ---------- ----------
Operating income (loss)...................... 121,054 (74,812) (104,657)
---------- ---------- ----------
Nonoperating income (expense):
Interest income...................................... 728 1,418 5,724
Interest expense (contractual interest of $72,961,
$73,931 and $79,271 for 1993, 1992 and 1991,
respectively) (note 4)............................ (54,192) (55,826) (61,912)
Loss on disposition of property and equipment........ (4,562) (1,283) (1,600)
Reorganization expense, net (note 2)................. (25,015) (16,216) (58,440)
Other, net (notes 4 and 11).......................... (89) 14,958 (1,131)
---------- ---------- ----------
Total nonoperating expense, net.............. (83,130) (56,949) (117,359)
---------- ---------- ----------
Income (loss) before income taxes............ 37,924 (131,761) (222,016)
---------- ---------- ----------
Income taxes (note 5).................................. 759 -- --
---------- ---------- ----------
Net income (loss)...................................... $ 37,165 $ (131,761) $ (222,016)
========== ========== ==========
Earnings (loss) per share:
Primary.............................................. $ 1.50 $ (5.58) $ (10.39)
========== ========== ==========
Fully diluted........................................ $ 1.04 $ (5.58) $ (10.39)
========== ========== ==========
Shares used for computation:
Primary.............................................. 27,525 23,914 21,534
========== ========== ==========
Fully diluted........................................ 41,509 23,914 21,534
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 97
AMERICA WEST AIRLINES, INC., D.I.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................................... $ 37,165 $(131,761) $(222,016)
Adjustments to reconcile net income (loss) to cash provided by operating
activities:
Depreciation and amortization............................................ 81,894 86,981 97,803
Amortization of manufacturers' and deferred credits...................... (5,186) (5,869) (9,851)
Loss on disposition of property and equipment............................ 4,562 1,283 1,600
Restructuring charges.................................................... -- 31,316 --
Reorganization items..................................................... 18,167 3,188 44,273
Other.................................................................... (554) 866 9,242
Changes in operating assets and liabilities:
Decrease in short-term investments....................................... -- -- 19,705
Decrease (increase) in accounts receivable, net.......................... (927) 19,418 (13,945)
Decrease (increase) in spare parts and supplies, net..................... 6,320 (2,384) (3,227)
Decrease in prepaid expenses............................................. 2,627 812 3,208
Increase in other assets and restricted cash............................. (5,295) (1,141) (21,053)
Increase (decrease) in accounts payable.................................. 9,014 (8,473) 65,083
Increase (decrease) in air traffic liability............................. 8,749 30,723 (41,256)
Decrease in accrued compensation and vacation benefits................... (1,300) (1,491) (909)
Increase in accrued interest............................................. 10,368 25,640 23,676
Increase (decrease) in accrued taxes..................................... (1,764) 2,968 (2,945)
Increase in other accrued liabilities.................................... 644 18,204 4,594
Increase (decrease) in other liabilities................................. (11,126) 6,465 65,945
-------- --------- ---------
Net cash provided by operating activities........................... 153,358 76,745 19,927
Cash flows from investing activities:
Purchases of property and equipment........................................ (54,324) (69,208) (96,803)
Decrease (increase) in equipment purchase deposits......................... -- 14,425 (7,294)
Proceeds from disposition of property...................................... 3,715 383 275
Proceeds from manufacturers' credits....................................... -- -- 5,100
-------- --------- ---------
Net cash used in investing activities............................... (50,609) (54,400) (98,722)
Cash flows from financing activities:
Proceeds from issuance of D.I.P. financing................................. -- 53,000 78,000
Proceeds from issuance of debt............................................. -- 22,804 --
Repayment of debt.......................................................... (77,501) (75,871) (44,939)
Proceeds from issuance of common stock..................................... -- -- 7,265
Preferred dividends paid................................................... -- -- (423)
-------- --------- ---------
Net cash provided by (used in) financing activities................. (77,501) (67) 39,903
-------- --------- ---------
Net increase (decrease) in cash and cash equivalents................ 25,248 22,278 (38,892)
-------- --------- ---------
Cash and cash equivalents at beginning of year............................... 74,383 52,105 90,997
-------- --------- ---------
Cash and cash equivalents at end of year..................................... $ 99,631 $ 74,383 $ 52,105
======== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE> 98
AMERICA WEST AIRLINES, INC., D.I.P.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NOTES RECEIVABLE
AND DEFERRED
CONVERTIBLE ADDITIONAL COMPENSATION
PREFERRED COMMON PAID-IN ACCUMULATED EMPLOYEE STOCK
STOCK STOCK CAPITAL DEFICIT PURCHASE PLANS TOTAL
----------- ------ ---------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1991............... $91 $4,832 $156,573 $(118,669) $(21,686) $ 21,141
Issuance of 253,422 shares of common
stock sold at:
$5.50 per share, net of expenses....... -- 63 1,331 -- -- 1,394
Issuance of 2,755,938 shares of common
stock pursuant to convertible
subordinated debentures................ -- 689 28,084 -- -- 28,773
Issuance of 10,841 shares of common stock
pursuant to exercise of stock options
and warrants........................... -- 3 38 -- -- 41
Repurchase of 1,356 shares of common
stock pursuant to employee restricted
stock plan............................. -- -- (8) -- -- (8)
Repurchase of 3,659 shares of common
stock pursuant to employee stock
purchase plan.......................... -- (1) (23) -- -- (24)
Employee restricted stock deferred
compensation........................... -- -- (1) -- 214 213
Employee stock purchase plan:
Issuance of 1,271,765 shares of common
stock at:
$.94-$7.50 per share................. -- 318 4,601 -- (889) 4,030
Deferred compensation.................. -- -- 1,230 -- 389 1,619
Preferred stock dividends
Series B: $5.41 per share.............. -- -- -- (1,575) -- (1,575)
Series C: $1.33 per share.............. -- -- -- (98) -- (98)
Net loss................................. -- -- -- (222,016) -- (222,016)
--- ------ -------- --------- -------- ---------
Balance at December 31, 1991............. 91 5,904 191,825 (342,358) (21,972) (166,510)
--- ------ -------- --------- -------- ---------
Issuance of 346,661 shares of common
stock pursuant to convertible
subordinated debentures................ -- 86 3,599 -- -- 3,685
Employee restricted stock deferred
compensation........................... -- -- -- -- 101 101
Employee stock purchase plan:
Issuance of 7,305 shares of common
stock at:
$.19-$2.63 per share................. -- 2 (13) -- 81 70
Deferred compensation.................. -- -- (4) -- 1,478 1,474
Preferred stock dividends
Series B: $5.41 per share............ -- -- -- (1,575) -- (1,575)
Series C: $1.33 per share............ -- -- -- (97) -- (97)
Net loss................................. -- -- -- (131,761) -- (131,761)
--- ------ -------- --------- -------- ---------
Balance at December 31, 1992............. 91 5,992 195,407 (475,791) (20,312) (294,613)
--- ------ -------- --------- -------- ---------
Issuance of 170,173 shares of common
stock pursuant to convertible
subordinated debentures................ -- 43 1,896 -- -- 1,939
Issuance of 1,164,596 shares of common
stock pursuant to convertible preferred
stock.................................. (73) 291 (218) -- -- --
Employee restricted stock deferred
compensation........................... -- -- -- -- 21 21
Employee stock purchase plan:
Cancellation of 11,330 shares of common
stock at:
$.22-$1.59 per share................. -- (3) (38) -- 49 8
Deferred compensation.................. -- -- (37) -- 1,255 1,218
Net income............................... -- -- -- 37,165 -- 37,165
--- ------ -------- --------- -------- ---------
Balance at December 31, 1993............. $18 $6,323 $197,010 $(438,626) $(18,987) $(254,262)
=== ====== ======== ========= ======== =========
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE> 99
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(1) REORGANIZATION UNDER CHAPTER 11, LIQUIDITY, FINANCIAL CONDITION AND
SUBSEQUENT EVENTS
On June 27, 1991, America West Airlines, Inc., D.I.P. (the "Company" or
"America West") filed a voluntary petition in the United States Bankruptcy Court
for the District of Arizona (the "Bankruptcy Court") to reorganize under Chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code"). The Company is
currently operating as a debtor-in-possession ("D.I.P.") under the supervision
of the Bankruptcy Court. As a debtor-in-possession, the Company is authorized to
operate its business but may not engage in transactions outside its ordinary
course of business without the approval of the Bankruptcy Court.
Subject to certain exceptions under the Bankruptcy Code, the Company's
filing for reorganization automatically enjoined the continuation of any
judicial or administrative proceedings against the Company. Any creditor actions
to obtain possession of property from the Company or to create, perfect or
enforce any lien against the property of the Company are also enjoined. As a
result, the creditors of the Company are precluded from collecting pre-petition
debts without the approval of the Bankruptcy Court.
The Company had the exclusive right for 120 days after the Chapter 11
filing on June 27, 1991 to file a plan of reorganization and 60 additional days
to obtain necessary acceptances of such plan. Such periods may be extended at
the discretion of the Bankruptcy Court, but only on a showing of good cause, and
extensions have been obtained such that the Company has until June 10, 1994 to
file its plan of reorganization with the Court or obtain an additional
extension. Subject to certain exceptions set forth in the Bankruptcy Code,
acceptance of a plan of reorganization requires approval of the Bankruptcy Court
and the affirmative vote (i.e. 50% of the number and 66 2/3% of the dollar
amount) of each class of creditors and equity holders whose claims are impaired
by the plan.
Certain pre-petition liabilities have been paid after obtaining the
approval of the Bankruptcy Court, including certain wages and benefits of
employees, insurance costs, obligations to foreign vendors and governmental
agencies, travel agent commissions and ticket refunds. The Company has also been
allowed to honor all tickets sold prior to the date it filed for reorganization.
In addition, the Company is authorized to pay pre-petition liabilities to
essential suppliers of fuel, food and beverages and to other vendors providing
critical goods and services. Subsequent to filing and with the approval of the
Bankruptcy Court, the Company assumed certain executory contracts of essential
suppliers.
Parties to executory contracts may, under certain circumstances, file
motions with the Bankruptcy Court to require the Company to assume or reject
such contracts. Unless otherwise agreed, the assumption of a contract will
require the Company to cure all prior defaults under the related contract,
including all pre-petition liabilities unless terms can be negotiated. Unless
otherwise agreed, the rejection of a contract is deemed to constitute a breach
of the agreement as of the moment immediately preceding Chapter 11 filing,
giving the other party to the contract a right to assert a general unsecured
claim for damages arising out of the breach.
February 28, 1992 was set as the last date for the filing of proof of
claims under the Bankruptcy Code and the Company's creditors have submitted
claims for liabilities not paid and for damages incurred. There may be
differences between the amounts at which any such liabilities are recorded in
the financial statements and the amount claimed by the Company's creditors.
Significant litigation may be required to resolve any such disputes.
The Company has incurred and will continue to incur significant costs
associated with the reorganization. The amount of these costs, which are being
expensed as incurred, is expected to significantly affect results of operations.
As a result of its filing protection under Chapter 11 of the Bankruptcy
Code, the Company is in default of substantially all of its debt agreements. All
outstanding pre-petition unsecured debt of the Company has been
F-26
<PAGE> 100
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
presented in these financial statements within the caption Estimated Liabilities
Subject to Chapter 11 Proceedings.
Additional liabilities subject to the proceedings may arise in the future
as a result of the rejection of executory contracts, including leases, and from
the determination by the Bankruptcy Court (or agreement by parties in interest)
of allowed claims for contingencies and other disputed amounts. Conversely, the
assumption of executory contracts and unexpired leases may convert liabilities
shown as subject to Chapter 11 proceedings to post-petition liabilities.
Substantially all of the aircraft, engines and spare parts in the Company's
fleet are subject to lease or secured financing agreements that entitle the
Company's aircraft lessors and secured creditors to rights under Section 1110 of
the Bankruptcy Code. Pursuant to Section 1110, the Company had 60 days from the
date of its Chapter 11 filing, or until August 26, 1991, to bring its
obligations to these aircraft lessors and secured creditors current and/or reach
other mutually satisfactory negotiated arrangements. In September 1991, as a
condition to the borrowings under the initial $55 million D.I.P. facility, the
Company arranged for rent, principal and interest payment deferrals from a
majority of its aircraft providers as a condition to the assumption of the
related lease or secured borrowing by the Company. As a result of these
arrangements, the Company was able to assume the executory contracts associated
with 83 aircraft in its fleet without having to bring its obligations to these
aircraft providers current. In addition, as part of the initial D.I.P. facility,
the Company assumed and brought current lease agreements for 16 Airbus A320
aircraft, three CFM engines, a Boeing 757-200 and a Boeing 737-300. Twenty-two
aircraft were deemed surplus to the Company's needs and the associated executory
contracts were rejected. Included in 1991 reorganization costs is $35.2 million
in write-offs of leasehold improvements, security deposits, accrued maintenance,
accrued rents and other costs to return the aircraft which were subject to the
rejected aircraft agreements. In certain cases, final agreements were reached
with such aircraft providers and no further claims by such providers will be
pursued as a result of the rejections. In other instances, the aircraft
providers have filed claims in the normal course of the bankruptcy and as of
December 31, 1993 significant claims for rejected aircraft have not yet been
settled.
Due to the uncertain nature of many of the potential claims, the Company is
unable to project the magnitude of such claims with any degree of certainty.
However, the claims (pre-petition claims and administrative claims) that have
been filed against the Company are in excess of $2 billion. Such aggregate
amount includes claims of all character, including, but not limited to,
unsecured claims, secured claims, claims that have been scheduled but not filed,
duplicative claims, tax claims, claims for leases that were assumed, and claims
which the Company believes to be without merit; however, claims filed for which
an amount was not stated, are not reflected in such amount. The Company is
unable to estimate the potential amount of such unstated claims; however, the
amount of such claims could be material.
The Company is in the process of reviewing the general unsecured claims
asserted against the Company. In many instances, such review process will
include the commencement of Bankruptcy Court proceedings in order to determine
the amount at which such claims should be allowed. The Company has accrued its
estimate of claims that will be allowed or the minimum amount at which it
believes the asserted general unsecured claims will be allowed if there is no
better estimate within the range of possible outcomes. However, the ultimate
amount of allowed claims will be different and such differences could be
material. The Company is unable to estimate the amount of such differences with
any reasonable degree of certainty at this time.
The Bankruptcy Code requires that all administrative claims be paid on the
effective date of a plan of reorganization unless the respective claimants
agreed to different treatment. Consequently, depending on the ultimate amount of
administrative claims allowed by the Bankruptcy Court, the Company may be unable
to obtain confirmation of a plan of reorganization. The Company is actively
negotiating with claimants to achieve mutually acceptable dispositions of these
claims. Since the commencement of the bankruptcy proceeding, claims alleging
administrative expense priority totaling more than $153 million have been filed
and an additional claim of $14 million has been alleged. As of February 28,
1994, $115 million of the filed claims have
F-27
<PAGE> 101
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
been allowed and settled for $50.2 million in the aggregate. The Company is
currently negotiating the resolution of the remaining $38 million filed
administrative expense claim (which relates to a rejected lease of a Boeing
737-300 aircraft) and the alleged $14 million administrative claim (which
relates to a rejected lease of a Boeing 757-200 aircraft). Claims have been or
may be asserted against the Company for alleged administrative rent and/or
breach of return conditions (i.e. maintenance standards), guarantees and tax
indemnity agreements related to aircraft or engines abandoned or rejected during
the bankruptcy proceedings. Additional claims may be asserted against the
Company and allowed by the Bankruptcy Court. The amount of such unidentified
administrative claims may be material.
Plan of Reorganization
Under the Bankruptcy Code, the Company's pre-petition liabilities are
subject to settlement under a plan of reorganization. Pursuant to an extension
granted by the Bankruptcy Court on February 2, 1994, the Company has the
partially exclusive right, until June 10, 1994 (unless extended by the
Bankruptcy Court), to file a plan of reorganization. Each of the official
committees has also been approved to submit a plan of reorganization. The
exclusivity period may be extended by the Bankruptcy Court upon a showing of
cause after notice has been given and a hearing has been held, although no
assurance can be given that any additional extensions will be granted if
requested by the Company. The Company has agreed not to seek additional
extensions of the exclusivity period without the advance consent of the
Creditors' Committee and the Equity Committee.
On December 8, 1993 and February 16, 1994, the Bankruptcy Court entered
certain orders which provided for a procedure pursuant to which interested
parties could submit proposals to participate in a plan of reorganization for
America West. The Bankruptcy Court also set February 24, 1994 as the date for
America West to select a "Lead Plan Proposal" from the proposals submitted.
On February 24, 1994, America West selected as its Lead Plan Proposal an
investment proposal submitted by AmWest Partners, L.P., a limited partnership
("AmWest"), which includes Air Partners II, L.P., Continental Airlines, Inc.,
Mesa Airlines, Inc. and Fidelity Management Trust Company. On March 11, 1994,
the Company and AmWest entered into a revised investment agreement which
substantially incorporates the terms of the AmWest investment proposal (the
"Investment Agreement"). The Investment Agreement provides that AmWest will
purchase from America West equity securities representing a 37.5% ownership
interest in the Company for $120 million and $100 million in new senior
unsecured debt securities. The Investment Agreement also provides that, in
addition to the 37.5% ownership interest in the Company, AmWest would also
obtain 72.9% of the total voting interest in America West after the Company is
reorganized. The terms of the Investment Agreement will be incorporated into a
plan of reorganization to be filed with the Bankruptcy Court; however,
modifications to the Investment Agreement may occur prior to the submission of a
plan of reorganization and such modifications may be material. There can be no
assurance that a plan of reorganization based upon the Investment Agreement will
be accepted by the parties entitled to vote thereon or confirmed by the
Bankruptcy Court.
In addition to the interest in the reorganized America West that would be
acquired by AmWest pursuant to the Investment Agreement, the Investment
Agreement also provides for the following:
1. The D.I.P. financing would be repaid in full with cash on the date a
plan of reorganization is confirmed ("Reorganization Date").
2. On the Reorganization Date, unsecured creditors would receive 45% of the
new common equity in the reorganized Company, with the potential to receive up
to 55% of such equity if within one year after the Reorganization Date, the
value of the securities distributed to them has not provided them with a full
recovery under the Bankruptcy Code. In addition, unsecured creditors would have
the right to elect to receive cash at
F-28
<PAGE> 102
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
$8.889 per share up to an aggregate maximum amount of $100 million, through a
repurchase by AmWest of a portion of the shares to be issued to unsecured
creditors under a plan of reorganization.
3. Holders of equity interests would have the right to receive up to 10% of
the new common equity of the Company, depending on certain conditions
principally involving a determination as to whether the unsecured creditors had
received a full recovery on account of their claims. In addition, holders of
equity interests would have the right to purchase up to $15 million of the new
common equity in the Company for $8.296 per share from AmWest, and would also
receive warrants entitling them to purchase, together with AmWest, up to 5% of
the reorganized Company's common stock, at a price to be set so that the
warrants would have value only after the unsecured creditors would have received
full recovery on their claims.
4. In exchange for certain concessions principally arising from
cancellation of the right of Guinness Peat Aviation ("GPA") affiliates to put to
America West 10 Airbus A320 aircraft at fixed rates, GPA, or certain affiliates
thereof, would receive (i) 7.5% of the new common equity in the reorganized
Company, (ii) warrants to purchase up to 2.5% of the reorganized Company's
common stock on the same terms as the AmWest warrants, (iii) $3 million in new
senior unsecured debt securities, and (iv) the right to require the Company to
lease up to eight aircraft of types operated by the Company from GPA prior to
June 30, 1999 on terms which the Company believes to be more favorable than
those currently applicable to the put aircraft. See note 11 for an additional
discussion of the put rights.
5. Continental Airlines, Inc., Mesa Airlines, Inc. and America West would
enter into certain alliance agreements which would include code-sharing,
schedule coordination and certain other relationships and agreements. A
condition to proceeding with a plan of reorganization based upon the Investment
Agreement would be that these agreements be in form and substance satisfactory
to America West, including the Company's reasonable satisfaction that such
alliance agreements when fully implemented will result in an increase in pre-tax
income of not less than $40 million per year.
6. The expansion of the Company's board of directors to 15 members. Nine
members would be designated by AmWest and other members reasonably acceptable to
AmWest would include four members designated by representatives of the Company,
the Equity Committee and the Creditors' Committee and two members designated by
GPA.
7. The Investment Agreement also provides for many other matters, including
the disposition of the various types of claims asserted against the Company, the
adherence to the Company's aircraft lease agreements, the amendment of the
Company's aircraft purchase agreements and release of the Company's employees
from all currently existing obligations arising under the Company's stock
purchase plan in consideration for the cancellation of the shares of Company
stock securing such obligations.
The Company has also entered into a revised Interim Procedures Agreement
(the "Procedures Agreement") with AmWest. The Procedures Agreement is subject to
the approval of the Bankruptcy Court and sets forth terms and conditions upon
which the Company must operate prior to the effective date of a confirmed plan
of reorganization based upon the terms of the Investment Agreement. The
Procedures Agreement provides for the reimbursement of AmWest's expenses (up to
a maximum of $3.6 million) as well as a termination fee of up to $8 million
under certain conditions. The Procedures Agreement has not yet been approved by
the Bankruptcy Court.
The Company is currently developing with AmWest a plan of reorganization
based upon the foregoing terms. The Equity Committee has agreed to support the
plan. The Creditors' Committee has indicated that it does not support the
current terms of the Investment Agreement. Another group interested in
developing a plan of reorganization with the Company has proposed to invest $155
million in equity securities and $65 million in new senior unsecured debt
securities. The proponent of this proposal would receive a 33.5% ownership
interest in the reorganized Company, current equity holders would receive a 4%
ownership interest
F-29
<PAGE> 103
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
in the reorganized company and the unsecured creditors would receive a 62.5%
ownership interest in the reorganized company.
Any plan of reorganization must be approved by the Bankruptcy Court and by
specified majorities of each class of creditors and equity holders whose claims
are impaired by the plan. Alternatively, absent the requisite approvals, the
Company may seek Bankruptcy Court approval of its reorganization plan under
Section 1129(b) of the Bankruptcy Code, assuming certain tests are met. The
Company cannot predict whether any plan submitted by it will be approved.
The Company is currently unable to predict when it may file a plan of
reorganization based upon the Investment Agreement, but intends to do so as soon
as practicable. Once a plan with a disclosure statement is filed by any party,
the Bankruptcy Court will hold a hearing to determine the adequacy of the
information contained in such disclosure statement. Only upon receiving an order
form the Bankruptcy Court providing that the disclosure statement accompanying
any such plan contains adequate information as required by Section 1125 of the
Bankruptcy Code, may a party solicit acceptances or rejections of any such plan
of reorganization. Following entry of an order approving the disclosure
statement, the plan will be sent to creditors and equity holders for voting
pursuant to both the Bankruptcy Code and orders that will be entered by the
Bankruptcy Court. Following submission of the plan to holders of claims and
equity interest, the Bankruptcy Court will hold a hearing to consider
confirmation of the plan pursuant to Section 1129 of the Bankruptcy Code.
Although the Bankruptcy Code provides for certain minimum time periods for these
events, the Company is unable to reasonably estimate when a plan based on the
Investment Agreement might be submitted for voting and confirmation.
If at any time the Creditors' Committee, the Equity Committee or any
creditor of the Company or equity holder of the Company believes that the
Company is or will not be in a position to sustain operations, such party can
move in the Bankruptcy Court to compel a liquidation of the Company's estate by
conversion to Chapter 7 bankruptcy proceedings or otherwise. In the event that
the Company is forced to sell its assets and liquidate, it is unlikely that
unsecured creditors or equity holders will receive any value for their claims or
interests.
The Company anticipates that the reorganization process will result in the
restructuring, cancellation and/or replacement of the interest of its existing
common and preferred stockholders. Because of the "absolute priority rule" of
Section 1129 of the Bankruptcy Code, which requires that the Company's creditors
be paid in full (or otherwise consent) before equity holders can receive any
value under a plan of reorganization, the Company previously disclosed that it
anticipated that the reorganization process would result in the elimination of
the Company's existing equity interests. Due to recent events, including
sustained improvement in the Company's operating results as well as general
improvement in the condition of the United States' economy and airline industry,
some form of distribution to the equity interests pursuant to Section 1129 may
occur. However, there can be no assurances in this regard.
The accompanying financial statements have been prepared on a going concern
basis which assumes continuity of operations and realization of assets and
liquidation of liabilities in the ordinary course of business. As a result of
the reorganization proceedings, there are significant uncertainties relating to
the ability of the Company to continue as a going concern. The financial
statements do not include any adjustments that might be necessary as a result of
the outcome of the uncertainties discussed herein including the effects of any
plan of reorganization.
(2) ESTIMATED LIABILITIES SUBJECT TO CHAPTER 11 PROCEEDINGS AND REORGANIZATION
EXPENSE
Under Chapter 11, certain claims against the Company in existence prior to
the filing of the petitions for relief under the Code are stayed while the
Company continues business operations as debtor-in-possession.
F-30
<PAGE> 104
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
These pre-petition liabilities are expected to be settled as part of the plan of
reorganization and are classified as "Estimated liabilities subject to Chapter
11 proceedings."
Estimated liabilities subject to Chapter 11 proceedings as of December 31,
1993 and 1992 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1992
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt (including convertible subordinated debentures
of $138.9 million and $140.8 million at December 31,1993 and
1992, respectively) (note 4)................................. $ 224,642 $ 235,026
Accounts payable and accrued liabilities....................... 113,945 73,488
Accrued interest............................................... 16,808 14,261
Accrued taxes.................................................. 25,719 25,547
--------- ---------
$ 381,114 $ 348,322
======== ========
</TABLE>
The debt balance included above consists of unsecured and secured
obligations and other obligations that have not been affirmed by the Company
through the Bankruptcy Court (note 4).
Reorganization expense is comprised of items of income, expense, gain or
loss that were realized or incurred by the Company as a result of reorganization
under Chapter 11 of the Federal Bankruptcy Code. Such items consisted of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provisions for pre-petition and administrative
claims.............................................. $18,231 $ 1,748 $35,203
Professional fees..................................... 7,227 11,147 8,531
D.I.P. financing issuance costs....................... 1,378 1,760 2,660
Write-off of debt issuance costs...................... -- -- 2,773
Employee termination and furlough costs............... -- 561 1,343
Facility closing costs................................ -- 2,776 6,796
Interest income....................................... (2,635) (2,030) (1,365)
Other................................................. 814 254 2,499
------- ------- -------
$25,015 $16,216 $58,440
======= ======= =======
</TABLE>
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Financial Reporting for Bankruptcy Proceedings
On November 19, 1990, the American Institute of Certified Public
Accountants issued Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). SOP 90-7 provides
guidance for financial reporting by entities that have filed petitions with the
Bankruptcy Court and expect to reorganize under Chapter 11 of the Code.
SOP 90-7 recommends that all such entities report consistently while
reorganizing under Chapter 11, with the objective of reflecting their financial
evolution. To achieve such objectives, their financial statements should
distinguish transactions and events that are directly associated with the
reorganization from those of the operations of the ongoing business as it
evolves.
F-31
<PAGE> 105
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SOP 90-7 became effective for financial statements of enterprises that
filed petitions under the Code after December 31, 1990, although earlier
application was encouraged. The Company has implemented the guidance provided by
SOP 90-7 in the accompanying financial statements.
Pursuant to SOP 90-7, pre-petition liabilities are reported on the basis of
the expected amounts of such allowed claims, as opposed to the amounts for which
those allowed claims may be settled. Under an approved final plan of
reorganization, those claims may be settled at amounts substantially less than
their allowed amounts.
(b) Cash Equivalents
Cash equivalents consist of all highly liquid debt instruments purchased
with original maturities of three months or less and are carried at cost which
approximates market.
(c) Restricted Cash
Restricted cash includes cash held in Company accounts, but pledged to an
institution which processes credit card sales transactions and cash deposits
securing certain letters of credit.
(d) Expendable Spare Parts and Supplies
Flight equipment expendable spare parts and supplies are valued at average
cost. Allowances for obsolescence are provided, over the estimated useful life
of the related aircraft and engines, for spare parts expected to be on hand at
the date the aircraft are retired from service.
(e) Property and Equipment
Property and equipment is stated at cost or, if acquired under capital
leases, at the lower of the present value of minimum lease payments or fair
market value at the inception of the lease. Interest capitalized on advance
payments for aircraft acquisitions and on expenditures for aircraft improvements
is part of the cost. Property and equipment is depreciated and amortized to
residual values over the estimated useful lives or the lease term using the
straight-line method. The Company discontinued capitalizing interest on June 27,
1991 due to the Chapter 11 filing.
The estimated useful lives for the Company's property and equipment range
from three to twelve years for owned property and equipment and to thirty years
for the reservation and training center and technical support facilities. The
estimated useful lives of the Company's owned aircraft, jet engines, flight
equipment and rotable parts range from eleven to twenty-two years. Leasehold
improvements relating to flight equipment and other property on operating leases
are amortized over the life of the lease or the life of the asset, whichever is
shorter.
Routine maintenance and repairs are charged to expense as incurred. The
cost of major scheduled airframe, engine and certain component overhauls are
capitalized and amortized over the periods benefited and included in
depreciation and amortization expense. Additionally, a provision for the
estimated cost of scheduled airframe and engine overhauls required to be
performed on leased aircraft prior to their return to the lessors has been
provided.
(f) Revenue Recognition
Passenger revenue is recognized when the transportation is provided. Ticket
sales for transportation which has not yet been provided are reflected in the
financial statements as air traffic liability.
F-32
<PAGE> 106
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(g) Passenger Traffic Commissions and Related Fees
Passenger traffic commissions and related fees are expensed when the
transportation is provided and the related revenue is recognized. Passenger
traffic commissions and related fees not yet recognized are included as a
prepaid expense.
(h) Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
As more fully discussed at note 5, adoption of the new standard changes the
Company's method of accounting for income taxes from the deferred approach to an
asset and liability approach.
As with the prior standard, the Company continues to account for its
investment tax credits and general business credits by use of the flow-through
method.
(i) Per Share Data
Primary earnings (loss) per share is based upon the weighted average number
of shares of common stock outstanding and dilutive common stock equivalents
(stock options and warrants). Primary earnings per share reflect net income
adjusted for interest on borrowings effectively reduced by the proceeds from the
assumed conversion of common stock equivalents.
Fully diluted earnings per share in 1993 is based on the average number of
shares of common stock and dilutive common stock equivalents outstanding
adjusted for conversion of outstanding convertible preferred stock and
convertible debentures. Fully diluted earnings per share reflects net income
adjusted for interest on borrowings effectively reduced by the proceeds from the
assumed conversion of common stock equivalents.
(j) Frequent Flyer Awards
The Company maintains a frequent travel award program known as "FlightFund"
that provides a variety of awards to program members based on accumulated
mileage. The estimated cost of providing the free travel, using the incremental
cost method as adjusted for estimated redemption rates, is recognized as a
liability and charged to operations as program members accumulate mileage.
(k) Manufacturers' and Deferred Credits
In connection with the acquisition of certain aircraft and engines, the
Company receives various credits. Such manufacturers' credits are deferred until
the aircraft and engines are delivered, at which time they are either applied as
a reduction of the cost of acquiring owned aircraft and engines, resulting in a
reduction of future depreciation expense, or amortized as a reduction of rent
expense for leased aircraft and engines.
(l) Fair Value of Financial Instruments
The fair value estimates and assumptions used in developing the estimates
of the Company's financial instruments are as follows:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity
of those instruments.
F-33
<PAGE> 107
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Accounts Receivable and Accounts Payable
The carrying amount of accounts receivable and accounts payable
approximates fair value as they are expected to be collected or paid within 90
days of year-end.
Long-term Debt and Estimated Liabilities Subject to Chapter 11 Proceedings
The fair value of long-term debt and estimated liabilities subject to
Chapter 11 proceedings cannot readily be estimated as quoted market prices are
not available. Additionally, future cash flows cannot be estimated as the
repayment of these instruments is subject to disposition within the bankruptcy
proceedings.
(m) Reclassifications
Certain prior year reclassifications have been made to conform to the
current year presentation.
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
D.I.P. financing, secured by substantially all Company
assets(a).................................................. $ 83,577 $ 110,784
Note payable to aircraft provider for advance credits(a)..... 68,356 60,732
Notes payable secured by aircraft(b)......................... 306,837 327,267
Line of credit agreements(c)................................. 18,589 24,979
Note from an aircraft engine provider(d)..................... 7,191 12,392
Notes payable secured by flight simulators(e)................ 20,064 22,804
Notes payable to administrative claimants(f)................. 10,734 --
Other........................................................ 6,273 9,687
--------- ---------
521,621 568,645
Less current maturities............................ (125,271) (156,656)
--------- ---------
$ 396,350 $ 411,989
========= =========
</TABLE>
Long-term debt included in estimated liabilities subject to Chapter 11
proceedings consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
7 3/4% convertible subordinated debentures due 2010(g)........... $ 30,477 $ 30,752
7 1/2% convertible subordinated debentures due 2011(h)........... 31,709 32,069
11 1/2% convertible subordinated debentures due 2009(i).......... 76,722 78,025
Note payable to an aircraft provider for deferred pre-delivery
payments(j).................................................... 21,126 21,126
Line of credit agreement(k)...................................... 9,854 11,000
Industrial development revenue bonds(l).......................... 29,497 29,497
Letter of credit draws secured by rotable parts(m)............... 22,967 23,113
Other............................................................ 2,290 9,444
--------- ---------
$ 224,642 $ 235,026
======== ========
</TABLE>
F-34
<PAGE> 108
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As part of the Chapter 11 reorganization process, the Company is required
to notify all known or potential claimants for the purpose of identifying all
pre-petition claims against the Company. Additional bankruptcy claims and
pre-petition liabilities may arise by termination of various contractual
obligations and as certain contingent and/or potentially disputed bankruptcy
claims are allowed for amounts which may differ from those shown on the balance
sheet.
As discussed in note 1, payment of these liabilities, including maturity of
debt obligations, is stayed while the debtor continues to operate as a
debtor-in-possession. As a result, contractual terms have been suspended with
respect to debt subject to the Chapter 11 proceedings. The following paragraphs
include discussion of the original contractual terms of the long-term debt;
however, the maturity and terms of the long-term debt subsequent to the petition
date may differ as a result of negotiations that take place as part of the plan
of reorganization.
No principal or interest may be paid on pre-petition debt without the
approval of the Bankruptcy Court. The Company has continued to accrue and pay
interest on its long-term debt related to D.I.P. financing, affirmed long-term
debt and secured debt included in estimated liabilities subject to Chapter 11
proceedings only to the extent that, in the Company's opinion, the value of
underlying collateral exceeds the principal amount of the secured claim. The
Company believes it is probable such interest will be an allowed secured claim
as part of the bankruptcy proceeding. Except as otherwise stated above, the
Company ceased accruing interest on pre-petition debt as of June 27, 1991, due
to uncertainties relating to a final plan of reorganization.
(a) In September 1991, the Company completed arrangements for a $55 million
D.I.P. credit facility. The D.I.P. credit facility is secured by a first
priority lien senior to all other liens on substantially all existing assets of
the Company, except that such lien is junior in priority to Permitted First
Liens (as such term is defined in the D.I.P. credit facility documents) with
respect to the property encumbered thereby. In December 1991, the Company
completed arrangements for an additional $23 million of D.I.P. financing under
terms and conditions substantially the same as those associated with the $55
million D.I.P. credit facility. Quarterly interest payments for the D.I.P.
financings commenced in the quarter ending December 31, 1991 at the 90-day
London Interbank Offered Rate (LIBOR) plus 3.5% and quarterly principal
repayments of $3.9 million were to commence in September 1992 with the balance
due in September 1993, or earlier upon confirmation of an approved plan of
reorganization.
In connection with the $23 million of D.I.P. financing, the Company agreed
to convert advanced cash credits for 24 Airbus A320 aircraft previously provided
to the Company into an unsecured priority term loan. At December 31, 1993, the
amount of the term loan was $68.4 million including accrued interest of $21.9
million. Until the Reorganization Date, the term loan will accrue interest at
12% per annum and such interest will be added to the principal balance. On the
Reorganization Date, 85% of the outstanding balance will be converted into an
eight-year term loan which will accrue interest at 2% over 90-day LIBOR and will
be secured by substantially all the assets of the Company if the D.I.P.
financing is fully repaid. Principal payments will be made in equal quarterly
installments, plus interest, commencing after the Reorganization Date. The
Company has the right to prepay the loan if the D.I.P. financing is fully
repaid. The remaining 15% of the term loan will be treated as a general
unsecured claim without priority status under the Company's plan of
reorganization. In the first quarter of 1994, the Company received information
that the term loan was purchased by a third party.
In connection with the D.I.P. financing, a D.I.P. lender agreed to acquire
the Company's Honolulu to Nagoya, Japan route for $15 million. The Nagoya route
sale was finalized in March 1992, resulting in a gain of $15 million, which is
included in other non-operating income in the accompanying statement of
operations. Upon the completion of the sale of the Nagoya route, $10 million of
the proceeds from the sale were paid to the lender to reduce the Company's
obligation to the lender under the D.I.P. financing. The balance of the proceeds
from the sale of the Nagoya route were added to the Company's working capital.
The remaining D.I.P. balance was paid to this lender in connection with the
September 1992 D.I.P. Facility.
F-35
<PAGE> 109
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In September 1992, the Company completed arrangements to expand its
existing D.I.P. financing by an additional $53 million (the "September 1992
D.I.P. Facility").
As a condition to the closing of the September 1992 D.I.P. Facility, the
Company was required to reduce its aircraft fleet and the number of aircraft
types from five to three pursuant to certain agreements with third parties,
including the following:
1. With the exception of four lessors (two of which participated in the
September 1992 D.I.P. Facility and did not defer or reduce their lease
payments), aircraft lessors whose aircraft were retained in the fleet and who
agreed to payment deferrals during July and August 1992, were required to waive
any default which occurred as a result of such non-payments and to defer these
payments without interest until the first calendar quarter of 1993. In addition,
effective August 1, 1992, the rental rates on these retained aircraft were
reduced to fair market lease rates for a two-year period. The rental rates
adjust to market rates effective August 1, 1994.
Of the remaining two lessors, one accepted rental payment reductions and
the other agreed to a deferral of the rents from July through October 1992.
Repayment of this deferral is monthly over seven years beginning November 1992
at level principal and interest at 90-day LIBOR plus 3.5%.
2. The aircraft lessors who accepted rent reductions and agreed to waive
any administrative claims arising from the reductions stipulated that, if prior
to July 31, 1994, the Company defaults on any of these leases and the aircraft
are repossessed, the lessors are entitled to fixed damages which will be
afforded priority as administrative claims. Lessors of 11 aircraft have the
option, beginning August 1, 1994, to reset the rents to the current fair market
rental rates and, if elected by the lessor, to readjust at two other two-year
intervals during the remaining term of the lease.
The Company also agreed in certain cases that lessors could call the
aircraft upon 180 days notice if the lessor had a better lease proposal from
another party which the Company was unwilling to match. During the period August
1, 1994 through July 31, 1995, certain of these lessors may call their aircraft
without first giving the Company the right to match any competing offer. Call
rights with a right of first refusal affect 16 aircraft and call rights without
a right of first refusal affect 10 aircraft. In addition, in order to induce
several lessors to extend the lease terms of their aircraft, the Company agreed
that the aircraft could be called by the lessors at the end of the original
lease term. One lessor of 11 aircraft has the right to terminate each lease at
the end of the original lease term of each aircraft. Such lessor also has the
right to call its aircraft on 90 days notice at any time prior to the end of the
amended lease term. America West has no right of first refusal with respect to
such aircraft. To date, no lessor has exercised its call rights.
3. Certain principal and interest payments relating to owned aircraft due
in July 1992 were deferred without interest and were repaid by March 31, 1993.
Additionally, certain other principal and interest payments due from August 1992
through January 1993 were deferred and repaid beginning February 1993 over five
to nine years with interest at approximately 10.25%. In lieu of payment
deferrals, two of the aircraft lenders agreed to adjust the interest rates based
on 90-day LIBOR plus 3.5% per annum.
In September 1993, the Bankruptcy Court approved an amendment to the D.I.P.
loan agreement extending the maturity date of the loan from September 30, 1993
to June 30, 1994. Concurrent with the extension of the maturity date, $8.3
million of the principal balance was repaid to one of the participants who did
not agree with the amendment. Interest on all funds advanced under the D.I.P.
facility accrues at 3.5% per annum, over 90-day LIBOR and is payable quarterly.
The amended D.I.P. loan agreement defers all principal payments to the earlier
of June 30, 1994 or the effective date of a confirmed Chapter 11 plan of
reorganization with the exception of $5 million that will be due on March 31,
1994. The amended terms of the D.I.P. financing require the Company to notify
the D.I.P. lenders if the unrestricted cash balance of the Company exceeds $125
million. Upon receipt of such notice, the D.I.P. lenders may require the Company
to prepay the D.I.P. financing by the amount of such excess. Subsequent to
December 31, 1993, the Company notified the
F-36
<PAGE> 110
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
D.I.P. lenders that the Company's unrestricted cash exceeded $125 million;
however, the D.I.P. lenders have not exercised their prepayment rights. The
D.I.P. financings contain a minimum unencumbered cash balance requirement of $55
million at December 31, 1993 and other financial covenants. At December 31,
1993, the Company was in compliance with these covenants.
As a condition to extending the maturity date of the D.I.P. financing in
September 1993, the Company also agreed to pay a facility fee of $627,000 to the
D.I.P. lenders on September 30, 1993 and to pay an additional facility fee equal
to 1/4% of the then outstanding balance of the D.I.P. financing on March 31,
1994. Consequently, the outstanding balance of $83.6 million is classified as a
current liability as of December 31, 1993. Presently, the Company does not
possess sufficient liquidity to satisfy the D.I.P. financing nor does it appear
likely that new equity capital will be obtained and a plan of reorganization
confirmed prior to June 30, 1994. Consequently, the Company will be required to
obtain alternative repayment terms from the D.I.P. lenders. There can be no
assurance that alternative repayment terms will be obtained. The Company
believes that any extension of the D.I.P. financing will be for a short period
of time and would be concurrent with the implementation of a plan of
reorganization.
The D.I.P. financings contain a minimum unencumbered cash balance
requirement of $55 million at December 31, 1993 and other financial covenants.
At December 31, 1993, the Company was in compliance with these covenants.
(b) These notes from financial institutions, secured by seventeen aircraft
with a net book value of $327.6 million, are payable in semi-monthly, monthly,
quarterly and semi-annual installments ranging from $75,000 to $1,637,000 plus
interest at 30-day LIBOR plus 3.5% (6.88% at December 31, 1993) to 10.79%, with
maturities ranging from 1999 to 2008. Approximately $105.3 million of these
secured notes have provisions providing for the reset of interest rates at
various future dates based on fluctuations in indices such as the Eurodollar
rate. Additionally, interest rates and principal payments for certain of these
notes were modified, as discussed above, in connection with the September 1992
D.I.P. Facility.
(c) The Company has a $40 million line of credit that extends to December
31, 1997 for which no borrowing can occur after December 31, 1994. The purpose
of the line is to provide for the initial provisioning of spare parts for Airbus
A320 aircraft. The loan is repaid quarterly with level principal payments of
$970,000 each and interest at LIBOR plus 4%. At December 31, 1993 and 1992, the
Company had borrowings outstanding of $15.5 million and $20.4 million,
respectively, under this credit facility. However, the lender will not make the
unused credit of $24.5 million available at December 31, 1993 as a result of the
Chapter 11 filing. This loan was affirmed in December 1991 by the Bankruptcy
Court under Section 1110 of the Bankruptcy Code.
The Company also has a $25 million line of credit that extends to September
1997 under which no borrowing could occur after September 1992. The credit line
was used for spare engine parts and has an interest rate of LIBOR plus 4%. At
December 31, 1993 and 1992, the Company had borrowings outstanding of $3.1
million and $4.6 million, respectively, under this credit facility. In
connection with the financing by this same lender of two aircraft flight
simulators in October 1992 (see (e)), this loan was affirmed in the bankruptcy
proceeding. Consequently, the outstanding balance at December 31, 1993 is
included in long-term debt.
(d) This note from an aircraft engine manufacturer was originally made for
$30 million in September 1990. The note is secured by two aircraft, spare engine
parts and other equipment. Interest on the note began to accrue at its inception
at 90-day LIBOR plus 2.0%, compounded quarterly, until September 1993 when all
such accrued interest, or approximately $6 million, was paid. Interest is
currently paid quarterly at the same interest rate. In October 1992, this lender
financed two new flight simulators which were securing this note (see (e)), and
this loan was reduced by the amount of such financing, or approximately $22.8
million. Repayment of the balance of this loan is dependent on the future
delivery of certain firm ordered aircraft
F-37
<PAGE> 111
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
scheduled to begin in November 1996 (however, the related aircraft purchase
agreement has been neither affirmed nor rejected at December 31, 1993). In
connection with the above financing of the two flight simulators, this note was
affirmed in the bankruptcy proceedings, and the outstanding balances at December
31, 1993 and 1992 are included in long-term debt.
(e) In October 1992, the Company acquired two flight simulators and
executed two notes secured by the simulators. The notes are payable in 84 equal
monthly principal installments, plus accrued interest at LIBOR plus 2%. However,
the Company has the right, upon the giving of notice to the lender, to fix the
interest rate at the greater of the then current LIBOR plus 2% or 6.375%. In
connection with this financing, the Company affirmed in the bankruptcy
proceedings the agreements for a certain note payable (see (d) above) and a line
of credit (see (c) above).
(f) In 1993, the Company settled three administrative claims with three
four-year promissory notes totaling $9.6 million with quarterly principal
payments and interest at 6%. At December 31, 1993, the outstanding balance of
these promissory notes was $8.7 million.
Also in 1993, the Company renegotiated a note for certain ground equipment
for $2 million as part of an administrative claim settlement which takes effect
upon the confirmation of a plan of reorganization. The Company is required to
make adequate protection payments of $8,000 per month from the settlement date
until plan confirmation, at which time, the note term is 5 years with interest
at 6%.
(g) The Company's 7 3/4% convertible subordinated debentures are
convertible into common stock at $13.50 per share. The debentures are redeemable
at prices ranging from 101.55% of the principal amount at December 31, 1993 to
100% of the principal amount in 1995 and thereafter. Annual sinking fund
payments of $1.5 million are required beginning in 1995.
(h) The Company's 7 1/2% convertible subordinated debentures are
convertible into common stock at $14.00 per share. The debentures are redeemable
at prices ranging from 102.25% of the principal amount at December 31, 1993 to
100% of the principal amount in 1996 and thereafter. Annual sinking fund
payments of $1.6 million are required beginning in 1996.
(i) The Company's 11 1/2% convertible subordinated debentures are
convertible into common stock at $10.50 per share. The debentures are redeemable
at prices ranging from 105.75% of the principal amount from January 1, 1994 to
100% of the principal amount in 1999 and thereafter. Annual sinking fund
payments of $5.8 million are required beginning in 1999.
During 1991, certain bondholders converted $22.1 million of the 11 1/2%
convertible subordinated debentures into common stock. The conversion of the
11 1/2% subordinated debentures resulted in a charge to other non-operating
expense of $875,000 for incremental shares issued upon conversion. Certain
bondholders converted $1.4 million of the 7 1/2% convertible subordinated
debentures and $4.4 million of the 7 3/4% convertible subordinated debentures
into common stock.
During 1992, certain bondholders converted $95,000 of the 7 1/2%
convertible subordinated debentures, $100,000 of the 7 3/4% convertible
subordinated debentures and $3.5 million of the 11 1/2% convertible subordinated
debentures into common stock.
During 1993, certain bondholders converted $360,000 of the 7 1/2%
convertible subordinated debentures, $275,000 of the 7 3/4% convertible
subordinated debentures and $1.3 million of the 11 1/2% convertible subordinated
debentures into common stock.
All of the convertible subordinated debenture interests will be subject to
settlement of their stated amounts in a plan of reorganization, thereby
eliminating the need for continued deferral of the debt issuance costs.
Therefore, the unamortized debt issuance costs of $2.8 million for these
convertible subordinated
F-38
<PAGE> 112
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
debentures were charged to operations as reorganization expense in 1991. The
Company ceased accruing interest on all of these debentures as of June 27, 1991
in accordance with SOP 90-7.
(j) This note from an aircraft manufacturer for deferred pre-delivery
payments was required under a purchase agreement entered into in 1990. The
deferred pre-delivery payments will accrue interest at one year LIBOR plus 4%
with both principal and interest due upon delivery of the aircraft. The Company
has ceased accruing interest on the outstanding balance in accordance with SOP
90-7. The acquisition of the aircraft associated with these deferred
pre-delivery payments is subject to the affirmation or rejection of the
respective aircraft purchase agreement by the Company in the reorganization
proceeding.
(k) The Company has a $20 million secured revolving credit facility with a
group of financial institutions that expired on April 17, 1993. Borrowings under
this credit facility were either made i) at the federal funds rate plus 1%, ii)
based on a CD rate or iii) 90-day LIBOR two business days prior to the first day
of the interest period. The borrowings are secured by certain assets. The
Company is obligated to pay a commitment fee equal to 1/4% per annum on the
average daily amount by which the aggregate commitments exceed the applicable
borrowing base and 1/2% per annum on the average daily amount by which the
lower of the aggregate commitments or applicable borrowing base exceeds the
aggregate principal amount on all outstanding loans. At December 31, 1993 and
1992, the Company had an outstanding balance of $9.9 million and $11 million,
respectively, under the revolving credit agreement. Proceeds from sales of
assets securing the loan were used to prepay the loan during 1993. The Company
ceased accruing interest on the outstanding balance as of June 27, 1991 in
accordance with SOP 90-7.
(l) The holders of industrial development revenue bonds have the right to
put the bonds back to the Company at various times. If such a put occurs, the
Company has an agreement with the underwriters to remarket the bonds. Any bonds
not remarketed will be retired utilizing a letter of credit. Any funding under
the letter of credit will be in the form of a two-year term loan at prime plus
2%. During the first quarter of 1991, the Company redeemed $14.5 million of the
$44 million of industrial development revenue bonds issued and outstanding and
agreed to a seven-year amortization schedule for the redemption of the remaining
balance. In July and August 1991, $29.5 million in the aggregate was drawn
against the letter of credit facility that supported these bonds. The Company
intends to remarket the bonds in the future. Such draws were made on behalf of
holders of such bonds who exercised their right to put the bonds back to the
Company for purchase. The bonds are currently held in trust for the benefit of
the Company. These bonds were issued in connection with the Company's technical
support facility.
(m) These draws on a letter of credit from a financial institution, secured
by spare rotable parts with a net book value of $35.8 million, are payable in
quarterly installments of $1.3 million plus interest at prime plus 4.5%. The
Company has ceased accruing interest as of June 27, 1991 on the outstanding
balance in accordance with SOP 90-7.
Maturities of long-term debt, excluding $225 million included in estimated
liabilities subject to Chapter 11 proceedings, for the years ending December 31
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1994........................................... $125,271
1995........................................... 41,949
1996........................................... 44,957
1997........................................... 39,544
1998........................................... 32,916
Thereafter..................................... 236,984
</TABLE>
F-39
<PAGE> 113
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) INCOME TAXES
Adoption of New Accounting Standard
As of January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109
is a fundamental change in the manner used to account for income taxes in that
the deferred method has been replaced with an asset and liability approach.
Under SFAS 109, deferred tax assets (subject to a possible valuation allowance)
and liabilities are recognized for the expected future tax consequences of
events that are reflected in the Company's financial statements or tax returns.
In the year of adoption, SFAS 109 permits an enterprise to record in its
current year financial statements, the cumulative effect (if any) of the change
in accounting principle. Upon adoption, the Company did not need to record a
cumulative effect adjustment.
Income Tax Expense
For the year ended December 31, 1993, the Company recorded income tax
expense as follows:
<TABLE>
<S> <C>
Current taxes:
Federal............................................. $675
State............................................... 84
----
$759
====
Deferred taxes........................................ $ --
====
</TABLE>
For the year ended December 31, 1993, income tax expense is solely
attributable to income from continuing operations. The difference in income
taxes at the federal statutory rate ("expected taxes") to those reflected in the
financial statements (the "effective rate") results from the effect of the
benefit of net operating loss carryforwards of $12.6 million and state income
tax expense, net of federal tax benefit of $55,000, for an effective tax rate of
2%. In 1992 and 1991, the tax benefits at the federal statutory rate of 34% were
offset by the generation of net operating loss carryforwards.
At December 31, 1993, the Company has available net operating loss,
business tax credit and alternative minimum tax credit carryforwards for federal
income tax purposes of $530.3 million, $12.7 million and $700,000, respectively.
The net operating loss carryforwards expire during the years 1999 through 2007
while the business credit carryforwards expire during the years 1997 through
2006. However, such carryforwards are not fully available to offset federal
(and, in certain circumstances, state) alternative minimum taxable income.
Accordingly, income tax expense recognized for the year ended December 31, 1993,
is attributable to the Company's expected net current liability for federal and
various state alternative minimum taxes. The alternative minimum tax credit
carryforward does not expire and is available to reduce future income tax
payable.
As of December 31, 1993, to the best of the Company's knowledge, it has not
undergone a statutory "ownership change" (as defined in sec.382 of the Internal
Revenue Code) that would result in any material limitation of the Company's
ability to use its net operating loss and business tax credit carryforwards in
future tax years. Should an "ownership change" occur prior to confirmation of a
plan of reorganization, the Company's ability to utilize said carryforwards
would be significantly restricted. Further, the net operating loss and business
tax credit carryforwards may be limited as a result of the Company's
reorganization under the United States Bankruptcy Code.
F-40
<PAGE> 114
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Composition of Deferred Tax Items
The Company has not recognized any net deferred tax items for the year
ended December 31, 1993. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1993 are a result of the temporary differences related to the
items described as follows:
<TABLE>
<CAPTION>
NET DEFERRED ITEMS
------------------
(IN THOUSANDS)
<S> <C>
Deferred income tax liabilities:
Property and equipment, principally depreciation differences.... $ (105,242)
----------
Deferred income tax assets:
Aircraft leases................................................. 20,594
Frequent flyer accrual.......................................... 3,721
Reorganization expenses......................................... 16,527
Net operating loss carryforwards................................ 212,124
Tax credit carryforwards........................................ 12,706
Other........................................................... 5,986
----------
Total deferred income tax assets........................ 271,658
Valuation allowance............................................... (166,416)
----------
Net deferred items...................................... $ --
==========
</TABLE>
SFAS 109 requires a "more likely than not" criterion be applied when
evaluating the realizability of a deferred tax asset. Given the Company's
history of losses for income tax purposes, the volatility of the industry within
which the Company operates and certain other factors, the Company has
established a valuation allowance for the portion of its net operating loss
carryforwards that may not be available due to expirations after considering the
net reversals of future taxable and deductible differences occurring in the same
periods. In this context, the Company has taken into account prudent and
feasible tax planning strategies. After application of the valuation allowance,
the Company's net deferred tax assets and liabilities are zero.
(6) EMPLOYEE STOCK PURCHASE PLANS AND OTHER EMPLOYEE BENEFIT PROGRAMS
The Company has a stock purchase plan covering its directors, officers and
employees and certain other persons providing service to the Company, as well as
a separate plan covering its California resident employees. At December 31,
1993, the number of shares authorized under the plans is 10,450,000. Each
participating employee is required to purchase a number of shares having an
aggregate purchase price equivalent to 20% of such employee's annual base wage
or salary on the date of purchase. Each participating employee has the option of
simultaneously purchasing additional shares having an aggregate purchase price
not exceeding 20% of such wage or salary. California resident employees electing
to participate in the plan may purchase a number of shares having an aggregate
purchase price not exceeding 40% of their annual base wage or salary on the date
of purchase at a specified price.
Participating employees can elect to finance their purchase through the
Company for up to 20% of their annual base wage or salary over a five-year
period at an interest rate of 9.5%. Employee notes receivable of $17.6 million
existed at December 31, 1993 and were classified in the stockholders' deficiency
section. Shares issued under the plans cannot be sold, transferred, assigned,
pledged or encumbered in any way for a period of two years from the date such
shares are paid for and delivered to participating employees. The employees'
F-41
<PAGE> 115
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
purchase price is 85% of the market price on the date of purchase. The
difference between the employees' purchase price and the market price is
recorded as deferred compensation and is amortized over five years.
The plans provide for the purchase of additional shares of common stock up
to 10% of the employee's annual base wage during the first year of employment
and 20% of the employee's annual base wage during each subsequent calendar year.
Such purchases may be financed through the Company at the same terms as
indicated above, as long as total outstanding amounts previously financed do not
exceed 10% of the employee's annual base compensation.
Effective August 1, 1991, the Company suspended the mandatory portion of
the Employee Stock Purchase Plan for 60 days. Subsequent to the expiration of
the 60-day period, the Company indefinitely suspended the Employee Stock
Purchase Plan. The Company also suspended payroll deductions related to the
Employee Stock Purchase Plan as a result of a 10% across the board reduction in
wages which commenced August 1, 1991 for all employees whose wages had not been
previously reduced. The unpaid employee stock purchase notes continue to accrue
interest. The Company anticipates that the reorganization process will result in
the restructuring, cancellation and/or replacement of the interests of its
existing common and preferred stockholders.
The bankruptcy process has caused the suspension of the Company's profit
sharing plan which covers all personnel. The plan provided for the distribution
of 15% of annual pre-tax profits to employees based on each individual's base
wage. The Company made no distributions under the plan in 1993, 1992 or 1991.
The Company implemented a 401(k) defined contribution plan on January 1,
1989, covering essentially all employees of the Company. Participants may
contribute from 1% to 10% of their pre-tax earnings to a maximum of $8,994. The
Company will match 25% of a participant's contributions up to 6% of the
participant's annual pre-tax earnings. The Company's contribution expense to the
plan totaled $2.1 million, $2 million and $4.9 million in 1993, 1992 and 1991,
respectively.
The Company provides no post-retirement benefits to its former employees
other than the continuation of flight benefits on a stand-by, non-revenue basis;
the cost of which is not material. Additional, no material post-employment
benefits are provided.
(7) CONVERTIBLE PREFERRED STOCK
Annual dividends of $5.41 per share are payable quarterly on the 291,149
shares of voting Series B 10.5% convertible preferred stock. Each preferred
share is entitled to four votes and may be converted into four shares of common
stock subject to certain anti-dilution provisions. The preferred shares are
redeemable at the Company's election, if the price of common stock is at least
$19.32 per share, at $51.52 per share plus unpaid accrued dividends plus a
redemption premium starting at 3% during 1991 and decreasing 1% per year to zero
during and after 1994. During 1993, the Series B convertible preferred stock was
converted into 1,164,596 shares of common stock.
Annual dividends of $1.33 per share are payable quarterly on the 73,099
shares of voting Series C 9.75% convertible preferred stock. Such shares may be
converted into an equal number of shares of common stock subject to certain
anti-dilution provisions. The preferred shares are redeemable at the Company's
election at $13.68 per share plus unpaid accrued dividends plus a redemption
premium starting at 4% during 1991 and decreasing 1% per year to zero during and
after 1995.
Under Delaware law, the Company is precluded from paying dividends on its
outstanding preferred stock until such time as the Company's stockholder
deficiency has been eliminated.
At December 31, 1993, the Company was delinquent in the payment of its
sixth consecutive dividends on the Preferred Stock. See note 1 for a discussion
of the potential effects of the Company's reorganization upon preferred stock.
F-42
<PAGE> 116
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(8) COMMON STOCK
Certain "Rights" have been distributed to certain shareholders of record on
August 25, 1986. The Rights, which entitle the holder to purchase one
one-hundredth ( 1/100th) of a share of Series D Participating Preferred Stock at
a price of $200, are not exercisable unless certain conditions relating to a
possible attempt to acquire the Company are met. In the event of an acquisition
or merger, the Rights will entitle the holder of a Right to purchase that number
of common shares of the acquiring or surviving entity having twice the market
value of the exercise price of each Right. The Rights expire on August 24, 1996
and are redeemable at a price of $.03 per Right under certain conditions.
The Board of Directors has authorized the purchase of up to 700,000 shares
of the Company's common stock from time to time in open market transactions. The
Company has purchased and retired 348,410 shares as of December 31, 1993 at an
average per share price of $8.31.
(9) STOCK OPTIONS AND WARRANTS
The Company has an Incentive Stock Option Plan and has reserved 13,225,000
shares of common stock for issuance upon the exercise of stock options granted
under the plan. Of the total shares reserved, 10,350,000 shares are restricted
for issuance to employees other than certain management employees. Options are
granted at fair market value on the date of grant and generally become
exercisable over a five-year period, and ultimately lapse if unexercised at the
end of ten years.
Activity under the Incentive Stock Option Plan is as follows:
<TABLE>
<CAPTION>
INCENTIVE STOCK OPTION PLAN
---------------------------------------------
NUMBER OF OPTIONS
-------------------------
KEY OTHER OPTION PRICE
MANAGEMENT EMPLOYEES PER SHARE
---------- ---------- ---------------
<S> <C> <C> <C>
Outstanding January 1, 1991................. 1,721,326 5,215,028 $2.50 - $13.06
Granted..................................... 52,000 2,434,880 $0.94 - $ 7.50
Canceled.................................... (254,025) (535,116) $1.38 - $12.81
Exercised................................... (8,981) (1,860) $2.50 - $ 9.13
---------- ---------- ---------------
Outstanding December 31, 1991............... 1,510,320 7,112,932 $0.94 - $13.06
Granted..................................... -- 414,060 $1.13 - $ 2.63
Canceled.................................... (183,700) (791,199) $0.27 - $13.06
---------- ---------- ---------------
Outstanding December 31, 1992............... 1,326,620 6,735,793 $0.94 - $13.06
Canceled.................................... (284,990 (1,005,192) $0.94 - $12.81
---------- ---------- ---------------
Outstanding December 31, 1993............... 1,041,630 5,730,601 $0.94 - $13.06
========= ========= ==============
</TABLE>
At December 31, 1993, options to purchase 3,731,608 shares were exercisable
at prices ranging from $0.94 to $13.06 per share under the Incentive Stock
Option Plan. Effective March 13, 1992, additional grants under the Plan were
suspended.
The Company has a Nonstatutory Stock Option Plan under which options to
purchase 3,785,880 shares of common stock at prices ranging from $5.06 to $10.25
per share (fair market value on date of grant) have been granted, of which
1,961,410 stock options are outstanding as of December 31, 1993. During 1991,
40,000 options were granted at $6.00 per share. During 1993, 1992 and 1991, no
options were exercised. At December 31, 1993, all options were exercisable.
Options expire 10 years from date of grant.
The Company had granted warrants and options to purchase 227,500 shares of
common stock to members of the Board of Directors who are not employees of the
Company. At December 31, 1993, 110,000
F-43
<PAGE> 117
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
options are outstanding and exercisable through February 4, 1996 at prices of
$6.00 to $9.00 per share (fair market value at date of grant). No warrants or
options were granted or exercised during 1993, 1992 or 1991.
The Company has adopted a Restricted Stock Plan and has reserved 250,000
shares of common stock for issuance at no cost to key employees. Grants that are
issued will vest over a three to five-year period. As of December 31, 1993, the
Company granted 93,870 shares and the related unamortized deferred compensation
was $5,320. In 1991, the operation of the Restricted Stock Plan was suspended
due to the Company's reorganization.
(10) SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Cash paid for interest, net of amounts capitalized, during the years ended
December 31, 1993, 1992 and 1991 was approximately $44 million, $46 million and
$33 million, respectively.
Cash paid for income taxes during the year ended December 31, 1993 was
$537,000.
Cash flows from reorganization items in connection with the Chapter 11
proceedings during the years ended December 31, 1993, 1992 and 1991 were as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest received on cash accumulations.............. $ 2,635 $ 2,030 $ 1,365
Professional fees paid for services rendered......... (7,372) (11,346) (6,913)
D.I.P. financing issuance costs paid................. (1,378) (1,760) (2,660)
</TABLE>
In addition, during the years ended December 31, 1993, 1992 and 1991, the
Company had the following non-cash financing and investing activities:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Conversion of long-term debt to common stock......... $ 1,938 $ 3,685 $ 27,898
======= ======= ========
Draws taken by third parties on letters of credit.... $ -- $11,201 $ 42,415
======= ======= ========
Equipment acquired through capital leases............ $ 709 $ 437 $ 10,028
======= ======= ========
Notes payable issued to equipment seller............. $ 818 $22,804 $106,510
======= ======= ========
Notes payable issued for administrative claim
settlements........................................ $11,597 $ -- $ --
======= ======= ========
Preferred stock dividends declared but unpaid........ $ -- $ 1,672 $ 1,250
======= ======= ========
Accrued interest reclassified to long-term debt...... $15,137 $16,443 $ 19,311
======= ======= ========
</TABLE>
(11) COMMITMENTS AND CONTINGENCIES
(a) Leases
During 1991, the Company restructured its lease commitment for Airbus A320
aircraft with the lessors. As a result of the restructuring, the Company's
obligation to lease ten A320 aircraft was canceled and the basic rental rate for
twelve aircraft was revised to provide for the repayment to the lessor over a
ten-year period of certain advanced credits received by the Company which relate
to the ten canceled aircraft.
In the third quarter of 1991, the Company requested a deferral of rent and
other periodic payments from its aircraft providers. The deferral was requested
in an effort to conserve cash and improve the Company's liquidity position. As a
condition of securing the $78 million D.I.P. financing, the Company was required
to obtain from most aircraft providers rent, principal and interest payment
deferrals in excess of $100 million covering the six-month period of June
through November 1991. These deferrals will generally be repaid with
F-44
<PAGE> 118
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
interest at 10.5% over the remaining term of the lease or secured borrowing with
repayment commencing December 1991. At December 31, 1993 and 1992, the remaining
unpaid deferrals are reported as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable................................................. $ 7,567 $20,672
Other liabilities................................................ 31,425 28,196
Long-term debt................................................... 18,671 20,769
------- -------
$57,663 $69,637
======= =======
</TABLE>
In the third quarter of 1992, the Company requested an additional deferral
of rent and other periodic payments from its aircraft providers. The deferral
was requested to assure sufficient liquidity to sustain operations while
additional debtor-in-possession financing was obtained (note 4). The 1992
deferrals will generally be repaid either without interest during the first
quarter of 1993 or with interest over a period of seven years. At December 31,
1993 and 1992, the remaining unpaid deferrals are reported as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable................................................. $ 9,650 $17,528
Long-term debt................................................... 21,539 25,346
------- -------
$31,189 $42,874
======= =======
</TABLE>
As of December 31, 1993, the Company had 66 aircraft under operating leases
with remaining terms ranging from four months to 20 years. The Company has
options to purchase most of the aircraft at fair market value at the end of the
lease term. Certain of the agreements require security deposits and maintenance
reserve payments. The Company also leases certain terminal space, ground
facilities and computer and other equipment under noncancelable operating
leases.
Future minimum rental payments for years ending December 31 under
noncancelable operating leases with initial terms of more than one year are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1994........................................... $ 191,606
1995........................................... 182,236
1996........................................... 179,110
1997........................................... 169,797
1998........................................... 160,759
Thereafter..................................... 1,333,187
-----------
$2,216,695
===========
</TABLE>
Collectively, the operating lease agreements require security deposits with
lessors of $8.1 million and bank letters of credit of $17.7 million. The letters
of credit are collateralized by certain spare rotable parts with a net book
value of $35.8 million and $17.6 million in restricted cash.
Rent expense (excluding landing fees) was approximately $245 million in
1993, $307 million in 1992 and $319 million in 1991.
F-45
<PAGE> 119
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(b) Revenue Bonds
Special facility revenue bonds have been issued by a municipality used for
leasehold improvements at the airport which have been leased by the Company.
Under the operating lease agreements, which commenced in 1990, the Company is
required to make rental payments sufficient to pay principal and interest when
due on the bonds. The Company ceased rental payments in June 1991. The principal
amount of such bonds outstanding at December 31, 1992 and 1991 was $40.7
million. In October 1993, the Company and the bondholder agreed to reduce the
outstanding balance of the bonds to $22.5 million and adjust the related
operating lease payments sufficient to pay principal and interest on the reduced
amount effective upon the confirmation of a plan of reorganization. The
remaining principal balance of $18.2 million will be accorded the same treatment
under the plan of reorganization as a pre-petition unsecured claim. The Company
also agreed to make adequate protection payments in the amount of $150,000 per
month from August 1993 to plan confirmation.
(c) Aircraft Acquisitions
At December 31, 1993, the Company had on order a total of 93 aircraft of
the types currently comprising the Company's fleet, of which 51 are firm and 42
are options. The table below details such deliveries.
<TABLE>
<CAPTION>
FIRM ORDERS
-------------------------------------------------------- OPTION
1994 1995 1996 1997 THEREAFTER TOTAL ORDERS TOTAL
---- ---- ---- ---- ---------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Boeing: 737-300............... -- -- 4 2 -- 6 10 16
757-200............... -- 4 3 -- -- 7 10 17
Airbus: A320-200............. 9 5 2 8 14 38 22 60
---- ---- ---- ---- ---- ---- ---- ----
Total............... 9 9 9 10 14 51 42 93
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
The current estimated aggregate cost for these firm commitments and options
is approximately $5.2 billion. Future aircraft deliveries are planned in some
instances for incremental additions to the Company's existing aircraft fleet and
in other instances as replacements for aircraft with lease terminations
occurring during this period. The purchase agreements to acquire 24 Boeing
737-300 aircraft had been affirmed in the Company's bankruptcy proceeding. With
timely notice to the manufacturer, all or some of these deliveries may be
converted to Boeing 737-400 aircraft. At December 31, 1993, eight Boeing 737
delivery positions had been eliminated due to the lack of a required
reconfirmation notice by the Company to Boeing leaving 16 delivery positions as
reflected above. The failure to reconfirm such delivery positions exposes the
Company to loss of pre-delivery deposits and other claims which may be asserted
by Boeing in the bankruptcy proceeding. The purchase agreements for the
remaining aircraft types have not been assumed, and the Company has not yet
determined which of the other aircraft purchase agreements, if any, will be
affirmed or rejected.
As part of the $68.4 million term loan (see note 4(a)), the Company
terminated an agreement to lease 24 Airbus A320 aircraft and ultimately replaced
it with a put agreement to lease up to four such aircraft. The lessor is under
no obligation to lease such aircraft to the Company and has the right to
remarket these aircraft to other parties. Prior to its bankruptcy filing, the
Company also entered into a similar arrangement with another lessor, whereby the
Company terminated its agreement to lease 10 Airbus A320 aircraft and replaced
it with a put agreement to lease up to 10 Airbus A320 aircraft.
The put agreement related to the term loan requires the lessor to notify
the Company prior to July 1, 1994 if it intends to require the Company to lease
any of its put aircraft. The other put agreement requires 180 days prior notice
of the delivery of a put aircraft. The agreement also provides that the lessor
may not put more than five aircraft to the Company in any one calendar year.
This put right expires on December 31, 1996. No more than nine put aircraft
(from both lessors combined) may be put to the Company in one calendar year. The
put aircraft are reflected in the "Firm Orders" section of the table above.
F-46
<PAGE> 120
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Investment Agreement provides that as partial consideration for the
cancellation of certain put rights, the lessor will receive the right to require
the Company to lease up to eight aircraft prior to June 30, 1999.
The Company does not have firm lease or debt financing commitments with
respect to the future scheduled aircraft deliveries (other than for the put
aircraft referred to above).
In addition to the aircraft set forth in the chart above, the Company also
has a pre-petition executory contract under which the Company holds delivery
positions for four Boeing 747-400 aircraft under firm orders and another four
under options. The contract allows the Company, with the giving of adequate
notice, to substitute other Boeing aircraft types for the Boeing 747-400 in
these delivery positions. As a result, the Company is still evaluating its
future fleet needs and is currently unable to determine if it will substitute
other aircraft types or reject this agreement.
(d) Concentration of Credit Risk
The Company does not believe it is subject to any significant concentration
of credit risk. At December 31, 1993, approximately 82% of the Company's
receivables related to tickets sold to individual passengers through the use of
major credit cards or to tickets sold by other airlines and used by passengers
on America West. These receivables are short-term, generally being settled
shortly after sale or in the month following usage. Bad debt losses, which have
been minimum in the past, have been considered in establishing allowances for
doubtful accounts.
(12) RELATED PARTY TRANSACTIONS
During 1989, the Company sold 486,219 shares of common stock at $6.31 and
$9.79 to the stockholder that purchased 3,029,235 shares of common stock at
$10.50 in 1987 and $1 million of the Series C preferred stock in 1985. This
stockholder has the right to maintain a 20% voting interest through the purchase
of common stock from the Company at a price per share which is the average
market price per share for the preceding six months. In 1990, the stockholder
made direct purchases on the open market to maintain its 20% voting interest. On
February 15, 1991, the stockholder purchased 253,422 shares of common stock from
the Company at $5.50 per share. No such purchases occurred in 1993 or 1992.
The Company has entered into various aircraft acquisition and leasing
agreements with this stockholder at terms comparable to those obtained from
third parties for similar transactions. The Company leases 11 aircraft from this
stockholder and the rental payments for such leases amounted to $33.7 million in
1993, $33.8 million in 1992 and $18.1 million in 1991. At December 31, 1993, the
Company was obligated to pay $232 million under these leases through August 2003
unless terminated earlier at the stockholder's option. In 1991, the stockholder
drew upon a $7.5 million letter of credit which had been issued in its favor in
lieu of a cash reserve for periodic heavy maintenance overhauls. This cash
deposit is included in other assets at December 31, 1993 and 1992.
In addition, the stockholder participated as a lender in the September 1992
D.I.P. Facility and advanced $10 million of the $53 million in total D.I.P
financing. In September 1993, the stockholder was repaid the then outstanding
balance of $8.3 million as a result of not participating in the extension of the
maturity date of the debt financing.
In order to assist the Chairman of the Board with certain costs associated
with his service as chairman, the Company pays an office overhead allowance of
$4,167 per month to a company owned by the chairman. During 1993 and 1992, such
payments totaled approximately $50,000 and $16,000, respectively.
Additionally, a former member of the Board of Directors provided consulting
services to the Company during 1993 and 1992 for which he received fees of
approximately $39,000 and $47,000, respectively.
F-47
<PAGE> 121
AMERICA WEST AIRLINES, INC., D.I.P
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(13) RESTRUCTURING CHARGES
Restructuring charges consist of the following:
<TABLE>
<CAPTION>
1992
--------------
(IN THOUSANDS)
<S> <C>
Write-off for certain assets related to station closures or route $ 9,529
restructuring.......................................................
Provision for spare parts for aircraft types no longer in service..... 12,651
Provision for employee severance...................................... 2,284
Loss on return of aircraft............................................ 6,852
--------
$ 31,316
========
</TABLE>
The restructuring charges were necessitated by aircraft fleet reductions
and other operational changes. The Company has reduced its fleet to 85 aircraft
and has reduced the number of aircraft types in the fleet from five to three.
(14) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1993 and 1992 are as follows (in
thousands of dollars except per share amounts):
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total operating revenues:
1993............................................. $316,605 $324,910 $335,113 $348,736
1992............................................. $337,050 $333,511 $321,590 $301,989
Operating income (loss):
1993............................................. $ 17,168 $ 25,179 $ 32,981 $ 45,726
1992(a).......................................... $ (7,974) $(15,979) $(48,534) $ (2,325)
Nonoperating expense, net
1993............................................. $(14,990) $(14,710) $(18,285) $(35,145)
1992 (b)......................................... $ (2,010) $(17,390) $(22,230) $(15,319)
Income tax expense
1993............................................. $ (44) $ (209) $ (293) $ (213)
1992............................................. $ -- $ -- $ -- $ --
Net income (loss)
1993............................................. $ 2,134 $ 10,260 $ 14,403 $ 10,368
1992............................................. $ (9,984) $(33,369) $(70,764) $(17,644)
Earnings (loss) per share
1993:
Primary........................................ $ .09 $ .41 $ .56 $ .40
Fully diluted.................................. $ .09 $ .28 $ .38 $ .28
1992:
Primary........................................ $ (0.44) $ (1.41) $ (2.97) $ (0.75)
</TABLE>
- ---------------
(a) During the third quarter of 1992, restructuring charges for employee
separation costs, losses related to returning aircraft to lessors, write-off
of assets related to the restructuring and a loss provision related to spare
parts expected to be sold amounting to $31.3 million was recorded.
(b) During the first quarter of 1992, a gain of $15 million was recorded for the
transfer of the Honolulu/Nagoya route to another carrier.
F-48
<PAGE> 122
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING SECURITYHOLDERS OR ANY UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Investment Considerations............. 9
The Company........................... 13
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Selected Financial Data............... 17
Unaudited Pro Forma Condensed
Financial Information............... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 33
Management............................ 42
Compensation Committee Interlocks and
Insider Participation............... 50
Certain Transactions.................. 51
Principal Stockholders................ 52
Selling Securityholders............... 55
Shares Eligible for Future Sale....... 55
Description of the Senior Notes....... 56
Description of Capital Stock.......... 66
Description of Warrants............... 68
Plan of Distribution.................. 70
Legal Matters......................... 71
Experts............................... 71
Index to Financial Statements......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
AMERICA WEST
AIRLINES, INC.
1,200,000 SHARES
CLASS A COMMON STOCK
14,265,473 SHARES
CLASS B COMMON STOCK
$100,000,000 %
SENIOR UNSECURED NOTES DUE 2001
4,153,846 CLASS B
COMMON STOCK WARRANTS
------------------------
PROSPECTUS
------------------------
, 1994
------------------------------------------------------
------------------------------------------------------
<PAGE> 123
PART II
INFORMATION REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the issuance and distribution of the securities being registered hereby:
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee............................. $ 87,357
NYSE Listing Fee.......................................................... 287,046
Blue Sky Filing Fees and Expenses......................................... 820,000
Printing and Engraving Costs.............................................. *
Legal Fees and Expenses................................................... *
Accounting Fees and Expenses.............................................. 75,000
Trustee's Fees and Expenses............................................... 7,500
Transfer Agent Fees....................................................... *
Miscellaneous............................................................. 8,000
--------
Total........................................................... $ *
========
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") authorizes,
inter alia, a corporation generally to indemnify any person ("indemnitee") who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (other than an action by or in the right
of the corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation, in a similar position with another corporation or
entity, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. With respect to actions or
suits by or in the right of the corporation; however, an indemnitee who acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation is generally limited to attorneys' fees and
other expenses, and no indemnification shall be made if such person is adjudged
liable to the corporation unless and only to the extent that a court of
competent jurisdiction determines that indemnification is appropriate. Section
145 further provides that any indemnification shall be made by the corporation
only as authorized in each specific case upon a determination by the (i)
stockholders, (ii) board of directors by a majority vote of a quorum of
disinterested directors so directs, that indemnification of the indemnitee is
proper because he has met the applicable standard of conduct. Section 145
provides that indemnification pursuant to its provisions is not exclusive of
other rights of indemnification to which a person may be entitled under any
by-law agreement, vote of stockholders or disinterested directors or otherwise.
Section 8.02 of the Company's By-laws, a copy of which is filed as Exhibit
3.2 to this Registration Statement provides, in substance, that directors,
officers, employees and agents shall be indemnified to the fullest extent
permitted by Section 145 of the DGCL.
Article 12.0 of the Company's Restated Certificate of Incorporation, a copy
of which is filed as Exhibit 3.1 to this Registration Statement, limits the
liability of directors of the Company to the Company or its stockholders (in
their capacity as directors but not in their capacity as officers) to the
fullest extent permitted by the DGCL. Specifically, directors of the Company
will not be personally liable for monetary damages for
II-1
<PAGE> 124
breach of a director's fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchase or redemptions as provided in
section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. The Restated Certificate of Incorporation
also provides that if the DGCL is amended after the approval of the Restated
Certificate of Incorporation to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Company will be eliminated or limited to the full extent
permitted by the DGCL, as so amended.
The form of the Third Revised Investment Agreement filed as Exhibit 10.1 to
this Registration Statement contains certain provisions for indemnification of
directors and officers of the Company and the Selling Securityholder against
civil liabilities under the Securities Act. Certain of these provisions are set
forth in the form of the Registration Rights Agreement filed as Exhibit 4.6 to
this Registration Rights Agreement.
The Company intends to enter into indemnification agreements with certain
of its directors providing for indemnification to the fullest extent permitted
by the laws of the State of Delaware. These agreements provide for specific
procedures to better assure the directors' rights to indemnification, including
procedures for directors to submit claims, for determination of directors
entitled to indemnification (including the allocation of the burden of proof and
selection of a reviewing party) and for enforcement of directors'
indemnification rights.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following summarizes transactions occurring within the last three years
in which the Company has sold securities without registration under the
Securities Act.
On February 15, 1991, the Company sold 253,422 shares of its common stock
to Transpacific Enterprises, Inc. for $1,393,821, or $5.50 per share, in
reliance upon the exemption set forth in Section 4(2) of the Securities Act.
On the Effective Date, the Company will issue the following securities in
connection with its Reorganization:
1. The Company will issue 25,669,348 shares of Class B Common Stock to
holders of approximately million of allowed, general unsecured
prepetition claims against the Company in satisfaction of such claims in
reliance upon the exemption set forth in Section 1145 of the Bankruptcy
Code.
2. The Company will issue 3,865,179 shares of Class B Common Stock
(1,615,179 of which shares are to be issued in exchange for cash,
aggregating $14,357,326, provided by such equity holders upon the exercise
of rights to subscribe for such shares at a price of $8.889 per share) and
6,230,769 Warrants to the holders of pre-existing equity interests in the
Company in consideration of cancellation of such pre-existing equity
interests in reliance upon the exemption set forth in Section 1145 of the
Bankruptcy Code.
3. The Company issued 900,000 shares of Class B Common Stock and
1,384,615 Warrants to Guiness Peat Aviation and its affiliates ("GPA") in
satisfaction of claims of GPA against the Company in reliance upon the
exemption set forth in Section 1145 of the Bankruptcy Code.
4. The Company issued the following securities to AmWest (or to Lehman
Brothers Inc. or certain funds managed or advised by Fidelity Management
Trust Company, in each case as assignees of AmWest's rights to acquire such
securities) for new consideration paid to the Company in accordance with
the Company's Plan: (i) 1,200,000 shares of Class A Common Stock for $7.467
per share; (ii) 13,365,473 shares of Class B Common Stock for $7.467 per
share and 1,105,652 shares of Class B Common Stock for $8.889 per share;
(iii) $100 million principal amount of Senior Notes for $100 million in
cash; and (iv) 2,769,231 Warrants, separate consideration for which was not
specified. The Company relied upon the exemption set forth in Section 4(2)
of the Securities Act.
II-2
<PAGE> 125
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
---------- --------------------------------------------------------------------------
<C> <C> <S>
*2.1 -- The Company's Plan of Reorganization under Chapter 11 of the Bankruptcy
Code.
*3.1 -- Form of Restated Certificate of Incorporation of America West Airlines,
Inc.
*3.2 -- Form of Restated By-laws of America West Airlines, Inc.
4.1 -- Form of Indenture for $100,000,000 % Senior Notes due 2001 dated
1994, of America West Airlines, Inc. and American Bank National
Association, as trustee.
4.2 -- Form of Senior Note (included as Exhibit A to Exhibit 4.1 above).
*4.3 -- Form of Warrant Agreement dated , 1994 between America West
Airlines, Inc. and First Interstate, N.A., as Warrant Agent.
*4.4 -- Form of Warrant (included as Exhibit A to Exhibit 4.3 above).
*4.5 -- Form of Stockholders' Agreement for America West Airlines, Inc. dated
, 1994 among America West Airlines, Inc., AmWest Partners,
L.P., GPA Group plc and certain other Stockholder Representatives.
*4.6 -- Form of Registration Rights Agreement dated , 1994 among America
West Airlines, Inc., AmWest Partners, L.P. and other holders.
*4.7 -- Article 4.0 of the Company's Restated Certificate of Incorporation
(included in Exhibit 3.1 above).
*5.1 -- Opinion of Andrews & Kurth L.L.P.
10.1 -- Third Revised Investment Agreement dated April 21, 1994 between America
West Airlines, Inc. and AmWest Partners, L.P. -- Incorporated by reference
to Exhibit 10.A to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1994.
10.11 -- Third Revised Interim Procedures Agreement dated April 21, 1994 between
America West Airlines and AmWest Partners, L.P. -- Incorporated by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
10.12 -- Code Sharing Agreement dated June 29, 1994 between America West Airlines,
Inc. and Continental Airlines, Inc.
10.13 -- Alliance agreement as amended dated September 4, 1992 between America West
Airlines, Inc. and Mesa Airlines.
10.14 -- The GPA Term Sheet between America West Airlines, Inc. and GPA Group plc,
dated June 13, 1994.
*10.15 -- America West Airlines Management Resignation Allowance Guidelines, as
amended, dated November 18, 1993.
10.16 -- Airbus A320 Purchase Agreement (including exhibits thereto), dated as of
September 28, 1990 between AVSA, S.A.R.L. ("AVSA") and the Company,
together with Letter Agreement Nos. 1-10, inclusive -- Incorporated by
reference to Exhibit 10-(D)(1) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1990.
10.17 -- Loan Agreement, dated as of September 28, 1990, among the Company, AVSA
and AVSA, as agent -- Incorporated by reference to Exhibit 10-(D)(2) to
the Company's Quarterly Report on Form 10-Q for the period ended September
30, 1990.
10.19 -- V2500 Support Contract Between the Company and IAE International Aero
Engines AG ("IAE"), dated September 28, 1990, together with Side Letters
Nos. 1-4, inclusive -- Incorporated by reference to Exhibit 10-(D)(3) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990.
</TABLE>
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<PAGE> 126
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<S> <C>
10.20 -- Cash Management Agreement, dated September 28, 1991, among the Company, BT
and First Interstate of Arizona, N.A. -- Incorporated by reference to
Exhibit 10-D(21) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
10.21 -- First Amendment to Cash Management Agreement, dated December 1, 1991,
among the Company, BT and First Interstate of Arizona,
N.A. -- Incorporated by reference to Exhibit 10-D(22) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.22 -- Second Amendment to Cash Management Agreement, dated September 1, 1992,
among the Company, BT and First Interstate of Arizona,
N.A. -- Incorporated by reference to Exhibit 10-O(3) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.23 -- Restructuring Agreement, dated December 1, 1991 between the Company and
Kawasaki -- Incorporated by reference to Exhibit 10-D(24) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.24 -- A320 Put Agreement, dated December 1, 1991 between the Company and
Kawasaki -- Incorporated by reference to Exhibit 10-D(25) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.25 -- First Amendment to A320 Put Agreement, dated September 1,
1992 -- Incorporated by reference to Exhibit 10-R(2) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.26 -- A320 Put Agreement, dated as of June 25, 1991 between the Company and GPA
Group plc -- Incorporated by reference to Exhibit 10-D(26) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1991.
10.27 -- First Amendment to A320 Put Agreement, dated as of September 1, 1992 --
Incorporated by reference to Exhibit 10-S(2) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
10.28 -- Restructuring Agreement, dated as of June 25, 1991 among GPA Group plc,
GPA Leasing USA I, Inc. GPA Leasing USA Sub I, and the
Company -- Incorporated by reference to Exhibit 10-D(27) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.29 -- Official Statement dated August 11, 1986 for the $54,000,000 Variable Rate
Airport Facility Revenue Bonds -- Incorporated by reference to Exhibit
10.e to the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1986.
10.30 -- Airport Use Agreement dated July 1, 1989 (the "Airport Use Agreement")
among the City of Phoenix, The Industrial Development Authority of the
City of Phoenix, Arizona and the Company -- Incorporated by reference to
Exhibit 10-D(9) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989.
10.31 -- First Amendment dated August 1, 1990 to Airport Use
Agreement -- Incorporated by reference to Exhibit 10-(D)(9) to the
Company's Quarterly Report on Form 10-Q for the period ended September 30,
1990.
10.32 -- Revolving Loan Agreement dated April 17, 1990, by and among the Company,
the Bank signatories thereto, and Bank of America National Trust and
Savings Association, as Agent for the Banks (the "Revolving Loan
Agreement") -- Incorporated by reference to Exhibit 10-1 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 1990.
10.33 -- First Amendment dated April 17, 1990 to Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(10) to the
Company's Quarterly Report on Form 10-Q for the period ended September 30,
1990.
</TABLE>
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<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
---------- --------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C> <C>
10.34 -- Second Amendment dated September 28, 1990 to the Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(11) to the
Company's Quarterly Report on Form 10-Q for the period ended September 30,
1990.
10.35 -- Third Amendment dated as of January 14, 1991 to the Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(13) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1990.
10.36 -- Spares Credit Agreement, dated as of September 28, 1990, between the
Company and IAE -- Incorporated by reference to Exhibit 10-(D)(4) to the
Company's Quarterly Report on Form 10-Q for the period ended September 30,
1990.
10.37 -- Master Credit Modification Agreement dated as of October 1, 1992, among
the Company, IAE International Aero Engines AG, Intlaero (Phoenix A320)
Inc., Intlaero (Phoenix B737) Inc., CAE Electronics Ltd., and Hughes
Rediffusion Simulation Limited -- Incorporated by reference to Exhibit
10-L to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10.38 -- Credit Agreement, dated as of September 28, 1990 between the Company and
IAE -- Incorporated by reference to Exhibit 10-(D)(5) to the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1990.
10.39 -- Amendment No. 1 to the Credit Agreement, dated March 1,
1991 -- Incorporated by reference to Exhibit 10-(M)(2) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.40 -- Amendment No. 2 to the Credit Agreement, dated May 15,
1991 -- Incorporated by reference to Exhibit 10-(M)(3) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.41 -- Amendment No. 3 to the Credit Agreement, dated October 1,
1992 -- Incorporated by reference to Exhibit 10-(M)(4) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.42 -- Form of Third Amended and Restated Credit Agreement dated September 30,
1993, among the Company, various lenders, and BT Commercial Corp. as
Administrative Agent (without exhibits) -- Incorporated by reference to
Exhibit 10-(N)(1) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
10.43 -- Form of Amended and Restated Management Letter Agreement, dated as of
September 30, 1993 from the Company to the Lenders -- Incorporated by
reference to Exhibit 10-N(2) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
10.44 -- Form of Amendment to Amended and Restated Management Letter Agreement;
Consent to Amendment of By-laws dated February 8, 1994 from the Company to
the Lenders -- Incorporated by reference to Exhibit 10-N(3) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
10.45 -- Fourth Amended and Restated Credit Agreement dated June 30,
1994 -- Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1994.
*10.46 -- Key Employee Protection Agreement dated as of June 27, 1994 between
America West Airlines, Inc. and William A. Franke.
11.1 -- Statement re: computation of net income (loss) per common share.
12.1 -- Statement re: computation of ratio of earnings to fixed charges.
*23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1 above).
23.2 -- Consent of KPMG Peat Marwick (independent auditors) -- Included at page
S-1.
</TABLE>
II-5
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
---------- --------------------------------------------------------------------------
<S> <C> <C>
*24.1 -- Power of Attorney (included on the signature pages of this Registration
Statement.
25.1 -- Statement of Eligibility on Form T-1 of American Bank National
Association, as trustee under the Indenture for $100,000,000 Senior Notes
due 2001.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
(b) Financial Statement Schedules:
The following financial statement schedules are filed as part of this
Registration Statement, but not included in the Prospectus.
<TABLE>
<CAPTION>
SCHEDULES PAGE
---------------------------------------------------------------------- -----
<S> <C>
Independent Auditors' Report on Schedules and Consent................. S-1
Schedule V -- Property, Plant and Equipment........................... S-2
Schedule VI -- Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment.......................... S-3
Schedule VIII -- Valuation and Qualifying Accounts.................... S-4
Schedule X -- Supplementary Income Statement Information.............. S-5
</TABLE>
All other schedules for which provision is made in Regulation S-X of the
Commission are not required under the related instructions or are
inapplicable or the required information is included in the financial
statements or notes thereto and, therefore, have been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement: (i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-6
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Phoenix, State of Arizona on the 12th day of August, 1994.
AMERICA WEST AIRLINES, INC.
By: *
------------------------------------
William A. Franke,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and Chief August 12, 1994
- ------------------------------------------ Executive Officer (Principal
William A. Franke Executive Officer)
* President, Chief Operating August 12, 1994
- ------------------------------------------ Officer and Director
A. Maurice Myers
* Vice President and Controller August 12, 1994
- ------------------------------------------ (Principal Financial and
Raymond T. Nakano Accounting Officer)
* Director August 12, 1994
- ------------------------------------------
O. Mark DeMichele
* Director August 12, 1994
- ------------------------------------------
Frederick W. Bradley
Director
- ------------------------------------------
Samuel L. Eichenfield
* Director August 12, 1994
- ------------------------------------------
Richard C. Kraemer
Director
- ------------------------------------------
James T. McMillan
* Director August 12, 1994
- ------------------------------------------
John R. Norton III
</TABLE>
II-7
<PAGE> 130
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
* Director August 12, 1994
- ------------------------------------------
John F. Tierney
Director
- ------------------------------------------
Declan Treacy
*By: /s/ MARTIN J. WHALEN
-------------------------------------
Martin J. Whalen
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 131
INDEPENDENT AUDITORS' REPORT ON SCHEDULES AND CONSENT
The Board of Directors and Stockholders
America West Airlines, Inc. D.I.P.:
The audits referred to in our report dated March 18, 1994 included the
related financial statement schedules as of December 31, 1993, and for each of
the years in the three-year period ended December 31, 1993, included in the
registration statement. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits. In our
opinion, such financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
Our report dated March 18, 1994, referenced to above, contains an
explanatory paragraph that states that America West's Chapter 11 proceeding,
significant losses, accumulated deficit and highly leveraged capital structure
raise substantial doubt about its ability to continue as a going concern. The
financial statements and financial statement schedules do not include any
adjustments that might result from the outcome of these uncertainties.
KPMG PEAT MARWICK
Phoenix, Arizona
August 12, 1994
S-1
<PAGE> 132
AMERICA WEST AIRLINES, INC., D.I.P.
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING ADDITIONS AT END
CLASSIFICATION OF PERIOD AT COST RETIREMENTS TRANSFERS OF PERIOD
- -------------- ---------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
1993
Building and improvements............... $ 72,917 $ 71 $ (3,340) $ 1,482 $ 71,130
Flight equipment owned.................. 767,080 45,082 (19,922) 26,602 818,842
Leasehold improvements -- flight
equipment............................. 36,550 31 (1,183) 5,428 40,826
Ground property and equipment........... 111,131 1,303 (9,654) 2,111 104,891
Construction in progress................ 43,316 9,367 (38) (35,623) 17,022
---------- --------- ---------- --------- ----------
$1,030,994 $ 55,854 $ (34,137) $ -- $1,052,711
========== ========= ========== ========= ==========
1992
Building and improvements............... $ 83,596 $ 341 $ (11,967) $ 947 $ 72,917
Flight equipment owned.................. 759,579 39,876 (33,192) 817 767,080
Leasehold improvements -- flight
equipment............................. 40,604 (63) (8,234) 4,243 36,550
Ground property and equipment........... 117,408 1,950 (9,083) 856 111,131
Construction in progress................ 23,955 28,034 (1,810) (6,863) 43,316
---------- --------- ---------- --------- ----------
$1,025,142 $ 70,138 $ (64,286) $ -- $1,030,994
========== ========= ========== ========= ==========
1991
Building and improvements............... $ 87,287 $ 330 $ (9,863) $ 5,842 $ 83,596
Flight equipment owned.................. 768,728 86,033 (104,964) 9,782 759,579
Leasehold improvements -- flight
equipment............................. 35,516 2,547 (14,678) 17,219 40,604
Ground property and equipment........... 103,979 6,551 (936) 7,814 117,408
Construction in progress................ 27,139 42,351 (4,878) (40,657) 23,955
---------- --------- ---------- --------- ----------
$1,022,649 $ 137,812 $ (135,319) $ -- $1,025,142
========== ========= ========== ========= ==========
</TABLE>
S-2
<PAGE> 133
AMERICA WEST AIRLINES, INC., D.I.P.
SCHEDULE VI -- ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
CLASSIFICATION OF PERIOD EXPENSES RETIREMENTS OF PERIOD
- -------------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
1993
Building and improvements...................... $ 18,163 $ 4,237 $ (1,309) $ 21,091
Flight equipment............................... 226,972 59,896 (14,717) 272,151
Leasehold improvements -- flight equipment..... 16,493 4,137 (1,096) 19,534
Ground property and equipment.................. 67,242 13,624 (7,866) 73,000
-------- -------- --------- ---------
$328,870 $81,894 $(24,988) $385,776
======== ======= ======== ========
1992
Building and improvements...................... $ 17,790 $ 4,763 $ (4,390) $ 18,163
Flight equipment............................... 174,235 72,523 (19,786) 226,972
Leasehold improvements -- flight equipment..... 14,262 4,184 (1,953) 16,493
Ground property and equipment.................. 55,466 16,202 (4,426) 67,242
-------- ------- -------- --------
$261,753 $97,672 $(30,555) $328,870
======== ======= ======== ========
1991
Building and improvements...................... $ 15,418 $ 5,626 $ (3,254) $ 17,790
Flight equipment............................... 133,526 67,750 (27,041) 174,235
Leasehold improvements -- flight equipment..... 15,542 6,073 (7,353) 14,262
Ground property and equipment.................. 37,660 18,354 (548) 55,466
-------- ------- -------- --------
$202,146 $97,803 $(38,196) $261,753
======== ======= ======== ========
</TABLE>
S-3
<PAGE> 134
AMERICA WEST AIRLINES, INC., D.I.P.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful receivables:
Years ended:
December 31, 1993................... $2,542 $5,474 $-- $4,986 $3,030
====== ====== === ====== ======
December 31, 1992................... $3,603 $3,800 $-- $4,861 $2,542
====== ====== ==== ====== ======
December 31, 1991................... $1,203 $5,300 $-- $2,900 $3,603
====== ======= ==== ====== ======
Reserve for obsolescence:
Years ended:
December 31, 1993................... $6,921 $ 902 $-- $ 592 $7,231
====== ====== ==== ====== ======
December 31, 1992................... $3,638 $3,283 $-- $ -- $6,921
====== ====== ==== ====== ======
December 31, 1991................... $2,296 $1,342 $-- $ -- $3,638
====== ====== ==== ====== ======
</TABLE>
S-4
<PAGE> 135
AMERICA WEST AIRLINES, INC., D.I.P.
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
ITEM 1993 1992 1991
- ---- ------- ------- -------
<S> <C> <C> <C>
Advertising costs............................................. $25,118 $25,007 $29,821
======= ======= =======
Aircraft maintenance materials and repairs.................... $31,000 $38,366 $41,649
Amortization of deferred overhauls included in depreciation
and amortization............................................ 29,870 31,482 27,453
------- ------- -------
Maintenance and repairs.................................. $60,870 $69,848 $69,102
======= ======= =======
</TABLE>
Other items are not listed because they are either shown in the financial
statements or the amounts are less than 1% of revenues for all periods.
S-5
<PAGE> 136
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NUMBERED
NUMBER TITLE PAGE
------- -----
<S> <C> <C>
*2.1 -- The Company's Plan of Reorganization under Chapter 11 of the
Bankruptcy Code.
*3.1 -- Form of Restated Certificate of Incorporation of America West
Airlines, Inc.
*3.2 -- Form of Restated By-laws of America West Airlines, Inc.
4.1 -- Form of Form of Indenture for $100,000,000 % Senior Notes
due 2001 dated 1994, of America West Airlines, Inc. and
, as trustee.
*4.2 -- Form of Senior Note (included as Exhibit A to Exhibit 4.1
above).
*4.3 -- Form of Warrant Agreement dated , 1994 between
America West Airlines, Inc. and , as
Warrant Agent.
*4.4 -- Form of Warrant (included as Exhibit A to Exhibit 4.3 above).
*4.5 -- Form of Stockholders' Agreement for America West Airlines, Inc.
dated , 1994 among America West Airlines, Inc.,
AmWest Partners, L.P., GPA Group plc and certain other
Stockholder Representatives.
*4.6 -- Form of Registration Rights Agreement dated , 1994
among America West Airlines, Inc., AmWest Partners, L.P. and
other holders.
*4.7 -- Article 4.0 of the Company's Restated Certificate of
Incorporation (included in Exhibit 3.1 above).
*5.1 -- Opinion of Andrews & Kurth L.L.P.
10.1 -- Third Revised Investment Agreement dated April 21, 1994 between
America West Airlines, Inc. and AmWest Partners,
L.P. -- Incorporated by reference to Exhibit 10.A to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1994.
10.11 -- Third Revised Interim Procedures Agreement dated April 21, 1994
between America West Airlines and AmWest Partners,
L.P. -- Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993.
10.12 -- Code Sharing Agreement dated , 1994 between America
West Airlines, Inc. and Continental Airlines, Inc.
10.13 -- Alliance Agreement dated , 1994 between America West
Airlines, Inc. and Mesa Airlines.
10.14 -- The GPA Term Sheet between America West Airlines, Inc. and GPA
Group plc, dated , 1994.
*10.15 -- America West Airlines Management Resignation Allowance
Guidelines, as amended, dated November 18, 1993.
10.16 -- Airbus A320 Purchase Agreement (including exhibits thereto),
dated as of September 28, 1990 between AVSA, S.A.R.L. ("AVSA")
and the Company, together with Letter Agreement Nos. 1-10,
inclusive -- Incorporated by reference to Exhibit 10-(D)(1) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990.
</TABLE>
<PAGE> 137
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NUMBERED
NUMBER TITLE PAGE
--------- ---------------------------------------------------------------- ----------
<S> <C> <C>
10.17 -- Loan Agreement, dated as of September 28, 1990, among the
Company, AVSA and AVSA, as agent -- Incorporated by reference to
Exhibit 10-(D)(2) to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1990.
10.19 -- V2500 Support Contract Between the Company and IAE International
Aero Engines AG ("IAE"), dated September 28, 1990, together with
Side Letters Nos. 1-4, inclusive -- Incorporated by reference to
Exhibit 10-(D)(3) to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1990.
10.20 -- Cash Management Agreement, dated September 28, 1991, among the
Company, BT and First Interstate of Arizona,
N.A. -- Incorporated by reference to Exhibit 10-D(21) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991.
10.21 -- First Amendment to Cash Management Agreement, dated December 1,
1991, among the Company, BT and First Interstate of Arizona,
N.A. -- Incorporated by reference to Exhibit 10-D(22) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991.
10.22 -- Second Amendment to Cash Management Agreement, dated September
1, 1992, among the Company, BT and First Interstate of Arizona,
N.A. -- Incorporated by reference to Exhibit 10-O(3) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
10.23 -- Restructuring Agreement, dated December 1, 1991 between the
Company and Kawasaki -- Incorporated by reference to Exhibit
10-D(24) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991.
10.24 -- A320 Put Agreement, dated December 1, 1991 between the Company
and Kawasaki -- Incorporated by reference to Exhibit 10-D(25) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
10.25 -- First Amendment to A320 Put Agreement, dated September 1,
1992 -- Incorporated by reference to Exhibit 10-R(2) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
10.26 -- A320 Put Agreement, dated as of June 25, 1991 between the
Company and GPA Group plc -- Incorporated by reference to
Exhibit 10-D(26) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991.
10.27 -- First Amendment to A320 Put Agreement, dated as of September 1,
1992 -- Incorporated by reference to Exhibit 10-S(2) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
10.28 -- Restructuring Agreement, dated as of June 25, 1991 among GPA
Group plc, GPA Leasing USA I, Inc. GPA Leasing USA Sub I, and
the Company -- Incorporated by reference to Exhibit 10-D(27) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
10.29 -- Official Statement dated August 11, 1986 for the $54,000,000
Variable Rate Airport Facility Revenue Bonds -- Incorporated by
reference to Exhibit 10.e to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1986.
</TABLE>
<PAGE> 138
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NUMBERED
NUMBER TITLE PAGE
------- -----
<S> <C> <C>
10.30 -- Airport Use Agreement dated July 1, 1989 (the "Airport Use
Agreement") among the City of Phoenix, The Industrial
Development Authority of the City of Phoenix, Arizona and the
Company -- Incorporated by reference to Exhibit 10-D(9) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1989.
10.31 -- First Amendment dated August 1, 1990 to Airport Use Agreement --
Incorporated by reference to Exhibit 10-(D)(9) to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
1990.
10.32 -- Revolving Loan Agreement dated April 17, 1990, by and among the
Company, the Bank signatories thereto, and Bank of America
National Trust and Savings Association, as Agent for the Banks
(the "Revolving Loan Agreement") -- Incorporated by reference to
Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 1990.
10.33 -- First Amendment dated April 17, 1990 to Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(10) to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1990.
10.34 -- Second Amendment dated September 28, 1990 to the Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(11) to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1990.
10.35 -- Third Amendment dated as of January 14, 1991 to the Revolving
Loan Agreement -- Incorporated by reference to Exhibit
10-(D)(13) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1990.
10.36 -- Spares Credit Agreement, dated as of September 28, 1990, between
the Company and IAE -- Incorporated by reference to Exhibit
10-(D)(4) to the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1990.
10.37 -- Master Credit Modification Agreement dated as of October 1,
1992, among the Company, IAE International Aero Engines AG,
Intlaero (Phoenix A320) Inc., Intlaero (Phoenix B737) Inc., CAE
Electronics Ltd., and Hughes Rediffusion Simulation
Limited -- Incorporated by reference to Exhibit 10-L to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
10.38 -- Credit Agreement, dated as of September 28, 1990 between the
Company and IAE -- Incorporated by reference to Exhibit
10-(D)(5) to the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1990.
10.39 -- Amendment No. 1 to the Credit Agreement, dated March 1, 1991 --
Incorporated by reference to Exhibit 10-(M)(2) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.40 -- Amendment No. 2 to the Credit Agreement, dated May 15, 1991 --
Incorporated by reference to Exhibit 10-(M)(3) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.41 -- Amendment No. 3 to the Credit Agreement, dated October 1,
1992 -- Incorporated by reference to Exhibit 10-(M)(4) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
</TABLE>
<PAGE> 139
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NUMBERED
NUMBER TITLE PAGE
--------- ---------------------------------------------------------------- ----------
<C> <C> <S> <C>
10.42 -- Form of Third Amended and Restated Credit Agreement dated
September 30, 1993, among the Company, various lenders, and BT
Commercial Corp. as Administrative Agent (without exhibits) --
Incorporated by reference to Exhibit 10-(N)(1) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
10.43 -- Form of Amended and Restated Management Letter Agreement, dated
as of September 30, 1993 from the Company to the
Lenders -- Incorporated by reference to Exhibit 10-N(2) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993.
10.44 -- Form of Amendment to Amended and Restated Management Letter
Agreement; Consent to Amendment of By-laws dated February 8,
1994 from the Company to the Lenders -- Incorporated by
reference to Exhibit 10-N(3) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
10.45 -- Fourth Amended and Restated Credit Agreement dated June 30,
1994-Incorporated by reference to the Company's Quarterly
report on Form 10-Q for the period ended June 30, 1994
10.46 -- Key Employee Protection Agreement dated as of June 27, 1994
between America West Airlines, Inc. and William A. Franke.
11.1 -- Statement re: computation of net income (loss) per common share.
12.1 -- Statement re: computation of ratio of earnings to fixed charges.
*23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1
above).
23.2 -- Consent of KPMG Peat Marwick (independent auditors) -- Included
at page S-1.
*24.1 -- Power of Attorney (included on the signature pages of this
Registration Statement.
25.1 -- Statement of Eligibility on Form S-1 of American Bank National
Association, as trustee under the Indenture for $100,000,000
Senior Notes due 2001.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMERICA WEST AIRLINES, INC.,
AND
AMERICAN BANK NATIONAL ASSOCIATION,
TRUSTEE
INDENTURE
DATED AS OF AUGUST , 1994
------------------------------------
$100,000,000
% SENIOR UNSECURED NOTES DUE 2001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS REFERENCE SHEET(1)
Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of
, 1994 among AMERICA WEST AIRLINES, INC. and [
], Trustee:
<TABLE>
<CAPTION>
SECTION OF THE ACT SECTION OF INDENTURE
- ---------------------------------------------------- -------------------------------------
<S> <C>
310(a)(1) and (2)................................... 6.9 and 6.10(b)
6.8, 6.10(a), (b) and (d), 6.11 and
310(b).............................................. 6.12
311(a).............................................. 6.13
312(a).............................................. 4.1 and 4.2
312(b).............................................. 4.2
312(c).............................................. 4.2
313(a).............................................. 4.4
313(c).............................................. 4.4, 5.11, 6.10, 6.11, 8.2 and 12.2
314(a).............................................. 4.3
314(a)(4)........................................... 3.5
314(c)(1) and (2)................................... 11.5
314(c)(3)........................................... Inapplicable
314(e).............................................. 11.5
315(a), (c) and (d)................................. 6.1
315(b).............................................. 5.11
315(e).............................................. 5.12 and 6.10(b)
316(a)(1)........................................... 5.9
316(a) (last sentence).............................. 7.4
316(b).............................................. 5.7
317(a).............................................. 5.2
317(b).............................................. 3.4(a) and (b)
318(a).............................................. 11.7
</TABLE>
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(1) This Cross Reference Sheet is not part of the Indenture.
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TABLE OF CONTENTS
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ARTICLE ONE -- DEFINITIONS............................................................ 1
SECTION 1.1 Certain Terms Defined............................................... 1
"Acceleration Notice"............................................................ 1
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"Adjusted Consolidated Net Income"............................................... 1
"Affiliates"..................................................................... 1
"Alliance Agreements"............................................................ 1
"Applicable Documents"........................................................... 1
"Asset Sale"..................................................................... 1
"Authenticating Agent"........................................................... 2
"Board of Directors"............................................................. 2
"Board Resolution"............................................................... 2
"Business Day"................................................................... 2
"Capital Stock".................................................................. 2
"Capitalized Lease Obligation"................................................... 2
"Cash Equivalents"............................................................... 2
"Change of Control".............................................................. 2
"Closing Date"................................................................... 2
"Commission"..................................................................... 3
"Commodity Agreement"............................................................ 3
"Common Stock"................................................................... 3
"Company"........................................................................ 3
"Company Order".................................................................. 3
"Consolidated" or "consolidated"................................................. 3
"Consolidated Net Worth"......................................................... 3
"Consolidated Tangible Net Worth"................................................ 3
"Corporate Trust Office"......................................................... 3
"Currency Agreement"............................................................. 3
"Default"........................................................................ 3
"Depository"..................................................................... 3
"Event of Default"............................................................... 3
"Excess Proceeds Offer".......................................................... 3
"Excess Proceeds Purchase Date".................................................. 3
"Exchange Act"................................................................... 4
"GAAP"........................................................................... 4
"Global Security"................................................................ 4
"Guarantee"...................................................................... 4
"Holder", "Holder of Securities", "Securityholder"............................... 4
"Indebtedness"................................................................... 4
"Indenture"...................................................................... 4
"Interest Payment Date".......................................................... 4
"Interest Rate Agreement"........................................................ 4
"Investment"..................................................................... 5
"Investment Grade"............................................................... 5
"Lien"........................................................................... 5
"Material Subsidiary"............................................................ 5
"Moody's"........................................................................ 5
"Net Cash Proceeds".............................................................. 5
"Net Offering Proceeds".......................................................... 5
"Net Proceeds Offer"............................................................. 5
"Net Proceeds Purchase Date"..................................................... 5
"Officer"........................................................................ 5
"Officers' Certificate".......................................................... 6
"Opinion of Counsel"............................................................. 6
"Outstanding".................................................................... 6
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"Paying Agent"................................................................... 6
"Payment Restriction"............................................................ 6
"Permitted Holders".............................................................. 6
"Person"......................................................................... 6
"principal"...................................................................... 6
"Public Offering Sale"........................................................... 6
"Purchase Agreement"............................................................. 6
"record date".................................................................... 6
"Redeemable Dividends"........................................................... 6
"Redeemable Stock"............................................................... 7
"Redemption Date"................................................................ 7
"Redemption Price"............................................................... 7
"Refinancing Indebtedness"....................................................... 7
"Registration Rights Agreement".................................................. 7
"Responsible Officer"............................................................ 7
"Restricted Payment"............................................................. 7
"S&P"............................................................................ 8
"Securities Act"................................................................. 8
"Security" or "Securities"....................................................... 8
"Stated Maturity"................................................................ 8
"Subsidiary"..................................................................... 8
"TIA"............................................................................ 8
"Trade Payables"................................................................. 8
"Trustee"........................................................................ 8
"U.S. Government Obligations".................................................... 8
"U.S. Legal Tender".............................................................. 8
"Voting Stock"................................................................... 8
"Wholly Owned"................................................................... 8
ARTICLE TWO
SECURITIES............................................................................ 8
SECTION 2.1 Form and Dating..................................................... 8
SECTION 2.2 Execution and Authentication........................................ 9
SECTION 2.3 Certificate of Authentication....................................... 9
SECTION 2.4 Payments of Interest................................................ 9
SECTION 2.5 Registration, Transfer and Exchange................................. 10
SECTION 2.6 Mutilated, Defaced, Destroyed, Lost and Stolen Securities........... 11
SECTION 2.7 Cancellation of Securities; Destruction Thereof..................... 12
SECTION 2.8 Temporary Securities................................................ 12
SECTION 2.9 Currency and Manner of Payments in Respect of Securities............ 12
SECTION 2.10 CUSIP Number......................................................... 12
ARTICLE THREE
REDEMPTIONS........................................................................... 12
SECTION 3.1 Notices to Trustee.................................................. 12
SECTION 3.2 Selection of Securities to be Redeemed.............................. 13
SECTION 3.3 Notice of Redemption................................................ 13
SECTION 3.4 Effect of Notice of Redemption...................................... 14
SECTION 3.5 Deposit of Redemption Price......................................... 14
SECTION 3.6 Securities Redeemed in Part......................................... 14
SECTION 3.7 Optional Redemption................................................. 14
SECTION 3.8 Mandatory Redemption................................................ 15
ARTICLE FOUR
COVENANTS OF THE COMPANY.............................................................. 15
SECTION 4.1 Payment of Principal and Interest................................... 15
SECTION 4.2 Offices for Payments, etc........................................... 15
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SECTION 4.3 Appointment to Fill a Vacancy in Office of Trustee.................. 15
SECTION 4.4 Paying Agents....................................................... 15
SECTION 4.5 Reports and Information............................................. 16
SECTION 4.6 Corporate Existence................................................. 17
SECTION 4.7 Payment of Taxes and Other Claims................................... 17
SECTION 4.8 Maintenance of Properties........................................... 17
SECTION 4.9 Maintenance of Insurance............................................ 17
SECTION 4.10 Compliance with Laws................................................. 17
SECTION 4.11 Change of Control.................................................... 17
SECTION 4.12 Limitation on Issuances and Dispositions of Capital Stock of
Subsidiaries......................................................... 18
SECTION 4.13 Limitation on Restricted Payments.................................... 18
SECTION 4.14 Limitation on Transactions with Affiliates........................... 20
SECTION 4.15 Limitation on Asset Sales............................................ 21
SECTION 4.16 Limitation on Payment Restrictions Affecting Subsidiaries............ 22
SECTION 4.17 [INTENTIONALLY OMITTED].............................................. 23
SECTION 4.18 Limitation on Investments............................................ 23
SECTION 4.19 Waiver of Stay, Extension or Usury Laws.............................. 23
ARTICLE FIVE
SECURITYHOLDERS LISTS AND REPORTS BY COMPANY AND THE TRUSTEE.......................... 23
SECTION 5.1 The Company to Furnish Trustee Information as to Names and Addresses
of Securityholders............................................. 23
SECTION 5.2 Disclosure of Names and Addresses of Securityholders................ 23
SECTION 5.3 Reports by the Trustee.............................................. 23
ARTICLE SIX
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER......................................... 24
SECTION 6.1 Merger or Consolidation............................................. 24
SECTION 6.2 Successor Corporation Substituted................................... 24
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT....................... 25
SECTION 7.1 Event of Default Defined; Acceleration of Maturity; Waiver of
Default............................................................. 25
SECTION 7.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt....... 27
SECTION 7.3 Application of Proceeds............................................. 28
SECTION 7.4 Suits for Enforcement............................................... 29
SECTION 7.5 Restoration of Rights on Abandonment of Proceedings................. 29
SECTION 7.6 Limitations on Suits by Securityholders............................. 29
SECTION 7.7 Unconditional Right of Securityholders to Institute Certain Suits... 29
SECTION 7.8 Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Default............................................................. 29
SECTION 7.9 Control by Holders of Securities.................................... 29
SECTION 7.10 Waiver of Past Defaults.............................................. 30
SECTION 7.11 Trustees to Give Notice of Default, But May Withhold in Certain
Circumstances........................................................ 30
SECTION 7.12 Right of Court to Require Filing of Undertaking to Pay Costs......... 30
ARTICLE EIGHT
CONCERNING THE TRUSTEE................................................................ 31
SECTION 8.1 Duties and Responsibilities of the Trustee; During Default; Prior to
Default............................................................. 31
SECTION 8.2 Certain Rights of the Trustee....................................... 32
SECTION 8.3 Trustee Not Responsible for Recitals, Disposition of Securities or
Application of Proceeds Thereof..................................... 32
SECTION 8.4 Trustee and Agents May Hold Securities; Collections, etc............ 32
SECTION 8.5 Monies Held by Trustee.............................................. 33
SECTION 8.6 Compensation and Indemnification of Trustee and Its Prior Claim..... 33
SECTION 8.7 Right of Trustee to Rely on Officers' Certificate, etc.............. 33
SECTION 8.8 Persons Eligible for Appointment as Trustee......................... 33
SECTION 8.9 Resignation and Removal; Appointment of Successor Trustee........... 33
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SECTION 8.10 Acceptance of Appointment by Successor Trustee....................... 34
SECTION 8.11 Merger, Conversion, Consolidation or Succession to Business of
Trustee.............................................................. 35
SECTION 8.12 Preferential Collection of Claims Against the Company................ 35
SECTION 8.13 Appointment of Authenticating Agent.................................. 35
ARTICLE NINE
CONCERNING THE SECURITYHOLDERS........................................................ 36
SECTION 9.1 Evidence of Action Taken by Securityholders......................... 36
SECTION 9.2 Proof of Execution of Instruments and of Holding of Securities...... 36
SECTION 9.3 Holders to be Treated as Owners..................................... 36
SECTION 9.4 Securities Owned by the Company Deemed Not Outstanding.............. 37
SECTION 9.5 Right of Revocation of Action Taken................................. 37
ARTICLE TEN
AMENDMENTS............................................................................ 37
SECTION 10.1 Amendments and Supplements Permitted Without Consent of Holders...... 37
SECTION 10.2 Amendments and Supplements Requiring Consent of Holders.............. 38
SECTION 10.3 Compliance with TIA.................................................. 39
SECTION 10.4 Revocation and Effect of Consents.................................... 39
SECTION 10.5 Notation on or Exchange of Securities................................ 39
SECTION 10.6 Trustee Protected.................................................... 39
ARTICLE ELEVEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONIES............................. 39
SECTION 11.1 Satisfaction and Discharge of Indenture.............................. 39
SECTION 11.2 Application by Trustee of Funds Deposited for Payment of Securities;
Other Miscellaneous Provisions................................. 43
SECTION 11.3 Repayment of Monies Held by Paying Agent............................. 43
SECTION 11.4 Return of Monies Held by Trustee and Paying Agent Unclaimed for
Two Years...................................................... 43
SECTION 11.5 Indemnity for U.S. Government Obligations............................ 43
ARTICLE TWELVE
MISCELLANEOUS PROVISIONS.............................................................. 43
SECTION 12.1 Incorporators, Stockholders, Officers and Directors of the Company
Exempt from Individual Liability............................... 43
SECTION 12.2 Provisions of Indenture for the Sole Benefit of Parties and Holders
of Securities........................................................ 44
SECTION 12.3 Successors and Assigns of the Company Bound by Indenture............. 44
SECTION 12.4 Notices.............................................................. 44
SECTION 12.5 Officers' Certificates and Opinions of Counsel; Statements to be
Contained Therein.............................................. 44
SECTION 12.6 Payments Due on Saturdays, Sundays and Holidays...................... 45
SECTION 12.7 Conflict of Any Provision of Indenture with Trust Indenture Act of
1939................................................................. 45
SECTION 12.8 New York Law to Govern............................................... 45
SECTION 12.9 Counterparts......................................................... 45
SECTION 12.10 Effect of Headings................................................... 45
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<PAGE> 7
INDENTURE, dated as of August , 1994, between America West Airlines,
Inc., a Delaware corporation (the "Company"), having its principal office at
4000 East Sky Harbour Blvd., Phoenix, Arizona 85034, and American Bank National
Association (the "Trustee").
Each party hereto agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's % Senior
Unsecured Notes due 2001.
ARTICLE ONE
DEFINITIONS
SECTION 1.1 Certain Terms Defined. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Indenture shall have the respective meanings specified
in this Section. All other terms used in this Indenture that are defined in the
TIA or the definitions of which in the Securities Act are referred to in the
TIA, including terms defined therein by reference to the Securities Act (except
as herein otherwise expressly provided or unless the context otherwise
requires), shall have the meanings assigned to such terms in the TIA and in the
Securities Act as in force at the date of this Indenture. All accounting terms
used herein and not expressly defined shall have the meanings assigned to such
terms in accordance with GAAP. The words "herein " "hereof" 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. The terms defined in this
Article have the meanings assigned to them in this Article and include the
plural as well as the singular.
"Acceleration Notice" shall have the meaning set forth in Section 7.1
"Adjusted Consolidated Net Income" means, for any Person for any period,
the aggregate net income (or loss) of such Person and its consolidated
Subsidiaries for such period determined in accordance with GAAP; provided that
the following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication): (i) the net income (or loss) of any Person (other
than a Subsidiary of such first Person) in which any other Person (other than
such first Person or any of its Subsidiaries) has a joint or shared interest,
except to the extent of the amount of cash dividends or other distributions
actually paid to, and received by, such first Person or any of its Subsidiaries
during such period out of funds legally available therefor, (ii) the net income
(or loss) of any Person accrued prior to the date it becomes a Subsidiary of
such first Person or any of its Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by such first Person or any of
its Subsidiaries, (iii) the net income (or loss) of any Subsidiary of such first
Person which Subsidiary is subject to a Payment Restriction, except (A) such
exclusion shall not apply to the extent of the amount of cash dividends or other
distributions actually paid to, and received by, such first Person or any of its
Subsidiaries during such period from such Subsidiary in compliance with such
Payment Restriction out of funds legally available therefor and (B) such
exclusion shall apply only while such Payment Restriction is in effect, and upon
the elimination or reduction of such Payment Restriction, the previously
excluded net income (or loss) shall be added back retroactively; (iv) any gains
or losses (on an after-tax basis) attributable to Asset Sales; and (v) all
extraordinary gains and extraordinary losses.
"Affiliates" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Alliance Agreements" means those certain business alliance agreements
among the Company, Continental Airlines, Inc. and Mesa Airlines, Inc. that
include, but are not limited to, code-sharing, frequent flyer, ground handling
and marketing agreements.
"Applicable Documents" means collectively, the Purchase Agreement, the
Registration Rights Agreement, this Indenture and the Securities.
<PAGE> 8
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation, exchange of assets or sale-leaseback
transactions), in one transaction or a series of related transactions, by the
Company or any of its Subsidiaries to any Person other than the Company or any
of its Subsidiaries of (i) all or any of the Capital Stock of any Subsidiary of
the Company, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Subsidiaries or (iii)
any other property and assets of the Company or any of its Subsidiaries outside
the ordinary course of business of the Company or such Subsidiary and, in each
case, that is not governed by the provisions of Article Six of this Indenture;
provided that none of (A) sales or other dispositions of inventory, receivables
and other current assets, (B) sale or other dispositions of surplus equipment,
spare parts, expendable inventories, furniture or fixtures in an aggregate
amount not to exceed $10,000,000 in any fiscal year of the Company, (C) sale
leasebacks of aircraft and engines, passenger loading bridges or other flight or
ground equipment, flight simulators or the Company's reservation facility
located at 222 South Mill Avenue, Tempe, Arizona or (D) $20,000,000 of other
sales in any fiscal year of the Company shall be included within the meaning of
"Asset Sale".
"Authenticating Agent" shall have the meaning set forth in Section 8.13.
"Board of Directors" when used with reference to any Person, means the
Board of Directors of such Person or any committee of such Board duly
authorized, with respect to any particular matter, to exercise the power of the
Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person, as certified by the
Secretary or an Assistant Secretary of such Person.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York, New York, the City of Phoenix,
Arizona or the city of the Corporate Trust Office of the Trustee, are authorized
or required by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital stock, whether now outstanding or
issued after the date of this Indenture, including, without limitation, all
Common Stock.
"Capitalized Lease Obligation" means, as applied to any Person, obligations
of such Person under any lease of any property (whether real, personal or mixed)
which, in accordance with GAAP, is required to be capitalized on the balance
sheet of such Person, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations determined in
accordance with GAAP.
"Cash Equivalents" means (i) U.S. Government Obligations, (ii) commercial
paper, (iii) time deposits, certificates of deposit and banker's acceptances,
(iv) repurchase agreements that are secured by a perfected security interest in
U.S. Government Obligations, and (v) money market funds investing solely in one
or both of the types of securities described in clauses (i) and (ii) above.
"Change of Control" means (i) the acquisition at any time by any Person
(other than one or more Permitted Holders), of "beneficial ownership" (within
the meaning of Section 13(d) under the Exchange Act and the rules and
regulations promulgated thereunder) in excess of 50% of the total voting power
of the Voting Stock of the Company; (ii) the sale, lease, transfer or other
dispositon, of all or substantially all of the assets of the Company to any
Person (other than one or more Permitted Holders) as an entirety or
substantially as an entirety in one transaction or a series of related
transactions; (iii) the merger or consolidation of the Company, with or into
another corporation, or the merger of another corporation into the Company, or
any other transaction, with the effect that a Person (other than one or more
Permitted Holders), has "beneficial ownership" (within the meaning of Section
13(d) under the Exchange Act and the rules and regulations promulgated
thereunder) in excess of 50% of the Voting Stock of the Company, or such other
corporation, as the case may be (including indirect ownership through another
Person other than one or more Permitted Holders); or (iv) the liquidation or
dissolution of the Company. For purposes of this definition, the term Person
includes a "person" within the meaning of Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder.
"Closing Date" means the date on which the Securities are originally issued
under this Indenture.
2
<PAGE> 9
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, or if at any time after the execution and delivery of this
Indenture such Commission is not existing and performing the duties now assigned
to it under the TIA, then the body performing such duties on such date.
"Commodity Agreement" means any agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in the
prices of commodities used by the Company or any of its Subsidiaries in the
ordinary course of its business.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the date of this Indenture, including, without limitation, all
series and classes of such common stock.
"Company" means America West Airlines, Inc., a Delaware corporation and,
subject to Article Six hereof, its successors and assigns.
"Company Order" means a written statement, request or order of the Company
signed in its name by the Chairman, the President or a Vice President and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Company and delivered to the Trustee.
"Consolidated" or "consolidated," when used with reference to any
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with GAAP, after elimination of
intercompany items.
"Consolidated Net Worth" means, with respect to any Person on any date, the
consolidated stockholders' equity, less amounts attributable to Redeemable
Stock, of such Person and its Subsidiaries on such date as determined on a
consolidated basis in accordance with GAAP; provided that, with respect to the
Company, adjustments following the Closing Date to the accounting books and
records of the Company in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions thereto) shall not be given effect.
"Consolidated Tangible Net Worth" means, with respect to any Person on any
date, the Consolidated Net Worth of such Person on such date, less the net book
value on such date as shown by the accounting books and records of such Person
and its Subsidiaries of all of its licenses, patents, patent applications,
copyrights, trademarks, trade names, goodwill, non-compete agreements or
unamortized debt discount and expense, all as determined on a consolidated basis
in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located at .
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values or
under which the Company or any of its Subsidiaries is a party or a beneficiary
on the date of the Indenture or becomes a party or a beneficiary thereafter.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in the form of
one or more Global Securities, each Person designated as Depository by the
Company until a successor Depository shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Depository" shall mean
or include each Person who is then a Depository hereunder.
"Event of Default" means any event or condition specified as such in
Section 7.1.
"Excess Proceeds Offer" shall have the meaning set forth in Section 4.15.
"Excess Proceeds Purchase Date" shall have the meaning set forth in Section
4.15.
3
<PAGE> 10
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of this Indenture, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board.
"Global Security" means a Security evidencing all or a part of the
Securities, issued to a Depository or its nominee in accordance with Section
2.2, and bearing the legend prescribed in Section 2.2.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct, or indirect, contingent or otherwise, of such first Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of such other Person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Holder", "Holder of Securities", "Securityholder" or other similar terms
means the person in whose name a Security is registered in the security register
kept by the Company for that purpose in accordance with the terms hereof.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all Capitalized Lease Obligations of
such Person, (vi) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B) the
stated principal amount of such Indebtedness, (vii) all Indebtedness of other
Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed
by such Person, (viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements, Interest Rate Agreements and Commodity
Agreements. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.
"Indenture" means this instrument as originally executed and delivered or,
if amended or supplemented as herein provided, as so amended or supplemented or
both, and shall include the form and terms of the Securities as set forth
herein.
"Interest Payment Date", means the fifteenth day of each and
, commencing 15, 1994.
"Interest Rate Agreement" means any interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement designed to protect the Company or any of
its Subsidiaries against fluctuations in interest rates or under which the
Company or any of its Subsidiaries is a party or a beneficiary on the date of
this Indenture or becomes a party or a beneficiary thereafter.
4
<PAGE> 11
"Investment" means, with respect to any Person, any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business consistent with past practices that are recorded as accounts receivable
on the balance sheet of such Person or its Subsidiaries) or other extension of
credit or capital contribution by such Person to any other Person (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others; provided, that any transfer of
aircraft to a limited partnership or other entity in connection with the
transaction in which the aircraft are leased to the Company shall not be an
Investment), or any purchase or acquisition by such person of Capital Stock,
bonds, notes, debentures or other similar instruments issued by any other
Person.
"Investment Grade" means a rating of BBB-or higher by S&P or Baa3 or higher
by Moody's or the equivalent of such ratings by S&P or Moody's. In the event
that the Company shall select any other rating agency, the equivalent of such
ratings by such rating agency shall be used.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof, any sale with recourse
against the seller or any Affiliate of the seller, or any agreement to give any
security interest); provided, that in no event shall a true operating lease be
deemed to constitute a Lien hereunder.
"Material Subsidiary" means each Subsidiary that is either (a) a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the
Securities Act and the Exchange Act (as such regulation is in effect on the date
hereof) or (b) material to the financial condition or results of operations of
the Company and its Subsidiaries taken as a whole.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds of
such Asset Sale in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company) and proceeds
from the conversion of other property received when converted to cash or Cash
Equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale
without regard to the consolidated results of operations of the Company and its
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required by its own
terms to be paid as a result of such Asset Sale, and (iv) appropriate amounts to
be provided by the Company or any Subsidiary of the Company as a reserve against
any liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP.
"Net Offering Proceeds" means, with respect to any Public Offering Sale,
the proceeds of such Public Offering Sale in the form of cash or Cash
Equivalents, net of (i) underwriting discounts and commissions and other fees
and expenses (including fees and expenses of counsel) incurred in connection
with such Public Offering Sale, (ii) provisions for all taxes payable as a
result of such Public Offering Sale without regard to the consolidated results
of operations of the Company and its Subsidiaries, taken as a whole, and (iii)
appropriate amounts to be provided by the Company or any Subsidiary of the
Company as a reserve against any liabilities associated with such Public
Offering Sale, all as determined in conformity with GAAP.
"Net Proceeds Offer" shall have the meaning set forth in Section 4.11(a).
"Net Proceeds Purchase Date" shall have the meaning set forth in Section
4.11(b).
"Officer" means with respect to any Person, the Chairman, the President,
the Secretary, any Assistant Secretary, the Chief Financial Officer, the
Controller, the Treasurer, the Assistant Treasurer or any Vice President of such
Person.
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"Officers' Certificate" means a certificate signed by the Chairman, the
President or a Vice President of the Company and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who may be
either internal or outside counsel for the Company.
"Outstanding" when used with reference to Securities, subject to the
provisions of Section 9.4 means, as of any particular time, all Securities
authenticated and delivered by the Trustee under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or redemption of
which monies or U.S. Government Obligations (as provided for in Section
11.1) in the necessary amount shall have been deposited in trust with the
Trustee or with any Paying Agent (other than the Company) or shall have
been set aside, segregated and held in trust by the Company for the Holders
of such Securities (if the Company shall act as Paying Agent); provided,
however, that, if such Securities, or portions thereof, are to be redeemed
prior to the maturity thereof, notice of such redemption shall have been
given as herein provided, or provision satisfactory to the Trustee shall
have been made for giving such notice; and
(c) Securities that shall have been paid or in substitution for which
other Securities shall have been authenticated and delivered pursuant to
the terms of Section 2.6.
"Paying Agent" means any Person (which may include the Company) authorized
by the Company to pay the principal of, premium (if any) or interest on the
Securities on behalf of the Company.
"Payment Restriction" means, with respect to a Subsidiary of any Person,
any encumbrance, restriction or limitation, whether by operation of the terms of
its charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such Subsidiary
to (a) pay dividends or make other distributions on its Capital Stock or make
payments on any obligation, liability or Indebtedness owed to such Person or any
other Subsidiary of such Person, (b) make loans or advances to such Person or
any other Subsidiary of such Person, or (c) transfer any of its property or
assets to such Person or any other Subsidiary of such Person, or (ii) such
Person or any other Subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or (c) property or
assets.
"Permitted Holders" means (i) AmWest Partners, L.P., (ii) TPG Partners,
L.P., (iii) Continental Airlines, Inc., (iv) Mesa Airlines, Inc., (v) funds or
accounts managed or advised by Fidelity Management Trust Company and its
affiliates, and their respective successors and Affiliates.
"Person" means an individual, a corporation, a partnership, an association,
a business trust, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"principal" of any Indebtedness (including the Securities) means the
principal of such Indebtedness plus the premium, if any, on such Indebtedness.
"Public Offering Sale" means an underwritten public offering of Capital
Stock of the Company pursuant to a registration statement filed pursuant to the
Securities Act.
"Purchase Agreement" means that certain Note Purchase Agreement dated as of
the date of this Indenture pursuant to which the Company agreed to issue and
sell and the Purchasers named in such agreement agreed to purchase, an aggregate
of $100,000,000 in principal amount of Securities.
"record date" shall have the meaning set forth in Section 2.4.
"Redeemable Dividends" means, for any dividend payable with regard to
Redeemable Stock, the quotient of (i) the aggregate amount of the dividend
divided by (ii) the difference between one and the maximum statutory federal and
state income tax rate (expressed as a decimal number between one and zero) then
applicable to the issuer of such Redeemable Stock.
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"Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise (i) is required to be redeemed prior to the
Stated Maturity of the Securities, (ii) may be required to be redeemed at the
option of the holder of such class or series of Capital Stock at any time prior
to the Stated Maturity of the Securities or (iii) is convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the Stated Maturity of the
Securities; provided that any Capital Stock that would not constitute Redeemable
Stock but for provisions thereof offering holders thereof the right to require
the Company to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" occurring prior to the Stated Maturity of the Securities shall not
constitute Redeemable Stock if the asset sale provisions contained in such
Capital Stock specifically provide that in respect of any particular asset sale
proceeds, the Company will not repurchase or redeem any such Capital Stock
pursuant to such provisions prior to the Company's repurchase of such Securities
as are required to be repurchased from Holders accepting an Excess Proceeds
Offer pursuant to the provisions of Section 4.15.
"Redemption Date" when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Securities.
"Redemption Price" when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Securities.
"Refinancing Indebtedness" means any Indebtedness of the Company or any
Subsidiary issued in exchange for, or the net proceeds of which are applied
entirely to substantially concurrently repay, refinance, refund or replace,
outstanding Indebtedness of the Company or any of its Subsidiaries (the
"Refinanced Indebtedness"), to the extent such Indebtedness:
(a) is issued in a principal amount (or if such Indebtedness is issued
at an original issue discount, is issued at an original issue price) not
exceeding the outstanding principal amount (or, if such Refinanced
Indebtedness was issued at an original issue discount, not exceeding the
outstanding accreted principal amount) of such Refinanced Indebtedness, and
(b) if the Refinanced Indebtedness is Indebtedness of the Company and
ranks by contract, by its terms or otherwise junior in right of payment to
the Securities, (i) does not have a final scheduled maturity and is not
subject to any principal payments, including but not limited to payments
upon mandatory or optional redemption, prior to the dates of analogous
payments under the Refinanced Indebtedness, and (ii) has subordination
provisions effective to subordinate such Indebtedness to the Securities at
least to the extent that such Refinanced Indebtedness is subordinated to
the Securities, and
(c) if the Refinanced Indebtedness is Indebtedness of the Company
which is pari passu in right of payment with the Securities, (i) is pari
passu or subordinated in right of payment to the Securities, (ii) does not
have a final scheduled maturity and is not subject to any principal
payments, including but not limited to, payments upon mandatory or optional
redemption, prior to the final scheduled maturity date of the Refinanced
Indebtedness, and (iii) is not secured by any Lien on any property of the
Company or any Subsidiary in addition to Liens securing the Refinanced
Indebtedness.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of the date of this Indenture among the Company and the
parties named as signatories thereto, pursuant to which the Company is obligated
to register the Securities and certain other securities of the Company.
"Responsible Officer" when used with respect to the Trustee means the
chairman of the board of directors, any vice chairman of the board of directors,
the chairman of the trust committee, the chairman of the executive committee,
any vice chairman of the executive committee, the president, any vice president
(whether or not designated by numbers or words added before or after the title
"vice president"), the secretary, the treasurer, any trust officer, any
assistant trust officer, any assistant secretary, any assistant treasurer, or
any other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" shall have the meaning set forth in Section 4.13.
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"S&P" means Standard & Poor's Corporation and its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" or "Securities" means the Company's % Senior Unsecured Notes
due 2001 issued under this Indenture.
"Stated Maturity" means, (i) with respect to the principal of the
Securities, 2001 and (ii) with respect to any scheduled
installment of interest on any Security, the date specified in such Security as
the fixed date on which such installment is due and payable.
"Subsidiary" means any corporation more than 50% of the outstanding shares
of Voting Stock of which at the time of determination are owned by the Company
directly or indirectly through one or more Subsidiaries, or both.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries and arising in
the ordinary course of business in connection with the acquisition of goods or
services.
"Trustee" means the Person identified as the "Trustee" in the first
paragraph hereof and, subject to the provisions of Article Eight, shall also
include any successor trustee. "Trustee" shall also mean or include each Person
who is then a trustee hereunder.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the principal of the Securities, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such U.S. Government Obligation or a specific payment of interest
on or principal of any such U.S. Government Obligation held by such custodian
for the account of the holder of a depository receipt; provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of interest on or principal of the U.S. Government Obligation evidenced
by such depository receipt.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to vote for the election of directors, managers or trustees of any
Person (irrespective of whether or not at the time stock of any class or classes
will have or might have voting power by the reason of the happening of any
contingency).
"Wholly Owned" means, a Subsidiary all of the Capital Stock or other
similar equity ownership interests of which (other than any director's
qualifying shares or Investments by foreign nationals mandated by applicable
law) is owned directly or indirectly by the Company.
ARTICLE TWO
SECURITIES
SECTION 2.1 Form and Dating. The Securities and the related Trustee's
certificate of authentication shall be substantially in the respective forms set
forth in Exhibit A, which exhibit is a part of this Indenture. The Securities
may have notations, legends or endorsements required by law, stock exchange rule
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or usage. Each Security shall be dated the date of its authentication. The
Securities shall be issuable only in registered form in denominations of $1,000
and integral multiples thereof.
The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and agree to be bound thereby.
SECTION 2.2 Execution and Authentication. Two Officers of the Company
(each of whom shall have been duly authorized by all requisite corporate
actions) shall sign each Security for the Company by manual or facsimile
signature. If an Officer whose signature is on a Security no longer holds that
office at the time any Securities are authenticated, such Securities shall
nevertheless be valid. The Company's seal shall be reproduced on each Security.
The seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Securities.
Typographical and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Security that has been duly authenticated and delivered by the Trustee.
With respect to the sale and issuance of the Securities, the Trustee shall,
upon receipt of a written order of the Company in the form of an Officers'
Certificate, authenticate Securities for issuance on the Closing Date in the
aggregate principal amount of $100,000,000.
If any Securities are to be issued in the form of one or more Global
Securities, then the Company shall execute and the Trustee shall authenticate
and deliver one or more Global Securities, that (i) shall be in denominations of
$1,000 or integral multiples thereof (ii) shall be registered in the name of the
Depository for such Global Security or Securities or the nominee of such
Depository, (iii) shall be delivered by the Trustee to such Depository or
pursuant to such Depository's instructions and (iv) shall bear a legend
substantially to the following effect:
Unless and until it is exchanged in whole or in part for Securities in
definitive registered form, this Security may not be transferred except
as a whole by the Depository to the nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
Each Depository must, at the time of its designation and at all times while
it serves as Depository, be a clearing agency registered under the Exchange Act
and any other applicable statute or regulation.
SECTION 2.3 Certificate of Authentication. Only such Securities as shall
bear thereon a certificate of authentication substantially in the form set forth
in Exhibit A hereto, executed (subject to Section 8.13) by the Trustee by the
manual signature of one of its authorized officers, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. The
execution of such certificate by the Trustee upon any Security executed by the
Company shall be conclusive evidence, and the only evidence, that the Security
so authenticated has been duly authenticated and delivered hereunder and that
the Holder of such Security is entitled to the benefits of this Indenture.
SECTION 2.4 Payments of Interest. The Securities shall bear interest from
the date of authentication, and such interest shall be payable on the Interest
Payment Dates.
The person in whose name any Security is registered at the close of
business on any record date applicable to such Security with respect to any
Interest Payment Date for such Security shall be entitled to receive the
interest, if any, payable on such Interest Payment Date notwithstanding any
transfer or exchange of such Security subsequent to the record date and prior to
such Interest Payment Date, except if and to the extent the Company shall
default in the payment of the interest due on such Interest Payment Date, in
which case such defaulted interest shall be paid to the persons in whose names
Outstanding Securities are registered at the close of business on a subsequent
record date (which shall be not less then five Business Days prior to the date
of payment of such defaulted interest) established by notice given by mail by or
on behalf of the Company to the Holders of Securities not less than 15 days
preceding such subsequent record date. The term
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"record date" as used with respect to any Interest Payment Date (except a date
for payment of defaulted interest) for the Securities shall mean the date
specified as such in the terms of the Securities.
Subject to the foregoing provisions of this Section 2.4, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
SECTION 2.5 Registration, Transfer and Exchange. The Company will keep at
each office or agency to be maintained for the purpose as provided in Section
4.2 a register or registers in which, subject to such reasonable regulations as
it may prescribe, it will provide for the registration of Securities and the
registration of transfer of Securities. Such register shall be in written form
in the English language or in any other form capable of being converted into
such form within a reasonable time. At all reasonable times such register or
registers shall be open for inspection by the Trustee.
Upon due presentation for registration of transfer of any Security at any
such office or agency to be maintained for the purpose as provided in Section
4.2, the Company shall execute and the Trustee shall authenticate and deliver in
the name of the transferee or transferees a new Security or Securities.
At the option of the Holder thereof, Securities (other than a Global
Security, except as set forth below) may be exchanged for a Security or
Securities having authorized denominations in an equal aggregate principal
amount, upon surrender of such Securities to be exchanged at the agency of the
Company that shall be maintained for such purpose in accordance with Section 4.2
and upon payment, if the Company shall so require, of the amounts hereinafter
provided.
All Securities presented for registration of transfer, exchange, redemption
or payment shall (if so required by the Company or the Trustee) be duly endorsed
by, or be accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Company and the Trustee and duly executed by the Holder
or his attorney duly authorized in writing.
The Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any exchange or
registration of transfer of Securities. No service charge shall be made for any
such transaction.
The Company shall not be required to exchange or register a transfer of (a)
any Securities for a period of 15 days next preceding the first mailing of
notice of redemption of Securities to be redeemed or (b) any Securities
selected, called or being called for redemption, in whole or in part, except, in
the case of any Security to be redeemed in part, the portion thereof not so to
be redeemed.
Notwithstanding any other provision of this Section 2.5, unless and until
it is exchanged in whole or in part for Securities in non-global form, a Global
Security representing all or a portion of the Securities may not be transferred
except as a whole by the Depository to a nominee of such Depository or by a
nominee of such Depository to such Depository or another nominee of such
Depository or by such Depository or any such nominee to a successor Depository
or a nominee of such successor Depository.
If at any time the Depository for any Securities represented by one or more
Global Securities notifies the Company that it is unwilling or unable to
continue as Depository for such Securities or if at any time the Depository for
such Securities shall no longer be eligible under Section 2.2, the Company shall
appoint a successor Depository eligible under Section 2.2 with respect to such
Securities. If a successor Depository eligible under Section 2.2 for such
Securities is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company will
execute, and the Trustee, upon receipt of an Officer's Certificate of the
Company for the authentication and delivery of Securities in non-global form,
will authenticate and deliver Securities in non-global form in exchange for such
Global Security or Securities.
The Company may at any time and in its sole discretion determine that the
Securities issued in the form of one or more Global Securities shall no longer
be represented by a Global Security or Securities. In such event the Company
will execute, and the Trustee, upon receipt of a Company Order for the
authentication and
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delivery of Securities in non-global form, will authenticate and deliver,
Securities in non-global form in exchange for such Global Security or
Securities.
Any person having a beneficial interest in a Global Security may upon
request exchange such beneficial interest for Securities in non-global form.
Upon receipt by the Trustee of written instructions (or such other form of
instructions as is customary for the Depository) from the Depository or its
nominee on behalf of any person having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written order or such other form
of instructions as is customary for the Depository or the person designated by
the Depository as having such a beneficial interest containing registration
instructions, then the Trustee will cause, in accordance with the standing
instructions and procedures existing between the Depository and the Trustee, the
aggregate principal amount of the Global Security to be reduced and following
such reduction, the Company will execute and upon receipt of an authentication
order in the form of an Officers' Certificate, the Trustee will authenticate and
deliver Securities in non-global form.
Securities in non-global form issued in exchange for a beneficial interest
in a Global Security pursuant to this Section 2.5 shall be registered in such
names and in such authorized denominations as the Depository for such Global
Security, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee or an agent of the Company or the Trustee.
The Trustee or such agent shall deliver such Securities to or as directed by the
Person in whose names such Securities are so registered.
The Securities executed by the Company, and authenticated and delivered by
the Trustee, upon any transfer or exchange contemplated by this Section 2.5
shall be dated the date of their authentication, shall be in authorized
denominations, shall be in like aggregate principal amount and have the same
Stated Maturity date and interest rate as, and bear interest from the most
recent date to which interest has been paid on (or if no interest has been paid,
from the date of), the Securities surrendered upon such transfer or exchange (or
as the portion of any Global Security being exchanged for Securities in
non-global form, as the case may be), and shall bear a number of other
distinguishing symbol not appearing on any Security contemporaneously
Outstanding.
All Securities issued upon any transfer or exchange of Securities shall be
valid obligations of the Company, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.
SECTION 2.6 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In
case any temporary or definitive Security shall become mutilated, defaced or be
destroyed, lost or stolen, the Company in its discretion may execute, and upon
the written request of any officer of the Company, the Trustee shall
authenticate and deliver a new Security of the same principal amount, Stated
Maturity date and interest rate as, and bearing interest from the most recent
date to which interest has been paid on (or if no interest has been paid, from
the date of) the mutilated or defaced Security, or the Security so destroyed,
lost or stolen, and bearing a number or other distinguishing symbol not
appearing on any security contemporaneously Outstanding, in exchange and
substitution for the mutilated or defaced Security, or in lieu of or in
substitution for the Security so destroyed, lost or stolen. In every case the
applicant for a substitute Security shall furnish to the Company and to the
Trustee and any agent of the Company or the Trustee such security or indemnity
as may be required by them to indemnify and defend and to save each of them
harmless and, in every case of destruction, loss or theft, evidence to their
satisfaction of the destruction, loss or theft of such Security and of the
ownership thereof and in the case of mutilation or defacement, shall surrender
the Security to the Trustee or such agent.
Upon the issuance of any substitute Security, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee or its agent) connected therewith. In case any
Security that has matured or is about to mature or has been called for
redemption in full shall become mutilated or defaced or be destroyed, lost or
stolen, the Company may, instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated or defaced Security), if the applicant for such payment shall
furnish to the Company and to the Trustee and any agent of the Company or the
Trustee such security or indemnity as any of them may require to save each of
them harmless, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company and the Trustee and
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any agent of the Company or the Trustee evidence to their satisfaction of the
destruction, loss or theft of such Security and of the ownership thereof.
Every substitute Security issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any such Security is destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company whether or
not the destroyed, lost or stolen Security shall be at any time enforceable by
anyone and shall be entitled to all the benefits of (but shall be subject to all
the limitations of rights set forth in) this Indenture equally and
proportionately with any and all other Securities duly authenticated and
delivered hereunder. All Securities shall be held and owned upon the express
condition that, to the extent permitted by law, the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, defaced or
destroyed, lost or stolen Securities and shall preclude any and all other rights
or remedies notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
SECTION 2.7 Cancellation of Securities; Destruction Thereof.
(a) All Securities surrendered for payment, redemption, registration
of transfer or exchange, if surrendered to the Company or any agent of the
Company or any agent of the Trustee, shall be delivered to the Trustee for
cancellation and, upon receipt thereof by the Trustee, shall be cancelled
by it; and no Securities shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. The Trustee
shall destroy cancelled Securities held by it and deliver a certificate of
destruction to the Company. If the Company or any agent of the Company
shall acquire any of the Securities, such acquisition shall not operate as
a redemption or satisfaction of the indebtedness represented by such
Securities unless and until the same are delivered to the Trustee for
cancellation.
(b) At such time as all beneficial interests in a Global Security have
either been exchanged for Securities in non-global form, redeemed,
repurchased or cancelled, such Global Security shall be returned to and
cancelled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for Securities in
non-global form, redeemed, repurchased or cancelled, the principal amount
of Securities represented by such Global Security shall be reduced and an
endorsement shall be made on such Global Security by the Trustee to reflect
such reduction.
SECTION 2.8 Temporary Securities. Until definitive Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee, upon receipt of a written order signed by two
Officers of the Company, shall authenticate definitive Securities in exchange
for temporary Securities. Until such exchange, temporary Securities shall be
entitled to the same rights, benefits and privileges as definitive Securities.
SECTION 2.9 Currency and Manner of Payments in Respect of
Securities. Payment of the principal of and premium (if any) and interest on,
any Security will be made in U.S. Legal Tender.
SECTION 2.10 CUSIP Number. A "CUSIP" number will be printed on the
Securities, and the Trustee shall use the CUSIP number in notices of redemption,
purchase or exchange as a convenience to Holders, provided that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities and that reliance
may be placed only on the other identification numbers printed on the
Securities. The Company will promptly notify the Trustee of any change in the
CUSIP number.
ARTICLE THREE
REDEMPTIONS
SECTION 3.1 Notices to Trustee. If the Company elects to redeem
Securities pursuant to Section 3.7 or is required to redeem Securities pursuant
to Section 3.8 it shall furnish to the Trustee, at least 10 but not more than 15
days before notice of any redemption is to be mailed to Holders (or such shorter
time as
12
<PAGE> 19
may be satisfactory to the Trustee), an Officers' Certificate stating that the
Company has elected to redeem Securities pursuant to Section 3.7 or is required
to redeem Securities pursuant to Section 3.8, as the case may be, the date
notice of redemption is to be mailed to Holders, the Redemption Date, the
aggregate principal amount of Securities to be redeemed, the Redemption Price
for such Securities and the amount of accrued and unpaid interest on such
Securities as of the Redemption Date. If the Trustee is not the registrar for
the Securities, the Company shall, concurrently with delivery of its notice to
the Trustee of a redemption, cause the registrar for the Securities to deliver
to the Trustee a certificate (upon which the Trustee may rely) setting forth the
name of, and the aggregate principal amount of Securities held by each Holder.
The Company will also provide the Trustee with any additional information that
the Trustee reasonably requests in connection with any redemption.
SECTION 3.2 Selection of Securities to be Redeemed. If less than all
outstanding Securities are to be redeemed, the Company shall select the
outstanding Securities to be redeemed or accepted for payment in compliance with
the requirements of the principal national securities exchange, if any, on which
the Securities are listed or, if the Securities are not listed on a securities
exchange, on a pro rata basis, by lot or by any other method that the Trustee
deems fair and appropriate. If the Company elects to mail notice of a redemption
to Holders, the Trustee shall, at least 5 days prior to the date notice of
redemption is to be mailed, (i) select the Securities to be redeemed from
Securities Outstanding not previously called for redemption, and (ii) promptly
notify the Company of the names of each Holder of Securities selected for
redemption, the principal amount of Securities held by each such Holder and the
principal amount of such Holder's Securities that are to be redeemed. The
Trustee shall select for redemption Securities or portions of Securities in
principal amounts of $1,000 or integral multiples of $1,000; except that if all
of the Securities of a Holder are selected for redemption, the aggregate
principal amount of the Securities held by such Holder, even if not a multiple
of $1,000, may be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption.
SECTION 3.3 Notice of Redemption.
(a) At least 30 days but not more than 60 days before any Redemption
Date, the Company shall mail by first class mail to each such Holder's
registered address a notice of redemption to each Holder of Securities or
portions thereof that are to be redeemed. With respect to any redemption of
Securities, the notice shall identify the Securities or portions thereof to
be redeemed and shall state: (1) the Redemption Date; (2) the Redemption
Price for the Securities and the amount of unpaid and accrued interest on
such Securities as of the date of redemption; (3) if any Security is being
redeemed in part, the portion of the principal amount of such Security to
be redeemed and that, after the Redemption Date, upon surrender of such
Security, a new Security or Securities in principal amount equal to the
unredeemed portion will be delivered; (4) the name and address of the
Paying Agent; (5) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price for, and any accrued
and unpaid interest on, such Securities; (6) that, unless the Company
defaults in making such redemption payment, interest on Securities called
for redemption ceases to accrue on and after the Redemption Date and the
only remaining right of the Holders of such Securities is to receive
payment of the Redemption Price upon surrender to the Paying Agent of the
Securities redeemed; and (7) if fewer than all the Securities are to be
redeemed, the identification of the particular Securities (or portions
thereof) to be redeemed, as well as the aggregate principal amount of
Securities to be redeemed and the aggregate principal amount of Securities
to be outstanding after such partial redemption.
(b) At the Company's request, the Trustee shall (at the Company's
expense) give the notice of any redemption to Holders; provided, however,
that the Company shall deliver to the Trustee, at least 10 days prior to
the date that notice of the redemption is to be mailed to Holders, an
Officers' Certificate that (i) requests the Trustee to give notice of the
redemption to Holders, (ii) sets forth the information to be provided to
Holders in the notice of redemption, as set forth in the preceding
paragraph, and (iii) sets forth the aggregate principal amount of
Securities to be redeemed and the amount of accrued and unpaid interest
thereon as of the redemption date. If the Trustee is not the registrar for
the Securities, the Company shall, concurrently with any such request,
cause the registrar for the Securities to deliver to the Trustee a
certificate (upon which the Trustee may rely) setting forth the name of,
the address of, and the
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<PAGE> 20
aggregate principal amount of Securities held by, each Holder; provided
further that any such Officers' Certificate may be delivered to the Trustee
on a date later than permitted under this Section 3.3(b) if such later date
is acceptable to the Trustee.
SECTION 3.4 Effect of Notice of Redemption. Once notice of redemption is
mailed to the Holders, Securities called for redemption shall become due and
payable on the Redemption Date at the Redemption Price. Upon surrender to the
Trustee or the Paying Agent, the Securities called for redemption shall be paid
at the Redemption Price.
SECTION 3.5 Deposit of Redemption Price.
(a) On or prior to any Redemption Date, the Company shall deposit with
the Paying Agent money sufficient to pay the Redemption Price of, and
accrued interest on, all Securities to be redeemed on that date. After any
Redemption Date, the Trustee or the Paying Agent shall promptly return to
the Company any money that the Company deposited with the Trustee or the
Paying Agent in excess of the amounts necessary to pay the Redemption Price
of, and accrued interest on, all Securities to be redeemed.
(b) If the Company complies with the preceding paragraph, unless the
Company defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue on such Securities on the
applicable Redemption Date, whether or not such Securities are presented
for payment. If a Security is redeemed on or after an interest record date
but on or prior to the related Interest Payment Date, then any accrued and
unpaid interest shall be paid to the Person in whose name such Security was
registered at the close of business on such record date. If any Security
called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding
paragraph, interest will be paid on the unpaid principal and interest from
the redemption date until such principal and interest is paid, at the rate
of interest provided in the Securities and Section 4.1.
SECTION 3.6 Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder at the Company's expense a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
If a Global Security is so surrendered, such new Security so issued shall be a
new Global Security.
SECTION 3.7 Optional Redemption. The Company, at its option on notice to
the Holders as provided herein, may redeem the Securities:
(a) prior to , 1997
(i) at any time in whole but not in part, at a Redemption Price
equal to 105% of the aggregate principal amount of the Securities then
Outstanding, plus accrued and unpaid interest thereon to the Redemption
Date; or
(ii) from time to time in part from the Net Offering Proceeds
received by the Company prior to , 1997 from one or more
Public Offering Sales at a Redemption Price equal to 105% of the
aggregate principal amount of the Securities so redeemed, plus accrued
and unpaid interest thereon to the Redemption Date, except for amounts
redeemed under Section 3.8 hereof; and
(b) on and after , 1997, at any time in whole or from time
to time in part, at a Redemption Price equal to the applicable percentage
of the aggregate principal amount of the Securities so to be redeemed, set
forth below, plus accrued and unpaid interest thereon to the Redemption
Date.
<TABLE>
<CAPTION>
IF REDEEMED
DURING THE
12 MONTHS BEGINNING PERCENTAGE
------------------------------------------------------------------ ----------
<S> <C>
1997.............................................................. 105.0 %
1998.............................................................. 103.3 %
1999.............................................................. 101.7 %
2000 and thereafter............................................... 100.0 %
</TABLE>
14
<PAGE> 21
SECTION 3.8 Mandatory Redemption. In the event that, prior to
, 1997, the Company consummates a Public Offering Sale and
immediately prior to such consummation the Company has cash and Cash
Equivalents, not subject to any restriction on disposition (other than any such
restriction imposed by this Indenture), of at least $100,000,000, then the
Company shall redeem Securities at a Redemption Price equal to 104% of the
aggregate principal amount of the Securities so redeemed, plus accrued and
unpaid interest to the Redemption Date. The aggregate Redemption Price and
accrued and unpaid interest of the Securities to be so redeemed shall equal the
lesser of (a) 50% of the Net Offering Proceeds of such Public Offering Sale and
(b) the excess, if any, of (i) $20,000,000 over (ii) the amount of any Net
Offering Proceeds of any prior Public Offering Sale received to ,
1997 and applied to redeem Securities pursuant to this Section 3.8.
ARTICLE FOUR
COVENANTS OF THE COMPANY
SECTION 4.1 Payment of Principal and Interest. The Company covenants and
agrees that it will duly and punctually pay or cause to be paid the principal
of, premium (if any) and interest on, each of the Securities at the place or
places, at the respective times and in the manner provided in such Securities
and in this Indenture. To the extent lawful, the Company shall pay interest on
overdue principal, premium and interest at a rate equal to the then applicable
interest rate on the Securities, compounded semi-annually.
SECTION 4.2 Offices for Payments, etc. So long as any Securities are
authorized for issuance pursuant to this Indenture or are outstanding hereunder,
the Company will maintain in the Borough of Manhattan, the City of New York, an
office or agency where the Securities may be presented for payment and for
exchange and registration of transfer as in this Indenture provided. The Company
will give prompt written notice to the Trustee of any change in the location of
such office or agency. Until the Company shall furnish to the Trustee a
different address therefor, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee as specified
in Section 12.4 hereof.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
SECTION 4.3 Appointment to Fill a Vacancy in Office of Trustee. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.9, a Trustee so that there
shall at all times be a Trustee with respect to the Securities.
SECTION 4.4 Paying Agents. Whenever the Company shall appoint a Paying
Agent other than the Trustee with respect to the Securities, it will cause such
Paying Agent to execute and deliver to the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
4.4,
(a) that it will hold all sums received by it as such agent for the
payment of the principal of, premium (if any) and interest on the
Securities (whether such sums have been paid to it by the Company or any
other obligor on the Securities) in trust for the benefit of the Holders of
the Securities or of the Trustee,
(b) that it will give the Trustee notice of any failure by the Company
(or by any other obligor on the Securities) to make any payment of the
principal of, premium (if any) or interest on the Securities when the same
shall be due and payable, and
(c) that it will pay any such sums so held in trust by it to the
Trustee upon the Trustee's written request, at any time during the
continuance of the failure referred to in clause (b) above.
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<PAGE> 22
The Company will, on or prior to each due date of the principal of, premium
(if any) or interest on the Securities, deposit with the Paying Agent a sum
sufficient to pay such principal, premium or interest so becoming due, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of any failure to take such action.
If the Company shall act as its own Paying Agent with respect to the
Securities it will, on or before each due date of the principal of, premium (if
any) or interest on the Securities set aside, segregate and hold in trust for
the benefit of the Holders of the Securities a sum sufficient to pay such amount
so becoming due. The Company will promptly notify the Trustee of any failure to
take such action.
Anything in this Section 4.4 to the contrary notwithstanding, but subject
to Section 11.1, the Company may at any time, for the purpose of obtaining a
satisfaction and discharge with respect to the Securities or for any other
reason, pay or cause to be paid to the Trustee all sums held in trust with
respect to the Securities by the Company or any Paying Agent hereunder, as
required by this Section, such sums to be held by the Trustee upon the trusts
herein contained.
Anything in this Section 4.4 to the contrary notwithstanding, the agreement
to hold sums in trust as provided in this Section 4.4 is subject to the
provisions of Sections 11.3 and 11.4 hereof.
SECTION 4.5 Reports and Information.
(a) The Company will furnish to the Trustee within 120 days after the
end of each fiscal year an Officers' Certificate stating that (i) a review
of the activities of the Company and its Subsidiaries during the preceding
fiscal year has been made to determine whether the Company has kept,
observed, performed and fulfilled all of its obligations under this
Indenture and the Securities, (ii) such review was supervised by the
Officers of the Company signing such certificate, and (iii) that to the
best knowledge of each Officer signing such certificate, (A) during such
year the Company has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default occurred, describing
all such Defaults or Events of Default of which each such Officer may have
knowledge and what action the Company has taken or proposes to take with
respect thereto), and (B) no event has occurred and remains in existence by
reason of which payments on account of the principal of, premium (if any)
or interest on, the Securities are prohibited or if such event has
occurred, a description of the event and what action the Company is taking
or proposes to take with respect thereto. The Company will, so long as any
of the Securities are outstanding, deliver to the Trustee, promptly after
any Officer of the Company becomes aware of (i) any Default or Event of
Default, or (ii) any default or event of default under any issue of
Indebtedness that could result in an Event of Default under Section 7.1, an
Officers' Certificate specifying such Default, Event of Default or default
and what action the Company is taking or proposes to take with respect
thereto.
(b) If the Company is subject to the requirements of Section 13 or
15(d) of the Exchange Act, the Company shall file with the Commission all
quarterly and annual reports and such other information, documents or other
reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) required to be filed
pursuant to such provisions of the Exchange Act. The Company shall file
with the Trustee, within 5 days after it files the same with the
Commission, copies of the quarterly and annual reports and such other
information, documents, and reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe)
that it files with the Commission as contemplated by this Section 4.5(b).
The Company shall also comply with the other provisions of Section 314(a)
of the TIA. If the Company is not required to file the aforementioned
reports, the Company (at its own expense) shall file with the Trustee and
mail, or cause the Trustee to mail, to Holders at their addresses appearing
in the register of Securities at the time of such mailing within 5 days
after it would have been required to file such information with the
Commission, all information and financial statements, including any notes
thereto and with respect to annual reports, an auditors' report by an
accounting firm of established national reputation, and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
comparable to the disclosure that the Company would have been required to
include in annual and quarterly reports, information,
16
<PAGE> 23
documents or other reports, including, without limitation, reports on Forms
10-K, 10-Q and 8-K, if the Company was subject to the requirements of
Section 13 or 15(d) of the Exchange Act.
SECTION 4.6 Corporate Existence. Subject to Article Six, the Company will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence and the corporate, partnership or other
existence of each Subsidiary of the Company and the rights (charter and
statutory) and franchises of the Company and any Subsidiary of the Company;
provided, that the Company shall not be required to preserve any such corporate,
partnership or other existence of any Subsidiary or any such right or franchise,
if the Board of Directors of the Company shall determine in the exercise of its
business judgment that the preservation thereof is no longer desirable in the
conduct of the business of the Company or any Subsidiary and that abandonment of
any such right or franchise shall have no material adverse effect on the Company
and its Subsidiaries taken as a whole, or the Holders.
SECTION 4.7 Payment of Taxes and Other Claims. The Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and (2) all lawful claims for labor,
materials and supplies that, if unpaid, might by law become a lien upon the
property of the Company, or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim the amount, applicability or validity of
which is being contested in good faith by appropriate proceedings and with
respect to which an adequate reserve has been established by the Company to the
extent required by GAAP.
SECTION 4.8 Maintenance of Properties. The Company shall, and shall cause
each of its Subsidiaries to, maintain all properties used or useful in the
conduct of its business in good condition, repair and working order and supply
such properties with all necessary equipment and make all necessary repairs,
renewals, replacements, betterments and improvements thereto, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company or any
Subsidiary from discontinuing the operation and maintenance of any of such
properties if such discontinuance is, in the good faith judgment of the Company
or such Subsidiary, as the case may be, desirable in the conduct of its
respective business and not disadvantageous in any material respect to the
Holders.
SECTION 4.9 Maintenance of Insurance. The Company will insure and keep
insured, and will cause each Subsidiary to insure and keep insured, with
reputable insurance companies, such of their respective properties, to such an
extent and against such risks, and will maintain liability insurance, to the
extent that property of a similar character is usually so insured by companies
engaged in a similar business and owning similar properties in accordance with
good business practice.
SECTION 4.10 Compliance with Laws. The Company shall comply, and shall
cause each of its Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, all states
and municipalities thereof, and of any governmental department, commission,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except such as are being contested in
good faith and by appropriate proceedings and except for such noncompliance as
would not in the aggregate have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
SECTION 4.11 Change of Control.
(a) Upon a Change of Control, each Holder shall have the right to
require the Company to repurchase all or any part of such Holder's
Securities at a repurchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).
17
<PAGE> 24
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder stating:
(i) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase all or any part of such
Holder's Securities at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to
the date of purchase (subject to the record Holders' right on the
relevant record date to receive interest due on the relevant interest
payment date);
(ii) the circumstances and relevant facts regarding such Change of
Control;
(iii) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed; and
(iv) the instructions, consistent with this Section 4.11, that the
Company determines that a Holder must follow to have its Securities
repurchased.
(c) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least 10 Business Days
prior to the purchase date. Holders will be entitled to withdraw their
election if the Company receives not later than three Business Days prior
to the purchase date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount of the Security
which was delivered for purchase by the Holder and a statement that such
Holder is withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Company to the Trustee for
cancellation, together with an Officer's Certificate requesting such
cancellation and stating that they are being delivered for cancellation in
accordance with the terms of this Section 4.11 and that the Company shall
pay the purchase price plus accrued and unpaid interest, if any, to the
Holders entitled thereto.
(e) The Company shall comply with the requirements of Section 14(e) of
the Exchange Act and any other securities laws or regulations in connection
with the repurchase of Securities pursuant to this Section 4.11. To the
extent that the provisions of any securities laws or regulations conflict
with provisions of this Section 4.11, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.11 by virtue thereof.
(f) The Trustee shall be under no obligation to ascertain the
occurrence of a Change of Control or to give notice with respect thereto
other than as provided above, upon receipt of the written notice of Change
of Control from the Company. The Trustee may conclusively assume, in the
absence of written notice to the contrary from the Company, that no Change
of Control has occurred.
SECTION 4.12 Limitation on Issuances and Dispositions of Capital Stock of
Subsidiaries. Each Subsidiary of the Company shall at all times be a Wholly
Owned Subsidiary of the Company. The Company (i) shall not, and shall not permit
any Subsidiary to, transfer, convey, sell, or otherwise dispose of any Capital
Stock of a Subsidiary, or securities convertible or exchangeable into, or
options, warrants, rights or any other interest with respect to, Capital Stock
of a Subsidiary to any Person (other than the Company or a Wholly Owned
Subsidiary) and (ii) shall not permit any Subsidiary to issue shares of its
Capital Stock (other than directors' qualifying shares), or securities
convertible or exchangeable into, or options, warrants, rights or any other
interest with respect to, its Capital Stock to any Person other than to the
Company or a Wholly Owned Subsidiary.
SECTION 4.13 Limitation on Restricted Payments.
(a) Except as otherwise provided in this Section 4.13, the Company
shall not, and shall not permit any Subsidiary to, directly or indirectly,
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<PAGE> 25
(i) declare or pay any dividends on or make any distributions in
respect of the Capital Stock of the Company (other than dividends or
distributions payable solely in shares of Capital Stock (other than
Redeemable Stock) or in options, warrants, or other rights to purchase
Capital Stock (other than Redeemable Stock)) to holders of Capital Stock
of the Company;
(ii) purchase, redeem or otherwise acquire or retire for value
(other than through the issuance solely of Capital Stock (other than
Redeemable Stock) or options, warrants or other rights to purchase
Capital Stock (other than Redeemable Stock)) any Capital Stock or
warrants, rights (other than exchangeable or convertible Indebtedness of
the Company not prohibited under clause (iii) below) or options to
acquire Capital Stock of the Company; or
(iii) redeem, repurchase, defease (including, but not limited to,
in substance or legal defeasance), or otherwise acquire or retire for
value (other than through the issuance solely of Capital Stock (other
than Redeemable Stock) or warrants, rights or options to acquire Capital
Stock (other than Redeemable Stock)) (collectively, a "prepayment"),
directly or indirectly (including by way of amendment of the terms of
any Indebtedness in connection with any retirement or acquisition of
such Indebtedness), other than at any scheduled maturity thereof or by
any scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company which is subordinated in right of payment to
the Securities or which matures after the maturity date of the
Securities (except out of the proceeds of Refinancing Indebtedness);
if, at the time of such transaction described in clause (i), (ii) or (iii)
(such transactions being hereinafter collectively referred to as
"Restricted Payments") or after giving effect thereto, either (x) a Default
or an Event of Default shall have occurred and be continuing or (y) the
aggregate amount expended by the Company and its Subsidiaries for all
Restricted Payments (the amount of any Restricted Payment if other than
cash to be the fair market value of the property included in such payment
as determined in good faith by the Board of Directors as evidenced by a
Board Resolution) from and after the Closing Date shall exceed the sum of
(A) 50% (or, if the Securities at the time of the proposed Restricted
Payment are rated Investment Grade by both S&P and Moody's, 75%) of the
aggregate Adjusted Consolidated Net Income (or if such Adjusted
Consolidated Net Income is a loss, minus 100% of such loss) of the Company
and its Subsidiaries for the period from the first day of the first quarter
ended subsequent to the Closing Date and through the last day of the most
recently completed quarter immediately preceding the quarter in which the
Restricted Payment occurs, calculated on a cumulative basis as if such
period were a single accounting period; (B) the aggregate net proceeds
received by the Company after the Closing Date (including the fair market
value of non-cash proceeds as determined in good faith by the Board of
Directors as evidenced by a Board Resolution) from any Person other than a
Subsidiary, as a result of the issuance of (or contribution to capital on)
Capital Stock of the Company (other than any Redeemable Stock) or warrants,
rights or options to acquire Capital Stock (other than any Redeemable
Stock); (C) the aggregate net proceeds received by the Company after the
Closing Date from any Person other than a Subsidiary as a result of the
issuance of Capital Stock (other than Redeemable Stock) upon conversion or
exchange of Indebtedness or upon exercise of options, warrants or other
rights to acquire such Capital Stock and (D) $25,000,000. For purposes of
any calculation that is required to be made in respect of, or after, the
declaration of a dividend by the Company, such dividend shall be deemed to
be paid at the date of declaration and shall be included in determining the
aggregate amount of Restricted Payments.
For the purposes of this Section 4.13, the net proceeds from the
issuance of shares of Capital Stock of the Company upon conversion of debt
securities shall be deemed to be an amount equal to the net book value of
such debt securities (plus the additional amount required to be paid upon
such conversion, if any), less any cash payment on account of fractional
shares; the "net book value" of a security shall be the net amount received
by the Company on the issuance of such security, as adjusted on the books
of the Company to the date of conversion.
(b) Notwithstanding the foregoing, if no Default or Event of Default
shall have occurred or be continuing at the time or as a result thereof,
the provisions of this Section 4.13 shall not prohibit (i) the
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<PAGE> 26
payment of any dividend in respect of the Company's Capital Stock within 60
days after the date of declaration thereof, if at such date of declaration
such payment complied with the provisions hereof; (ii) the purchase,
redemption or other acquisition or retirement for value of any shares of
the Company's Capital Stock or the prepayment of any indebtedness of the
Company which is subordinated in right of payment to the Securities or
which matures after the maturity date of the Securities by any exchange
for, or out of and to the extent the Company has received cash proceeds
from the substantially concurrent sale or issuance (other than to a
Subsidiary) of, shares of Capital Stock (other than any Redeemable Stock)
of the Company or warrants, rights or options to acquire Capital Stock
(other than any Redeemable Stock); or (iii) the purchase or redemption of
shares of Capital Stock of the Company (including options on any such
shares or related stock appreciation rights or similar securities) held by
officers or employees of the Company or its Subsidiaries (or their estates
or beneficiaries under their estates) upon death, disability, retirement,
termination of employment of any such Person pursuant to the terms of any
Plan or any other agreement under which such shares of stock or related
rights were issued; provided that the aggregate amount of such purchases or
redemptions of such Capital Stock shall not exceed $3,000,000 in any one
fiscal year of the Company. For purposes of determining the aggregate
amount of Restricted Payments permitted under clause (y) of Section
4.13(a), all amounts expended pursuant to clauses (i) (to the extent deemed
to have been paid and already included in determining the aggregate amount
of Restricted Payments pursuant to clause (y) of Section 4.13(a)), (ii) and
(iii) of this paragraph shall be excluded.
Prior to making any Restricted Payment under this Section, the Company
shall deliver to the Trustee an Officers' Certificate setting forth the
computation by which the amount available for Restricted Payments was
determined. The Trustee shall have no duty or responsibility to determine
the accuracy or correctness of this computation or that the provisions of
this Section have been satisfied and shall be fully protected in relying on
such Officers' Certificate.
SECTION 4.14 Limitation on Transactions with Affiliates.
(a) Neither the Company nor any Subsidiary of the Company shall,
directly or indirectly (i) sell, lease, transfer or otherwise dispose of
any of its properties or assets, or issue securities to, (ii) purchase any
property, assets or securities from, (iii) make any Investment in, or (iv)
enter into or suffer to exist any contract or agreement with or for the
benefit of, an Affiliate or holder of 5% or more of any class of Capital
Stock (and any Affiliate of such holder) of the Company (an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under
Section 4.14(b) and (y) Affiliate Transactions (including lease
transactions) which are on fair and reasonable terms no less favorable to
the Company or such Subsidiary, as the case may be, than those as might
reasonably have been obtainable at such time from an unaffiliated party;
provided that if an Affiliate Transaction or series of related Affiliate
Transactions involves or has a value in excess of $10,000,000, the Company
or such Subsidiary, as the case may be, shall not enter into such Affiliate
Transaction or series of related Affiliate Transactions unless a majority
of the disinterested members of the Board of Directors of the Company or
such Subsidiary shall reasonably and in good faith determine that such
Affiliate Transaction is fair to the Company or such Subsidiary, as the
case may be, or is on terms no less favorable to the Company or such
Subsidiary, as the case may be, than those as might reasonably have been
obtainable at such time from an unaffiliated party.
(b) The provisions of Section 4.14(a) shall not apply to (i) any
agreement as in effect as of the Closing Date, or any amendment thereto so
long as any such amendment is not disadvantageous to the Holders in any
material respect or any transaction contemplated thereby (including
pursuant to any amendment thereto); (ii) any transaction between the
Company and any Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries, provided such transactions are not otherwise prohibited by
this Indenture; (iii) reasonable and customary fees and compensation paid
to, and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Subsidiary, as determined by the Board of
Directors of the Company or any Subsidiary or the senior management thereof
in good faith; (iv) any Restricted Payments not prohibited by Section 4.13;
(v) any payments or other transactions pursuant to any tax sharing
agreement between the Company and any other Person with which the Company
is required or permitted to file a consolidated tax return or with which
the Company
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is or could be part of a consolidated group for tax purposes; and (vi)
transactions with Continental Airlines, Inc., Mesa Airlines, Inc. and their
respective Affiliates as contemplated by the Alliance Agreements.
SECTION 4.15 Limitation on Asset Sales. Subject to the following
paragraphs of this Section, in the event and to the extent that on any date
after the Closing Date the Company and its Subsidiaries shall receive Net Cash
Proceeds from one or more Asset Sales (other than Asset Sales by the Company or
any Subsidiary to the Company or another Subsidiary), then the Company shall, or
shall cause such Subsidiary to, within 12 months after such date apply an amount
equal to such Net Cash Proceeds (A) to repay Indebtedness of the Company or
Indebtedness of any Subsidiary, in each case owing to a Person other than the
Company or any of its Subsidiaries, and/or (B) as an Investment (or enter into a
definitive agreement committing to so invest within 12 months after the date of
such agreement), in property or assets of a nature or type or that are used in a
business (or in a Person having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Company and its Subsidiaries existing on
the date thereof (as determined in good faith by the Board of Directors of the
Company or such Subsidiary, as the case may be, whose determination shall be
conclusive and evidenced by a Board Resolution). The amount of such Net Cash
Proceeds required to be applied (or to be committed to be applied) during such
12-month period as set forth in clause (A) or (B) of the preceding sentence
shall constitute "Excess Proceeds."
If on the first Business Day following any 12-month period referred to in
the preceding paragraph, the aggregate amount of Excess Proceeds from all Asset
Sales, not previously applied as provided in clause (A) or (B) of the preceding
paragraph, exceeds $15,000,000, the Company, within 10 Business Days after the
end of any such 12-month period, make an offer to purchase on a pro rata basis
from all Holders (an "Excess Proceeds Offer"), and shall purchase from Holders
accepting such Excess Proceeds Offer, the maximum principal amount (expressed as
an integral multiple of $1,000) of Securities that may be purchased from funds
in an amount equal to all such outstanding Excess Proceeds at a purchase price
equal to 100% of the principal amount of the Securities so purchased, plus
accrued and unpaid interest thereon (if any) to the date of purchase ("Excess
Proceeds Payment"). Upon completion of an Excess Proceeds Offer (or upon
termination of such offer if no repurchases are required), the amount of such
Excess Proceeds relating thereto shall be equal to zero.
The Company shall commence an Excess Proceeds Offer by causing the Trustee
to mail a notice to each Holder stating: (i) that the Excess Proceeds Offer is
being made pursuant to this Section 4.15 and that all Securities validly
tendered will be accepted for purchase; provided, however, that if the aggregate
purchase price of Securities tendered in an Excess Proceeds Offer (including
accrued interest to the date of purchase) exceeds the aggregate amount of the
Excess Proceeds required to be applied in such Excess Proceeds Offer, the
Company shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or integral multiples thereof shall be
purchased); (ii) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed) (the "Excess Proceeds
Purchase Date"); (iii) that any Security not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless the Company defaults in the
purchase of such Security on the Excess Proceeds Purchase Date, any Security
accepted for purchase pursuant to the Excess Proceeds Offer shall cease to
accrue interest after the Excess Proceeds Purchase Date; (v) that Holders
electing to have a Security purchased pursuant to the Excess Proceeds Offer will
be required to surrender the Security, together with the form entitled "Option
of the Holder to Elect Purchase" on the reverse side of the Security completed,
to the Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Excess Proceeds Purchase
Date; (vi) that each Holder will be entitled to withdraw its election (in whole
but not in part) if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Excess Proceeds
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of such Holder, the principal amount of Securities delivered for
purchase and a statement that such Holder is withdrawing its election to have
such Securities purchased; and (vii) that Holders whose Securities are being
purchased only
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in part will be issued new Securities equal in aggregate principal amount to the
unpurchased portion of the Securities surrendered.
On the Excess Proceeds Purchase Date, the Company shall: (i) accept for
purchase on a pro rata basis Securities or portions thereof tendered pursuant to
the Excess Proceeds Offer; (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Securities or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all Securities or
portions thereof so accepted together with an Officers' Certificate specifying
the Securities or portions thereof accepted for purchase by the Company. The
Paying Agent shall promptly mail to the Holders of Securities so accepted
payment in an amount equal to the purchase price, and the Company shall execute
and the Trustee shall promptly authenticate and mail to each such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered; provided that each Security purchased and each new Security
delivered shall be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Excess Proceeds
Offer as soon as practicable after the Excess Proceeds Purchase Date. For
purposes of this Section 4.15, the Trustee shall act as the Paying Agent.
Notwithstanding the foregoing:
(i) to the extent that any or all of the Net Cash Proceeds of any
Asset Sale are prohibited or delayed by applicable local law from being
repatriated to the United States of America, the portion of such Net Cash
Proceeds so affected will not be required to be applied pursuant to this
Section 4.14 but may be retained for so long, but only for so long, as the
applicable local law will not permit repatriation to the United States of
America (the Company hereby agrees to promptly take all reasonable actions
required by the applicable local law to permit such repatriation) and once
such repatriation of any such affected Net Cash Proceeds is permitted under
the applicable local law, such repatriation will be immediately effected
and such repatriated Net Cash Proceeds will be applied in the manner set
forth in this Section 4.15 as if such Asset Sale had occurred on the date
of repatriation; and
(ii) to the extent that the Board of Directors of the Company has
determined in good faith that repatriation of any or all of the Net Cash
Proceeds would have an adverse tax consequence to the Company, the Net Cash
Proceeds so affected may be retained outside the United States of America
for so long as such adverse tax consequences would continue.
The Company will comply with Rule 14e-1 under the Securities Exchange Act
of 1934, as amended, and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable, in the event that such
Excess Proceeds are received by the Company as contemplated by this Section 4.15
and the Company is required to repurchase Securities as described above.
SECTION 4.16 Limitation on Payment Restrictions Affecting
Subsidiaries. The Company shall not, and shall not permit any Subsidiary to,
create or otherwise cause or suffer to exist or become effective any Payment
Restriction or consensual encumbrance with respect to any Subsidiary thereof to
(a) pay dividends or make any other distributions on such Subsidiary's Capital
Stock; (b) make any loans or advances to the Company or any other Subsidiary; or
(c) transfer any of its property or assets to the Company or any other
Subsidiary except (i) restrictions imposed by applicable law; (ii) any
restrictions existing under this Indenture; and (iii) encumbrances or
restrictions contained in any agreement or instrument (A) relating to any
property acquired or leased by the Company or any of its Subsidiaries after the
Closing Date, provided that such encumbrance or restriction relates only the
property which is acquired or leased; (B) relating to any Indebtedness of any
Subsidiary at the date of acquisition of such Subsidiary by the Company or any
Subsidiary of the Company, provided that such Indebtedness was not incurred in
connection with, or in contemplation of, such acquisition (the Company being
entitled to rely upon a certificate of such Subsidiary as to whether such
Indebtedness was incurred in contemplation thereof); (C) arising pursuant to an
agreement effecting a refinancing of Indebtedness issued pursuant to an
agreement referred to in the foregoing clauses (A) and (B), so long as the
encumbrances and restrictions contained in any such refinancing agreement are no
more restrictive than the encumbrances and restrictions contained in such
agreements; (D) which constitute customary provisions restricting subletting or
assignment of any lease of the Company or any Subsidiary or provisions in
agreements that restrict the assignment of such agreement or any rights
thereunder;
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and (E) which constitute restrictions on the sale or other disposition of any
property securing Indebtedness as a result of a lien on such property.
SECTION 4.17 [Intentionally Omitted].
SECTION 4.18 Limitation on Investments. The Company shall not, and shall
not permit any Subsidiary to make any Investment other than (i) Investments
consisting of non-cash proceeds from Asset Sales as contemplated by Section 4.15
of this Indenture; (ii) Investments consisting of Cash Equivalents; (iii)
accounts receivable if credited or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; (iv)
payroll advances and advances for business and travel expenses in the ordinary
course of business; (v) Investments by the Company in its Subsidiaries in the
ordinary course of business; (vi) Investments by any Subsidiary of the Company
in the Company or in any Subsidiary; [(vii) Investments by the Company for the
purpose of acquiring businesses reasonably related to the business of the
Company, in an aggregate amount not exceeding $5,000,000 in any fiscal year of
the Company; (viii) Investments made by way of any endorsement of negotiable
instruments received by the Company or any Subsidiary in the ordinary course of
its business and presented by it to any bank for collection or deposit; (ix)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business owing to the company or any Subsidiary; (x)
Investments by the Company in any Subsidiary for the purpose of receivables
financing; and (xi) in addition to any other permitted investments, any other
Investments by the Company in an aggregate amount not exceeding $1,000,000 at
any time].
SECTION 4.19 Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE FIVE
SECURITYHOLDERS LISTS AND REPORTS BY COMPANY AND THE TRUSTEE
SECTION 5.1 The Company to Furnish Trustee Information as to Names and
Addresses of Securityholders. If and so long as the Trustee shall not be the
Security registrar for the Securities, the Company covenants and agrees that it
will furnish or cause to be furnished to the Trustee a list in such form as the
Trustee may reasonably require of the names and addresses of the Holders of the
Securities pursuant to Section 312 of the TIA:
(a) semi-annually and not more than 15 days after each record date for
the payment of interest on such Securities, as hereinabove specified and as
of such record date, and
(b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Company of any such request as of a date not
more than 15 days prior to the time such information is furnished.
SECTION 5.2 Disclosure of Names and Addresses of Securityholders. Each
and every Holder of Securities, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of the Company or the Trustee shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
of Securities in accordance with Section 312 of the TIA, regardless of the
source from which such information was derived, and that the Trustee shall not
be held accountable by reason of mailing any material pursuant to a request made
under Section 312(b) of the TIA.
SECTION 5.3 Reports by the Trustee. Any Trustee's report required under
Section 313(m) of the TIA shall be transmitted on or before May 15 in each year
beginning May 15, 1995, as provided in
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Section 313(c) of the TIA, so long as any Securities are outstanding hereunder,
and shall be dated as of a date convenient to the Trustee no more than 60 days
prior thereto.
ARTICLE SIX
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 6.1 Merger or Consolidation. The Company shall not consolidate
with or merge into any other corporation or convey, lease or transfer its
properties and assets substantially as an entirety to any Person, unless:
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person that acquires by conveyance, lease or
transfer the properties and assets of the Company substantially as an
entirety shall be a corporation organized and existing under the laws of
the United States of America or any State or the District of Columbia, and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
Company's obligation for the due and punctual payment of the principal of
and interest on all the Securities according to their tenor and the
performance of every covenant of this Indenture on the part of the Company
to be performed or observed;
(b) immediately before and after giving effect to such transaction, no
Event of Default, and no event that, after notice or lapse of time, or
both, would become an Event of Default, shall have happened and be
continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation, merger,
conveyance, lease or transfer and such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
This Section shall only apply to a merger or consolidation in which the
Company is not the surviving corporation and to conveyances, leases, and
transfers by the Company, as transferee or lessor.
SECTION 6.2 Successor Corporation Substituted. Upon any consolidation or
merger by the Company with or into any other corporation, or any conveyance or
transfer by the Company of its properties and assets substantially as an
entirety to any Person, in accordance with Section 6.1, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such conveyance or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor corporation had been
named as the Company and in the event of any such conveyance or transfer, the
Company, except in the event of a conveyance by way of lease, shall be
discharged from all obligations and covenants under this Indenture and the
Securities and may be dissolved and liquidated. Such successor corporation may
cause to be signed, and may issue either in its own name or in the name of the
Company prior to such succession, any or all of the Securities issuable
hereunder that theretofore shall not have been signed by the Company or and
delivered to the Trustee; and, upon the order of such successor corporation,
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities that previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication, and any Securities
that such successor corporation thereafter shall, cause to be signed and
delivered to the Trustee for that purpose. All the Securities so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, conveyance or transfer, such
changes in phrasing and form (but not in substance) may be made in the
Securities that may be endorsed thereon, as the case may be, thereafter to be
delivered as may be appropriate.
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ARTICLE SEVEN
REMEDIES OF THE TRUSTEE
AND SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 7.1 Event of Default Defined; Acceleration of Maturity; Waiver of
Default. "Event of Default", with respect to the Securities, means any one of
the following events that shall have occurred and be continuing (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of the principal of or premium (if any) on
any Security when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Security when the same
becomes due and payable, and such default continues for a period of 30
days;
(c) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or under the
Securities and such default or breach continues for a period of 30
consecutive days after the date on which written notice specifying such
failure, stating that such notice is a "Notice of Default" under the
Indenture and demanding that the Company remedy the same, shall have been
given by registered or certified mail, return receipt requested, to the
Company by the Trustee or to the Company and the Trustee by the Holders of
25% or more in aggregate principal amount of the Securities Outstanding;
(d) there occurs with respect to any issue or issues of Indebtedness
of the Company and/or one or more Subsidiaries having an outstanding
principal amount of $10 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its
Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration;
(e) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Subsidiary and shall not be discharged,
and there shall be any period of 60 consecutive days following entry of the
final judgment or order that causes the aggregate amount for all such final
judgments or orders outstanding against all such Persons to exceed $10
million during which a stay of enforcement of such final judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect;
(f) a court having jurisdiction in the premises enters a decree or
order for (i) relief in respect of the Company or any Material Subsidiary
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (ii) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Company or any Material Subsidiary or for all or substantially all
of the property and assets of the Company or any Material Subsidiary or
(iii) the winding up or liquidation of the affairs of the Company or any
Material Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days;
(g) the Company or any Material Subsidiary (i) commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, (ii) consents to the appointment of
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any Material
Subsidiary or for all or substantially all of the property and assets of
the Company or any Material Subsidiary or (iii) effects any general
assignment for the benefit of creditors of the Company or any Material
Subsidiary;
(h) the Company and/or one or more Subsidiaries fail to make at the
final (but not any interim) fixed maturity of one or more issues of
Indebtedness a principal payment or principal payments
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aggregating more than $10 million and all such defaulted payments shall not
have been made, waived or extended within 30 days of the payment default
that caused the aggregate amount of such defaulted payments to exceed $10
million; or
(i) any of the Applicable Documents shall cease, for any reason, to be
in full force and effect in any material respect, except as a result of an
amendment, waiver or termination thereof as contemplated or permitted
therein.
If an Event of Default (other than an Event of Default specified in clause
(f) or (g) above that occurs with respect to the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% of the aggregate
principal amount of the Securities then Outstanding, by written notice to the
Company (and to the Trustee if such notice is given by the Holders (the
"Acceleration Notice" )), may, and the Trustee at the request of the Holders
shall, declare the entire unpaid principal, premium (if any) and accrued
interest on the Securities to be immediately due and payable as specified below.
Upon a declaration of acceleration, such principal, premium (if any) and accrued
interest shall be immediately due and payable. In the event of a declaration of
acceleration because an Event of Default set forth in clause (d) above has
occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default shall be remedied, cured by the Company or waived by the
holders of the relevant Indebtedness within 30 days after the occurrence of the
Event of Default with respect thereto and the Company has delivered an Officer's
Certificate as to such effect. If an Event of Default specified in clause (f) or
(g) above occurs with respect to the Company, all unpaid principal of, premium
(if any) and accrued interest on the Securities then outstanding shall ipso
facto become and be immediately due and payable without declaration or other act
on the part of the Trustee or any Holder.
The Holders of at least a majority in principal amount of the outstanding
Securities, by written notice to the Company and the Trustee, may waive all past
defaults and rescind and annul a declaration of acceleration and its
consequences if (i) all existing Events of Default, other than the non-payment
of the principal of, premium, if any, and interest on Securities that have
become due solely by such declaration of acceleration, have been cured or waived
and (ii) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction.
Upon receipt by the Trustee of any Notice of Default pursuant to this
Section 7.1 with respect to Securities all or part of which are represented by a
Global Security, a record date shall be established for determining Holders of
Outstanding Securities entitled to join in such Notice of Default, which record
date shall be at the close of business on the day the Trustee receives such
Notice of Default. The Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to join in such Notice of
Default, whether or not such Holders remain Holders after such record date;
provided, that unless Holders of at least 25% in principal amount of the
Outstanding Securities, or their proxies, shall have joined in such Notice of
Default prior to the day which is 90 days after such record date, such Notice of
Default shall automatically and without further action by any Holder be
cancelled and of no further effect. Nothing in this paragraph shall prevent a
Holder, or a proxy of a Holder, from giving, after expiration of such 90-day
period, a new Notice of Default identical to a Notice of Default which has been
cancelled pursuant to the proviso to the preceding sentence, in which event a
new record date shall be established pursuant to the provisions of this Section
7.1.
Upon receipt by the Trustee of any Acceleration Notice or any rescission
and annulment thereof, with respect to Securities all or part of which are
represented by a Global Security, a record date shall be established for
determining Holders of Outstanding Securities entitled to join in such notice,
which record date shall be at the close of business on the day the Trustee
receives such notice. The Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to join in such notice,
whether or not such Holders remain Holders after such record date; provided,
that unless such declaration of acceleration, or rescission and annulment, as
the case may be, shall have become effective by virtue of the requisite
percentage having joined in such notice prior to the day which is 90 days after
such record date, such notice of declaration of acceleration or rescission and
annulment, as the case may be, shall automatically and without further action by
any Holder be cancelled and of no further effect. Nothing in this paragraph
shall
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prevent a Holder, or a proxy of a Holder, from giving, after expiration of such
90-day period, a new written notice of declaration of acceleration, or
rescission and annulment thereof, as the case may be, that is identical to a
written notice which has been cancelled pursuant to the proviso to the preceding
sentence, in which event a new record date shall be established pursuant to the
provisions of this Section 7.1.
SECTION 7.2 Collection of Indebtedness by Trustee; Trustee May Prove
Debt. The Company covenants that (a) in case default shall be made in the
payment of any installment of interest on any of the Securities when such
interest shall have become due and payable, and such default shall have
continued for a period of 30 days or (b) in case default shall be made in the
payment of all or any part of the principal of any of the Securities when the
same shall have become due and payable, whether upon maturity of the Securities
or upon any redemption or by declaration or otherwise, then upon demand of the
Trustee, the Company will pay to the Trustee for the benefit of the Holders of
the Securities the whole amount that then shall have become due and payable an
all Securities for principal or interest, as the case may be (with interest to
the date of such payment upon the overdue principal and, to the extent that
payment of such interest is enforceable under applicable law, on overdue
installments of interest at the same rate as the rate of interest specified in
the Securities); and in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and any expenses and liabilities incurred, and
all advances made by the Trustee and each predecessor Trustee except as a result
of its negligence or bad faith.
Until such demand is made by the Trustee, the Company may pay the principal
of and interest on the Securities to the registered Holders, whether or not the
Securities are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Company or other obligor upon the
Securities and collect in the manner provided by law out of the property of the
Company or other obligor upon the Securities, wherever situated the monies
adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the Company or any
other obligor upon the Securities under Title 11 of the United States Code or
any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Company or the property of the Company or such other
obligor, or in case of any other judicial proceedings relative to the Company or
other obligor upon the Securities, or to the creditors or property of the
Company or such other obligor, the Trustee, irrespective of whether the
principal of the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee will have
made any demand pursuant to the provisions of this Section, shall be entitled
and empowered, by intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Securities and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee, except as a result of negligence or bad
faith) and of the Securityholders allowed in any judicial proceedings
relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor,
(b) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of the Securities in any election of a trustee or a
standby trustee in arrangement, reorganization, liquidation or other
bankruptcy or insolvency proceedings or person performing similar functions
in comparable proceedings, and
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(c) to collect and receive any monies or other property payable or
deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Securityholders and of the Trustee on their
behalf; and any trustee, receiver, or liquidator, custodian or other
similar official is hereby authorized by each of the Securityholders to
make payments to the Trustee, and, in the event that the Trustee shall
consent to the making of payments directly to the Securityholders, to pay
to the Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee except as a result of negligence or bad faith.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar person.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities may be enforced by the Trustee without the possession of
any of the Securities or the production thereof on any trial or other
proceedings relative thereto, and any such action or proceedings instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment, subject to the payment of the expenses, disbursements
and compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Securities in respect of which such action was taken, and it shall not be
necessary to make any Holders of such Securities parties to any such
proceedings.
SECTION 7.3 Application of Proceeds. Any monies collected by the Trustee
pursuant to this Article Seven in respect of the Securities shall be applied in
the following order at the date or dates fixed by the Trustee and, in the case
of the distribution of such monies on account of principal or interest, upon
presentation of the several Securities in respect of which monies have been
collected and stamping (or otherwise noting) thereon the payment, or issuing
Securities in reduced principal amounts in exchange for the presented Securities
if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of amounts due the Trustee or any predecessor
Trustee under Section 8.6;
SECOND: In case the principal of the Securities shall not have become
and be then due and payable, to the payment of interest on the Securities
in default in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of interest at the
same rate as the rate of interest specified in the Securities, such
payments to be made ratably to the persons entitled thereto, without
discrimination or preference;
THIRD: In case the principal of the Securities shall have become and
shall be then due and payable, to the payment of the whole amount then
owing and unpaid upon all the Securities for principal and interest, with
interest upon the overdue principal, and (to the extent that such interest
has been collected by the Trustee) upon overdue installments of interest at
the same rate as the rate of interest specified in the Securities and in
case such monies shall be insufficient to pay in full the whole amount so
due and unpaid upon the Securities, then to the payment of such principal
and interest without preference or priority of principal over interest or
of interest over principal, or of any installment of interest over any
other installment of interest, or of any Security over any other Security,
ratably to the aggregate of such principal and accrued and unpaid interest;
and
FOURTH: To the payment of the remainder, if any, to the Company or any
other person lawfully entitled thereto.
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SECTION 7.4 Suits for Enforcement. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
SECTION 7.5 Restoration of Rights on Abandonment of Proceedings. In case
the Trustee shall have proceeded to enforce any right under this Indenture and
such proceedings shall have been discontinued or abandoned for any reason, or
shall have been determined adversely to the Trustee, then and in every such case
the Company and the Trustee shall be restored respectively to their former
positions and rights hereunder, and all rights, remedies and powers of the
Company, the Trustee and the Securityholders shall continue as though no such
proceedings had been taken.
SECTION 7.6 Limitations on Suits by Securityholders. A Holder of
Securities may not pursue any remedy with respect to this Indenture or the
Securities unless; (i) such Holder gives to the Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in aggregate
principal amount of outstanding Securities make a written request to the Trustee
to pursue the remedy; (iii) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any costs, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity; and (v) during such 60-day period,
the Holders of a majority in aggregate principal amount of the outstanding
Securities do not give the Trustee a direction that is inconsistent with the
request.
For purposes of this Section 7.6, the Trustee shall comply with Section
316(a) of the TIA in making any determination of whether the Holders of the
required aggregate principal amount of outstanding Securities have concurred in
any request or direction of the Trustee to pursue any remedy available to the
Trustee or the Holders with respect to this Indenture or the Securities or
otherwise under the law.
A Holder of Securities may not use this Indenture to prejudice the rights
of another Holder or to obtain a preference or priority over such other Holder.
SECTION 7.7 Unconditional Right of Securityholders to Institute Certain
Suits. Notwithstanding any other provision in this Indenture and any provision
of any Security, the right of any Holder of any Security to receive payment of
the principal of, premium (if any) and interest on such Security on or after the
respective due dates expressed in such Security, or to institute suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 7.8 Powers and Remedies Cumulative; Delay or Omission Not Waiver
of Default. Except as provided in Section 7.6, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
No delay or omission of the Trustee or of any Holder to exercise any right
or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein; and, subject to
Section 7.6, every power and remedy given by this Indenture or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
shall be deemed expedient, by the Trustee or by the Holders.
SECTION 7.9 Control by Holders of Securities. The Holders of a majority
in aggregate principal amount of the Securities at the time outstanding shall
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee with respect to the Securities by this Indenture;
provided, that such direction shall not be otherwise than in accordance with law
and the provisions of this Indenture; and provided, further, that
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(subject to the provisions of Section 8.1) the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
shall determine that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith by its board of directors, the executive
committee, or a trust committee of directors or Responsible Officers of the
Trustee shall determine that the action or proceedings so directed would involve
the Trustee in personal liability or if the Trustee in good faith shall so
determine that the actions or forbearances specified in or pursuant to such
direction would be unduly prejudicial to the interests of Holders not joining in
the giving of said direction. It being understood that (subject to Section 8.1)
the Trustee shall have no duty to ascertain whether or not such actions or
forbearances are unduly prejudicial to such Holders.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and that is not
inconsistent with such direction or directions by the Holders.
Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such trust
or power, with respect to Securities all or part of which are represented by a
Global Security, a record date shall be established for determining Holders of
Outstanding Securities entitled to join in such notice, which record date shall
be at the close of business on the day the Trustee receives such notice. The
Holders on such record date, or their duly designated proxies, and only such
Persons, shall be entitled to join in such notice, whether or not such Holders
remain Holders after such record date; provided, that unless the Holders of a
majority in principal amount of the Outstanding Securities shall have joined in
such notice prior to the day which is 90 days after such record date, such
notice shall automatically and without further action by any Holder be cancelled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving, after expiration of such 90-day period, a new
notice identical to a notice which has been cancelled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 7.9.
SECTION 7.10 Waiver of Past Defaults. Subject to Sections 7.1 and 7.7,
the Holders of at least a majority in principal amount of the outstanding
Securities, by notice to the Trustee, may waive an existing Event of Default and
its consequences, except a default in the payment of principal of or interest on
any Security as specified in clause (a) or (b) of Section 7.1.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Persons entitled to waive any past default hereunder.
If a record date is fixed, the Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to waive any
default hereunder, whether or not such Holders remain Holders after such record
date; provided, that unless such majority in principal amount shall have waived
such default prior to the date which is 90 days after such record date, any such
waiver previously given shall automatically and without further action by any
Holder be cancelled and of no further effect.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default at Event of Default or impair any right consequent thereon.
SECTION 7.11 Trustees to Give Notice of Default, But May Withhold in
Certain Circumstances. The Trustee shall, within ninety days after the
occurrence of a Default with respect to the Securities, give notice of all
Defaults known to the Trustee to all Holders of Securities in the manner and to
the extent provided in Section 313(c) of the TIA, unless in each case such
Defaults shall have been cured before the mailing or publication of such notice;
provided, however, that, except in the case of Default in the payment of the
principal of or interest on any of the Securities, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors or trustees or
Responsible Officers of the Trustee, or any combination of the foregoing, in
good faith determines that the withholding of such notice is in the interests of
the Securityholders.
SECTION 7.12 Right of Court to Require Filing of Undertaking to Pay
Costs. All parties to this Indenture agree, and each Holder of any Security by
its acceptance thereof shall be deemed to have agreed,
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that any court may in its discretion require, in any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merit and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder or group of
Securityholders holding in the aggregate more than 10% in aggregate principal
amount of the Securities or to any suit instituted by any Securityholder for the
enforcement of the payment of the principal of or interest on any Security on or
after the due date expressed in such Security or any date fixed for redemption.
ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.1 Duties and Responsibilities of the Trustee; During Default;
Prior to Default. With respect to the Holders of the Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to the Securities and after the curing or waiving of all Events of
Default that may have occurred, has undertaken to perform such duties and only
such duties as are specifically set forth in this Indenture. In case an Event of
Default with respect to the Securities has occurred (that has not been cured or
waived), the Trustee shall exercise with respect to such Securities 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.
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 wilful misconduct, except that:
(a) prior to the occurrence of an Event of Default with respect to the
Securities and after the curing or waiving of all such Events of Default
with respect to such Securities that may have occurred:
(i) the duties and obligations of the Trustee with respect to the
Securities shall be determined solely by the express provisions of this
Indenture, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth
in this Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such statements,
certificates or opinions that 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;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(c) 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 Holders pursuant to Section 7.9 relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that the
repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.
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Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
The provisions of this Section 8.1 are in furtherance of and subject to
Section 315 of the TIA.
SECTION 8.2 Certain Rights of the Trustee. In furtherance of and subject
to the TIA, and subject to Section 8.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate or any
other certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture, note, coupon, security or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate of the
Company (unless other evidence in respect thereof be herein specifically
prescribed); and any resolution of the Board of Directors of the Company
may be evidenced to the Trustee by a copy thereof certified by the
secretary or an assistant secretary of the Company;
(c) the Trustee may consult with counsel and any written advice or any
Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted to be taken by it
hereunder in good faith and in reliance thereon in accordance with such
advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture; and
(f) prior to the occurrence of an Event of Default hereunder and after
the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, appraisal, bond, debenture, note,
coupon, security, or other paper or document unless requested in writing to
so do by the Holders of not less than a majority in aggregate principal
amount of the Securities then Outstanding; provided, however, that, if the
payment within a reasonable time to the Trustee of the costs, expenses, or
liabilities likely to be incurred by it in the making of such investigation
is, in the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Indenture, the Trustee may
require reasonable indemnity against such expenses or liabilities as a
condition to proceeding; the reasonable expenses of every such
investigation shall be paid by the Company or, if paid by the Trustee or
any predecessor Trustee, shall be repaid by the Company upon demand.
SECTION 8.3 Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof. The recitals contained herein
and in the Securities, except the Trustee's certificates of authentication,
shall be taken as the statements of the Company and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the use or application by
the Company of any of the Securities or of the proceeds thereof.
SECTION 8.4 Trustee and Agents May Hold Securities; Collections, etc. The
Trustee or any agent of the Company or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities with the same
rights it would have if it were not the Trustee or such agent and may otherwise
deal with the Company and receive, collect, hold and retain collections from the
Company with the same rights it would have if it were not the Trustee or such
agent.
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SECTION 8.5 Monies Held by Trustee. Subject to the provisions of Section
11.4 hereof, all monies 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
mandatory provisions of law. Neither the Trustee nor any agent of the Company or
the Trustee shall be under any liability for interest on any monies received by
it hereunder.
SECTION 8.6 Compensation and Indemnification of Trustee and Its Prior
Claim. The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) and the Company covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on behalf
of it in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
The Company also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense incurred,
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this Indenture or the trusts hereunder
and its duties hereunder, including the costs and expenses of defending itself
against or investigating any claim of liability in the premises. The obligations
of the Company under this Section to compensate and indemnify the Trustee and
each predecessor Trustee and to pay or reimburse the Trustee and each
predecessor Trustee for expenses, disbursements and advances shall constitute
additional indebtedness of the Company hereunder and shall survive the
satisfaction and discharge of this Indenture. Such additional indebtedness shall
be a senior claim to that of the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the Holders of particular Securities, and the Securities are hereby subordinated
to such senior claim.
SECTION 8.7 Right of Trustee to Rely on Officers' Certificate,
etc. Subject to Sections 8.1 and 8.2, whenever in the administration of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate of the Company delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 8.8 Persons Eligible for Appointment as Trustee. The Trustee
shall at all times be a corporation organized and doing business under the laws
of the United States of America or of any State or the District of Columbia, or
a corporation or other Person permitted to act as Trustee by the Commission
pursuant to the TIA, having a combined capital and surplus of at least
$50,000,000, and that is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by Federal, State or
District of Columbia authority. Such corporation shall have an address in the
Borough of Manhattan, The City of New York for the presentment of Securities. 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, 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. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 8.9.
The provisions of this Section 8.8 are in furtherance of and subject to
Section 310(a) of the TIA.
SECTION 8.9 Resignation and Removal; Appointment of Successor Trustee.
(a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice of resignation to the Company
and by mailing notice of such resignation to the Holders of then
Outstanding Securities at their addresses as they shall appear on the
registry books. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee or trustees by written
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instrument in duplicate, executed by authority of the Board of Directors of
the Company, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee or trustees. If no
successor trustee shall have been so appointed and have accepted
appointment within 30 days after the mailing of such notice of resignation,
the resigning trustee may petition any court of competent jurisdiction for
the appointment of a successor trustee, or any Securityholder who has been
a bona fide Holder of a Security or Securities for at least six months may,
subject to the provisions of Section 8.12, on behalf of itself and all
others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section
310(b) of the TIA with respect to the Securities after written request
therefor by the Company or by any Securityholder who has been a bona
fide Holder of a Security or Securities for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 8.8 and Section 310(a) of the TIA and shall fail
to resign after written request therefor by the Company or by any
Securityholder; or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver or liquidator of the
Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, unless the Trustee's duty to resign has been stayed
as provided pursuant to Section 310(b) of the TIA, the Company may remove
the Trustee and appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors of the Company, one
copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee, or, subject to the provisions of Section
315(e) of the TIA, any Securityholder who has been a bona fide Holder of a
Security or Securities of such series for at least six months may on behalf
of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment
of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.
(c) The Holders of a majority in aggregate principal amount of the
Securities at the time Outstanding may at any time remove the Trustee and
appoint a successor trustee by delivering to the Trustee so removed, to the
successor trustee so appointed, and to the Company the evidence provided
for in Section 9.1 of the action in that regard taken by the
Securityholders.
(d) Any resignation or removal of the Trustee and any appointment of a
successor trustee pursuant to any of the provisions of this Section 8.9
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.10.
SECTION 8.10 Acceptance of Appointment by Successor Trustee. Any
successor trustee appointed as provided in Section 8.9 shall execute and deliver
to the Company and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee hereunder; but nevertheless, on the written
request of the Company or of the successor trustee, upon payment of its charges
then unpaid, the Trustee ceasing to act shall, subject to Section 11.4, pay over
to the successor trustee all monies at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 8.6.
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No successor trustee shall accept appointment as provided to this Section
8.10 unless at the time of such acceptance such successor trustee shall be
qualified under Section 310(b) of the TIA and eligible under the provisions of
Section 8.8.
Upon acceptance of appointment by any successor trustee as provided in this
Section 8.10, the Company shall give notice thereof to the Holders of
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the registry books. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
8.9. If the Company fails to give such notice within ten days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
SECTION 8.11 Merger, Conversion, Consolidation or Succession to Business
of Trustee. Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder; provided, however, that such
corporation shall be qualified under Section 310(b) of the TIA and eligible
under the provisions of Section 8.8, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trust created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor Trustee hereunder or in
the name of the successor Trustee; and in all such cases such certificate shall
have the full force that it has anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have; provided, however, that
the right to adopt the certificate of authentication of any predecessor Trustee
or to authenticate Securities in the name of any predecessor Trustee shall apply
only to its successor or successors by merger, conversion or consolidation.
SECTION 8.12 Preferential Collection of Claims Against the Company. The
Trustee shall comply with Section 311(a) of the TIA. Any Trustee that has
resigned or been removed is subject to Section 311(s) of the TIA to the extent
indicated therein.
SECTION 8.13 Appointment of Authenticating Agent. As long as any
Securities remain Outstanding, the Trustee may, by an instrument in writing,
appoint an authenticating agent (the "Authenticating Agent") that shall be
authorized to act on behalf of the Trustee to authenticate Securities, including
Securities issued upon exchange, registration of transfer, partial redemption or
pursuant to Section 2.5. Securities authenticated by such Authenticating Agent
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee. Whenever
reference is made in this Indenture to the authentication and delivery of
Securities by the Trustee or to the Trustee's Certificate of Authentication
(including, without limitation, in Section 2.3), such reference shall be deemed
to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a Certificate of Authentication executed on behalf of
the Trustee by such Authenticating Agent. Such Authenticating Agent shall at all
times be a corporation organized and doing business under the laws of the United
States of America or of any State or the District of Columbia, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $5,000,000 (determined as provided in Section 8.8 with
respect to the Trustee) and subject to supervision or examination by Federal or
State authority.
Any corporation into which any Authenticating Agent may be merged or
converted, or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of any Authenticating Agent, shall continue to be the Authenticating Agent with
respect to all Securities for which it served as Authenticating Agent without
the execution or filing of any paper or any further act on the part of
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the Trustee or such Authenticating Agent. Any Authenticating Agent may at any
time, and if it shall cease to be eligible shall, resign by giving written
notice of resignation to the Trustee and to the Company.
Upon receiving such a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 8.13, the Trustee shall upon
receipt of an Company Order appoint a successor Authenticating Agent and the
Company shall provide notice of such appointment to all Holders in the manner
and to the extent provided in Section 12.4. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested with all
rights, powers, duties and responsibilities of its predecessor hereunder, with
like effect as if originally named as Authenticating Agent. The Company agrees
to pay to the Authenticating Agent from time to time reasonable compensation.
The Authenticating Agent for the Securities shall have no responsibility or
liability for any action taken by it as such at the direction of the Trustee.
Sections 8.2, 8.3, 8.4, 8.6, 8.8 and 9.3 shall be applicable to any
Authenticating Agent as if each reference to "Trustee" therein referred to the
Authenticating Agent.
ARTICLE NINE
CONCERNING THE SECURITYHOLDERS
SECTION 9.1 Evidence of Action Taken by Securityholders. Any request
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by a specified percentage in
principal amount of the Securityholders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such specified
percentage of Securityholders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee.
Proof of execution of any instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Sections
8.1 and 8.2) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Article Nine.
SECTION 9.2 Proof of Execution of Instruments and of Holding of
Securities. Subject to Sections 8.1 and 8.2, the execution of any instrument by
a Securityholder or his agent or proxy may be proved in the following manner:
(a) The fact and date of the execution by any Holder of any instrument
may be proved by the certificate of any notary public or other officer of
any jurisdiction authorized to take acknowledgments of deeds or administer
oaths that the person executing such instruments acknowledged to him the
execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or other such officer. Where such execution is by
or on behalf of any legal entity other than an individual, such certificate
or affidavit shall also constitute sufficient proof of the authority of the
person executing the same.
(b) The ownership of Securities shall be proved by the Security
register or by a certificate of the Security registrar.
The Company may set a record date for purposes of determining the identity
of Holders of Securities entitled to vote or consent to any action referred to
in Section 9.1, which record date may be set at any time or from time to time by
notice to the Trustee, for any date or dates (in the case of any adjournment or
reconsideration not more than 60 days nor less than five days prior to the
proposed date of such vote or consent, and thereafter, notwithstanding any other
provisions hereof, only Holders of Securities of record on such record date
shall be entitled to so vote or give such consent or revoke such vote or
comment.
SECTION 9.3 Holders to be Treated as Owners. The Company, the Trustee and
any agent of the Company or the Trustee may deem and treat the person in whose
name any Security shall be registered upon the Security register as the absolute
owner of such Security (whether or not such Security shall be overdue and
notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of, premium (if
any) and interest on such Security and for all other purposes,
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and neither the Company or the Trustee nor any agent of the Company or the
Trustee shall be affected by any notice to the contrary.
SECTION 9.4 Securities Owned by the Company Deemed Not Outstanding. In
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities have concurred in any direction, consent or waiver under
this Indenture, Securities that are owned by the Company or any other obligor on
the Securities with respect to which such determination is being made or by any
Affiliate of the Company or any other obligor on the Securities with respect to
which such determination is being made shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination, except that for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, consent or waiver only Securities that the Trustee knows are so
owned shall be so disregarded. Securities so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any other obligor on
the Securities. In case of a dispute as to such right, the advice of counsel
shall be full protection in respect of any decision made by the Trustee in
accordance with such advice. Upon request of the Trustee, the Company shall
furnish to the Trustee promptly an Officer's Certificate listing and identifying
all Securities, if any, known by the Company, to be owned or held by or for the
account of any of the above-described persons; and, subject to Sections 8.1 and
8.2, the Trustee shall be entitled to accept such Officer's Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are Outstanding for the purpose of any such
determination.
SECTION 9.5 Right of Revocation of Action Taken. At any time prior to
(but not after) the evidencing to the Trustee, as provided in Section 9.1, of
the taking of any action by the Holders of the percentage in aggregate principal
amount of the Securities specified in this Indenture in connection with such
action, any Holder of a Security the serial number of which is shown by the
evidence to be included among the serial numbers of the Securities the Holders
of which have consented to such action may, by filing written notice at the
Corporate Trust Office and upon proof of holding as provided in this Article
Nine, revoke such action so far as it concerns such Security. Except as
aforesaid, any such action taken by the Holder of any Security shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of such Security and of any Securities issued in exchange of substitution
therefor or on registration of transfer thereof, irrespective of whether or not
any notation in regard thereto is made upon any such Security. Any action taken
by the Holders of the percentage in aggregate principal amount of the Securities
specified in this Indenture in connection with such action shall be conclusively
binding upon the Company, the Trustee and the Holders of all the Securities
affected by such action.
ARTICLE TEN
AMENDMENTS
SECTION 10.1 Amendments and Supplements Permitted Without Consent of
Holders.
(a) Notwithstanding Section 10.2, the Company and the Trustee may
amend or supplement this Indenture or the Securities without the consent of
any Holder to: (i) cure any ambiguity, correct or supplement any provisions
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture; provided that such amendment does not adversely affect the
rights of the Holders; (ii) provide for uncertificated Securities in
addition to or in place of certificated Securities; (iii) evidence the
succession of another corporation to the Company and provide for the
assumption by such successor of the Company's obligations to the Holders
hereunder and under the Notes as permitted under Article Six; (iv) make any
change that would (1) provide any additional rights or benefits to Holders
or (2) not adversely affect the legal rights under the Indenture of any
Holder, or (v) comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA.
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(b) Upon the Company's request, after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any
amended or supplemental indenture, and the documents described in Section
10.6, the Trustee shall join with the Company in the execution of any
amended or supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and
stipulations that may be contained in any such amended or supplemental
indenture, but the Trustee shall not be obligated to enter into an amended
or supplemental indenture that affects its own rights, duties or immunities
under this Indenture or otherwise.
SECTION 10.2 Amendments and Supplements Requiring Consent of Holders.
(a) Except as otherwise provided in Section 10.1(a) and 10.2(c), this
Indenture and the Securities may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate
principal amount of the then outstanding Securities (including consents
obtained in connection with a tender offer or exchange offer for the
Securities), and any existing Default or Event of Default or non-compliance
with any provision of the Indenture or the Securities may be waived with
the consent of Holders of at least a majority in principal of the then
outstanding Securities (including consents obtained in connection with a
tender offer or exchange offer for the Securities).
(b) Upon the Company's request and after receipt by the Trustee of a
resolution of the Board of Directors authorizing the execution of any
supplemental indenture, evidence of the Holders' consent, and the documents
described in Section 10.6, the Trustee shall join with the Company in the
execution of such amended or supplemental indenture unless such amended or
supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may
in its discretion, but shall not be obligated to, enter into such amended
or supplemental indenture.
(c) Without the consent of each Holder affected, no amendment,
supplement or waiver to this Indenture shall: (i) reduce the principal
amount of Securities whose Holders must consent to an amendment, supplement
or waiver of any provision of this Indenture on the Securities, (ii) reduce
the principal of or change the fixed maturity of any Security, or alter the
provisions with respect to the redemption of the Securities in a manner
adverse to the Holders, (iii) reduce the rate of or change the time for
payment of interest on any Security, (iv) waive a Default or Event of
Default in the payment of principal of, or premium (if any) or interest on,
the Securities (except that Holders of at least a majority in aggregate
principal amount of the then outstanding Securities may (1) rescind an
acceleration of the Securities that resulted from a non-payment default,
and (2) waive the payment default that resulted from such acceleration),
(v) make any Security payable in money other than U.S. Legal Tender, (vi)
make any change in the provisions of the Indenture relating to waivers of
past Defaults or the rights of Holders to receive payments of principal of,
or premium (if any) or interest on, the Securities, (vii) waive a
redemption payment with respect to any Security, or (ix) make any change in
Section 7.7, Section 7.10 or this sentence.
(d) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Persons entitled to consent to any
indenture supplemental hereto. If a record date is fixed, the Holders on
such record date, or their duly designated proxies, and only such Persons,
shall be entitled to consent to such supplemental indenture, whether or not
such Holders remain Holders after such record date; provided, that unless
such consent shall have become effective by virtue of the requisite
percentage having been obtained prior to the date which is 90 days after
such record date, any such consent previously given shall automatically and
without further action by any Holder be cancelled and of no further effect.
(e) It shall not be necessary for the consent of the Holders under
this Section 10.2 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the
substance thereof. After an amendment, supplement or waiver under this
Section 10.2 becomes effective, the Company shall mail to each Holder
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of
any such amended or supplemental indenture or waiver.
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SECTION 10.3 Compliance with TIA. Every amendment or supplement to this
Indenture or the Securities shall be set forth in an amended supplemental
indenture that complies with the TIA as then in effect.
SECTION 10.4 Revocation and Effect of Consents.
(a) Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Security is a continuing consent by the
Holder and every subsequent holder of a Security or portion of a Security
that evidences the same Indebtedness as the consenting Holder's Security,
even if notation of the consent is not made on any Security. However, any
such Holder or subsequent Holder may revoke the consent as to its Security
or portion of a Security if the Trustee receives the notice of revocation
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities
have consented (and not theretofore revoked such consent) to the amendment
or waiver.
(b) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the holders of Securities entitled to
consent to any amendment or waiver. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph,
those Persons who were holders of Securities at such record date (or their
duly designated proxies), and only those Persons, shall be entitled to
consent to such amendment or waiver or to revoke any consent previously
given, whether or not such Persons continue to be holders of Securities
after such record date. No consent shall be valid or effective for more
than 90 days after such record date.
(c) After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in Section 10.2(c), in which
case the amendment or waiver shall only bind each Holder that consented to
it and every subsequent holder of a Security that evidences the same debt
as the consenting Holder's Security.
SECTION 10.5 Notation on or Exchange of Securities. The Trustee may place
an appropriate notation about an amendment, supplement or waiver on any Security
thereafter authenticated. The Company in exchange for all Securities may issue
and the Trustee shall authenticate new Securities that reflect the amendment,
supplement or waiver. Failure to make the appropriate notation or issue a new
Security shall not affect the validity and effect of such amendment, supplement
or waiver.
SECTION 10.6 Trustee Protected. The Trustee shall sign any amendment or
supplemental indenture authorized pursuant to this Article Ten if the amendment
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing such
amendment or supplemental indenture, the Trustee shall be entitled to receive
and, subject to Section 8.1, shall be fully protected in relying upon, an
Officers' Certificate and Opinion of Counsel as conclusive evidence that such
amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms. The Company may not sign
an amendment or supplemental indenture until the Board of Directors approves it.
ARTICLE ELEVEN
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONIES
SECTION 11.1 Satisfaction and Discharge of Indenture.
(A) Except as otherwise provided in this Section 11.1, the Company may
terminate its obligations under the Securities and this Indenture with
respect to the Securities if:
(i) all Securities previously authenticated and delivered (other
than destroyed, lost or stolen Securities that have been replaced or
Securities that are paid pursuant to Section 4.1 of this Indenture or
Securities for whose payment money or securities have theretofore been
held in trust and thereafter repaid to the Company, as provided in
Section 11.4 of this Indenture) have been
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delivered to the Trustee for cancellation and the Company has paid all
sums payable by it hereunder; or
(ii) (A) the Securities mature within one year or all of them are
to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B) the
Company irrevocably deposits in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely
for the benefit of the Holders for that purpose, money or U.S.
Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee), without consideration
of any reinvestment of any interest thereon, to pay principal and
interest on the Securities to maturity or redemption, as the case may
be, and to pay all other sums payable by it hereunder, (C) no Event of
Default with respect to the Securities shall have occurred and be
continuing on the date of such deposit, (D) such deposit will not result
in a breach or violation of, or constitute a default under, this
Indenture or any other agreement or instrument to which the Company is a
party or by which either is bound and (E) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, in each
case stating that all conditions precedent provided for herein relating
to the satisfaction and discharge of this Indenture have been complied
with.
With respect to the foregoing clause (i), the Company's obligations under
Section 8.6 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 4.1, 4.2, 4.3, 4.4,
8.6, 8.9, 11.2, 11.4 and 11.5 of this Indenture shall survive until the
Securities are no longer outstanding. Thereafter, only the Company's obligations
in Section 8.6 and 11.2 of this Indenture shall survive. After any such
irrevocable deposit, the Trustee upon request shall acknowledge in writing the
discharge of the Company's obligations under the Securities and this Indenture
with respect to the Securities except for those surviving obligations specified
above.
(B) The Company will be deemed to have paid and will be discharged
from any and all obligations in respect of the Securities on the 123rd day
after the deposit referred to in clause (d) of this paragraph, and the
provisions of this Indenture will no longer be in effect with respect to
the Securities, except as to (i) rights of registration of transfer and
exchange, (ii) substitution of apparently mutilated, defaced, destroyed,
lost or stolen Securities, (iii) rights of Holders to receive payments of
principal thereof and interest thereon, (iv) the Company's obligations
under Section , (v) the rights, obligations and immunities of the
Trustee hereunder and (vi) the rights of the Holders of Securities as
beneficiaries of this Indenture with respect to the property so deposited
with the Trustee payable to all or any of them, and the Trustee, at the
expense of the Company, shall at the Company's request execute proper
instruments acknowledging the same; provided that the following conditions
shall have been satisfied:
(a) with reference to this Section 11.1(B), the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 8.8)
and conveyed all right, title and interest for the benefit of the
Holders of the Securities, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, in and to (1) money in an amount, (2) U.S. Government
Obligations that, through the payment of interest and principal in
respect thereof in accordance with their terms, will provide, not later
than one day before the due date of any payment referred to in this
clause (a), money in an amount or (3) a combination thereof in an amount
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment of
all federal, state and local taxes or other charges and assessments in
respect thereof payable by the Trustee, the principal of, premium, if
any, and interest on the outstanding Securities at the Stated Maturity
of such principal or interest; provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of such principal, premium, if
any, and interest with respect to the Securities;
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(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which either is bound;
(c) the Company shall have delivered to the Trustee (1) either (x)
a ruling directed to the Trustee received from the Internal Revenue
Service to the effect that the Holders of Securities will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this Section 11.1(B) and will be
subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such option had not
been exercised or (y) an Opinion of Counsel to the same effect as the
ruling described in clause (x) above and (2) an Opinion of Counsel to
the effect that (w) the creation of the defeasance trust does not
violate the Investment Company Act of 1940, (x) the Holders have a valid
first-priority security interest in the trust funds and (y) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section 15
of the New York Debtor and Creditor Law in a case commenced by or
against the Company under either such statute, and either (I) the trust
funds will not longer remain the property of the Company (and therefore
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally) or (II) if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the
Company, (a) assuming such trust funds remained in the possession of the
Trustee prior to such court ruling to the extent not paid to the
Holders, the Trustee will hold, for the benefit of the Holders, a valid
and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust
funds accruing after the commencement of a case under such statute and
(b) the Holders will be entitled to receive adequate protection of their
interests in such trust funds if such trust funds are used in such case
or proceeding;
(d) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit, defeasance and discharge will
not cause the Securities to be delisted; and
(e) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 11.1(B) have been complied with.
Notwithstanding the foregoing clause (a), prior to the end of the 123-day
period referenced to in clause (d)(2)(y) above, none of the Company's
obligations under this Indenture shall be discharged. Subsequent to the end of
such 123-day period with respect to this Section 11.1, the Company's obligations
in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 4.1, 4.2, 4.3, 4.4, 8.6, 8.9, 11.2, 11.4
and 11.5 shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's obligations in Section 8.6 and 11.2 shall
survive. If and when a ruling from the Internal Revenue Service or an Opinion of
Counsel referred to in clause (d)(1) above is able to be provided specifically
without regard to, and not in reliance upon, the continuance of the Company's
obligations under Section 4.1, then the Company's obligations under such Section
4.1 shall cease upon delivery to the Trustee of such ruling or Opinion of
Counsel and compliance with the other conditions precedent provided for herein
relating to the defeasance contemplated by this Section 11.1.
After any such irrevocable deposit, the Trustee upon request, shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture with respect to the Securities except for those
surviving obligations in the immediately preceding paragraph.
(C) The Company may omit to comply with any term, provision or
condition set forth in clause (d) of Section 6.1 of this Indenture, the
covenants described in Sections 4.11, 4.13, 4.14, 4.15 and 4.18 of this
Indenture and clause (c) of Section 7.1 of this Indenture with respect to
such covenants, and clauses (d),
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(e) and (h) of Section 7.1 shall be deemed not to be Events of Default, in
each case with respect to the outstanding Securities if:
(a) with reference to this Section 11.1(C), the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 8.8)
and conveyed in and to all right, title and interest to the Trustee for
the benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee as security for
payment of the principal of, premium, if any, and interest, in any, on
the Securities for, and dedicated solely to, the benefit of the Holders
of the Securities, in and to (1) money in an amount, (2) U.S. Government
Obligations that, through the payment of interest and principal in
respect thereof in accordance with their terms, will provide, not later
than one day before the due date of any payment referred to in this
clause (a), money in an amount or (3) a combination thereof in an amount
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment of
all federal, state and local taxes or other charges and assessments in
respect thereof payable by the Trustee, the principal of, premium, if
any, and interest on the outstanding Securities on the Stated Maturity
of such principal or interest; provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of such principal, premium, if
any, and interest with respect to the Securities;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(c) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit;
(d) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that (1) the creation of the defeasance trust does not
violate the Investment Company Act of 1940, (2) the Holders of the
Securities have a valid first-priority security interest in the trust
funds, (3) the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance
of certain obligations and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred and (4)
after the passage of 123 days following the deposit (except, with
respect to any trust funds for the account of any Holder who may be
deemed to be an "insider" for purposes of the United States Bankruptcy
Code, after one year following the deposit), the trust funds will not be
subject to the effect of Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law in a case
commenced by or against the Company under either such statute, and
either (x) the trust funds will no longer remain the property of the
Company (and therefore will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (y) if a court were to rule
under any such law in any case or proceeding that the trust funds
remained property of the Company, and (i) assuming such trust funds
remained in the possession of the Trustee prior to such court ruling to
the extent not paid to the Holders the Trustee will hold, for the
benefit of the Holders, a valid and perfected security interest in such
trustee funds that is not avoidable in bankruptcy or otherwise except
for the effect of Section 552(b) of the United States Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case
under such statute and (ii) the Holders will be entitled to receive
adequate protection of their interests in such trust funds if such trust
funds are used in such case or proceeding;
(e) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit, defeasance and discharge will
not cause the Securities to be delisted; and
42
<PAGE> 49
(f) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 11.1 have been complied with.
SECTION 11.2 Application by Trustee of Funds Deposited for Payment of
Securities; Other Miscellaneous Provisions. Subject to Section 11.4, all monies
deposited with the Trustee (or other trustee) pursuant to Section 11.3 shall be
held in trust and applied by it to the payment, either directly or through any
Paying Agent (including the Company or the guarantor acting as Paying Agent), to
the Holders of the Securities for the payment or redemption of which such monies
have been deposited with the Trustee, of all sums due and to become due thereon
for principal premium, if any, and interest if may; but such money need not be
segregated from other funds except to the extent required by law.
If the Trustee or any Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 11.1 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such applications, the
Company's obligations under this Indenture and the Securities related thereto
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 11.1B(a) or 11.1C(a) until such time as the Trustee or any Paying Agent
is permitted to apply all such money or U.S. Government Obligations in
accordance with Section 11.1; provided, however, that if the Company has made
any payment of interest on or principal of and premium (if any) on the
Securities because of the reinstatement of its obligations hereunder, the
Company shall be subrogated to the rights of the holders of the Securities to
receive such payment from the money or U.S. Government obligations held by the
Trustee for such purpose.
SECTION 11.3 Repayment of Monies Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to Securities, all
monies then held by any Paying Agent under the provisions of this Indenture with
respect to such Securities shall, upon demand of the Company, be repaid to the
Company or paid to the Trustee and thereupon such Paying Agent shall be released
from all further liability with respect to such monies.
SECTION 11.4 Return of Monies Held by Trustee and Paying Agent Unclaimed
for Two Years. Any monies deposited with or paid to the Trustee or any Paying
Agent for the payment of the principal of, premium (if any) or interest on any
Security and not applied but remaining unclaimed for two years after the date
upon which such principal or interest shall have become due and payable shall,
upon the written request of the Company and unless otherwise required by
mandatory provisions of applicable escheat or abandoned or unclaimed property
law, be repaid to the Company by the Trustee or such Paying Agent, and the
Holder of the Securities shall, unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property laws,
thereafter look only to the Company for any payment that such Holder may be
entitled to collect, and all liability of the Trustee or any Paying Agent with
respect to such monies shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment
with respect to monies deposited with it for any payment, may at the expense of
the Company, mail by first-class mail to Holders of such Securities at their
addresses as they shall appear on the security register notice, that such monies
remain and that, after a date specified therein, which shall not be less than
thirty days from the date of such mailing, any unclaimed balance of such money
then remaining will be, repaid to the Company.
SECTION 11.5 Indemnity for U.S. Government Obligations. The Company shall
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited by the Company
pursuant to Section 11.1 or the principal or interest received in respect of
such obligations.
ARTICLE TWELVE
MISCELLANEOUS PROVISIONS
SECTION 12.1 Incorporators, Stockholders, Officers and Directors of the
Company Exempt from Individual Liability. No director, officer, employee,
incorporator or shareholder of the Company or the
43
<PAGE> 50
Trustee shall have any liability for any obligation of the Company under this
Indenture or the Securities or for any claim based on, in respect of, or by
reason of, any such obligation or the creation of any such obligation. Each
Holder by accepting a Security waives and releases such Persons from all such
liability and such waiver and release is part of the consideration for the
issuance of the Securities.
SECTION 12.2 Provisions of Indenture for the Sole Benefit of Parties and
Holders of Securities. Nothing in this Indenture or in the Securities expressed
or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and their successors and the Holders
of the Securities any legal or equitable right, remedy or claim under this
Indenture or under any covenant or provision herein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
their successors and of the Holders of the Securities.
SECTION 12.3 Successors and Assigns of the Company Bound by
Indenture. All the covenants, stipulations, promises and agreements in this
Indenture contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 12.4 Notices. Any notice, communication or demand that by any
provision of this Indenture is required or permitted to be given or served may
be given or served by being personally delivered, deposited postage prepaid,
first-class mail, return receipt requested or delivered by telecopier or
overnight air courier guaranteeing next day delivery addressed if to the Company
to: 4000 East Sky Harbor Blvd., Phoenix, Arizona 85034; if to the Trustee to:
. The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Where this Indenture provides for notice to Holders of Registered
Securities, such notice shall be sufficiently given (unless otherwise herein
expressly provided) it in writing and mailed, first-class postage prepaid, to
each Holder entitled thereto, at his last address an it appears in the Security
register. In any case where notice to such Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
each filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 12.5 Officers' Certificates and Opinions of Counsel; Statements to
be Contained Therein. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (a) a statement that the person making such
certificate or opinion has read such covenant or condition, (b) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based, (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with and (d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to
44
<PAGE> 51
factual matters, information with respect to which is in the possession of the
Company, upon the certificate, statement or opinion of or representations by an
officer or officers of the Company unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Company or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with and directed to the Trustee shall contain a statement that such firm
is independent.
SECTION 12.6 Payments Due on Saturdays, Sundays and Holidays. If the date
of maturity of interest on or principal of the Securities the date fixed for
redemption or repayment of any Security shall not be a Business Day, then
payment of interest or principal need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period after such date.
SECTION 12.7 Conflict of Any Provision of Indenture with Trust Indenture
Act of 1939. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by, or with another provision (an
"incorporated provision") included in this Indenture by operation of, Sections
310 to 316, inclusive, of the Trust Indenture Act of 1939, such imposed duties
or incorporated provision shall control.
SECTION 12.8 New York Law to Govern. This Indenture and each Security,
shall be deemed to be a contract under the law of the State of New York, and for
all purposes shall be construed in accordance with the law of such State, except
as may otherwise be required by mandatory provisions of law.
SECTION 12.9 Counterparts. This Indenture may be executed in any number
of counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 12.10 Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
45
<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of August , 1994.
AMERICA WEST AIRLINES, INC.
By:
Title:
Attest:
By:
Title:
AMERICAN BANK NATIONAL
ASSOCIATION
By:
Title:
Attest:
By:
Title:
46
<PAGE> 53
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this of August , 1994, before me personally came
, to me personally known, who, being by
me duly sworn, did depose and say that he resides at
; that he is the
of America West Airlines, Inc., one of the
corporations described in and which executed the above instrument; that he knows
the corporate seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that It was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
(NOTARIAL SEAL)
--------------------------------------
Notary Public
47
<PAGE> 54
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this of August, 1994, before me personally came
, to me personally known, who, being by
me duly sworn, did depose and say that he resides at
; that he is the
of [TRUSTEE], one of the corporations
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that It was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
(NOTARIAL SEAL)
--------------------------------------
Notary Public
67762.c7
48
<PAGE> 55
EXHIBIT A
[FORM OF FACE OF SECURITY]
THE ISSUANCE OF THE SECURITIES PRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE
SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT
TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (iii)
ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT,
PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
[OID LEGEND]
AMERICA WEST AIRLINES, INC.
% SENIOR UNSECURED NOTES DUE 2001
No. R- $
America West Airlines, Inc. a Delaware corporation (the "Company"), which
term includes any successor corporation, for value received, promises to pay
, or registered assigns, the principal sum of on
, 2001.
Interest Payment Dates: 15 and 15, commencing
, 1994.
Record Dates: 1 and 1.
This Security is continued on the following page and the additional
provisions set forth therein shall for all purposes have the same effect as if
set forth at this place.
A-1
<PAGE> 56
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed to, or imprinted on, this Security.
Dated:
AMERICA WEST AIRLINES, INC.
By:
------------------------------------
Name:
Title:
Attest:
- ---------------------------------------------------------
Assistant Secretary
[Seal]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within mentioned Indenture.
[TRUSTEE], as trustee
By:
------------------------------------
Authorized Signature
A-2
<PAGE> 57
AMERICA WEST AIRLINES, INC.
[FORM OF REVERSE OF SECURITY]
% SENIOR UNSECURED NOTES DUE 2001
1. INTEREST.
America West Airlines, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the unpaid principal amount of this Security to
Persons who are registered Holders at the close of business on the relevant
Record Date at the rate of % per annum.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months and shall be payable semi-annually on 15 and
15 of each year commencing 15, 1994, or if any
such day is not a Business Day, on the next succeeding Business Day. Interest
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance. Interest shall accrue with
respect to principal on this Security to, but not including the date of
repayment of such principal; provided, however, that if payment to the Paying
Agent occurs after 10:00 a.m., New York City time, interest shall be deemed to
accrue until the following Business Day.
To the extent lawful, the Company shall pay interest on overdue principal,
premium (if any) and interest at the rate of interest borne by this Security. On
each Interest Payment Date, interest on the Securities will be paid for the
immediately preceding accrual period.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities (except defaulted interest)
to the persons who are registered Holders at the close of business on the Record
Date next preceding the applicable Interest Payment Date. If the Company
defaults in the payment of the interest due on such Interest Payment Date, such
defaulted interest will be paid to the Persons who are registered Holders of
Securities at the close of business on a subsequent record date established by
notice given not less than 15 days prior to such subsequent record date. The
Company will pay the principal of this Security to the Holder that surrenders
this Security to a Paying Agent on or after , 2001 or, in the
event of a redemption of this Security, on or after the Redemption Date, as
described below. The Company will pay principal and interest in U.S. Legal
Tender by Federal funds bank wire transfer or (in the case of payment of
interest) by check. If this Security is a Global Security, all payments in
respect of this Security will be made to the Depository or its nominee in
immediately available funds in accordance with customary procedures established
from time to time by the Depository.
3. PAYING AGENT AND REGISTRAR.
Initially, (the "Trustee"), will act as Paying Agent and
registrar for the Securities. The Company may change any Paying Agent, co-Paying
Agent, registrar or co-registrar without notice. Except as provided in the
Indenture, the Company or any of its Subsidiaries may, subject to certain
exceptions, act as Paying Agent, registrar or co-registrar.
4. INDENTURE.
The Company issued this Security under an Indenture dated as of
, 1994 (the "Indenture") between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code sec.sec. 77aaa -- 77bbbb). The Securities
are subject to all such terms, and Holders of the Securities are referred to the
Indenture and said Act for a statement of such terms. In the event of any
conflict between this Security and the Indenture, the Indenture shall govern.
The Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $100,000,000.
<PAGE> 58
5. OPTIONAL REDEMPTION.
The Securities may be redeemed prior to , 1997 (a) at any
time in whole but not in part, at a Redemption Price equal to 105% of the
aggregate principal amount of the Securities then Outstanding plus accrued and
unpaid interest hereon to the Redemption Date, or (b) from time to time in part
from the Net Offering Proceeds received by the Company prior to ,
1997 from one or more Public Offering Sales at a Redemption Price equal to 105%
of the aggregate principal amount of the Securities so redeemed, plus accrued
and unpaid interest thereon to the Redemption Date.
The Securities further may be redeemed on and after , 1997,
at any time in whole or from time to time in part, at a Redemption Price equal
to the applicable percentage of the aggregate principal amount of the Securities
so to be redeemed, set forth below, plus accrued and unpaid interest thereon to
the Redemption Date.
<TABLE>
<CAPTION>
IF REDEEMED
DURING THE
12 MONTHS
BEGINNING % OF
, PRINCIPAL AMOUNT
------------------------- ----------------
<S> <C>
1997................................................. 105.0
1998................................................. 103.3
1999................................................. 101.7
2000 and thereafter.................................. 100.0
</TABLE>
If the Redemption Date is subsequent to a Record Date with respect to any
Interest Payment Date and on or prior to such Interest Payment Date, then such
accrued interest, if any, will be paid to the person in whose name such
Securities are registered at the close of business on such Record Date and no
other interest will be payable thereon.
6. MANDATORY REDEMPTION.
As more fully set forth in the Indenture, under certain circumstances the
Company is required to redeem Securities with the net proceeds from one or more
Public Offering Sales at a Redemption Price equal to 104% of the aggregate
principal amount of the Securities so redeemed, plus accrued and unpaid interest
to the Redemption Date.
7. NOTICE OF REDEMPTION.
Notice of Redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
his registered address. Securities in denominations larger than $1,000 may be
redeemed in part, but not in denominations of less than $1,000.
From and after any Redemption Date, if monies for the redemption of the
Securities called for redemption shall have been made available for redemption
on such Redemption Date, the Securities called for redemption will cease to bear
interest and the only right of the Holders of such Securities will be to receive
payment of the Redemption Price.
8. PUT PROVISIONS.
As provided in and subject to the terms of the Indenture, upon a Change of
Control, any Holder will have the right to cause the Company to repurchase all
or any part of the Securities of such Holder at a repurchase price equal to 101%
of the principal amount of the Securities to be repurchased plus accrued and
unpaid interest, if any, to the date of repurchase.
9. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in fully registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of or exchange Securities in accordance with the
2
<PAGE> 59
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Company need not register the
transfer of or exchange any Securities selected for redemption. Also, the
Company need not issue, exchange or register the transfer of any Securities for
a period of 15 days prior to the selection of the Securities to be redeemed.
In accordance with the provisions of the Indenture and subject to certain
limitations therein set forth, an owner of a beneficial interest in a Global
Security may request a Security in certificated form, in exchange in whole or in
part, as the case may be, for such beneficial owner's interest in the Global
Security. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery in certificated form of
Securities in authorized denominations equal in principal amount to such
beneficial interest and to have such Securities registered in its name.
10. PERSONS DEEMED OWNERS.
The registered Holder of a Security may be treated as the owner of it for
all purposes.
With respect to Global Securities, the Depository shall grant proxies and
otherwise authorize Holders of Global Securities to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a Holder of a Security is entitled to give or take under the Indenture.
11. UNCLAIMED MONEY.
If money deposited with or paid to the Trustee or any Paying Agent for the
payment of principal, premium (if any) or interest on the Securities remains
unclaimed for 2 years, the Trustee and any such Paying Agent will pay the money
back to the Company at its request. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company at any time deposits with the Trustee money or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding certain obligations, including without limitation its
obligation to pay the principal of or interest on the Securities).
13. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the outstanding Securities and certain existing
Defaults or Events of Default or compliance with any provisions may be waived
with the consent of the Holders of at least a majority in aggregate principal
amount of the outstanding Securities. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, correct or supplement any
provision which may be inconsistent with any other provision, or to make any
other provisions with respect to matters or questions arising under the
Indenture which shall not be inconsistent with the provisions of the Indenture
(provided such amendment or supplement does not adversely affect the rights of
any of the Holders), provide for any additional rights or benefits to Holders or
make any change that does not adversely affect the rights of any Holder.
14. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the Company and
its Subsidiaries to, among other things, make payments in respect of its Capital
Stock or certain Indebtedness, merge or consolidate with any other person or
sell, lease, transfer or otherwise dispose of all or substantially all of its
properties or assets and undertake certain transactions with Affiliates. The
limitations are subject to a number of important
3
<PAGE> 60
qualifications and exceptions. The Company must annually (and in certain
instances, more frequently) report to the Trustee on compliance with such
limitations.
15. ASSET SALES.
As more fully set forth in the Indenture, the Indenture provides that the
Company must apply certain proceeds resulting from certain Asset Sales to the
repurchase Securities under certain circumstances in an Excess Proceeds Offer at
a purchase price equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon to the date of purchase. A Holder of Securities may
tender or refrain from tendering in any Excess Proceeds Offer all or any portion
of its Securities at its discretion by completing the form entitled "Option of
Holder to Elect Purchase" appearing on the reverse side of this Security.
16. SUCCESSORS.
When a successor assumes all the obligations of its predecessor under the
Securities and the Indenture, the predecessor will be released from those
obligations.
17. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, subject to certain
exceptions, the Trustee or the Holders of at least 25% in principal amount of
Securities may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold notice in certain circumstances.
18. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from, and perform services for the Company or
its Affiliates, and may otherwise deal with the Company or its Affiliates as if
it were not the Trustee.
19. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator, as such, past,
present or future, of the Company or any successor corporation shall have any
liability for any obligation of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration of the issue for the Securities.
20. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the face of this Security.
21. ABBREVIATION.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the
entireties), TEN (= joint tenants with right of survivorship and not as tenants
in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. INDENTURE.
The Holder hereof, by accepting this Security, agrees to be bound by all of
the terms and provisions of the Indenture applicable to such Holder.
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The Company will furnish to any Holder of a Security upon written request
and without charge a copy of the Indenture. Requests may be made to: America
West Airlines, Inc., 4000 East Sky Harbor Blvd., Phoenix, Arizona 85034.
5
<PAGE> 62
[FORM OF ASSIGNMENT]
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert social security or other
identifying number of assignee
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Dated Signed
- --------------------------------------------------------------------------------
(Sign exactly as name appears on the other side of this Security)
Signature Guarantee:
6
<PAGE> 1
EXHIBIT 10.12
CODE SHARING AGREEMENT
This Agreement is made this 29th day of June, 1994, by and between
CONTINENTAL AIRLINES, INC. ("CAL"), a Delaware corporation, and AMERICA WEST
AIRLINES, INC. ("AWA"), Debtor and Debtor-in-Possession, a Delaware corporation.
RECITALS
CAL and AWA are each certificated air carriers providing air transportation
services in their respective areas of operation.
CAL and AWA desire to cooperate in the coordination of schedules by
allowing AWA to market its flight operations under the CO* designator and CAL to
market its flight operations under the HP* designator.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, CAL and AWA hereby agree as follows:
1. Schedules to be Operated. It is the intent of the parties to share
their two letter designator codes, "CO*" in the case of CAL and "HP*" in the
case of AWA. CAL operated Shared Code Segments (as herein defined) will be
marketed under not only CAL's "CO" designator code but also under AWA's "HP*"
designator code, and AWA operated Shared Code Segments will be marketed under
not only AWA's "HP" designator code, but also under CAL's "CO*" designator code.
Schedule 1 hereto sets forth the flight segments where shared code segments
("Shared Code Segments") will operate at the commencement of this Agreement and
some of the Shared Code Segments that will be operated in the future; however,
it is the intent of the carriers to designate, to the maximum extent permitted
by law, all flights operated by either as Share Code Segments during the term of
this Agreement. The carriers shall meet together every six months that this
Agreement is in effect to discuss the appropriateness of expanding or
contracting the list of city pairs on Schedule 1.
2. Code Sharing Licenses.
(a) CO* License.
(i) Grant of License. Subject to the terms and conditions of this
Agreement, CAL hereby grants to AWA a nonexclusive, nontransferable,
revocable license to use the CO* designator code on all of its flights
operated as a Shared Code Segments. (AWA flights flown using the CO*
code are hereinafter referred to as "CO* Flights").
(ii) Control of CO* Flights. AWA shall have sole responsibility
for and control over, and CAL shall have no responsibility for, control
over or obligations or duties with respect to, each and every aspect of
AWA's operations including, without limitation, scheduling (except as
provided in Section 12 hereto), pricing (except as provided in Section
13 hereto), planning of flight itineraries and routings, reservations,
reservations control/yield management, dispatch, fueling, weight and
balance, flight release, maintenance, and flight operations and
compliance with applicable rules and regulations.
(b) HP* License.
(i) Grant of License. Subject to the terms and conditions of this
Agreement, AWA hereby grants to CAL a nonexclusive, nontransferable,
revocable license to use the HP* designator code on all of its flights
operated as a Shared Code Segment. (CAL flights flown using the HP* code
are hereinafter referred to as "HP* Flights").
(ii) Control of HP* Flights. CAL shall have sole responsibility
for and control over, and AWA shall have no responsibility for, control
over or obligations or duties with respect to, each and every aspect of
CAL's operations including, without limitation, scheduling (except as
provided in
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<PAGE> 2
Section 12 hereto), pricing (except as provided in Section 13 hereto),
planning of flight itineraries and routings, reservations,
reservations control/yield management, dispatch, fueling, weight and
balance, flight release, maintenance, and flight operations and
compliance with applicable rules and regulations.
3. Confidential Information. Neither AWA nor CAL shall disclose to the
other carrier or be required to disclose by the other carrier any information
relating to its scheduling (except as provided in Section 12 hereto), pricing,
inventory control or flight profitability. Neither AWA nor CAL shall disclose
the terms of this Agreement or any proprietary information with respect to the
other obtained as a result of this Agreement, either during the term hereof or
thereafter except as may be required by law or by any order of a court or
administrative agency, and then on ten days' notice to the other. The parties
hereto recognize that, in the course of the performance of each of the
provisions hereof, each carrier may be given and may have access to confidential
and proprietary information of the other carrier, including proposed schedule
and fare changes, statistical data regarding loads and fares, sales and
promotional programs and other operating and competitive information
("Confidential Information"). Each carrier shall preserve, and shall ensure that
each of its officers, agents, consultants and employees who receive Confidential
Information preserve, the confidentiality of the other carrier's Confidential
Information.
4. Quality of Service. Each carrier shall perform its service with respect
to its flights operated under the designation of the other carrier in a timely,
expert and quality manner. Each carrier agrees that, in conducting flight
operations under the designator of the other carrier, it will employ prudent
safety and loss prevention policies.
5. Audit.
(a) CAL Audit. CAL shall have the right, at its own cost, to inspect,
review, and observe AWA's operations of CO* Flights, and/or to conduct a
full safety and/or service audit of AWA's operations, manuals and
procedures reasonably related to CO* Flights, at such intervals as CAL
shall reasonably request. In the exercise of such right, CAL does not
undertake any responsibility for the performance of AWA's operations. CAL
shall coordinate its safety and service audits with AWA so as to avoid
disruptions of AWA's operations. Any safety audit may include, without
limitation, maintenance and operation procedures, crew planning,
reservations, passenger and baggage handling, customer service, personnel
records, spare parts, inventory records, training records and manuals,
flight, flight training and operational personnel records. This paragraph
shall not entitle CAL access to AWA's records, documents or systems
relating to its pricing, inventory control or flight profitability.
(b) AWA Audit. AWA shall have the right, at its own cost, to inspect,
review, and observe CAL's operations of HP* Flights, and/or to conduct a
full safety and/or service audit of CAL's operations, manuals and
procedures reasonably related to HP* Flights, at such intervals as AWA
shall reasonably request. In the exercise of such right, AWA does not
undertake any responsibility for the performance of CAL's operations. AWA
shall coordinate its safety and service audits with CAL so as to avoid
disruptions of CAL's operations. Any safety audit may include, without
limitation, maintenance and operation procedures, crew planning,
reservations, passenger and baggage handling, customer service, personnel
records, spare parts, inventory records, training records and manuals,
flight, flight training and operational personnel records. This paragraph
shall not entitle AWA access to CAL's records, documents or systems
relating to its pricing, inventory control or flight profitability.
6. Public Relations. In the event of any irregularity in Shared Code
Segments' operations, including, without limitation, any event causing damage to
persons or property, the operating carrier shall identify itself as being
operated independently of the carrier whose code is being used, and as being
solely responsible for its operations. Either carrier may state that it holds a
code sharing license from the other carrier and that it obtains certain services
from the other carrier if third parties inquire as to such relationship.
7. Irregularities in Operations. AWA shall promptly notify CAL of all
irregularities involving a CO* Flight which result in any damage to persons or
property as soon as such information is available and shall furnish to CAL as
much detail as practicable. CAL shall promptly notify AWA of all irregularities
involving a
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<PAGE> 3
HP* Flight which result in any damage to persons or property as soon as such
information is available and shall furnish to AWA as much detail as practicable.
8. Reporting Obligation.
(a) Changes in Service. Each carrier shall give the other carrier 60
days advance notice (or notice as far in advance as possible if 60 days is
impracticable) of any intended (i) changes to its operating specifications,
or (ii) material changes to the manner of conducting its business or the
nature of its product. In the event any such change materially affects the
value or risk to the other carrier of this Code Sharing Agreement in the
other carrier's reasonable judgment, the other carrier shall be entitled to
terminate this agreement if the change is implemented.
(b) Correspondence from Government Authorities. AWA shall immediately
provide CAL copies of any correspondence received from government authority
which, with respect to CO* Flights, references (i) any alleged
noncompliance with rules or regulations affecting air transportation, or
(ii) any investigation of AWA performed or proposed by any government
authority, including, without limitation, any communication issued by a
government authority concerning the airworthiness of AWA's aircraft, the
compliance of AWA's personnel with required operational or training
procedures or any other matter relating to the safe operation of AWA
aircraft.
CAL shall immediately provide AWA copies of any correspondence
received from any government authority which, with respect to HP* Flights,
references (i) any alleged noncompliance with rules or regulations
affecting air transportation, or (ii) any investigation of CAL performed or
proposed by any government authority, including, without limitation, any
communication issued by a government authority concerning the airworthiness
of CAL's aircraft, the compliance of CAL's personnel with required
operational or training procedures or any other matter relating to the safe
operation of CAL aircraft.
(c) Notice of Complaints. AWA shall monthly furnish CAL a summary of
complaints, notices or violation, request to cease activity or similar
correspondence which reasonably relate to CO* Flights and which are
received by AWA from passengers, any government authority, or other
parties. CAL shall monthly furnish AWA a summary of complaints, notices or
violation, request to cease activity or similar correspondence which
reasonably relate to HP* Flights and which are received by CAL from
passengers, any government authority, or other parties. Each carrier shall
comply with the other carrier's reasonable requests for actual copies of
any such documents.
9. Flight Display.
(a) All Shared Code Segments will be included in the availability and
fare displays of all computerized reservations systems in which CAL and AWA
participate, the Official Airline Guide (to the extent agreed upon) and
CAL's and AWA's internal reservation systems, under the shared code as well
as the operator's own code, to the extent possible. CAL and AWA will take
the appropriate measures necessary to ensure the display of Shared Code
Segments in accordance with the preceding sentence.
(b) CAL and AWA will disclose and identify the Shared Code Segments to
the public as actually being a flight of and operated by the operating
carrier, in at least the following ways:
(i) a symbol will be used in timetables and computer reservation
system indicating that Shared Code Segments are actually operated by the
other carrier;
(ii) to the extent reasonable, messages on airport flight
information displays will identify the operator of flights shown as
Shared Code Segments;
(iii) CAL and AWA advertising concerning Shared Code Segments and
CAL and AWA reservationists will disclose the operator of each flight;
and
(iv) in any other manner prescribed by law.
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<PAGE> 4
10. Terms and Conditions of Carriage and Claims Procedures.
(a) In all cases the contract of carriage between a passenger and a
carrier will be that of the carrier whose designator code is used and not
that of the carrier operating the Shared Code Flight.
(b) The carriers will use existing IATA procedures when handling and
settling claims made by customers in connection with Shared Code Segments.
11. Irregularity Handling.
(a) In the event of flight delays, cancellations or other schedule
irregularities that affect Shared Code Segments, the operating carrier will
inform the carrier whose designator is also used of all pertinent
information concerning an irregularity for customer information purposes.
(b) The parties agree that they will cooperate in all available ways
to accommodate passengers experiencing flight irregularities and that
neither will forbear from providing such assistance because the other may
have been responsible for the flight irregularity. In the event of a flight
irregularity, the carrier causing or experiencing the irregularity shall
bear all related costs associated with accommodating the passengers who
have been delayed. The carriers will review existing procedures for
accommodating interline passengers with respect to flight irregularities
and oversales to determine their adequacy for the purposes of this
Agreement and will make such adjustments in existing procedures as they
find necessary or appropriate.
12. Airport Operational Assistance. CAL and AWA will cooperate to
coordinate and maintain their schedules to minimize the waiting time and to
maximize convenience of passengers who are connecting from a CAL to AWA flight
segment (or vice versa). Each carrier will provide the other with the airport
operational assistance that is required to assure schedule compatibility for
Shared Code Segments for which a Through Fare (as such term is hereinafter
defined) may be applicable. The carriers will use their respective best efforts
to align gates and ticket counter space where Shared Code Segments operate.
13. Pricing and Capacity Control of Shared Code Segments.
[CONFIDENTIAL PORTION DELETED]
15. Compliance with Laws and Regulations. CAL and AWA each represent,
warrant, and agree that performance of its respective obligations under this
Agreement shall be conducted and all of its personnel shall at all times meet,
be in full compliance with and have all required licenses under any and all
applicable statutes, orders, rules and regulations, and satisfy all applicable
insurance requirements, whether in effect or hereafter promulgated of the United
States National Transportation Safety Board, Department of Transportation of
Federal Aviation Administration, Department of Defense of any country or
territory with jurisdiction over the Shared Code Segments.
16. Independent Parties.
(a) Independent Contractors. It is expressly recognized and agreed
that each carrier, in its performance and otherwise under this Agreement,
is and shall be engaged and acting as an independent contractor and in its
own independent and separate business; that each carrier shall retain
complete and exclusive control over its staff and operations and the
conduct of its business; and that each carrier shall bear and pay all
expenses, costs, risks and responsibilities incurred by it in connection
with its obligations under this Agreement. Neither CAL nor AWA nor any
officer, employee, representative, or agent of CAL or AWA shall in any
manner, directly or indirectly, expressly or by implication, be deemed to
be, or make any representation or take any action which may give rise to
the existence of, any employment, agent, partnership, or other like
relationship as between CAL and AWA but each carrier's relationship as
respects the other carrier in connection with this Agreement is and shall
remain that of an independent contractor.
(b) Status of Employees. The employees, agents and/or independent
contractors of AWA shall be employees, agents, and independent contractors
of AWA for all purposes, and under no circumstances
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<PAGE> 5
shall be deemed to be employees, agents or independent contractors of CAL.
The employees, agents and independent contractors of CAL for all purposes,
and under no circumstances shall be deemed to be employees, agents or
independent contractors of AWA. In its performance under this Agreement,
each carrier shall act as an independent contractor and not as an agent for
the other. CAL shall have no supervisory power or control over any
employees, agents or independent contractors employed by AWA, and AWA shall
have no supervisory power or control over any employees, agents and
independent contractors employed by CAL.
(c) Liability For Employee Costs. Each carrier, with respect to its
own employees (hired directly or through a third party), accepts full and
exclusive liability for the payment of worker's compensation and/or
employer's liability (including insurance premiums where required by law)
and for the payment of all taxes, contributions or other payments for
unemployment compensation, vacations, or old age benefits, pensions and all
other benefits now or hereafter imposed upon employers with respect to its
employees by any government or agency thereof or any other party (whether
measured by the wages, salaries, compensation or other remuneration paid to
such employees or otherwise) and each carrier further agrees to make such
payments and to make and file all reports and returns, and to do everything
necessary to comply with the laws imposing such taxes, contributions or
other payments.
17. Indemnification and Insurance.
(a) Indemnification.
(i) AWA hereby assumes liability for, and shall indemnify, defend,
protect, save and hold harmless CAL, its officers, agents, and employees
from and against any and all liabilities, claims, judgments, damages,
and losses, including all costs, fees, and expenses incidental thereto,
of every type and nature whatsoever, including without limitation those
involving (i) death of or injury to any person including, but not
limited to, AWA's officers, employees and agents, (ii) loss of, damage
to, or destruction of any property whatsoever, including any loss of use
thereof, and (iii) trademark, service mark or trade name infringement,
provided that such liabilities, claims, judgments, damages or losses are
caused by or arise out of (or are alleged to be caused by or arise out
of) any alleged acts or omissions of AWA or its officers, employees, or
agents which are in any way related to the services contemplated by this
Agreement. CAL shall give AWA prompt notice of any claim made or suit
instituted against CAL which, if successful, would result in
indemnification of CAL hereunder, and CAL shall have the right to
compromise or participate in the defense of same to the extent of its
own interest.
(ii) CAL hereby assumes liability for, and shall indemnify, defend,
protect, save and hold harmless AWA, its officers, agents, and employees
from and against any and all liabilities, claims, judgments, damages,
and losses, including all costs, fees, and expenses incidental thereto,
of every type and nature whatsoever, including without limitation those
involving (i) death of or injury to any person including, but not
limited to, CAL's officers, employees and agents, (ii) loss of, damage
to, or destruction of any property whatsoever, including any loss of use
thereof, and (iii) trademark, service mark or trade name infringement,
provided that such liabilities, claims, judgments, damages or losses are
caused by or arise out of (or are alleged to be caused by or arise out
of) any alleged acts or omissions of CAL or its officers, employees, or
agents which are in any way related to the services contemplated by this
Agreement. AWA shall give CAL prompt notice of any claim made or suit
instituted against AWA which, if successful, would result in
indemnification hereunder, and AWA shall have the right to compromise or
participate in the defense of same to the extent of its own interest.
(b) Insurance Coverage.
(i) Each carrier shall, at all time during the term of this
Agreement, maintain in full force and effect policies of insurance as
follows:
1. Comprehensive Airline Liability Insurance, including Aircraft
Third Party, Passenger, including Passengers' Baggage and Personal
Effects, Cargo and Mail Legal Liability for a
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<PAGE> 6
Combined Single Limit (CSL) of not less than $500 million per
occurrence per Aircraft. In respect of Personal Injury the
maximum limit is $25 million per offense and in the aggregate.
The minimum amounts of insurance coverage required under this
paragraph 1 shall be per occurrence, combined single limit for all
coverage required under this paragraph 1.
<TABLE>
<S> <C> <C>
2. Workmen's Compensation Insurance Per Accident
(Company Employee) Statutory
3. Employer's Liability $1,000,000 (combined single limit)
</TABLE>
(ii) Subject to Section 17(b)(i) above, each carrier as appropriate
shall cause the policies of insurance described in such Section 17(b)(i)
to be duly and properly endorsed by that carrier's insurance
underwriters as follows:
1. as to the policies of insurance described in paragraphs
(b)(i)1 and (b)(i)2 of Section 17:
(A) to provide that any waiver of rights of subrogration
against other parties by one party will not affect the coverage
provided thereunder with respect to the other party; and
(B) to provide that the one party's underwriters shall waive
any and all subrogation rights against the other party, its
directors, officers, agents, employees and other authorized
representatives, except for gross negligence or wilful
misconduct, with regard to any breach of warranty on the part of
the other party or to provide other evidence of such waiver or
recourse against the other party, its directors, officers,
agents, employees and other authorized representatives.
(C) to provide that each party, its directors, officers,
agents, employees and other authorized representatives shall be
endorsed as named insured parties thereunder, except for gross
negligence or wilful misconduct; and
(D) to provide that said insurance shall be primary
insurance and to acknowledge that any other insurance policy or
policies of each party shall be secondary or excess insurance.
2. as to policies of insurance described in paragraph (b)(i)1 of
Section 17 to provide a breach of warranty clause to said policies;
and
(iii) Each party shall cause each of the insurance policies
referred to in Section 17(b)(i) to be duly and properly endorsed to
provide that said policy or policies or any part or parts thereof shall
not be canceled, terminated or materially altered, changed or amended by
each party's insurance underwriters, until after 30 days' prior notice
to the other party, such notice period to commence when such other party
actually receives such notice.
(iv) Simultaneously with the commencement of this Agreement, and
from time to time thereafter upon request by either party, the other
party shall furnish to the requesting party evidence reasonably
satisfactory to the requesting party of the aforesaid insurance coverage
and endorsements, including certificates certifying that the aforesaid
insurance and endorsements are in full force and effect. Initially, this
evidence shall be a certificate of insurance required hereunder.
(v) In the event either party fails to maintain in full force and
effect any of the insurance and endorsements required in terms of these
sections, the other party shall have the right (but not the obligation)
to procure and maintain such insurance or any part thereof. The cost of
such insurance shall be payable by the first party to the other party
upon demand by the other party. The procurement of such insurance or any
part thereof by the other party shall not discharge or excuse the first
party's obligation to comply with the provisions of Sections 17(b)(i)
and 17(b)(ii)
(c) Survival of Rights and Obligations. The rights and obligations of
Section 18(a) shall survive the expiration or termination of this
Agreement.
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18. Term and Termination.
(a) Term. Unless the carriers agree to an earlier commencement date,
the term of this Agreement shall commence as soon as practicable after the
date that is the later of the date that this Agreement is signed by both
parties or the date that the investment agreement between AWA and AmWest
partners, L.P. (the "Investment Agreement") is consummated and shall
continue until the date immediately preceding the tenth anniversary of the
commencement date, unless earlier terminated as provided herein, and shall
continue thereafter until either carrier gives the other carrier notice of
termination at least 90 days prior to the effective date of such
termination. In no event shall termination or expiration pursuant to this
Section 18(a) be effective unless such 90 days' notice is provided.
(b) Termination as a Result of Changes of Law. In the event there is
any change in treaties, statutes or regulations of air transportation that
materially affects the rights and/or obligations presently in force with
respect to the air transportation services of CAL or AWA or both, relating
to CO* or HP* Flights, then the carriers will consult, within 30 days after
any of the occurrences described herein, in order to determine or seek
mutual agreement as to what, if any changes to this Agreement are necessary
or appropriate, including but not limited to the early termination and
cancellation of this Agreement.
(c) Other Termination Rights. In addition to any other provisions of
this Agreement, this Agreement may be terminated, without liability, as
follows:
(i) By either carrier on 30 days' prior written notice, if the
other carrier has breached any material provision of this Agreement
unless such other carrier cures such breach within such 30 day period;
(ii) By either carrier immediately on notice, if the other carrier
shall be dissolved or shall fail to maintain its corporate existence in
good standing, or shall have its authority to operate as a scheduled
airline suspended or revoked, either in whole or with respect to the CO*
or HP* Flights, or shall cease operations as a scheduled airline.
(iii) By either carrier immediately on notice if the other carrier
shall be cited by any government authority for any significant
noncompliance with a material law, rule or regulation with respect to
the marketing or operation of a CO* or HP* Flight;
(iv) By either carrier immediately on notice, in the event that the
commencement date of this Agreement is prior to the date that the
Investment Agreement is consummated, if the Investment Agreement is
terminated prior to its having been consummated;
(v) Except for AWA's currently pending Chapter 11 proceeding, by
either carrier if a petition is filed by or against the other carrier
under bankruptcy law, or any other law providing for the relief of
debtors, and the affected party does not succeed in having such petition
lifted or stayed within sixty days from the date of entry; the carrier
at its option may cancel this Agreement immediately and exercise such
other remedies as may be available at law and/or in equity;
(vi) By either carrier on six months' prior written notice, if a
carrier, foreign or domestic, that competes with the terminating carrier
on a material basis, acquires majority ownership of or substantial
control over the other carrier.
(vii) By CAL immediately on notice if
1. AWA shall fail to maintain any of its aircraft in an
airworthy condition and conduct its flight operations in accordance
with the standards, rules and regulations promulgated by any
government authority; or
2. AWA shall have a completion factor of less then 80% during
any 20 day period with respect to CO* Flights (including in such
calculations all flights canceled less than one week prior to the
date of its scheduled operation and excluding flights not completed
due to weather or labor stoppages); and
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(viii) By AWA immediately on notice if
1. CAL shall fail to maintain any of its aircraft in an
airworthy condition and conduct its flight operations in accordance
with the standards, rules and regulations promulgated by any
government authority; or
2. CAL shall have a completion factor of less then 80% during
any 20 day period with respect to HP* Flights (including in such
calculations all flights canceled less than one week prior to the
date of its scheduled operation and excluding flights not completed
due to weather or labor stoppages).
19. Booking Fee. The carrier operating over any segment of a Shared Code
Flight will be responsible for any booking fee relating to such segment charges
by the vendor of a computer reservation system used to create a booking on that
flight. If the booking fee relating to such segment is billed to the carrier
whose designator code is also used for that flight, the operating carrier will
reimburse the carrier whose designator code is also used for that flight.
20. Entire Agreement, Waivers and Amendments. This Agreement constitutes
the entire understanding of the carriers with respect to the subject matter
hereof superseding all prior discussions and agreements, written or oral. This
Agreement may not be amended, nor may any of its provisions be waived, except by
writing signed by both carriers. No delay on the part of either carrier in
exercising any right power or privilege hereunder shall operate as a waiver
hereof, nor shall any waiver operate as a continuing waiver of any right, power
or privilege.
21. Notices. All notices given hereunder shall be in writing delivered by
hand, certified mail, telex, or telecopy to the carriers at the following
addresses:
If to CAL:
Continental Airlines, Inc. Telephone No.: 713-834-2950
2929 Allen Parkway Telecopier No.: 713-520-6329
Houston, Texas 77019
Attention: Vice Chairman & CEO
With copy to:
Continental Airlines, Inc. Telephone No.: 713-834-5149
2929 Allen Parkway Telecopier No.: 713-834-5161
Houston, Texas 77019
Attention: Senior Vice President
and General Counsel
If to AWA:
America West Airlines, Inc. Telephone No.: (602) 693-5880
4000 E. Sky Harbor Blvd. Telecopier No.: (602) 693-5950
Phoenix, AZ 85034
Attention: President & COO
With copy to:
America West Airlines, Inc. Telephone No.: (602) 693-5750
4000 E. Sky Harbor Blvd. Telecopier No.: (602) 593-5904
Phoenix, AZ 85034
Attention: Vice President
and General Counsel
22. Successors and Assigns. Neither carrier may assign its rights or
delegate its duties under this Agreement without the prior written consent of
the other carrier, and any such purported assignment or delegation shall be
void. This Agreement shall be binding on the lawful successors of each carrier.
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23. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
24. Headings. The headings in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
25. Counterparts. This Agreement may be executed in counterparts, all of
which taken together shall constitute one agreement.
26. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
principles of choice or conflicts of law.
27. Equal Opportunity. EEO clauses contained at 11 C.F.R. sec.sec. 60-1.4,
60-250.4 and 60-741.4 are hereby incorporated by reference. Each party shall
comply with all equal opportunity laws and regulations which apply to or must be
satisfied by that party as a result of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
<TABLE>
<S> <C>
CONTINENTAL AIRLINES, INC. AMERICA WEST AIRLINES, INC.
By: /s/ BARRY P. SIMON By: /s/ A. MAURICE MYERS
--------------------------------------------- ---------------------------------------------
Title: Senior Vice President Title: President & CEO
------------------------------------------ ------------------------------------------
</TABLE>
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SCHEDULE 1
INITIAL SHARED CODE SEGMENTS
[CONFIDENTIAL PORTION DELETED]
10
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SCHEDULE 2
[CONFIDENTIAL PORTION DELETED]
11
<PAGE> 1
EXHIBIT 10.13
AGREEMENT
BETWEEN
AMERICA WEST AIRLINES, INC.
AND
MESA AIRLINES, INC.
<PAGE> 2
SECTION 5.03. Delivery of Prospectuses. If, and to the extent that, the
Company may be required by the 1933 Act or any other applicable Federal or state
law to furnish a prospectus to Warrant holders upon their exercise of Warrants,
the Company shall cause to be kept, either at the Warrant Agent's Office or at
such other location designated by the Company, sufficient quantities of such
prospectuses for delivery to Warrant holders upon their exercise of Warrants,
and shall deliver such prospectuses or cause such prospectuses to be delivered
to such Warrant holders together with the shares of Class B Common Stock or
other securities receivable by such Warrant holders upon their exercise of
Warrants.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Payment of Certain Taxes. The Company will from time to
time promptly pay all transfer, stamp or similar taxes and all other
governmental charges that may be imposed upon the Company or otherwise in
respect of the initial issuance or delivery of shares of Class B Common Stock
upon the exercise of Warrants, but the Company shall not be obligated to pay any
transfer, stamp or similar taxes or other governmental charges in respect of any
transfer of the Warrants or such shares effected by any holder thereof.
SECTION 6.02. Change of Warrant Agent.
(a) The Warrant Agent, or any successor to it hereafter appointed, may
resign its duties and be discharged from all further duties and liabilities
hereunder (except liabilities arising as a result of the Warrant Agent's
own negligence, willful misconduct or bad faith) after giving 60 days'
notice in writing to the Company, except that such shorter notice may be
given as the Company and AmWest shall, in writing, accept as sufficient. At
least 15 days prior to the date such resignation is to become effective,
the Warrant Agent shall cause a copy of such notice of resignation to be
mailed to the registered holder of each Warrant Certificate. If the office
of the Warrant Agent becomes vacant by resignation or incapacity to act or
otherwise, the Company shall appoint a successor Warrant Agent in place of
the Warrant Agent [; provided that in the event that AmWest is the holder
of any Warrants at such time, the Company shall notify and consult with
AmWest with respect to such proposed appointment]. If the Company shall
fail to make such appointment within a period of 60 days after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any holder of Warrants (who shall, with
such notice, submit a copy of his Warrant Certificate for inspection by the
Company), then the holder of any Warrants may apply, at the expense of the
Company, to any court of competent jurisdiction for the appointment of a
successor warrant agent.
(b) The Warrant Agent may be removed by the Company at any time upon
30 days' written notice to the Warrant Agent; provided, that the Warrant
Agent shall not be removed until a successor Warrant Agent meeting the
qualifications hereof shall have been appointed and provided further that
in the event AmWest is the holder of any Warrants at such time, the Company
shall obtain the consent of AmWest, which consent shall not be unreasonably
withheld.
(c) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a corporation organized, in good standing and doing
business under the laws of the United States of America or any state
thereof or the District of Columbia, and authorized under such laws to
exercise corporate trust powers and subject to supervision or examination
by Federal or state authority and having a combined capital and surplus of
not less than $10,000,000. The combined capital and surplus of any such
successor Warrant Agent shall be deemed to be the combined capital and
surplus as set forth in the most recent report of its condition published
prior to its appointment pursuant to law or to the requirements of a
Federal or state supervising or examining authority. After appointment, any
successor Warrant Agent shall be vested with all the authority, powers,
rights, immunities, duties and obligations of its predecessor Warrant Agent
with like effect as if originally named as Warrant Agent hereunder, without
any further assurance, conveyance, act or deed; provided, however, that in
no event shall any successor Warrant Agent be liable for any breach,
default or failure of performance by the predecessor Warrant Agent of any
covenant or obligation under this Agreement existing on the date the
successor
15
<PAGE> 3
Warrant Agent assumes authority pursuant to this Section 6.02. If for any
reason it becomes necessary or appropriate, the predecessor Warrant Agent
shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Warrant Agent all the authority, powers and
rights of such predecessor Warrant Agent hereunder; and upon request of any
successor Warrant Agent, the Company shall make, execute, acknowledge and
deliver any and all instruments in writing to more fully and effectually
vest in and confirm to such successor Warrant Agent all such authority,
powers, rights, immunities, duties and obligations. Upon assumption by a
successor Warrant Agent of the duties and responsibilities hereunder, the
predecessor Warrant Agent shall deliver and transfer, at the expense of the
Company, to the successor Warrant Agent any property at the time held by it
hereunder. As soon as practicable after such appointment, the Company shall
give notice thereof to the predecessor Warrant Agent, the registered
holders of the Warrants and each transfer agent for the shares of its Class
B Common Stock. Failure to give such notice, or any defect therein, shall
not affect the validity of the appointment of the successor Warrant Agent.
(d) Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, shall be the
successor Warrant Agent under this Agreement without any further act,
provided that such corporation is eligible for appointment as a successor
to the Warrant Agent. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the Company and
to the registered holder of each Warrant Certificate. In case at the time
such successor Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrant Certificates shall have been countersigned
but not delivered, any such successor Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
Certificates so countersigned, and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name
of the predecessor Warrant Agent or in the name of the successor Warrant
Agent; and in all such cases Warrant Certificates shall have the full force
provided in the Warrant Certificates and in this Agreement.
(e) In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver such Warrant
Certificates so countersigned; and in case at that time any of the Warrant
Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its
changed name; and in all such cases such Warrant Certificates shall have
the full force provided in the Warrant Certificates and in this Agreement.
SECTION 6.03. Compensation; Further Assurances. The Company agrees (i)
that it will pay the Warrant Agent the fees set forth in Exhibit B for its
services as Warrant Agent hereunder and, except as otherwise expressly provided,
will pay or reimburse the Warrant Agent upon demand for all reasonable expenses,
disbursements and advances incurred or made by the Warrant Agent in accordance
with any of the provisions of this Agreement (including the reasonable
compensation, expenses and disbursements of its agents and counsel) except any
such expense, disbursement or advance as may arise from its or any of their
negligence, willful misconduct or bad faith; and (ii) that it will perform,
execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Warrant Agent for the carrying
out or performing of the provisions of this Agreement.
SECTION 6.04. Reliance on Counsel. The Warrant Agent may consult with
legal counsel (who may be legal counsel for the Company), and the written
opinion of such counsel or any advice of legal counsel subsequently confirmed by
a written opinion of such counsel shall be full and complete authorization and
protection to the Warrant Agent as to any action taken or omitted by it in good
faith and in accordance with such written opinion or advice, provided that such
counsel shall be reasonably acceptable to the Company.
SECTION 6.05. Proof of Actions Taken. Whenever in the performance of its
duties under this Agreement the Warrant Agent shall deem it necessary or
desirable that any matter be proved or established by
16
<PAGE> 4
the Company prior to taking or suffering or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of bad faith on the part of the Warrant Agent,
be deemed to be conclusively proved and established by an Officers' Certificate
delivered to the Warrant Agent; and such Officers' Certificate shall, in the
absence of bad faith on the part of the Warrant Agent be full authority to the
Warrant Agent for any action taken, suffered or omitted in good faith by it
under the provisions of this Agreement in reliance upon such certificate; but in
its discretion the Warrant Agent may in lieu thereof accept other evidence of
such fact or matter or may require such further or additional evidence as to it
may deem reasonable.
SECTION 6.06. Correctness of Statements. The Warrant Agent shall not be
liable for or by reason of any of the statements of fact or recitals contained
in this Agreement or in the Warrant Certificates (except its countersignature
thereof) or be required to verify the same, and all such statements and recitals
are and shall be deemed to have been made by the Company only.
SECTION 6.07. Validity of Agreement. The Warrant Agent shall not be under
any responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (other than such execution and delivery by the Warrant
Agent) or in respect of the validity or execution of any Warrant Certificates
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Warrant Certificate; nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of Class B Common Stock to be issued pursuant to this Agreement or
any Warrants or as to whether any shares of Class B Common Stock will, when
issued, be validly issued and fully paid and non-assessable.
SECTION 6.08. Use of Agents. The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents and the Warrant Agent
shall not be responsible for the misconduct or negligence of any agent or
attorney, provided due care had been exercised in the appointment and continued
employment thereof.
SECTION 6.09. Liability of Warrant Agent. The Warrant Agent shall incur
no liability or responsibility to the Company or to any holder of Warrants for
any action taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document or instrument believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties. The
Company agrees to indemnify the Warrant Agent and hold it harmless against any
and all liabilities, including judgments, costs and reasonable counsel fees, for
anything done or omitted in good faith by the Warrant Agent in the execution of
this Warrant Agreement, except as a result of the Warrant Agent's negligence or
willful misconduct or bad faith.
SECTION 6.10. Legal Proceedings. The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or one or more holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity.
SECTION 6.11. Other Transactions in Securities of the Company. The
Warrant Agent in its individual or any other capacity may become the owner of
the Warrants or other securities of the Company, or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Warrant Agreement. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for the
Company or for any other legal entity.
SECTION 6.12. Actions as Agent. The Warrant Agent shall act hereunder
solely as agent and not in a ministerial capacity, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not be
liable for anything which it may do or refrain from doing in good faith in
connection with this Agreement except for its own negligence or willful
misconduct or bad faith.
SECTION 6.13. Appointment and Acceptance of Agency. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth in this Agreement, and the
17
<PAGE> 5
Warrant Agent hereby accepts the agency established by this Agreement and agrees
to perform the same upon the terms and conditions herein set forth.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01. Supplements and Amendments.
(a) Notwithstanding the provisions of subsection (b) below, the
Warrant Agent may, without the consent or concurrence of the registered
holders of the Warrants, enter into one or more supplemental agreements or
amendments with the Company for the purpose of evidencing the rights of
Warrant holders upon consolidation, merger, sale, transfer,
reclassification, liquidation or dissolution pursuant to Section 4.05
hereof, making any changes or corrections in this Agreement that are
required to cure any ambiguity, to correct or supplement any provision
contained herein that may be defective or inconsistent with any other
provision herein or any clerical omission or mistake or manifest error
herein contained, or making such other provisions in regard to matters or
questions arising under this Agreement as shall not adversely affect the
interests of the holders of the Warrants or be inconsistent with this
Agreement or any supplemental agreement or amendment.
(b) With the consent of the registered holders of at least a majority in
number of the Warrants at the time outstanding, the Company and the Warrant
Agent may at any time and from time to time by supplemental agreement or
amendment add any provisions to or change in any manner or eliminate any of the
provisions of this Agreement or of any supplemental agreement or modify in any
manner the rights and obligations of the Warrant holders and of the Company;
provided, however, that no such supplemental agreement or amendment shall,
without the consent of the registered holder of each outstanding Warrant
affected thereby,
(1) alter the provisions of this Agreement so as to affect
adversely in any material respect the terms upon which the Warrants are
exercisable; or
(2) reduce the number of Warrants outstanding the consent of whose
holders is required for any such supplemental agreement or amendment.
SECTION 7.02. Successors and Assigns. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 7.03. Notices. Any notice or demand authorized by this Agreement
to be given or made by the Warrant Agent or by the holder of any Warrant to or
on the Company shall be sufficiently given or made if sent by mail first-class,
postage prepaid or by facsimile, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
America West Airlines, Inc.
[4000 E. Sky Harbor Blvd.
Phoenix, AZ 85035
Attention: General Counsel
Facsimile No.: (602) 693-5904]
Any notice or demand authorized by this Agreement to be given or made by
the holder of any Warrant or by the Company to or on the Warrant Agent shall be
sufficiently given or made if sent by mail first-class,
18
<PAGE> 6
postage prepaid or by facsimile, addressed (until another address is filed in
writing by the Warrant Agent with the Company), as follows:
[
]
Any notice of demand authorized by this Agreement to be given or made to
the holder of any Warrants shall be sufficiently given or made if sent by
first-class mail, postage prepaid to the last address of such holder as it shall
appear on the Warrant Register.
SECTION 7.04. Applicable Law. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT AND OF THE WARRANT CERTIFICATES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.05. Benefits of this Agreement. Nothing in this Agreement
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any Person other
than the parties hereto and the holders of the Warrants any right, remedy or
claim under or by reason of this Agreement or of any covenant, condition,
stipulation, promise or agreement hereof, and all covenants, conditions,
stipulations, promises and agreements in this Agreement contained shall be for
the sole and exclusive benefit of the parties hereto and their successors and
assigns and of the holders of the Warrants.
SECTION 7.06. Registered Warrant Holders. Prior to due presentment for
registration of transfer, the Company and the Warrant Agent may deem and treat
the Person in whose name any Warrants are registered in the Warrant Register as
the absolute owner thereof for all purposes whatever (notwithstanding any
notation of ownership or other writing thereon made by anyone other than the
Company or the Warrant Agent) and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary or be bound to recognize any
equitable or other claim to or interest in any Warrants on the part of any other
Person and shall not be liable for any registration of transfer of Warrants that
are registered or to be registered in the name of a fiduciary or the nominee of
a fiduciary unless made with actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration of transfer or with
such knowledge of such facts that its participation therein amounts to bad
faith. The terms "Warrant" holder and holder of any "Warrants" and all other
similar terms used herein shall mean such Person in whose name Warrants are
registered in the Warrant Register.
SECTION 7.07. Inspection of Agreement. A copy of this Agreement shall be
available at all reasonable times for inspection by any registered Warrant
holder at the principal office of the Warrant Agent. The Warrant Agent may
require any such holder to submit his Warrant Certificate for inspection by it
before allowing such holder to inspect a copy of this Agreement.
SECTION 7.08. Headings. The Article and Section headings herein are for
convenience only and are not a part of this Agreement and shall not affect the
interpretation thereof.
SECTION 7.09. Counterparts. The Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original.
19
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto under their respective seals as of the day and year first above written.
AMERICA WEST AIRLINES, INC.
[CORPORATE SEAL]
By:__________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
[NAME OF WARRANT AGENT]
[CORPORATE SEAL]
By:__________________________________
Name:
Title:
Attest:____________________________
Name:
Title:
20
<PAGE> 8
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[INSERT LEGEND FROM STOCKHOLDERS AGREEMENT]
[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER (THE "1933 ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE; AND SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED OTHER THAN IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT OR AN EXEMPTION THEREFROM AND FROM ANY
APPLICABLE STATE SECURITIES LAWS.]
NO. [ ]-[ ] WARRANTS
VOID AFTER , 1999
WARRANTS TO PURCHASE CLASS B COMMON STOCK
OF AMERICA WEST AIRLINES, INC.
AMERICA WEST AIRLINES, INC., a Delaware corporation (hereinafter called the
("Company" ), for value received, hereby certifies that
or registered assigns, is the owner of the number of
Warrants set forth above, each of which represents the right, at any time
commencing on the day after , 1994, and before 5:00 p.m., New York
time, on , 1999, on which date such Warrants expire, initially to
purchase, subject to the terms hereof and of the Warrant Agreement (as
hereinafter defined), one share of Class B Common Stock, par value $[ ] per
share, of the Company (hereinafter called the "Class B Common Stock" ) at the
price of $[ ] per share (the "Warrant Price" ), subject to the terms and
conditions hereof and of the Warrant Agreement, each such purchase to be made,
and to be deemed effective for the purpose of determining the date of exercise,
only upon surrender hereof to the Company at the Warrant Agent's Office, with
the Election to Exercise Form on the reverse hereof duly completed and signed,
and upon [either (i)] payment in full to the Warrant Agent for the account of
the Company of the Warrant Price (a) in cash, (b) by certified or official bank
check, or (c) by any combination of the foregoing [or (ii) payment in full to
the Warrant Agent as provided pursuant to the last sentence of Section 3.02(c)
of the Warrant Agreement], and upon compliance with and subject to the
conditions set forth herein and in the Warrant Agreement. Capitalized terms that
are not otherwise defined herein shall have the meanings ascribed to them in the
Warrant Agreement (as hereinafter defined).
The Warrant Price and, at the Company's option, either (1) the number of
shares of Class B Common Stock purchasable on the exercise of each Warrant or
(2) the number of Warrants outstanding, are subject to adjustment in certain
events as provided in the Warrant Agreement. In the event the Company elects to
adjust the number of Warrants outstanding rather than the number of shares of
Class B Common Stock purchasable on the exercise of each Warrant, the Company
shall cause the Warrant Agent to distribute to registered holders of Warrant
Certificates either Warrant Certificates representing any additional Warrants
issuable pursuant to the adjustment or substitute Warrant Certificates to
replace all outstanding Warrant Certificates in accordance with the provisions
of the Warrant Agreement. The Company shall not be required to issue fractions
of Warrants or Warrant Certificates evidencing fractional Warrants upon any such
adjustment or otherwise, but the Company shall make adjustment in cash or scrip
for any fraction of a Warrant which the registered holder of Warrants would have
been entitled to receive upon such adjustment or otherwise on the basis of the
then-current market value of such fraction of a Warrant (computed as provided in
the Warrant Agreement).
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement dated as of [ ], 1994 (herein called the "Warrant
Agreement" ), between the Company and the Warrant Agent and is subject to and is
to be construed in accordance with the terms and provisions of the Warrant
A-1
<PAGE> 9
Agreement, which terms and provisions are hereby incorporated by reference
herein and made a part hereof. Every holder of this Warrant Certificate consents
to all of the terms contained in the Warrant Agreement by acceptance hereof. A
copy of the Warrant Agreement is available for inspection by the registered
holder hereof at the Warrant Agent's Office.
The Company shall not be required upon the exercise of the Warrants
represented hereby to issue fractions of shares of Class B Common Stock, to
distribute stock certificates that evidence fractional shares of Class B Common
Stock or to issue Warrant Certificates representing fractional Warrants, but
shall make adjustment in cash or scrip for any fraction of a share which the
same registered holder of Warrants exercised in the same transaction would have
been entitled to purchase on the basis of the then-current market value of any
such fraction of a share (computed as provided in the Warrant Agreement). If the
Warrants represented hereby shall be exercised in part, the registered holder
hereof shall be entitled to receive, upon surrender hereof, another Warrant
Certificate for the balance of the number of whole Warrants not exercised as
provided in the Warrant Agreement.
Commencing on the day after the Distribution Date, this Warrant Certificate
may be exchanged either separately or in combination with other Warrant
Certificates at the Warrant Agent's Office for new Warrant Certificates
representing the same aggregate number of Warrants evidenced by the Warrant
Certificate or Warrant Certificates exchanged, upon surrender of this Warrant
Certificate and upon compliance with and subject to the conditions set forth
herein and in the Warrant Agreement.
Commencing on the day after the Distribution Date, this Warrant Certificate
is transferable at the Warrant Agent's Office by the registered holder hereof in
Person or by his attorney duly authorized in writing, upon surrender of this
Warrant Certificate and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement. Upon any such transfer, a new Warrant
Certificate or new Warrant Certificates of different denominations, representing
in the aggregate a like number of Warrants, will be issued to the transferee.
Every holder of Warrants, by accepting this Warrant Certificate, consents and
agrees with the Company, the Warrant Agent and with every subsequent holder of
this Warrant Certificate that until due presentation for the registration of
transfer of this Warrant Certificate on the Warrant Register maintained by the
Warrant Agent, the Company and the Warrant Agent may deem and treat the Person
in whose name this Warrant Certificate is registered as the absolute and lawful
owner for all purposes whatsoever and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary.
The Company is authorized by the Warrant Agreement to suspend the exercise
of all Warrants for any period during which any shares of Class B Common Stock
reserved for exercise of Warrants require, under any Federal or state law or
rule or regulation of any national securities exchange, registration with or
approval of any governmental authority or listing on any national securities
exchange and such registration, approval or listing is not in effect.
Nothing contained in the Warrant Agreement or in this Warrant Certificate
shall be construed as conferring on the holder of any Warrants or his transferee
any rights whatsoever as a stockholder of the Company.
This Warrant Certificate shall not be valid unless countersigned manually
by the Warrant Agent.
The Warrant Agreement and each Warrant Certificate, including this Warrant
Certificate, shall be deemed a contract made under the laws of the State of New
York and for all purposes shall be governed by and construed in accordance with
the laws of the State of New York.
A-2
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: , 1994
AMERICA WEST AIRLINES, INC.
[CORPORATE SEAL]
By:___________________________________
Name:
Title:
ATTEST:
By:___________________________________
Name:
Title:
COUNTERSIGNED:
[NAME OF WARRANT AGENT]
By:___________________________________
Name:
Title:
A-3
<PAGE> 11
ELECTION TO EXERCISE
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
To AMERICA WEST AIRLINES, INC.:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
shares of Class B Common Stock, as provided for therein, and [either (i)]
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $ [or (ii) provide
for cashless exercise option].
Please issue a certificate or certificates for such shares of Class B
Common Stock in the name of, and pay any cash for any fractional share to:
<TABLE>
<S> <C>
PLEASE INSERT SOCIAL SECURITY OR OTHER Name________________________________________
IDENTIFYING NUMBER OF ASSIGNEE (Please Print Name and Address)
_______________________________________________ Address_____________________________________
_______________________________________________ Signature___________________________________
</TABLE>
NOTE: The above signature should correspond exactly with the name on the
face of this Warrant Certificate or with the name of assignee appearing in the
assignment form below. In the event of any assignment, the Warrant Agent may
require evidence of payment of any applicable transfer taxes.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder less any fraction of a share paid in cash or scrip.
Dated: , 19
A-4
<PAGE> 12
ASSIGNMENT
(TO BE EXECUTED ONLY UPON ASSIGNMENT OF WARRANT CERTIFICATE)
For value received, hereby sells, assigns and
transfers unto the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated: , 19
______________________________________
NOTE: The above signature should
correspond exactly with the name on
the face of this Warrant Certificate.
Signature guaranteed:
_____________________________________________
A-5
<PAGE> 13
EXHIBIT B
[SCHEDULE OF FEES TO BE PAID TO WARRANT AGENT]
<PAGE> 14
EXHIBIT 4.5
STOCKHOLDERS' AGREEMENT FOR
AMERICA WEST AIRLINES, INC.
THIS STOCKHOLDERS' AGREEMENT FOR AMERICA WEST AIRLINES, INC. (this
"Agreement") is entered into as of this day of , 1994 by and among
AmWest Partners, L.P., a Texas limited partnership ("AmWest"), GPA Group plc, a
corporation organized under the laws of Ireland ("GPA"), ,
and (collectively, the "Stockholder
Representatives"), and America West Airlines, Inc., a Delaware corporation (the
"Company").
RECITALS:
WHEREAS, on June 27, 1991, the Company filed a case seeking relief under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of Arizona (the "Bankruptcy Court"); and
WHEREAS, on December 8, 1993, the Bankruptcy Court entered an Order on
Motion to Establish Procedures for Submission of Investment Proposals (the
"Procedures Order"); and
WHEREAS, pursuant to the Procedures Order, AmWest and the Company have
entered into that certain Third Revised Investment Agreement dated April 21,
1994 (the "Investment Agreement"), contemplating an investment by AmWest in the
Company (the "Investment") and providing for the consummation of the Company's
Plan of Reorganization (the "Plan"); and
WHEREAS, on , 1994, the Bankruptcy Court entered an order
confirming the Plan; and
WHEREAS, in consideration of the Investment, the Company has issued common
stock of the Company ("Common Stock") consisting of Class A Common Stock ("Class
A Common") and Class B Common Stock ("Class B Common") and warrants to purchase
Class B Common to AmWest and others; and
WHEREAS, in exchange for the release and modification of certain agreements
and claims, the Company has issued shares of Class B Common and warrants to
purchase Class B Common to GPA; and
WHEREAS, pursuant to Section 6(b) of the Investment Agreement, the Official
Committee of Equity Holders of America West Airlines, Inc., appointed in the
Company's Chapter 11 case (the "Equity Committee") has appointed
as a Stockholder Representative; and
WHEREAS, pursuant to Section 6(b) of the Investment Agreement, the Official
Committee of Unsecured Creditors of America West Airlines, Inc., appointed in
the Company's Chapter 11 case (the "Creditors' Committee") has appointed
as a Stockholder Representative; and
WHEREAS, pursuant to Section 6(b) of the Investment Agreement, the Board of
Directors of the Company, as constituted prior to consummation of the Plan, has
appointed as a Stockholder Representative; and
WHEREAS, the parties hereto have agreed to enter into this Agreement
pursuant to Section 218(c) of Title 8 of the Delaware Code (the "General
Corporation Law").
NOW, THEREFORE, in consideration of the premises herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
"Affiliate" shall mean (i) when used with reference to any partnership, any
person or entity that, directly or indirectly, owns or controls ten percent
(10%) or more of either the capital or profit interests of such partnership or
is a partner of such partnership or is a person or entity in which such
partnership has a ten percent (10%) or greater direct or indirect equity
interest and (ii) when used with reference to any
1
<PAGE> 15
corporation, any person or entity that, directly or indirectly, owns or controls
ten percent (10%) or more of the outstanding voting securities of such
corporation or is a person or entity in which such corporation has a ten percent
(10%) or greater direct or indirect equity interest. In addition, the term
"Affiliate," when used with reference to any person or entity, shall also mean
any other person or entity that, directly or indirectly, controls or is
controlled by or is under common control with such person or entity. As used in
the preceding sentence, (A) the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of the entity referred to, whether through ownership of voting
securities, by contract or otherwise and (B) the terms "controlling" and
"controls" shall have meanings correlative to the foregoing. Notwithstanding the
foregoing, neither the Company nor any Fidelity Fund will be deemed to be an
Affiliate of AmWest or any of its partners.
"Alliance Agreements" shall have the meaning set forth in the Investment
Agreement.
"AmWest" shall have the meaning set forth above, and in the event AmWest
Partners, L.P., by dissolution or otherwise, designates any or all of its
general and limited partners to receive Common Stock attributable to AmWest
Partners, L.P., upon consummation of the Plan, "AmWest" shall collectively
include all such general and limited partners.
"AmWest Director" shall mean a director of the Company designated by AmWest
pursuant to Section 2.1(a).
"Annual Meeting" shall mean an annual meeting of the shareholders of the
Company.
"Board" shall mean the Company's Board of Directors.
"Bylaws" shall mean the Restated Bylaws adopted by the Company in
accordance with Section 303 of the General Corporation Law pursuant to the Plan.
"Citizens of the United States" shall have the meaning set forth in Section
1301, Title 49, United States Code, as now in effect or as it may hereafter from
time to time be amended.
"Continental" shall mean Continental Airlines, Inc. or any successor.
"Creditors' Committee Director" shall mean a director of the Company
designated by the Creditors' Committee or otherwise pursuant to Section 2.1(b).
"Effective Date" shall mean the date upon which the Restated Certificate of
Incorporation becomes effective in accordance with the Plan and the General
Corporation Law.
"Equity Committee Director" shall mean a director of the Company designated
by the Equity Committee or otherwise pursuant to Section 2.1(b)
"Fidelity Fund" shall mean a fund or account managed or advised by Fidelity
Management Trust Company or any of its Affiliates or successor(s).
"GPA Director" shall mean a director of the Company designated by GPA
pursuant to Section 2.1(c).
"Independent Company Director" shall mean a director of the Company
designated pursuant to Section 2.1(b).
"Independent Directors" shall mean, collectively, the Creditors' Committee
Directors, the Equity Committee Director, and the Independent Company Director.
"Lehman" shall mean Lehman Brothers Inc. or any successor.
"Mesa" shall mean Mesa Airlines, Inc. or any successor.
"Public Offering" shall have the meaning set forth in Section 4.2.
"Restated Certificate of Incorporation" shall mean the Restated Certificate
of Incorporation adopted by the Company in accordance with Section 303 of the
General Corporation Law pursuant to the Plan.
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<PAGE> 16
"Stockholder Representatives" shall mean the persons identified as such in
the recitals set forth above; provided that in the case of the death,
resignation, removal or disability of a Stockholder Representative, his or her
successor shall be designated by the remaining Stockholder Representatives, and
upon providing a written acknowledgment to such effect to all other parties
hereto and agreeing to be bound and subject to the terms hereof, shall become a
Stockholder Representative.
"Third Annual Meeting" shall mean the first Annual Meeting after the third
anniversary of the Effective Date.
2. DESIGNATION AND VOTING FOR COMPANY DIRECTORS.
2.1 Until the Third Annual Meeting, subject to the exception set forth in
Section 4.7(a), the Board shall consist of up to fifteen (15) persons, of whom
nine (9) persons shall be AmWest Directors, five (5) persons shall be
Independent Directors and up to one (1) person shall be a GPA Director, all
designated in accordance with the following procedure:
(a) The AmWest Directors designated on Exhibit A hereto shall serve
until the first Annual Meeting following the Effective Date and until the
successor to each such director shall be duly elected and qualified, or
until their death, disability, removal or resignation. No less than thirty
(30) days in advance of each Annual Meeting prior to (but not including)
the Third Annual Meeting, and no less than five (5) days in advance of any
other meeting of the Board at which a director will be elected to sit on
the Board in a seat vacated by an AmWest Director because of death,
disability, removal, resignation, or otherwise, AmWest shall give written
notice to the other parties hereto designating the individual or
individuals to serve as AmWest Directors. For so long as AmWest and/or its
Affiliates holds at least five percent (5%) of the voting equity securities
of the Company (on a fully diluted basis), GPA agrees to vote the Common
Stock held and controlled by it and to cause the GPA Director to vote or
provide written consents in favor of such designees and to take any other
action necessary to elect such designees. The Stockholder Representatives
agree to recommend to the Independent Directors to vote or provide written
consents in favor of such designees and to take any other action necessary
to elect such designees.
(b) Three (3) Creditors' Committee Directors, one (1) Equity Committee
Director, and one (1) Independent Company Director, each as designated on
Exhibit A hereto, shall serve until the first Annual Meeting following the
Effective Date and until the successor to each such director shall be duly
elected and qualified, or until their death, disability, removal or
resignation. Until the Third Annual Meeting, the Company shall nominate for
reelection, and AmWest and GPA shall vote the Common Stock held and
controlled by them in favor of, each Independent Director designated on
Exhibit A for so long as he or she continues to serve on the Board. No less
than five (5) days in advance of any meeting of the Board at which a
director will be elected to sit on the Board in a seat vacated by an
Independent Director because of death, disability, removal, resignation or
otherwise (a "Successor Independent Director"), and no less than thirty
(30) days in advance of an Annual Meeting prior to (but not including) the
Third Annual Meeting at which the term of any Successor Independent
Director will expire, the Stockholder Representatives shall give written
notice to the other parties hereto designating the individuals to serve as
Independent Directors; except that if the Creditors' Committee or the
Equity Committee remain in effect, they shall have the right to designate
the Creditors' Committee Directors and the Equity Committee Director,
respectively, or the individuals to fill vacancies thereof, by giving
written notice to the other parties hereto in accordance with the terms set
forth above and provided that the Stockholder Representatives shall select
any Successor Independent Director to replace the Independent Company
Director from among the executive officers of the Company. Each of AmWest
and GPA agrees to vote the Common Stock held and controlled by them and to
cause the AmWest Directors and the GPA Director, respectively, to vote or
provide written consents in favor of such designees and to take any other
action necessary to elect such designees; provided that each Independent
Director shall be reasonably acceptable to AmWest at the time of his or her
initial designation.
(c) The GPA Director designated on Exhibit A hereto shall serve until
the first Annual Meeting following the Effective Date and until the
successor to such director shall be duly elected and qualified or
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<PAGE> 17
until his or her death, disability, removal, or resignation. No less than
thirty (30) days in advance of each Annual Meeting prior to (but not
including) the Third Annual Meeting, and no less than five (5) days in
advance of any other meeting of the Board at which a director will be
elected to sit on the Board in a seat vacated by the GPA Director because
of death, disability, removal, resignation or otherwise, GPA shall give
written notice to the other parties hereto designating the individual to
serve as GPA Director. Unless the rights of GPA hereunder have been
terminated pursuant to Section 6.2, AmWest agrees to vote the Common Stock
held and controlled by it, and to cause the AmWest Directors, and the
Stockholder Representatives agree to recommend to the Independent
Directors, to vote or provide written consents in favor of such designee
and to take any other action necessary to elect such designee; provided
that the GPA Director shall be reasonably acceptable to AmWest at the time
of his or her initial designation.
(d) Except as otherwise provided herein, each of AmWest, the
Stockholder Representatives, and GPA agrees to nominate or cause the
nomination of the AmWest Directors, the Independent Directors, and the GPA
Director, respectively, in accordance with the Bylaws.
(e) Notwithstanding the foregoing, no party hereto shall be obligated
to vote any shares for which the voting rights have been suspended, whether
voluntarily or involuntarily.
(f) In the event that AmWest, the Creditors' Committee or Equity
Committee (for so long as each is in existence and has the ability to
designate a director as herein provided), the Stockholder Representatives,
or GPA shall fail or refuse to designate a nominee to the Board for a
position allocated to and to be filled by such group or entity as herein
provided, such position shall not be filled and shall remain vacant unless
and until such designation shall be made as herein provided.
(g) In the event that the rights and obligations of GPA with respect
to this Agreement are terminated in accordance with Section 6.2, GPA agrees
to cause the resignation of, or provide notice to the other parties hereto
as provided in subsection (h)(i) below requesting removal of the GPA
Director, at which time the Board shall be reduced to fourteen (14)
persons.
(h) The parties hereto agree (i) to vote the Common Stock held and
controlled by them in favor of the removal from the Board, upon notice by
the group or entity having the right to designate such director under this
Section 2.1 and requesting such removal, of any person or persons
designated to the Board by such group or entity, and (ii) to vote the
Common Stock held and controlled by them (other than stock held
individually by any Stockholder Representative) and to cause (or in the
case of the Stockholder Representatives, recommend to) the directors
designated by them to vote or take such action as may be required under the
General Corporation Law or otherwise to implement the provisions of this
Agreement. The group or entity who has nominated any director in accordance
with this Agreement shall have the exclusive right to remove or replace
such director by written notice as herein provided; except that nothing in
this agreement shall be construed to limit or prohibit the removal of any
director for cause.
2.2 Until the Third Annual Meeting, at least eight of the AmWest Directors,
at least two of the Creditors' Committee Directors, the Equity Committee
Director, and the Independent Company Director shall each be Citizens of the
United States.
2.3 AmWest agrees that no AmWest Director shall be an officer or employee
of Continental.
3. VOTING ON CERTAIN MATTERS.
3.1 Any Director who is selected by, or who is a director of, Continental
shall recuse himself or herself from voting on, or otherwise receiving any
confidential information regarding, matters in connection with negotiations
between Continental and the Company (including, without limitation, negotiation
between Continental and the Company of the Alliance Agreements) and matters in
connection with any action involving direct competition between Continental and
the Company. Any Director who is selected by, or who is a director, officer or
employee of, Mesa shall recuse himself or herself from voting on, or otherwise
receiving any confidential information regarding, matters in connection with
negotiations between Mesa and the Company (including, without limitation,
negotiation between Mesa and the Company of the Alliance
4
<PAGE> 18
Agreements) and matters in connection with any action involving direct
competition between Mesa and the Company.
3.2 Until the Third Annual Meeting, the affirmative vote of the holders of
a majority of the voting power of the outstanding shares of each class of common
stock of the Company entitled to vote (excluding any shares owned by AmWest or
any of its Affiliates, but not, however, excluding shares owned, controlled or
voted by Mesa or any of its transferees that are not otherwise Affiliates of
AmWest), voting as a single class, shall be required to approve, adopt or
authorize:
(a) Any merger or consolidation of the Company with or into AmWest or
any Affiliate of AmWest;
(b) Any sale, lease, exchange, transfer, or other disposition by the
Company of all or any substantial part of the assets of the Company to
AmWest or any Affiliate of AmWest;
(c) Any transaction with or involving the Company as a result of which
AmWest or any of AmWest's Affiliates will, as a result of issuances of
voting securities by the Company (or any other securities convertible into
or exchangeable for such voting securities), acquire an increased
percentage ownership of such voting securities, except for (i) the exercise
of Warrants issued under the Plan, (ii) the conversion of Class A Common
held by it to Class B Common, or (iii) otherwise pursuant to a transaction
in which all holders of Class B Common may participate on a pro rata basis
at the same price per share and on the same economic terms, including,
without limitation, (A) a tender or exchange offer for all shares of the
Common Stock and (B) a Public Offering; or
(d) Any related series or combination of transactions having or which
will have, directly or indirectly, the same effect as any of the foregoing.
At the request of any party proposing such a transaction and subject to
approval by the Board, the Company agrees to put to a vote of the shareholders
the approval of any transaction referred to in subparagraphs (a) through (d)
above (excluding the excepted transactions referred to in clauses (i), (ii), and
(iii) of subparagraph (c)) at the next regular or any duly convened special
meeting of the shareholders of the Company. The voting requirements specified
above shall not be applicable to a proposed action which has been approved or
recommended by at least three Independent Directors.
4. FURTHER COVENANTS.
4.1 Neither AmWest nor any partner or Affiliate of AmWest or of any partner
of AmWest shall sell or otherwise transfer any Common Stock (other than to an
Affiliate of the transferor) if, after giving effect thereto and to any related
transaction, the total number of shares of Class B Common beneficially owned by
the transferor is less than twice the total number of shares of Class A Common
beneficially owned by the transferor; provided, however, that nothing contained
in this Section 4.1 shall prohibit any owner of Common Stock from selling or
otherwise transferring, in a single transaction or related series of
transactions, all shares of Common Stock owned by it, subject to the remaining
provisions of this Agreement.
4.2 AmWest agrees that its constituent documents shall at all times require
that this Agreement be binding upon all general and limited partners of AmWest
and any Affiliate of AmWest or such partners who hold or receive shares of the
Company or direct the voting of any shares held by AmWest, and upon any
assignees or transferees in a single transaction or a related series of
transactions of all or substantially all of the Common Stock owned by AmWest or
any of its partners or Affiliates of AmWest or any of their partners; except
that this Agreement shall not be binding (x) upon and Fidelity Fund or Lehman
with respect to Class B Common and warrants to purchase Class B Common acquired
by them contemporaneous with the consummation of the Plan pursuant to an
assignment or transfer from AmWest, or (y) upon any assignee or transferee who
acquires such Common Stock pursuant to (i) a tender or exchange offer open to
all shareholders of the Company on a pro rata basis at the same price per share
and on the same economic terms, (ii) a distribution registered under the
Securities Act of 1933 (as amended, the "Securities Act") (a "Public Offering"),
or (iii) a transfer made pursuant to Rule 144 (as amended, "Rule 144") under the
Securities Act. AmWest shall not sell or transfer (including upon dissolution of
AmWest) any Common Stock held by it to any of its general or limited partners,
to any Fidelity Fund, or to any Affiliate of AmWest or such partners and
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<PAGE> 19
AmWest shall not sell or transfer all or substantially all of the Common Stock
held by it in a single transaction or a related series of transactions, except
in accordance with clauses (i), (ii) or (iii), above, unless and until it causes
any assignee or transferee to provide a written acknowledgment to the other
parties hereto that it accepts and is bound and subject to the terms of this
Agreement.
4.3 AmWest covenants and agrees that it shall not sell or transfer, in a
single transaction or a related series of transactions, shares of Common Stock
representing fifty one percent (51%) or more of the combined voting power of all
shares of Common Stock then outstanding, other than (i) pursuant to or in
connection with a tender or exchange offer for all shares of Common Stock and
for the benefit of all holders of Class B Common on a pro rata basis at the same
price per share and on the same economic terms, (ii) to any Affiliate of AmWest,
(iii) to any Affiliate of AmWest's partners, (iv) pursuant to a bankruptcy or
insolvency proceeding, (v) pursuant to a judicial order, legal process,
execution or attachment, or (vi) in a Public Offering.
4.4 Within ten (10) days of the Effective Date, AmWest shall file with the
Securities and Exchange Commission, a Schedule 13D pursuant to Regulation 13D-G
("Regulation 13D-G") under the Securities Exchange Act of 1934 (as amended, the
"Exchange Act"), and shall amend such filing as required by Regulation 13D-G.
Each other party hereto covered by such filing covenants and agrees to promptly
provide to AmWest all information pertaining to such party and necessary to make
such amendments and to notify AmWest of any changes in facts or circumstances
pertaining to such party that would require any amendments under Regulation
13D-G.
4.5 AmWest agrees that it shall not cause any amendment to the provisions
of the Restated Certificate of Incorporation or the Bylaws or otherwise take any
action that supersedes or materially adversely affects or impairs the rights and
obligations of the parties under this Agreement or is contrary to the provisions
of this Agreement.
4.6 (a) Each certificate evidencing shares of Common Stock issued to AmWest
or any of its partners, GPA and any of their respective Affiliates, and any
assignee or transferee bound by the terms hereof, including shares of Common
Stock issued in connection with the exercise of any warrant, so long as such
Common Stock is held by them and prior to the termination or expiration of this
Agreement, shall be conspicuously stamped or marked with a legend including
substantially as follows:
THE RIGHTS AND OBLIGATIONS OF THE HOLDER OF THIS CERTIFICATE
SHALL BE SUBJECT TO THE TERMS AND PROVISIONS OF THAT CERTAIN
STOCKHOLDERS' AGREEMENT DATED , 1994, COPIES OF
WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF AMERICA WEST
AIRLINES, INC.
and each such certificate, for so long as such certificate is held by AmWest or
any of its partners and any of their respective Affiliates and any assignee or
transferee bound by the terms hereof and prior to the termination or expiration
of this Agreement, shall include in such legend the following:
THIS CERTIFICATE AND ANY INTEREST HEREIN MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH
THE AFORESAID STOCKHOLDERS' AGREEMENT.
(b) All certificates evidencing shares of Common Stock and warrants of
the Company that have not been registered pursuant to the Securities Act of
1933, as amended, and that are not exempt from registration under Section
1145 of the Bankruptcy Code, shall at all times be conspicuously stamped or
marked with a legend including substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE
RULES AND REGULATIONS THEREUNDER (THE "SECURITIES ACT") OR UNDER
THE SECURITIES LAWS OF ANY STATE; AND SUCH SECURITIES MAY NOT BE
SOLD OR TRANSFERRED OTHER THAN IN ACCOR-
6
<PAGE> 20
DANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR AN
EXEMPTION THEREFROM AND FROM ANY APPLICABLE STATE SECURITIES LAWS.
(c) Upon the termination of this Agreement, the Company shall, without
charge and upon surrender of certificates by the holders thereof and
written request cancel all certificates evidencing shares of Common Stock
bearing the legend described in subparagraph (a) above and issue to the
holders thereof replacement certificates that do not bear such a legend for
an equal number of shares held by such holders. Upon the transfer of any
Common Stock bearing the legend described in subparagraph (a) above to a
party not bound by and subject to this Agreement, the Company shall,
without charge and upon the surrender of certificates by the holders
thereof and written request cancel all certificates evidencing such shares
of Common Stock and issue to the transferee thereof replacement
certificates that do not bear such a legend.
4.7 During the term of this Agreement, AmWest shall not cause the issuance
of any preferred stock that would (a) increase the number of directors in excess
of the number provided in Section 2.1 (except for increases caused by a
provision allowing holders of preferred stock to elect additional directors in
the event of nonpayment of dividends) or (b) eliminate or reduce the number of
Creditors' Committee Directors, Equity Committee Director, Independent Company
Director, or GPA Director.
5. RIGHTS UPON BREACH.
5.1 Each party hereto recognizes and agrees that a violation of any term,
provision, or condition of this Agreement may cause irreparable damage to the
other parties which is difficult or impossible to quantify or ascertain and that
the award of any sum of damages may not be adequate relief to such other
parties. Each party hereto therefore agrees that in the event of any breach of
this Agreement, the other party or parties shall, in addition to any remedies at
law which may be available, have the right to obtain appropriate equitable
(including, but not limited to, injunctive) relief. All remedies hereunder shall
be cumulative and not exclusive.
5.2 In addition to any other remedies available at law or in equity, each
party hereto agrees that the Company shall have the right (a) to withhold
transfer, and to instruct any transfer agent for securities of the Company to
withhold transfer, of any certificates evidencing shares of Common Stock held by
AmWest or any partner or Affiliate of AmWest or transferee if the Company
reasonably believes that such transfer would not be in material compliance with
the terms and provisions of this Agreement, unless the transferee provides to
the Company an opinion of legal counsel reasonably acceptable to the Company
that such transfer will be in material compliance with the terms and provisions
hereof, and (b) to require any person requesting such transfer to provide such
information as may reasonably be requested by the Company regarding ownership of
securities, affiliations, if any, between AmWest and the transferee and such
other matters pertaining to the transfer as may be appropriate to enable the
Company to determine the compliance of the proposed transfer of securities with
the terms and provisions of this Agreement.
6. TERMINATION.
6.1 This Agreement shall automatically terminate without any action by any
party on the day immediately preceding the Third Annual Meeting and shall not be
extended except in accordance with Section 7.3. Upon such termination, the
rights and obligations of each party hereunder shall terminate and the
provisions of this Agreement shall be of no force and effect; provided that no
such termination shall relieve any person or entity from liability for breach or
default of this Agreement prior to such termination.
6.2 GPA's rights and obligations under this Agreement (other than its
obligations under Section 2.1(g)) shall terminate immediately and without notice
upon the earlier of (a) termination of this Agreement under Section 6.1, (b) the
sale or transfer by GPA of equity securities of the Company resulting in the
holding by GPA of less than two percent (2%) of the voting equity securities of
the Company (on a fully diluted basis), or (c) any occurrence, other than as
described in clause (b) above, resulting in the holding by GPA of less than two
percent (2%) of the voting equity securities of the Company (on a fully diluted
basis) if (i) the Company files a Form 10-Q under the Exchange Act, or other
written report or statement, that is delivered to
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<PAGE> 21
GPA and a copy to the party designated in Section 7.1, reflecting information as
to the Company's total issued and outstanding capital stock as of a date therein
specified (the "Determination Date") from which GPA can determine whether it
holds less than two percent (2%) of the voting equity securities of the Company
(on a fully diluted basis) and (ii) GPA fails to acquire (by purchase, or
otherwise) sufficient voting equity securities of the Company such that it
continues to hold less than two percent (2%) of the voting equity securities of
the Company (on a fully diluted basis) determined as of the Determination Date
for thirty-five (35) days after delivery of such Form 10-Q, or provision of such
report or statement to GPA. GPA acknowledges that the Company's continuing with
its existing procedures for the distribution of Form-10Qs constitutes delivery
to GPA within the meaning of this Section 6.2.
7. MISCELLANEOUS.
7.1 All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
or by facsimile transmission or mailed (first class postage prepaid) or by
prepaid express courier at the following addresses or facsimile numbers:
<TABLE>
<S> <C>
If to AmWest: AmWest Partners, L.P.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Attention: James G. Coulter
Fax Number: (817) 871-4010
with a copy to: Arnold & Porter
1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
Attention: Richard P. Schifter
Fax Number: (202) 872-6720
and a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Lyle G. Ganske
Fax Number: (216) 586-7864
If to GPA: GPA Group plc
GPA House
Shannon, Ireland
Attention: Patrick H. Blaney
Fax Number: 353 61 360220
with a copy to: Paul, Hastings, Janofsky & Walker
399 Park Avenue, 31st Floor
New York, New York 10022
Attention: Marguerite R. Kahn
Fax Number: (212) 319-4090
If to____________:
If to____________:
If to____________:
If to the Company: America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
Attention: General Counsel
Fax Number: (602) 693-5904
</TABLE>
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<PAGE> 22
<TABLE>
<S> <C>
with a copy to: Andrews & Kurth, L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: David G. Elkins
Fax Number: (713) 220-4285
</TABLE>
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 7.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 7.1, be deemed given upon receipt, and (iii) if
delivered by mail or by express courier in the manner described above to the
address as provided in this Section 7.1, be deemed given upon receipt (in each
case regardless of whether such notice is received by any other person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section 7.1). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice as provided in this Section 7.1 specifying such change to the
other parties hereto. Nothing in this Section 7.1 shall be deemed or construed
to alter any notice provisions contained in the Bylaws.
7.2 This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of Delaware without reference to
principles of conflicts or choice of law under which the law of any other
jurisdiction would apply.
7.3 This Agreement may only be amended, waived, supplemented, modified or
extended by a written instrument signed by authorized representatives of each
party hereto.
7.4 This Agreement shall inure to the benefit of and be binding upon each
of the parties hereto and their respective successors and permitted assigns.
7.5 This Agreement may be executed by the parties hereto in counterparts
and by telecopy, each of which shall be deemed to constitute an original and all
of which together shall constitute one and the same instrument.
7.6 If any term or provision of this Agreement shall be found by a court of
competent jurisdiction to be illegal, invalid or unenforceable to any extent,
the remainder of this Agreement shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
7.7 The parties hereto intend that in the case of any conflict or
inconsistency between this Agreement and the Restated Certificate of
Incorporation or the Bylaws, that this Agreement shall control, and therefore in
the event that any term or provision of this Agreement is rendered invalid,
illegal or unenforceable by the Restated Certificate of Incorporation or the
Bylaws, the parties agree to amend the Restated Certificate of Incorporation or
the Bylaws (as the case may be) so as to render such term or provision valid,
legal and enforceable, if and to the extent possible.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto, by their respective officers
thereunto duly authorized, have executed this Agreement as of the date first
written above.
AMWEST PARTNERS, L.P.
By: AmWest Genpar, Inc.,
its General Partner
By:________________________________
Name:
Title:
GPA GROUP PLC
By:________________________________
Name:
Title:
___________________________________
[Stockholder Representative]
___________________________________
[Stockholder Representative]
___________________________________
[Stockholder Representative]
AMERICA WEST AIRLINES, INC.
By:________________________________
Name:
Title:
10
<PAGE> 24
EXHIBIT 4.6
================================================================================
REGISTRATION RIGHTS AGREEMENT
AMONG
AMERICA WEST AIRLINES, INC.,
AMWEST PARTNERS, L.P.
AND
THE OTHER HOLDERS NAMED HEREIN
DATED AS OF , 1994
================================================================================
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PAGE
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<C> <S> <C> <C>
1. Definitions....................................................................... 2
2. Registration under the Securities Act............................................. 6
2.1 Shelf Registration Statement............................................... 6
2.2 Demand Registration........................................................ 7
2.3 Piggyback Registration..................................................... 8
2.4 Trust Indenture Act Qualification; Rating.................................. 10
2.5 Registration Terms and Procedures.......................................... 10
2.6 Underwritten Offerings..................................................... 18
2.7 Preparation; Reasonable Investigation...................................... 19
2.8 Indemnification............................................................ 19
[2.9 Liquidated Damages......................................................... 23]
3. Rule 144 and Rule 144A............................................................ 25
4. Term.............................................................................. 26
5. Amendments and Waivers............................................................ 26
6. Entire Agreement.................................................................. 27
7. No Third-Party Beneficiary........................................................ 27
8. Invalid Provisions................................................................ 27
9. Nominees for Beneficial Owners.................................................... 27
10. Notices........................................................................... 27
11. Assignment........................................................................ 29
12. Descriptive Headings.............................................................. 29
[13. Specific Performance.............................................................. 28]
14. Governing Law..................................................................... 29
15. Registration Rights to Others..................................................... 29
16. Attorney's Fees................................................................... 30
17. Limitation of Liability........................................................... 30
18. Termination of Certain Rights..................................................... 30
19. Counterparts...................................................................... 30
</TABLE>
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<PAGE> 26
SCHEDULES
SCHEDULE 1 -- ADDITIONAL NOTICES
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<PAGE> 27
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of , 1994 among AMERICA
WEST AIRLINES, INC., a Delaware corporation (including its successor, as
reorganized pursuant to Chapter 11, Title 11 of the United States Bankruptcy
Code (the "Bankruptcy Code"), the "Company"), AMWEST PARTNERS, L.P., a Texas
limited partnership ("Investor"), and the funds or accounts managed or advised
by Fidelity Management Trust Company or its affiliates listed on the signature
pages hereto (each, a "Fidelity Fund" and collectively, "Fidelity").
W I T N E S S E T H :
WHEREAS, the Company is a Debtor and Debtor-in-Possession in the case (the
"Chapter 11 Case") filed in the United States Bankruptcy Court for the District
of Arizona (the "Bankruptcy Court"), entitled "In re America West Airlines,
Inc., Debtor," Chapter 11 Case No. 91-07505-PHX-RGM, under the Bankruptcy Code;
WHEREAS, the Company and Investor have entered into that certain Third
Revised Investment Agreement dated as of April 21, 1994 (as it may be further
amended, modified or supplemented from time to time, the "Investment Agreement")
and the Company and Fidelity have entered into a Note Purchase Agreement dated
as of , 1994 (as amended, modified or supplemented from time to
time, the "Note Purchase Agreement"), which agreements among other things
provide for the purchase of the Securities (as defined in the Investment
Agreement) in connection with and as part of the transactions to be consummated
pursuant to the confirmation of a Plan of Reorganization (as amended, modified
or supplemented from time to time) of the Company in the Chapter 11 Case (the
"Plan of Reorganization");
WHEREAS, as a condition to Investor's obligations to consummate the
transactions contemplated by the Investment Agreement, the Company has agreed to
file a shelf registration statement with respect to the Securities issued or
issuable to Investor, Fidelity and their respective Affiliates [and such shelf
registration shall have been declared effective on or prior to the Effective
Date];
WHEREAS, by Order dated , 1994, the Bankruptcy Court confirmed
the Plan of Reorganization; and
WHEREAS, the Investment Agreement, the Note Purchase Agreement and the Plan
of Reorganization contemplate that the Company, Investor, and Fidelity will
enter into certain agreements, including, without limitation, this Registration
Rights Agreement;
NOW THEREFORE, the parties hereby agree as follows:
1. Definitions. Capitalized terms used herein that are not otherwise
defined herein shall have the meanings ascribed to them in the Investment
Agreement. In addition, the following terms, as used herein, have the following
meanings (all terms defined herein in the singular to have the correlative
meanings when used in the plural and vice versa):
"Agreement" means this Registration Rights Agreement, as the same shall be
amended, modified or supplemented from time to time.
"Chapter 11 Case" has the meaning ascribed to it in the preamble.
"Demand Registration" means any registration of Registrable Securities
under the Securities Act effected in accordance with Section 2.2.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute, and the rules and regulations
promulgated thereunder.
"Fidelity Funds" has the meaning ascribed to it in the preamble.
"Holders" means the holders of record of Registrable Securities.
"Indemnified Party" has the meaning ascribed to it in Section 2.9(a).
<PAGE> 28
"Indenture" means that certain Indenture between the Company and
, as Trustee, dated as of , 1994 and relating to
$ principal amount of the Notes.
"Loss" has the meaning ascribed to it in Section 2.9(a).
"Material Adverse Change" means (i) any general suspension of trading in,
or limitation on, prices for securities on any national securities exchange or
in the over-the-counter market in the United States of America, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States of America, (iii) the commencement of a war, armed
hostilities or other international or national calamity involving the United
States of America, (iv) any limitation (whether or not mandatory) by any
governmental authority on, or any other event which is reasonably likely to
significantly affect the extension of credit by banks or other financial
institutions, (v) any material adverse change in the Company's business,
condition (financial or otherwise) or prospects or (vi) a % or more decline
in the Dow Jones Industrial average or the Standard and Poor's Index of 400
Industrial Companies, in each case from the date a Notice of Demand is made.
"Notes" has the meaning ascribed to it in the Note Purchase Agreement.
"Notice of Demand" means a request by Investor or any Fidelity Fund, as the
case may be, pursuant to Section 2.2 that the Company effect the registration
under the Securities Act of all or part of the Registrable Securities held by it
and its Affiliates and, at its option, any direct or indirect transferee of
Registrable Securities held by it, and any other Holder that requests to have
its Registrable Securities included in such registration pursuant to Section
2.2(c). A Notice of Demand shall specify (i) the type and amount of Registrable
Securities proposed to be registered, (ii) the intended method or methods and
plan of disposition thereof and (iii) whether or not such requested registration
is to be an underwritten offering.
"Participating Holders" means, with respect to any registration of
Registrable Securities by the Company pursuant to this Agreement, the Requesting
Holder and any other Holders that are entitled to participate in, and are
participating in or seeking to participate in, such registration.
"Piggyback Registration" means any registration of Registrable Equity
Securities under the Securities Act effected in accordance with Section 2.3.
"Piggyback Registration Notice" has the meaning ascribed to it in Section
2.3(a).
"Registrable Debt Securities" means the Notes sold to any Fidelity Fund or
any of their respective assignees or Affiliates pursuant to the Note Purchase
Agreement or subsequently acquired by any transferee (direct or indirect) of
such Persons. As to any particular Registrable Debt Securities, once issued such
securities shall cease to be Registrable Debt Securities when (a) such
securities shall have been distributed pursuant to the Plan of Reorganization
without registration or qualification under the Securities Act or any similar
state law then in force pursuant to Section 1145 of the Bankruptcy Code, (b) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with the plan of distribution set forth in such
registration statement, (c) such securities shall have been distributed in
accordance with Rule 144 or (d) such securities shall have been otherwise
transferred, new certificates therefor not bearing a legend restricting further
transfer shall have been delivered in exchange therefor by the Company and
subsequent disposition of such securities shall not require registration or
qualification under the Securities Act or any similar state law then in force.
"Registrable Equity Securities" means the equity securities acquired by
Investor, any Fidelity Fund or any of their respective assignees or Affiliates
pursuant to the Plan or subsequently acquired by any transferee (direct or
indirect) of such Persons, including, without limitation, (a) any shares of
Class A Common or Class B Common issued or issuable on the Effective Date, (b)
any Warrant, (c) any shares of Class B Common issued or issuable upon the
exercise of the Warrants and (d) any securities issued or issuable with respect
to any such Class A Common, Class B Common or Warrants by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Equity Securities, once issued such securities shall cease to be
Registrable Equity Securities when (i) such securities shall have been
distributed pursuant to the Plan of
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<PAGE> 29
Reorganization without registration or qualification under the Securities Act or
any similar state law then in force pursuant to Section 1145 of the Bankruptcy
Code, (ii) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with the plan of distribution set forth in
such registration statement, (iii) such securities shall have been distributed
in accordance with Rule 144 or (iv) such securities shall have been otherwise
transferred, new certificates therefor not bearing a legend restricting further
transfer shall have been delivered in exchange therefor by the Company and
subsequent disposition of such shares shall not require registration or
qualification under the Securities Act or any similar state law then in force.
"Registrable Securities" means the Registrable Debt Securities and the
Registrable Equity Securities.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
(a) all registration, filing, securities exchange listing, rating agency and
National Association of Securities Dealers fees, (b) all registration, filing,
qualification and other fees and expenses of complying with securities or blue
sky laws and any legal fees and expenses incurred in connection with the blue
sky qualifications of the Registrable Securities and the determination of their
eligibility for investment under the laws of any jurisdiction, (c) all word
processing, duplicating, printing, messenger and delivery expenses, (d) the fees
and disbursements of counsel for the Company and of its independent public
accountants, including, without limitation, the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, (e) the fees and disbursements incurred by the Holders of the
Registrable Securities being registered (including, without limitation, the fees
and disbursements for one counsel or firm of counsel selected by the Requisite
Holders of Registrable Debt Securities and Registrable Equity Securities), (f)
premiums and other costs of policies of insurance against liabilities arising
out of the public offering of the Registrable Securities being registered to the
extent the Company elects to obtain such insurance, (g) any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but excluding underwriting discounts and commissions and transfer
taxes, if any, relating to the Registrable Securities being registered) and (h)
fees and expenses of other Persons retained or employed by the Company.
"Requesting Holder" means the party providing a Notice of Demand to the
Company pursuant to Section 2.2(a).
"Requisite Holders" means, (a) with respect to any Registrable Equity
Securities, any Holder or Holders of a majority in interest of the Registrable
Equity Securities included or to be included in such registration and (b) with
respect to any Registrable Debt Securities, any Holder or Holders of a majority
of the aggregate principal amount of the Registrable Debt Securities included or
to be included in such registration.
"Rule 144" means Rule 144 promulgated by the SEC under the Securities Act,
and any successor provision thereto.
"Rule 144A" means Rule 144A promulgated by the SEC under the Securities
Act, and any successor provision thereto.
"SEC" means the United States Securities and Exchange Commission, or any
successor governmental agency or authority thereto.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor statute, and the rules and regulations promulgated
thereunder.
"Shelf Period" has the meaning ascribed to it in Section 2.1(b).
"Shelf Registration Statement" has the meaning ascribed to it in Section
2.1.
"Successor" means, with respect to any Person, a successor to such Person
by merger, consolidation, liquidation or other similar transaction.
"Suspension Notice" has the meaning ascribed to it in Section 2.5(h).
"Suspension Period" has the meaning ascribed to it in Section 2.5(h).
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"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
sec.sec. 77aaa-77bbbb), as amended from time to time, or any successor
statute, and the rules and regulations promulgated thereunder.
2. Registration under the Securities Act.
2.1 Shelf Registration Statement.
(a) Filing of Shelf Registration Statement. If, as of the Effective
Date, (i) the Company shall not have filed, or the SEC shall not have
declared (or there shall not remain) effective, a shelf registration
statement covering all of the Registrable Securities (the "Shelf
Registration Statement") or (ii) the securities covered under the Shelf
Registration Statement shall not qualify under all blue sky or other
securities laws, the Company shall, as appropriate, promptly file a Shelf
Registration Statement with the SEC and use [commercially reasonable] [its
best] efforts to cause a Shelf Registration Statement to be declared
effective as soon as practicable and to qualify such securities under all
blue sky and other securities laws as soon as practicable.
(b) Continuous Effectiveness of Shelf Registration Statement. Once
the Shelf Registration Statement has been filed and declared effective, the
Company shall use [commercially reasonable] [its best] efforts to cause the
Shelf Registration Statement to remain continuously effective until the
earlier of (i) the third (3rd) anniversary of the Effective Date and (ii)
the date on which all of the Registrable Securities covered by such Shelf
Registration Statement have been sold, but in no event prior to the
expiration of the applicable period referred to in Section 4(3) of the
Securities Act and Rule 174 thereunder (the "Shelf Period"); provided,
however, that (x) the Company may (no more than twice during any twelve
(12) month period and for a period not to exceed forty-five (45) days)
suspend use of the Shelf Registration Statement at any time if the
continued effectiveness thereof would require the Company to disclose a
material transaction, which disclosure the Board of Directors of the
Company shall have determined in good faith is not in the best interests of
the Company and its stockholders and (y) the Company may suspend use of the
Shelf Registration Statement during any period (not to exceed forty-five
(45) days) if each of the Company, Investor and each Fidelity Fund agrees
in writing to such suspension for such period.
(c) Underwritten Offering. If Investor and Fidelity so elect, the
offering of Registrable Securities pursuant to the Shelf Registration
Statement shall be in the form of an underwritten offering, with such
book-running managing underwriter or underwriters as they shall jointly
select with the approval of the Company, such approval not to be
unreasonably withheld.
2.2 Demand Registration.
(a) Registration on Request. Except as provided in subsection (b)
below,
(i) at any time after the Shelf Period, Investor may provide the
Company with a Notice of Demand[; and
(ii) if at any time during the Shelf Period the Shelf Registration
Statement is not effective for any reason (other than under the
circumstances and during the periods permitted by the proviso to Section
2.1(b)), each of Investor and Fidelity may, at any time and from time to
time, provide the Company with up to two (2) additional Notices of
Demand.]
Upon receipt of a Notice of Demand, the Company shall use [commercially
reasonable] [its best] efforts to effect at the earliest practicable date
the registration under the Securities Act of the Registrable Securities
that the Company has been so requested to register (whether pursuant to the
Notice of Demand or pursuant to Section 2.2(c)), for disposition in
accordance with the intended method or methods of disposition specified in
the Notice of Demand or such other notice.
(b) Limitations on Demand Registration. The Company shall not be
obligated to take any action to effect any registration pursuant to this
Section 2.2: (i) after the Company has, in accordance with the provisions
of Section 2.5(c), effected [(A) one (1) registration of Registrable
Securities with respect to
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<PAGE> 31
a registration requested pursuant to Section 2.2(a)(i) and (B) four (4)
registrations of Registrable Securities with respect to a registration
requested pursuant to Section 2.2(a)(ii); (ii) during any period (occurring
no more than twice during any twelve (12) month period and not to exceed
forty-five (45) days) in which such registration would require the Company
to disclose a material transaction, which disclosure the Board of Directors
of the Company shall have determined in good faith is not in the best
interests of the Company and its stockholders; or (iii) during any period
(not to exceed forty-five (45) days) if each of the Company, Investor and
each Fidelity Fund agrees in writing to suspend such registration for such
period.
(c) Notice to certain non-Requesting Holders. Upon receipt of any
Notice of Demand from a Requesting Holder, the Company will give prompt
(but in any event within ( ) days after such receipt) notice
to all Holders of Registrable Securities of such Notice of Demand and of
such Holders' rights under this Section 2.2. Upon the request of any such
Holder made within ( ) days after the receipt by such Holder
of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such Holder and the intended method or
methods of disposition thereof), the Company will use [commercially
reasonable] [its best] efforts to effect the registration of all
Registrable Securities which the Company has been so requested to register
pursuant to the Notice of Demand.
(d) Priority in Demand Registrations. If (i) a registration pursuant
to this Section 2.2(c) involves an underwritten offering of the securities
being registered to be distributed (on a firm commitment basis) by or
through one or more underwriters of recognized standing under underwriting
terms appropriate for such a transaction and (ii) the managing underwriter
of such underwritten offering shall inform the Company and the Requesting
Holder by letter of its belief that the amount of securities requested to
be included in such registration exceeds the amount which can be sold in
(or during the time of) such offering within a price range acceptable to
the Requesting Holder, then the Company will include in such registration
such amount of securities which the Company is so advised can be sold in
(or during the time of) such offering as follows: first, such Registrable
Securities requested to be included in such registration by the Requesting
Holder, its Affiliates and any direct or indirect transferees of its
Registrable Securities pro rata on the basis of the amount of such
securities so proposed to be sold and so requested to be included by such
parties; and second, such Registrable Securities requested to be included
in such registration by all other Holders pro rata on the basis of the
amount of such securities so proposed to be sold and so requested to be
included by such Holders.
2.3 Piggyback Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its equity securities under the Securities
Act (other than by a registration on Form S-4 or Form S-8 or any successor
or similar form then in effect and other than pursuant to Section 2.1 or
2.2) in a form and in a manner that would permit registration of the
Registrable Equity Securities, whether or not for sale for its own account,
it will give prompt (but in no event less than [thirty (30)] days prior to
the proposed date of filing the registration statement relating to such
registration) notice to all Holders of Registrable Equity Securities of the
Company's intention to do so and of such Holders' rights under this Section
2.3. Upon the request of any such Holder made within [twenty (20)] days
after the receipt by such Holder of any such notice (which request shall
specify the Registrable Equity Securities intended to be disposed of by
such Holder and the intended method or methods of disposition thereof) (the
"Piggyback Registration Notice"), the Company will use [commercially
reasonable] [its best] efforts to effect the registration under the
Securities Act of all Registrable Equity Securities which the Company has
been so requested to register by the Holders thereof, to the extent
required to permit the disposition (in accordance with the intended method
or methods thereof as aforesaid) of the Registrable Equity Securities so to
be registered, provided that if, at any time after giving notice of its
intention to register any equity securities and prior to the effective date
of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such equity securities, the Company may, at its election,
give notice of such determination to each such Holder and, thereupon, (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any
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<PAGE> 32
Registrable Equity Securities in connection with such registration (but not
from its obligation to pay all Registration Expenses in connection
therewith as provided in Section 2.5(b)), without prejudice, however, to
the right of Investor to request that such registration be effected as a
registration under Section 2.2, and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Equity Securities for the same period as the delay in registering such
other equity securities. No registration effected under this Section 2.3
shall be deemed to have been effected pursuant to Section 2.1 or 2.2 or
shall relieve the Company of its obligation to effect any registration
under such Sections.
(b) Priority in Piggyback Registrations. If (i) a registration
pursuant to this Section 2.3 involves an underwritten offering of the
securities being registered, whether or not for sale for the account of the
Company, to be distributed (on a firm commitment basis) by or through one
or more underwriters of recognized standing under underwriting terms
appropriate for such a transaction and (ii) the managing underwriter of
such underwritten offering shall inform the Company and the Holders
requesting such registration by letter of its belief that the amount of
securities requested to be included in such registration exceeds the amount
which can be sold in (or during the time of) such offering within a price
range acceptable to the Company, then the Company will include in such
registration such amount of securities which the Company is so advised can
be sold in (or during the time of) such offering as follows: first, all
securities proposed by the Company to be sold for its own account; second,
such Registrable Equity Securities requested to be included in such
registration by Investor, any Fidelity Fund or any of their respective
Affiliates pro rata on the basis of the amount of such securities so
proposed to be sold and so requested to be included by such parties; third,
such Registrable Equity Securities requested to be included in such
registration by all other Holders pro rata on the basis of the amount of
such securities so proposed to be sold and so requested to be included by
such Holders; and fourth, all other securities of the Company requested to
be included in such registration pro rata on the basis of the amount of
such securities so proposed to be sold and so requested to be included.
2.4 Trust Indenture Act Qualification; Rating. At or prior to the
date the SEC declares the Shelf Registration Statement to be effective, the
Company shall qualify the Indenture under the Trust Indenture Act, and
shall use [commercially reasonable] [its best] efforts to effect such
registration to permit the sale of the Notes thereunder in accordance with
the intended method or methods of disposition thereof. If notified by a
nationally recognized rating agency that the Notes are being rated, the
Company shall cooperate in providing information and making a presentation
to such agency in connection therewith.
2.5 Registration Terms and Procedures.
(a) Registration Statement Form. Registrations under Section 2.2
shall be on such appropriate registration forms of the SEC (i) as shall be
acceptable to the Requesting Holder (such acceptance not to be unreasonably
withheld) and (ii) as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of
disposition. The Company agrees to include in any such registration
statement all information that any Participating Holder shall reasonably
request (to the extent such information relates to such Participating
Holder).
(b) Registration Expenses. Subject to Section 2.5(f), the Company
will pay all Registration Expenses incurred in connection with a
registration to be effected (whether or not effected or deemed effected
pursuant to subsection (c) below) pursuant to Sections 2.1, 2.2 or 2.3.
(c) Effectiveness of Demand Registration. A registration will not be
deemed to have been effected under Section 2.2 unless the registration
statement with respect thereto has been declared effective by the SEC [and
remains effective for [nine (9)] months]; provided, however, that if (i)
after such registration statement has been declared effective, the offering
of Registrable Securities pursuant to such registration statement is
interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court (for reasons other
than a misrepresentation or omission by the Requesting Holder or any
Participating Holder) or (ii) the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection
with such registration have not been satisfied (for reasons other than a
wrongful or bad faith act, omission or misrepresentation by the
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<PAGE> 33
Requesting Holder or any Participating Holder), such registration statement
will be deemed not to have become effective. If a registration pursuant to
Section 2.2 is deemed not to have been effected hereunder, then the Company
shall continue to be obligated to effect a registration pursuant to such
Section.
(d) Selection of Underwriter. If, in connection with a registration
effected pursuant to Section 2.2, the Requesting Holder so elects, the
offering of Registrable Securities pursuant to such Section shall be in the
form of an underwritten offering. If the Requesting Holder so elects, it
shall select one or more nationally recognized firms of investment bankers
to act as the book-running managing underwriter or underwriters in
connection with such offering, provided that such selection shall be
subject to the consent of the Company, which consent shall not be
unreasonably withheld.
(e) Registration of Securities. Participating Holders may seek to
register different types of Registrable Securities and/or different classes
of the same type of Registrable Securities simultaneously and the Company
shall use its, and in the case of an underwritten offering, shall cause the
managing underwriter or underwriters to use [commercially reasonable] [its
best] efforts to effect such registration and sale in accordance with the
intended method or methods of disposition specified by such Holders.
(f) Withdrawal. Any Holder participating in a registration pursuant
to this Agreement shall be permitted to withdraw all or part of its
Registrable Securities from such registration at any time prior to the
effective date of the registration statement covering such securities;
provided that, in the event of a withdrawal from a registration effected
pursuant to Section 2.2, such registration shall be deemed to have been
effected for purposes of Section 2.5(c) unless (i) the Requesting Holder
and any Participating Holders shall have paid or reimbursed the Company for
the reasonable fees and expenses paid by the Company hereunder to the
extent such fees and expenses would customarily have been paid by sellers
in connection with a registration of similar securities or (ii) the
Requesting Holder elects to terminate such registration due to the
occurrence of a Material Adverse Change; provided, however, that only one
such withdrawal shall be permitted pursuant to this clause (ii).
(g) Registration Procedures. In connection with the Company's
obligations to register Registrable Securities pursuant to this Agreement,
the Company will use [commercially reasonable] [its best] efforts to effect
such registration so as to permit the sale of any Registrable Securities
included in such registration in accordance with the intended method or
methods of distribution thereof, and pursuant thereto the Company will as
expeditiously as possible:
(i) prepare and (as soon thereafter as possible) file with the SEC
the requisite registration statement containing all information required
thereby to effect such registration and thereafter use [commercially
reasonable] [its best] efforts to cause such registration statement to
become and remain effective in accordance with the terms of this
Agreement, provided that as far in advance as practicable before filing
such registration statement or any amendment, supplement or exhibit
thereto (but, with respect to the filing of such registration statement,
in no event later than ten (10) days prior to such filing), the Company
will furnish to the Participating Holders or their counsel copies of
reasonably complete drafts of all such documents proposed to be filed
(excluding exhibits, which shall be made available upon request by any
Participating Holder), and any such Holder shall have the opportunity to
object to any information contained therein and the Company will make
the corrections reasonably requested by such Holder with respect to such
information prior to filing any such registration statement, amendment,
supplement or exhibit;
(ii) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith (A) as reasonably requested by any Participating Holder to
which such registration statement relates (but only to the extent such
request relates to information with respect to such Holder) and (B) as
may be necessary to keep such registration statement effective for the
period referred to in Section 2.1(b) in the case of a Shelf Registration
Statement or [nine (9) months] in the case of a registration effected
pursuant to Section 2.2 or 2.3 (or such shorter period as shall be
necessary to complete the distribution of the securities covered
thereby, but not before the expiration of the applicable period referred
to in Section 4(3) of the Securities Act and Rule 174 thereunder), and
comply with the provisions of the
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<PAGE> 34
Securities Act with respect to the sale or other disposition of all
securities covered by such registration statement during such period
in accordance with the intended method or methods of disposition by
the seller or sellers thereof set forth in such registration
statement;
(iii) furnish to each Holder covered by, and each underwriter or
agent participating in the disposition of securities under, such
registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits and documents incorporated by
reference), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act relating to such Holder's Registrable Securities, in
conformity with the requirements of the Securities Act, and such other
documents as such Holder, underwriter or agent may reasonably request to
facilitate the disposition of such Registrable Securities;
(iv) use [commercially reasonable] [its best] efforts to register
or qualify all Registrable Securities and other securities covered by
such registration statement under (A) with respect to the Shelf
Registration Statement, all blue sky and other securities laws and (B)
with respect to a registration effected pursuant to Section 2.2, all
applicable blue sky and other securities laws, and to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition of the securities owned by such Holder, except that the
Company shall not for any such purpose be required to (a) qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this clause (iv) be
obligated to be so qualified, (b) subject itself to taxation in any such
jurisdiction [or (c) consent to general service of process in any
jurisdiction];
(v) use [commercially reasonable] [its best] efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities applicable to the Company as may be reasonably necessary to
enable the seller or sellers thereof (or underwriter or agent, if any)
to consummate the disposition of such Registrable Securities in
accordance with the plan of distribution set forth in such registration
statement;
(vi) furnish to each Holder of at least percent ( %) in
interest of Registrable Equity Securities or at least percent ( %)
in aggregate principal amount of Registrable Debt Securities covered by
such registration statement a signed counterpart, addressed to such
Holder (and underwriter or agent, if any) of:
(A) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), and
(B) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in
such registration statement,
in each case, reasonably satisfactory in form and substance to such
Holder (and underwriter or agent and their respective counsel) and
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriter or agent in underwritten public offerings of securities;
(vii) promptly notify each Holder and any underwriter or agent
participating in the disposition of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the
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<PAGE> 35
happening of any event known to the Company as a result of which, the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they were made, and promptly prepare and furnish to such Holder
(or underwriter or agent, if any) a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances under which they were made;
(viii) otherwise use [commercially reasonable] [its best] efforts
to comply with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable
(but not more than fifteen (15) months) after the effective date of the
registration statement, an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and furnish to each Holder covered by such registration
statement or any participating underwriter or agent at least five (5)
business days prior to the filing a copy of any amendment or supplement
to such registration statement or prospectus;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement;
(x) use [commercially reasonable] [its best] efforts to (A) list,
on or prior to the effective date of such registration statement, all
Registrable Equity Securities covered by such registration statement on
any securities exchange on which any of the Registrable Equity
Securities is then listed, if any or (B) have authorized for quotation
and/or listing, as applicable, on the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") of the National Market
System of NASDAQ if the Registrable Equity Securities so qualify;
(xi) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such
Registrable Securities and their respective counsel in connection with
any filings required to be made with the National Association of
Securities Dealers;
(xii) use [commercially reasonable] [its best] efforts to prevent
the issuance by the SEC or any other governmental agency or court of a
stop order, injunction or other order suspending the effectiveness of
such registration statement and, if such an order is issued, use
[commercially reasonable] [its best] efforts to cause such order to be
lifted as promptly as practicable;
[(xiii) enter into such agreements and take such other actions as
the Requisite Holders of such Registrable Securities shall reasonably
request in order to expedite or facilitate the disposition of such
Registrable Securities;]
(xiv) promptly notify each seller and the underwriter or agent, if
any:
(A) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has
been filed and, with respect to such registration statement or any
post-effective amendment thereto, when the same has become effective;
(B) of any written comments from the SEC with respect to any
filing referred to in clause (A) and of any written request by the
SEC for amendments or supplements to such registration statement or
prospectus;
(C) of the notification to the Company by the SEC of its
initiation of any proceeding with respect to, or of the issuance by
the SEC of, any stop order suspending the effectiveness of such
registration statement; and
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<PAGE> 36
(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the applicable securities or blue sky laws
of any jurisdiction;
(xv) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the distribution of such
Registrable Securities to facilitate the timely preparation and delivery
of certificates (which shall not bear any restrictive legends, other
than as required by applicable law, the Investment Agreement or the Note
Purchase Agreement) representing securities sold under a registration
statement hereunder, and enable such securities to be in such
denominations and registered in such names as such seller, underwriter
or agent may request and keep available and make available to the
Company's transfer agent, prior to the effectiveness of such
registration statement, an adequate supply of such certificates;
(xvi) not later than the effective date of such registration
statement, provide a CUSIP number for all Registrable Securities covered
by a registration statement hereunder;
(xvii) incorporate in the registration statement or any amendment,
supplement or post-effective amendment thereto such information as each
Holder, the underwriter or agent (if any) or their respective counsel
may reasonably request to be included therein with respect to any
Registrable Securities being sold by such Holder to such underwriter or
agent, the purchase price being paid therefor by such underwriter or
agent and any other terms of the offering of such Registrable
Securities;
(xviii) during any period when a prospectus is required to be
delivered under the Securities Act, make periodic filings with the SEC
pursuant to and containing the information required by the Exchange Act
(whether or not the Company is required to make such filings pursuant to
such Act);
(xix) in connection with an underwritten offering, participate, to
the extent reasonably requested by the Requisite Holders or the managing
underwriter for the offering, in customary efforts to sell the
securities under the offering, including, without limitation,
participating in "road shows."
(h) Agreements of Certain Holders. (i) Each Holder of Registrable
Securities as to which any registration is being effected shall furnish to
the Company such information regarding such Holder, the Registrable
Securities held by such Holder and the intended plan of distribution of
such securities as the Company may from time to time reasonably request in
writing in connection with such registration. If any registration statement
refers to Investor, any Fidelity Fund or any of their respective Affiliates
by name or otherwise as the holder of any securities of the Company, then
such Holder shall have the right to require [(A) the insertion therein of
language, in form and substance reasonably satisfactory to such Holder, to
the effect that the holding by such Holder of such securities is not to be
construed as a recommendation by such Holder of the investment quality of
the Company's securities covered thereby and that such holding does not
imply that such Holder will assist in meeting any future financial
requirements of the Company, or (B)] in the event that such reference to
such Holder by name or otherwise is not required by the Securities Act or
any similar federal or state blue sky statute and the rules and regulations
thereunder then in force, the deletion of the reference to such Holder.
(ii) Each Holder of Registrable Securities as to which any
registration is being effected agrees, by acquisition of such Registrable
Securities, that upon receipt of any notice (a "Suspension Notice") from
the Company of the happening of any event of the kind described in clause
(vii) of Section 2.5(g), such Holder will forthwith discontinue such
Holder's disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by clause (vii) of Section 2.5(g)[; provided, however, that in
no event shall the period (the "Suspension Period") from the date on which
such Holder receives a Suspension Notice to and including the date on which
such Holder receives copies of the supplemented or amended prospectus
contemplated by clause (vii) of Section 2.5(g) exceed twenty (20) days].
The Company shall [use commercially reasonable efforts to] take such
actions as are necessary to
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<PAGE> 37
end the Suspension Period as promptly as practicable. In the event the
Company shall give any such notice, the period referred to in clause (ii)
of Section 2.5(g) shall be extended by a number of days equal to the number
of days of the Suspension Period.
2.6 Underwritten Offerings.
(a) Underwritten Offerings in Connection with a Shelf or a Demand
Registration. If requested by the underwriters for any underwritten
offering in connection with a registration pursuant to Section 2.1 or 2.2,
the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement (i) to be satisfactory in
substance and form to the Company and to each of Investor and each Fidelity
Fund (so long as it or any of its Affiliates holds Registrable Securities
to be included in such registration) and (ii) to contain such
representations and warranties by the Company and such Holders (subject to
the last sentence of this Section 2.6(a)) and such other terms as are
generally prevailing in agreements of such type, including, without
limitation, indemnities to the effect and to the extent provided in Section
2.8. Each of Investor and each Fidelity Fund (so long as it or any of its
Affiliates holds Registrable Securities to be included in such
registration) shall be a party to such underwriting agreement and may, at
its option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for its benefit and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to
its obligations thereunder. [No Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
such Holder's Registrable Securities and such Holder's intended method of
distribution and any other representation required by law.]
(b) Underwritten Offerings in Connection with Piggyback
Registrations. If the Company at any time proposes to register any of its
equity securities under the Securities Act as contemplated by Section 2.3
and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any Participating Holder
and subject to Section 2.3(b), arrange for such underwriters to include all
of the Registrable Equity Securities to be offered and sold by such Holder
or Holders among the securities to be distributed by such underwriters. The
Holders of Registrable Equity Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the
Company and such underwriters, provided that such agreement is reasonably
satisfactory in substance and form to the Requisite Holders, and may, at
their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit of
such Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such Holders thereunder. Any
such Holder shall not be required to make any representations or warranties
to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Holder, such
Holder's Registrable Equity Securities and such Holder's intended method of
distribution and any other representation required by law.
2.7 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders of Registrable
Securities to be registered under such registration statement, their
underwriters or agents, if any, and their respective counsel and accountants
reasonable access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such Holders' and such underwriters' or agents' respective counsel,
to conduct a reasonable investigation within the meaning of the Securities Act.
2.8 Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless, to the full extent permitted by law, each Holder
participating in an offering hereunder, its directors, officers,
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<PAGE> 38
shareholders, employees, investment advisers, agents and Affiliates, either
direct or indirect (and such Affiliates', directors, officers,
shareholders, employees, investment advisers and agents), and each other
Person, if any, who controls such Persons within the meaning of the
Securities Act (each such Person, an "Indemnified Party"), from and against
any losses, claims, damages, liabilities or expenses, joint or several
(each a "Loss" and collectively, "Losses"), to which such Indemnified Party
may become subject under the Securities Act or otherwise, insofar as such
Losses (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act (including all documents incorporated therein by reference), any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company
will reimburse such Indemnified Party for any legal or any other expenses
reasonably incurred by it in connection with investigating or defending
against any such Loss, action or proceeding; provided that in any such case
the Company shall not be liable to any particular Indemnified Party to the
extent that such Loss (or action or proceeding in respect thereof) arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such
Indemnified Party specifically for inclusion therein; and provided,
further, that the Company shall not be liable in any such case to the
extent it is finally determined by a court of competent jurisdiction that
any such Loss (or action or proceeding in respect thereof) arises out of or
is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made
(i) in any such preliminary prospectus, if (A) it was the
responsibility of such Indemnified Party to provide the Person asserting
such Loss with a current copy of the prospectus and such Indemnified
Party failed to deliver or cause to be delivered a copy of the
prospectus to such Person after the Company had furnished such
Indemnified Party with a sufficient number of copies of the same prior
to the sale of Registrable Securities to the Person asserting such Loss
and (B) the prospectus corrected such untrue statement or omission; or
(ii) in such prospectus, if such untrue statement or omission is
corrected in an amendment or supplement to such prospectus and such
amendment or supplement has been delivered to the Indemnified Party
prior to the sale of Registrable Securities to the Person asserting such
Loss and the Indemnified Party thereafter fails to deliver the
prospectus as so amended or supplemented prior to or concurrently with
such sale after the Company had furnished such Indemnified Party with a
sufficient number of copies of the same [and informed the Indemnified
Party of the necessity to deliver such amendment or supplement to
purchasers of securities].
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of such securities by such Indemnified Party. The
Company shall also indemnify each other Person who participates (including
as an underwriter) in the offering or sale of Registrable Securities
hereunder, their officers and directors and each other Person, if any, who
controls any such participating Person within the meaning of the Securities
Act to the same extent as provided above with respect to Indemnified
Parties.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to Section 2.3 and as a condition to indemnifying
such sellers pursuant to this Section 2.8, that the Company shall have
received an undertaking reasonably satisfactory to it from each prospective
seller of such securities, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) of this Section
2.8) the Company, each director, officer, employee and agent of the
Company, and each other Person, if any, who controls the Company within the
meaning of the Securities Act, from and against any Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arising
out of or
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<PAGE> 39
based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such securities
were registered under the Securities Act (including all documents
incorporated therein by reference), any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission from such
registration statement, preliminary prospectus, final prospectus or summary
prospectus, or any amendment or supplement thereto required to be stated
therein or necessary to make the statements therein not misleading, if (but
only if) such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such prospective seller specifically for inclusion therein; provided,
however, that such prospective seller shall not be obligated to provide
such indemnity to the extent that such Losses result, directly or
indirectly, from the failure of the Company to promptly amend or take
action to correct or supplement any such registration statement,
prospectus, amendment or supplement based on corrected or supplemental
information provided in writing by such prospective seller to the Company
expressly for such purpose; and provided further, that the obligation to
provide indemnification pursuant to this Section 2.8(b) shall be several,
and not joint and several, among such indemnifying parties. Notwithstanding
anything in this Section 2.8(b) to the contrary, in no event shall the
liability of any prospective seller under such indemnity be greater in
amount than the amount of the proceeds received by such seller upon the
sale of its Registrable Securities in the offering to which the Losses
relate. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer, employee, agent or participating or controlling Person and shall
survive the transfer of such securities by such prospective seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in paragraph (a) or (b) of this Section 2.8, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give prompt written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under this Section 2.8, except to the extent that
the indemnifying party is actually and materially prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, the indemnifying party shall be entitled to participate
in and to assume the defense thereof [(such assumption to constitute its
acknowledgement of its agreement to indemnify the indemnified party with
respect to such matters)], jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal fees or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, in such
indemnified party's reasonable judgment, a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such
claim, such indemnified party shall be entitled to separate counsel at the
expense of the indemnifying party; and provided, further, that[, unless
there exists a conflict of interest among indemnified parties,] all
indemnified parties in respect of such claim shall be entitled to only one
counsel or firm of counsel for all such indemnified parties. In the event
an indemnifying party shall not be entitled, or elects not, to assume the
defense of a claim, such indemnifying party shall not be obligated to pay
the fees and expenses of more than one counsel or firm of counsel for all
parties indemnified by such indemnifying party in respect of such claim,
unless in the reasonable judgment of any such indemnified party a conflict
of interest may exist between such indemnified party and any other of such
indemnified parties in respect of such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel for such indemnified party or parties. No indemnifying
party shall, without the consent of the indemnified party, consent to entry
of any judgment or enter into any settlement that (i) does not include as
an unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all Losses in respect of such
claim or litigation or (ii) would impose injunctive relief on such
indemnified party. No indemnifying party shall be subject to
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<PAGE> 40
any Losses for any settlement made without its consent, which consent shall
not be unreasonably withheld.
(d) Other Indemnification. The provisions of this Section 2.8 shall
be in addition to any other rights to indemnification or contribution which
an indemnified party may have pursuant to law, equity, contract or
otherwise.
(e) Indemnification Payments. The indemnification required by this
Section 2.8 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, promptly as and when bills are
received or Losses are incurred.
(f) Contribution. If for any reason the foregoing indemnity and
reimbursement is unavailable or is insufficient to hold harmless an
indemnified party under paragraph (a) or (b) of this Section 2.8, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of any Loss (or actions or proceedings,
whether commenced or threatened, in respect thereof), including, without
limitation, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Loss, action or
proceeding, in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party
on the other. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates
to information supplied by the indemnifying party or the indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
Notwithstanding anything in this Section 2.8(f) to the contrary, no
indemnifying party (other than the Company) shall be required pursuant to
this Section 2.8(f) to contribute any amount in excess of the amount by
which the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the Losses of the
indemnified parties relate exceeds the amount of any damages which such
indemnifying party has otherwise been required to pay by reason of such
untrue statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.
[2.9 Liquidated Damages.
(a) If the Company shall not have filed, or the SEC shall not have
declared effective, a Shelf Registration Statement as of the Effective
Date, the Company shall pay liquidated damages to each Holder covered or to
be covered by such registration statement in an amount equal to (i) in the
case of Registrable Debt Securities, $.10 per $1,000 outstanding principal
amount of such Registrable Debt Securities and (ii) in the case of
Registrable Equity Securities, $. per share (or, in the case of any
Warrant, $. per share based on the number of shares issuable upon exercise
of the Warrant) for each week specified in subsection (g) below.
(b) If the late filing or late declaration of effectiveness referred
to in clause (a) above shall not have been cured within ninety (90) days
after the Effective Date, the daily liquidated damages set forth in clause
(a) above shall increase by an amount equal to (i) in the case of
Registrable Debt Securities, $.15 per $1,000 outstanding principal amount
of such Registrable Debt Securities and (ii) in the case of Registrable
Equity Securities, $. per share (or in the case of any Warrant, $. per
share based on the number of shares issuable upon exercise of the Warrant)
for each week specified in subsection (g) below.
(c) If the late filing or late declaration of effectiveness referred
to in clause (a) above shall not have been cured within one hundred and
eighty (180) days after the Effective Date, the daily liquidated damages
set forth in clause (a) above shall increase by an amount equal to (i) in
the case of Registrable Debt Securities, $.20 per $1,000 outstanding
principal amount of such Registrable Debt Securities and (ii) in the case
of Registrable Equity Securities, $. per share (or in the case of any
Warrant, $. per share based on the number of shares issuable upon exercise
of the Warrant) for each week specified in subsection (g) below.
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<PAGE> 41
(d) If a stop order is imposed or if for any other reason the
effectiveness of the Shelf Registration Statement is suspended during the
period specified in the first sentence of Section 2.1(b), the Company shall
pay liquidated damages to each Holder covered or to be covered by such
registration statement in an amount equal to (i) in the case of Registrable
Debt Securities, $.10 per $1,000 outstanding principal amount of such
Registrable Debt Securities and (ii) in the case of Registrable Equity
Securities, $. per share (or in the case of any Warrant, $. per share
based on the number of shares issuable upon exercise of the Warrant) for
each week specified in subsection (g) below.
(e) If the stop order or other suspension of effectiveness of the
Shelf Registration Statement referred to in clause (d) above shall not have
been cured within ninety (90) days after such stop order was imposed or the
effectiveness of the Shelf Registration Statement was otherwise suspended,
the daily liquidated damages set forth in clause (d) above shall increase
by an amount equal to (i) in the case of Registrable Debt Securities, $.15
per $1,000 outstanding principal amount of such Registrable Debt Securities
and (ii) in the case of Registrable Equity Securities, $. per share (or in
the case of any Warrant, $. per share based on the number of shares
issuable upon exercise of the Warrant) for each week specified in
subsection (g) below.
(f) If the stop order or other suspension of effectiveness of the
Shelf Registration Statement referred to in clause (d) above shall not have
been cured within one hundred and eighty (180) days after such stop order
was imposed or the effectiveness of the Shelf Registration Statement was
otherwise suspended, the daily liquidated damages set forth in clause (d)
above shall increase by an amount equal to (i) in the case of Registrable
Debt Securities, $.20 per $1,000 outstanding principal amount of such
Registrable Debt Securities and (ii) in the case of Registrable Equity
Securities, $. per share (or in the case of any Warrant, $. per share
based on the number of shares issuable upon exercise of the Warrant) for
each week specified in subsection (g) below.
(g) The liquidated damages payable to any Holder set forth in this
Section 2.9 shall begin accruing on the date on which the event triggering
such liquidated damages occurs and shall cease to accrue (i) with respect
to clauses (a) through (c) above, on the earlier of the date after the SEC
declares the Shelf Registration Statement to be effective and the date
after the SEC declares effective a registration statement effected pursuant
to Section 2.2 covering such Holder's Registrable Securities and (ii) with
respect to clauses (d) through (f) above, on the date after reinstatement
of the effectiveness of the Shelf Registration Statement. The Company will
pay the liquidated damages due with respect to any Registrable Securities
at the end of each month during which such damages accrue. Liquidated
damages shall be paid to the Holders entitled to receive such liquidated
damages by wire transfer in immediately available funds to the accounts
designated by such Holders.
(h) The parties hereto agree that (i) the liquidated damages provided
for in this Section 2.9 constitute a reasonable estimate of the damages
that will be suffered by each Holder covered or to be covered by the Shelf
Registration Statement by reason of the failure of the Shelf Registration
Statement to be filed, to be declared effective and to remain effective in
accordance with this Agreement and (ii) such liquidated damages shall be
the sole remedy of each such Holder with respect to the matters set forth
in this Section 2.9.]
3. Rule 144 and Rule 144A. (a) The Company will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder and will take such further action
as Investor and/or any Fidelity Fund may reasonably request, all to the extent
required from time to time to enable Investor and/or such Fidelity Fund to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144, (ii) Rule 144A or (iii)
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
Investor and/or any Fidelity Fund, the Company will deliver to Investor and/or
such Fidelity Fund a written statement as to whether it has complied with such
requirements and will, at its expense, forthwith upon the request of Investor
and/or such Fidelity Fund, deliver to Investor and/or such Fidelity Fund a
certificate, signed by the Company's principal financial officer, stating (A)
the Company's name, address and telephone number (including area code), (B) the
Company's Internal Revenue Service identification number, (C) the
15
<PAGE> 42
Company's SEC file number, (D) the amount of shares of each class of capital
stock outstanding as shown by the most recent report or statement published by
the Company, and (E) whether the Company has filed the reports required to be
filed under the Exchange Act for a period of at least ninety (90) days prior to
the date of such certificate and in addition has filed the most recent annual
report required to be filed thereunder.
(b) If at any time the Company is not required to file reports in
compliance with either Section 13 or Section 15(d) of the Exchange Act, the
Company at its expense will, forthwith upon the request of Investor and/or
any Fidelity Fund, (i) make available adequate current public information
with respect to the Company within the meaning of paragraph (c)(2) of Rule
144 and (ii) deliver the information required by Section (d) of Rule 144A
(such information to be "reasonably current" within the meaning of Section
(d)(4)(ii) of Rule 144A).
4. Term. This Agreement shall enter into force on the date hereof and
shall continue in full force and effect until the [sixth (6th)] [twelfth (12th)]
anniversary of the date hereof.
5. Amendments and Waivers. This Agreement may be amended, supplemented or
modified at any time; provided that (i) each of Investor and each Fidelity Fund
(so long as it or any of its Affiliates holds Registrable Securities), (ii) each
Holder of at least percent ( %) in interest of Registrable Equity
Securities and percent ( %) in aggregate principal amount of
Registrable Debt Securities then outstanding and (iii) the Company has provided
its written consent to such amendment, supplement or modification. Any term or
condition of this Agreement may be waived at any time by the party that is
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same term or condition of this Agreement on any
future occasion.
6. Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter hereof
(including, without limitation, Section 11 of the Investment Agreement) and
contains the sole and entire agreement between the parties hereto with respect
to the subject matter hereof.
7. No Third-Party Beneficiary. The terms and provisions of this Agreement
are intended solely for the benefit of each party, their respective Successors
or permitted assigns and it is not the intention of the parties to confer
third-party beneficiary rights upon any other Person other than (i) any
Affiliate of Investor or Fidelity, (ii) any transferee, direct or indirect, of
any of the Registrable Securities held by Investor or Fidelity or (iii) any
other Person entitled to notice of the registration of Registrable Securities
under Sections 2.2(c) or 2.3(a), to indemnity under Section 2.8 [or to
liquidated damages under Section 2.9].
8. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
9. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of request or other action by any Holder or
Holders pursuant to this Agreement or any determination of any amount of shares
of Registrable Securities held by any Holder or Holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities. For purposes of this Agreement, "beneficial ownership" and
"beneficial owner" refer to beneficial ownership as defined in Rule 13d-3
(without regard to the 60-day provision in paragraph (d)(1)(i) thereof) under
the Exchange Act.
16
<PAGE> 43
10. Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to the Company, to:
America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
Attention: William A. Franke and Martin J. Whalen
Fax No.: (602) 693-5904
If to Investor, to:
AmWest Partners, L.P.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Attention: James G. Coulter
Fax No.: (817) 871-4010
If to Fidelity, to:
Fidelity Management Trust Company
82 Devonshire Street, MS F7E
Boston, Massachusetts 02109
Attention: Daniel S. Harmetz
Fax No.: (617) 227-2536
and to:
Fidelity Management Trust Company
82 Devonshire Street, MS F7D
Boston, Massachusetts 02109
Attention: Wendy Schnipper-Clayton, Esq.
Fax No.: (617) 570-7688
with a copy to:
Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109-2881
Attention: Laura Hodges Taylor
Fax No.: (617) 523-1231
With respect to any other holder of Registrable Securities entitled to
receive notice, requests or other communications hereunder, such notices,
requests and other communications shall be sent to the addresses and telecopy
numbers set forth in SCHEDULE 1 hereto (as it may be amended, modified or
supplemented from time to time). All such notices, requests and other
communications will (i) if delivered personally to the address as provided in
this Section 10, be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section 10, be deemed
given upon receipt, and (iii) if delivered by mail in the manner described above
to the address as provided in this Section 10, be deemed given upon receipt (in
each case regardless of whether such notice, request or other communication is
received by any other Person to whom a copy of such notice is to be delivered
pursuant to this Section 10). Any Person from time to time may change its
address, facsimile number or other information for the purpose of notices to
that Person by giving notice in accordance with this Section 10 specifying such
change to the Company and the Investor.
17
<PAGE> 44
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties and their respective Successors
(including, in the case of the Company, the Company as reorganized pursuant to
the Plan of Reorganization) and permitted assigns. In addition, each of Investor
and Fidelity may assign [(by written instrument)] any of its rights hereunder
(in whole or in part) to one or more Affiliates or to one or more direct or
indirect transferees of its Registrable Securities.
12. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for convenience of reference only
and do not define or limit the provisions hereof or otherwise affect the meaning
hereof.
[13. Specific Performance. [Except with respect to the matters set forth
in Section 2.9], the parties agree that, to the extent permitted by law, (i) the
obligations imposed on them in this Agreement are special, unique and of an
extraordinary character, and that in the event of a breach by any such party
damages would not be an adequate remedy; (ii) each of the other parties shall be
entitled to specific performance and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled at law or in equity;
and (iii) any requirement for the securing or posting of any bond in connection
with the obtaining of any such injunctive or other equitable relief is hereby
waived.]
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
15. Registration Rights to Others. [The Company shall not provide to any
other holder of its securities rights with respect to the registration of such
securities under the Securities Act without the prior written consent of
Investor and each Fidelity Fund (so long as they or their Affiliates hold
Registrable Securities).] The Company represents and warrants that, other than
as provided herein, it has not granted to any other Person rights with respect
to the registration of any Registrable Securities or any other securities issued
or to be issued by it.
16. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement or where any provision hereof is validly asserted as
a defense, the successful party shall, to the extent permitted by applicable
law, be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
17. Limitation of Liability. Each party to this Agreement acknowledges and
agrees that (i) this Agreement is not executed on behalf of or binding upon any
of the trustees, officers, directors, partners or shareholders of any Fidelity
Fund individually, but is binding only upon the assets and property of each
Fidelity Fund and (ii) the obligations of each Fidelity Fund hereunder are
several and not joint. With respect to the obligations of any Fidelity Fund
arising out of this Agreement, each party to this Agreement shall look for
payment or satisfaction of any claim solely to the assets and property of such
Fidelity Fund.
18. Termination of Certain Rights. The rights and obligations hereunder of
each of Investor and each Fidelity Fund shall terminate with respect to such
party at such time when neither it nor any of its respective Affiliates holds
Registrable Securities, provided that the provisions of Section 2.8 shall
survive termination of this Agreement.
19. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument.
18
<PAGE> 45
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
AMERICA WEST AIRLINES, INC.
By:__________________________________
Name:
Title:
AMWEST PARTNERS, L.P.
By [AmWest GenPar Inc.]
its General Partner
[By ]
By:___________________________________
Name:
Title:
[LIST EACH FIDELITY FUND]
By:___________________________________
Name:
Title:
19
<PAGE> 46
EXHIBIT 10.15
MANAGEMENT RESIGNATION ALLOWANCE GUIDELINES
NOVEMBER 18, 1993
PROGRAM PURPOSE
The plan is intended to provide eligible employees with reasonable
transition support in order for them to seek career opportunities outside the
company. Management can use the plan after other reasonable alternatives for
dealing with the situation have been exhausted.
ELIGIBILITY
Eligibility for the program is determined by the Company and is intended to
apply to management employees who permanently end their employment relationship
with AWA. Eligible management employees include those whose positions are
eliminated or downgraded in conjunction with a reorganization of
responsibilities or priorities within the Company or whose particular services
no longer fit the needs of the Company. All or some of the functions may be
transferred to another position or eliminated as a result of the reorganization.
All resignation allowances are subject to case-by-case review by the
Compensation Committee of the Board of Directors. All resignation allowances for
directors, senior directors and officers of the corporation and all resignation
allowances for other management personnel in amounts in excess of twenty-six
(26) weeks pay must be approved by the Compensation Committee.
The plan is not intended to relieve management of its responsibility to
appropriately deal with individual performance issues on a firm and constructive
basis. Specifically, the plan is not available for:
- Employees with less than one full year of AWA service.
- Employees subject to termination for cause, for example, an employee with
an ongoing non-performance problem.
- Employees guilty of serious misconduct, for example, stealing or willful
or negligent destruction of AWA property.
PLAN DESIGN
- The resignation allowance payments are based on Current Annual
Compensation of three (3) weeks pay for each year of full-time AWA
service (partial years to be pro-rated to date of termination) with a
four (4) week minimum and a fifty-two (52) week maximum. If applicable,
any unearned portion of a salary advance will be reimbursed to the
company or will be deducted from the resignation allowance.
- Five percent (5%) increase in allowance period for each year over age 40,
not to exceed 52-weeks combined maximum payment.
- Group medical/life coverages continue during the allowance period at the
same cost paid by active employees.
- Travel privileges on AWA continue during the allowance period. Travel
privileges with other carriers vary based on the agreements with those
carriers. All travel privileges cease if the resigned employee becomes
employed by another airline.
- The resignation date is the termination date for purposes of 401(k) and
incentive stock options.
- Outplacement services through an outplacement agency approved by Human
Resources will be made available on a case-by-case basis with a maximum
per employee cost to AWA of $5,000.
<PAGE> 47
PROCESS
1. Before discussing the resignation program with a potential candidate,
the supervising Officer or Director will review the situation with the Senior
Director, Human Resources, to confirm plan eligibility. The Senior Director,
Human Resources, will then coordinate approval of the resignation package as
required. Any exceptions to these guidelines require the advance review by Human
Resources and the approval of the CEO and the Compensation Committee of the
Board of Directors.
2. Human Resources will prepare the resignation agreement documents,
including the resignation allowance payment calculation and employee benefits
summary.
3. The supervising Officer or Director will make the offer to the employee
with appropriate coordination from Human Resources.
4. The resigned employee is "out-processed" by Human Resources, Payroll and
the various employee benefits departments.
<PAGE> 48
EXHIBIT 10.46
KEY EMPLOYEE PROTECTION AGREEMENT
KEY EMPLOYEE PROTECTION AGREEMENT ("Agreement"), dated June 27, 1994, by
and between AMERICA WEST AIRLINES, INC., a Delaware corporation (the "Company"),
and WILLIAM A. FRANKE ("Franke").
WHEREAS, Franke is the Chairman of the Board and Chief Executive Officer of
the Company; and
WHEREAS, at the time of Franke's employment as Chairman of the Board in
1992, the Company's Board of Directors and debtor-in-possession lenders agreed,
among other things, to use their best efforts to cause any plan of
reorganization filed with the Bankruptcy Court (as hereinafter defined) relating
to the Company to provide for the payment to Franke, upon substantial
consummation of such plan of reorganization, of a confirmation success bonus of
not less than $500,000; and
WHEREAS, with significant contribution from Franke in his capacities as
Chairman of the Board and Chief Executive Officer of the Company, significant
financial and operating progress has been made by the Company and other actions
have been taken which have enhanced, and in the future are expected to further
enhance, the value of the Company's estate for the benefit of its creditors and
other constituencies; and
WHEREAS, under Franke's leadership, the Company is currently endeavoring to
develop and finalize a confirmable Plan of Reorganization (as hereinafter
defined); and
WHEREAS, the services and knowledge of Franke are valuable to the Company
in many respects, including (without limitation) the rendering of advice to the
Company and its Board of Directors with respect to the difficult and complex
process of developing and finalizing a confirmable Plan of Reorganization; and
WHEREAS, the Company considers it prudent to enter into this Agreement in
order to (i) better secure Franke's continued services, (ii) ensure Franke's
continued objectivity in the event of negotiations or actions that might lead to
a Change in Control (as hereinafter defined) and (iii) define the nature and
terms of Franke's severance benefits following a Change in Control.
NOW THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties (intending to be legally bound) hereby covenant and
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the respective meanings set forth below:
(a) "Bankruptcy Court" means the Bankruptcy Court for the District of
Arizona.
(b) "Board" means the Board of Directors of the Company.
(c) "Change in Control" shall occur if either:
(i) the individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board"), cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board; or
(ii) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended)
acquires the beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of 51% or more of the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors.
<PAGE> 49
(d) "Company Affiliate" means any corporation, partnership or other
business entity directly or indirectly controlling, controlled by or under
common control with, the Company. As used in this definition, the term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
corporation, partnership or other business entity, whether through
ownership of voting securities, by contract or otherwise.
(e) "Confirmation Bonus" means any reorganization success bonus
payable to Franke pursuant to a Plan of Reorganization in the event such
Plan of Reorganization is confirmed and consummated.
(f) "Confirmation Date" means the date a Plan of Reorganization is
confirmed by the Bankruptcy Court.
(g) "Plan of Reorganization" means any plan of reorganization which
(i) is filed with the Bankruptcy Court and (ii) contemplates and, if
confirmed and consummated, would result in the emergence of the Company
from its Chapter 11 bankruptcy proceedings.
(h) "Severance Payment" means as specified in Section 2 below.
(i) "Termination Date" means as specified in Section 2 below.
2. Severance Payment. (a) If a Change in Control occurs in connection with
the consummation of a Plan of Reorganization and if, for any reason (including,
without limitation, a voluntary resignation or an involuntary removal but
excluding death), Franke ceases to serve as the Chairman of the Board and the
Chief Executive Officer of the Company at any time during the period of 180 days
beginning on the Confirmation Date, the Company agrees to pay to Franke,
promptly after the date on which Franke ceases to be the Chairman of the Board
and the Chief Executive Officer of the Company ("Termination Date"), a lump sum
amount (the "Severance Payment") equal to 200% of the sum of (i) Franke's annual
base salary as in effect immediately prior to the Termination Date and (ii)
Franke's annual administrative expense allowance as in effect immediately prior
to the Termination Date; provided, however, that the Severance Payment shall be
reduced by the amount of any Confirmation Bonus actually paid to Franke prior to
the Termination Date.
(b) If all or any portion of the Severance Payment is actually paid to
Franke, any Confirmation Bonus thereafter payable to Franke shall be reduced by
the amount of the Severance Payment actually paid to Franke unless the payment
of such amount to Franke was taken into account in determining the amount of
such Confirmation Bonus.
3. Medical Insurance. During the 12-month period following the Termination
Date, the Company, at its cost, shall maintain in full force and effect for the
continued benefit of Franke and Franke's dependents all benefits available to
Franke and Franke's dependents under all medical plans and programs of the
Company, provided that (i) Franke's continued participation is possible under
the terms and provisions of such plans and programs and (ii) Franke pays the
regular employee contribution, if any, required by such plans and programs. In
the event that participation by Franke (or his dependents) in any such plan or
program after the Termination Date is barred pursuant to the terms thereof, or
in the event the Company shall terminate any such plan or program, the Company
shall obtain for Franke (and/or his dependents) comparable coverage under
individual policies.
4. Life Insurance. During the 12-month period following the Termination
Date, the Company, at its cost, shall continue to provide Franke all life
insurance coverages (and in the same amounts) provided to him by the Company
immediately prior to the Termination Date.
5. Travel Privileges. The Company shall provide Franke (and wife and his
dependents) such lifetime on-line and interline, positive space travel
privileges subject to the terms of the Company's non-revenue travel policy for
retired executives as from time to time in effect.
6. Accrued Vacation Pay, etc. Promptly after the Termination Date, the
Company shall pay to Franke a lump sum amount for (i) all unused vacation time
accrued by Franke as of the Termination Date and (ii) all unpaid benefits earned
by Franke as of the Termination Date under any and all incentive compensation
plans or programs of the Company.
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<PAGE> 50
7. Tax Withholdings. The Company shall be entitled to withhold from all
payments hereunder all applicable taxes (federal, state or other) which it is
required to withhold therefrom.
8. Successors; Binding Agreement. (a) This Agreement shall not be
terminated by the merger or consolidation of the Company whereby the Company is
or is not the surviving or resulting corporation or as a result of any transfer
of all or substantially all the assets of the Company. In the event of any such
merger, consolidation or transfer of assets, the provisions of this Agreement
shall be binding upon the surviving or resulting corporation or the person or
entity to which such assets are transferred.
(b) The Company agrees that concurrently with any merger, consolidation or
transfer referred to in paragraph (a) above, it will cause any successor or
transferee to unconditionally assume in writing all of the obligations of the
Company hereunder on terms and conditions reasonably satisfactory to Franke.
Failure of the Company to obtain such assumption prior to the effectiveness of
any such merger, consolidation or transfer shall be a breach of this Agreement
and shall entitle Franke to immediately receive the Severance Payment from the
Company and, for purposes of implementing the foregoing, the date on which such
merger, consolidation or transfer becomes effective shall be deemed to be the
Termination Date.
(c) This Agreement shall inure to the benefit of and be enforceable by
Franke's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Franke should die
while any amounts would still be payable to Franke hereunder if Franke had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to such person or persons
appointed in writing by Franke to receive such amounts or, if no person is so
appointed, to Franke's estate.
9. No Mitigation. The provisions of this Agreement are not intended to,
nor shall they be construed to, require that Franke seek or accept other
employment following a termination of employment. Except as provided in Section
1(a), the Company's obligations to make the payments to Franke required under
this Agreement or any other agreement and otherwise to perform its obligations
hereunder shall not be affected by any set off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against
Franke.
10. Expense Reimbursement. If any litigation, contest or dispute shall
arise under this Agreement involving the failure or refusal of the Company to
fully perform in accordance with the terms hereof, the Company shall reimburse
Franke, on a current basis, for all legal fees and expenses, if any, incurred by
Franke, on a current basis, for all legal fees and expenses, if any incurred by
Franke in connection with such litigation, contest or dispute, together with
interest thereon at the rate of 10% per annum, such interest to accrue from the
date the Company receives Franke's statement for such fees and expenses through
the date of payment thereof; provided, however, that in the event the final
resolution of such litigation, contest or dispute includes a finding denying, in
total, Franke's claims in such litigation, contest or dispute, Franke shall be
required to refund to the Company, over a period not to exceed 12 months from
the date of such resolution, all sums advanced to Franke pursuant to this
Section 10.
11. Assignability. The Company shall have the right to assign this
Agreement and to delegate all rights, duties and obligations hereunder, either
in whole or in part, to any affiliate of the Comapny, provided that no such
assignment or delegation shall relieve the Company of its obligations under this
Agreement.
12. Notices. All notices and all other communications to the parties shall
be in writing and addressed (i) if to the Company, at its principal office
address or such other address as it may have designated by written notice to
Franks for purposes hereof, directed to the attention of the Board with a copy
to the Secretary of the Company and (ii) if to Franke, at his residence address
on the records of the Company or to such other address as he may have designated
to the Company in writing for purposes hereof. Each such notice or other
communication shall be deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid,
except that any notice of change of address shall be effective only upon
receipt.
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<PAGE> 51
13. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Amendments and Waivers. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by Franke and a duly authorized officer of the
Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or in compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
15. Benefits Not Exclusive. The rights of and benefits payable to Franke
or his beneficiaries under this Agreement are not exclusive and are in addition
to any rights of and benefits payable to Franke or such beneficiaries under any
other agreement between Franke and the Company or under any employee benefit
plan or compensation program of the Company.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Franke have executed this Agreement as
of the date first above written.
AMERICA WEST AIRLINES, INC.
By: /s/ RICHARD O'BRIEN
___________________________________
/s/ WILLIAM A. FRANKE
___________________________________
4
<PAGE> 52
EXHIBIT 5.1
[ANDREWS & KURTH]
LETTERHEAD
August 2, 1994
Board of Directors
America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
Gentlemen:
We have acted as counsel for America West Airlines, Inc. (the "Company") in
connection with the Company's Registration Statement on Form S-1 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), relating to (i) shares of Class B Common Stock of the Company, par value
$.01 per share (the "Class B Common Stock"), (ii) warrants to purchase Class B
Common Stock (the "Warrants"), and (iii) senior unsecured notes of the Company
(the "Senior Notes") (the Class B Stock, Warrants and Senior Notes are
collectively referred to herein as the "Securities"), to be offered from time to
time pursuant to Rule 415 under the Act by certain selling securityholders of
the Company. The Securities are being issued pursuant to the Company's plan of
reorganization under Chapter 11 of the United States Bankruptcy Code as
described in the Registration Statement (the "Plan of Reorganization"). At your
request, this opinion is being furnished to you for filing as Exhibit 5.1 to the
Registration Statement.
In our capacity as counsel for the Company in connection with the
registration by the Company and proposed issuance of the securities described
herein, we have examined the charter and bylaws of the Company, and have
examined the originals, or copies otherwise identified, of corporate records of
the Company, as furnished to us by the Company, certificates, advices and
assurances of public officials and of representatives of the Company, statutes
and other instruments and documents, as a basis for the opinions hereinafter
expressed. In giving such opinions, we have relied upon certificates of officers
of the Company with respect to the accuracy of the material factual matters
contained in such certificates.
We have assumed that all signatures on all documents examined by us are
genuine, that all documents submitted to us as originals are authentic, that all
documents submitted to us as copies are true and correct copies of the originals
thereof and that all information submitted to us was accurate and complete.
Based upon our examination as aforesaid, and subject to the assumptions and
limitations herein set forth, we are of the opinion that:
1. The shares of Class B Common Stock to be issued pursuant to the
Plan of Reorganization have been duly authorized by all necessary corporate
action on the part of the Company and such shares, upon issuance pursuant
to and in accordance with the Plan of Reorganization, will constitute
validly issued, fully paid and non-assessable shares of common stock of the
Company.
<PAGE> 53
Board of Directors
America West Airlines, Inc.
August 2, 1994
Page 2
2. The Warrants to purchase Class B Common Stock have been duly
authorized by all necessary corporate action on the part of the Company
and, upon the issuance of the Warrants pursuant to and in accordance with
the Plan of Reorganization and the Warrant Agreement, the Warrants will
constitute valid and binding obligations of the Company enforceable in
accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws and by principles
of equity.
3. The Senior Notes have been duly authorized by all necessary
corporate action on the part of the Company and, upon the issuance of the
Senior Notes pursuant to and in accordance with the Plan of Reorganization
and the Indenture, the Senior Notes will constitute valid and binding
obligations of the Company enforceable in accordance with their terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws and by principles of equity.
In rendering the opinions set forth above, we express no opinion as to the
adequacy or sufficiency of the consideration paid or to be paid or contributions
made or to be made for any of the Securities in connection with the Plan of
Reorganization.
This opinion is limited in all respects to the corporate law of the State
of Delaware, the laws of the State of New York and of the United States of
America. To the extent any of such opinions relate to the corporate law of the
State of Delaware, we have formed our opinion based solely upon a reading of the
Delaware General Corporation Law. We express no opinion with respect to the laws
or regulations of other jurisdictions applicable by virtue of conflict of laws
or other principles.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the use of our name in the
Registration Statement under the caption "Legal Matters."
Very truly yours,
/s/ ANDREWS & KURTH
1098/1146/2560:sfe
<PAGE> 54
EXHIBIT 10.12
CODE SHARING AGREEMENT
This Agreement is made this 29th day of June, 1994, by and between
CONTINENTAL AIRLINES, INC. ("CAL"), a Delaware corporation, and AMERICA WEST
AIRLINES, INC. ("AWA"), Debtor and Debtor-in-Possession, a Delaware corporation.
RECITALS
CAL and AWA are each certificated air carriers providing air transportation
services in their respective areas of operation.
CAL and AWA desire to cooperate in the coordination of schedules by
allowing AWA to market its flight operations under the CO* designator and CAL to
market its flight operations under the HP* designator.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, CAL and AWA hereby agree as follows:
1. Schedules to be Operated. It is the intent of the parties to share
their two letter designator codes, "CO*" in the case of CAL and "HP*" in the
case of AWA. CAL operated Shared Code Segments (as herein defined) will be
marketed under not only CAL's "CO" designator code but also under AWA's "HP*"
designator code, and AWA operated Shared Code Segments will be marketed under
not only AWA's "HP" designator code, but also under CAL's "CO*" designator code.
Schedule 1 hereto sets forth the flight segments where shared code segments
("Shared Code Segments") will operate at the commencement of this Agreement and
some of the Shared Code Segments that will be operated in the future; however,
it is the intent of the carriers to designate, to the maximum extent permitted
by law, all flights operated by either as Share Code Segments during the term of
this Agreement. The carriers shall meet together every six months that this
Agreement is in effect to discuss the appropriateness of expanding or
contracting the list of city pairs on Schedule 1.
2. Code Sharing Licenses.
(a) CO* License.
(i) Grant of License. Subject to the terms and conditions of this
Agreement, CAL hereby grants to AWA a nonexclusive, nontransferable,
revocable license to use the CO* designator code on all of its flights
operated as a Shared Code Segments. (AWA flights flown using the CO*
code are hereinafter referred to as "CO* Flights").
(ii) Control of CO* Flights. AWA shall have sole responsibility
for and control over, and CAL shall have no responsibility for, control
over or obligations or duties with respect to, each and every aspect of
AWA's operations including, without limitation, scheduling (except as
provided in Section 12 hereto), pricing (except as provided in Section
13 hereto), planning of flight itineraries and routings, reservations,
reservations control/yield management, dispatch, fueling, weight and
balance, flight release, maintenance, and flight operations and
compliance with applicable rules and regulations.
(b) HP* License.
(i) Grant of License. Subject to the terms and conditions of this
Agreement, AWA hereby grants to CAL a nonexclusive, nontransferable,
revocable license to use the HP* designator code on all of its flights
operated as a Shared Code Segment. (CAL flights flown using the HP* code
are hereinafter referred to as "HP* Flights").
(ii) Control of HP* Flights. CAL shall have sole responsibility
for and control over, and AWA shall have no responsibility for, control
over or obligations or duties with respect to, each and every aspect of
CAL's operations including, without limitation, scheduling (except as
provided in
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Section 12 hereto), pricing (except as provided in Section 13 hereto),
planning of flight itineraries and routings, reservations,
reservations control/yield management, dispatch, fueling, weight and
balance, flight release, maintenance, and flight operations and
compliance with applicable rules and regulations.
3. Confidential Information. Neither AWA nor CAL shall disclose to the
other carrier or be required to disclose by the other carrier any information
relating to its scheduling (except as provided in Section 12 hereto), pricing,
inventory control or flight profitability. Neither AWA nor CAL shall disclose
the terms of this Agreement or any proprietary information with respect to the
other obtained as a result of this Agreement, either during the term hereof or
thereafter except as may be required by law or by any order of a court or
administrative agency, and then on ten days' notice to the other. The parties
hereto recognize that, in the course of the performance of each of the
provisions hereof, each carrier may be given and may have access to confidential
and proprietary information of the other carrier, including proposed schedule
and fare changes, statistical data regarding loads and fares, sales and
promotional programs and other operating and competitive information
("Confidential Information"). Each carrier shall preserve, and shall ensure that
each of its officers, agents, consultants and employees who receive Confidential
Information preserve, the confidentiality of the other carrier's Confidential
Information.
4. Quality of Service. Each carrier shall perform its service with respect
to its flights operated under the designation of the other carrier in a timely,
expert and quality manner. Each carrier agrees that, in conducting flight
operations under the designator of the other carrier, it will employ prudent
safety and loss prevention policies.
5. Audit.
(a) CAL Audit. CAL shall have the right, at its own cost, to inspect,
review, and observe AWA's operations of CO* Flights, and/or to conduct a
full safety and/or service audit of AWA's operations, manuals and
procedures reasonably related to CO* Flights, at such intervals as CAL
shall reasonably request. In the exercise of such right, CAL does not
undertake any responsibility for the performance of AWA's operations. CAL
shall coordinate its safety and service audits with AWA so as to avoid
disruptions of AWA's operations. Any safety audit may include, without
limitation, maintenance and operation procedures, crew planning,
reservations, passenger and baggage handling, customer service, personnel
records, spare parts, inventory records, training records and manuals,
flight, flight training and operational personnel records. This paragraph
shall not entitle CAL access to AWA's records, documents or systems
relating to its pricing, inventory control or flight profitability.
(b) AWA Audit. AWA shall have the right, at its own cost, to inspect,
review, and observe CAL's operations of HP* Flights, and/or to conduct a
full safety and/or service audit of CAL's operations, manuals and
procedures reasonably related to HP* Flights, at such intervals as AWA
shall reasonably request. In the exercise of such right, AWA does not
undertake any responsibility for the performance of CAL's operations. AWA
shall coordinate its safety and service audits with CAL so as to avoid
disruptions of CAL's operations. Any safety audit may include, without
limitation, maintenance and operation procedures, crew planning,
reservations, passenger and baggage handling, customer service, personnel
records, spare parts, inventory records, training records and manuals,
flight, flight training and operational personnel records. This paragraph
shall not entitle AWA access to CAL's records, documents or systems
relating to its pricing, inventory control or flight profitability.
6. Public Relations. In the event of any irregularity in Shared Code
Segments' operations, including, without limitation, any event causing damage to
persons or property, the operating carrier shall identify itself as being
operated independently of the carrier whose code is being used, and as being
solely responsible for its operations. Either carrier may state that it holds a
code sharing license from the other carrier and that it obtains certain services
from the other carrier if third parties inquire as to such relationship.
7. Irregularities in Operations. AWA shall promptly notify CAL of all
irregularities involving a CO* Flight which result in any damage to persons or
property as soon as such information is available and shall furnish to CAL as
much detail as practicable. CAL shall promptly notify AWA of all irregularities
involving a
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<PAGE> 56
HP* Flight which result in any damage to persons or property as soon as such
information is available and shall furnish to AWA as much detail as practicable.
8. Reporting Obligation.
(a) Changes in Service. Each carrier shall give the other carrier 60
days advance notice (or notice as far in advance as possible if 60 days is
impracticable) of any intended (i) changes to its operating specifications,
or (ii) material changes to the manner of conducting its business or the
nature of its product. In the event any such change materially affects the
value or risk to the other carrier of this Code Sharing Agreement in the
other carrier's reasonable judgment, the other carrier shall be entitled to
terminate this agreement if the change is implemented.
(b) Correspondence from Government Authorities. AWA shall immediately
provide CAL copies of any correspondence received from government authority
which, with respect to CO* Flights, references (i) any alleged
noncompliance with rules or regulations affecting air transportation, or
(ii) any investigation of AWA performed or proposed by any government
authority, including, without limitation, any communication issued by a
government authority concerning the airworthiness of AWA's aircraft, the
compliance of AWA's personnel with required operational or training
procedures or any other matter relating to the safe operation of AWA
aircraft.
CAL shall immediately provide AWA copies of any correspondence
received from any government authority which, with respect to HP* Flights,
references (i) any alleged noncompliance with rules or regulations
affecting air transportation, or (ii) any investigation of CAL performed or
proposed by any government authority, including, without limitation, any
communication issued by a government authority concerning the airworthiness
of CAL's aircraft, the compliance of CAL's personnel with required
operational or training procedures or any other matter relating to the safe
operation of CAL aircraft.
(c) Notice of Complaints. AWA shall monthly furnish CAL a summary of
complaints, notices or violation, request to cease activity or similar
correspondence which reasonably relate to CO* Flights and which are
received by AWA from passengers, any government authority, or other
parties. CAL shall monthly furnish AWA a summary of complaints, notices or
violation, request to cease activity or similar correspondence which
reasonably relate to HP* Flights and which are received by CAL from
passengers, any government authority, or other parties. Each carrier shall
comply with the other carrier's reasonable requests for actual copies of
any such documents.
9. Flight Display.
(a) All Shared Code Segments will be included in the availability and
fare displays of all computerized reservations systems in which CAL and AWA
participate, the Official Airline Guide (to the extent agreed upon) and
CAL's and AWA's internal reservation systems, under the shared code as well
as the operator's own code, to the extent possible. CAL and AWA will take
the appropriate measures necessary to ensure the display of Shared Code
Segments in accordance with the preceding sentence.
(b) CAL and AWA will disclose and identify the Shared Code Segments to
the public as actually being a flight of and operated by the operating
carrier, in at least the following ways:
(i) a symbol will be used in timetables and computer reservation
system indicating that Shared Code Segments are actually operated by the
other carrier;
(ii) to the extent reasonable, messages on airport flight
information displays will identify the operator of flights shown as
Shared Code Segments;
(iii) CAL and AWA advertising concerning Shared Code Segments and
CAL and AWA reservationists will disclose the operator of each flight;
and
(iv) in any other manner prescribed by law.
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10. Terms and Conditions of Carriage and Claims Procedures.
(a) In all cases the contract of carriage between a passenger and a
carrier will be that of the carrier whose designator code is used and not
that of the carrier operating the Shared Code Flight.
(b) The carriers will use existing IATA procedures when handling and
settling claims made by customers in connection with Shared Code Segments.
11. Irregularity Handling.
(a) In the event of flight delays, cancellations or other schedule
irregularities that affect Shared Code Segments, the operating carrier will
inform the carrier whose designator is also used of all pertinent
information concerning an irregularity for customer information purposes.
(b) The parties agree that they will cooperate in all available ways
to accommodate passengers experiencing flight irregularities and that
neither will forbear from providing such assistance because the other may
have been responsible for the flight irregularity. In the event of a flight
irregularity, the carrier causing or experiencing the irregularity shall
bear all related costs associated with accommodating the passengers who
have been delayed. The carriers will review existing procedures for
accommodating interline passengers with respect to flight irregularities
and oversales to determine their adequacy for the purposes of this
Agreement and will make such adjustments in existing procedures as they
find necessary or appropriate.
12. Airport Operational Assistance. CAL and AWA will cooperate to
coordinate and maintain their schedules to minimize the waiting time and to
maximize convenience of passengers who are connecting from a CAL to AWA flight
segment (or vice versa). Each carrier will provide the other with the airport
operational assistance that is required to assure schedule compatibility for
Shared Code Segments for which a Through Fare (as such term is hereinafter
defined) may be applicable. The carriers will use their respective best efforts
to align gates and ticket counter space where Shared Code Segments operate.
13. Pricing and Capacity Control of Shared Code Segments.
[CONFIDENTIAL PORTION DELETED]
15. Compliance with Laws and Regulations. CAL and AWA each represent,
warrant, and agree that performance of its respective obligations under this
Agreement shall be conducted and all of its personnel shall at all times meet,
be in full compliance with and have all required licenses under any and all
applicable statutes, orders, rules and regulations, and satisfy all applicable
insurance requirements, whether in effect or hereafter promulgated of the United
States National Transportation Safety Board, Department of Transportation of
Federal Aviation Administration, Department of Defense of any country or
territory with jurisdiction over the Shared Code Segments.
16. Independent Parties.
(a) Independent Contractors. It is expressly recognized and agreed
that each carrier, in its performance and otherwise under this Agreement,
is and shall be engaged and acting as an independent contractor and in its
own independent and separate business; that each carrier shall retain
complete and exclusive control over its staff and operations and the
conduct of its business; and that each carrier shall bear and pay all
expenses, costs, risks and responsibilities incurred by it in connection
with its obligations under this Agreement. Neither CAL nor AWA nor any
officer, employee, representative, or agent of CAL or AWA shall in any
manner, directly or indirectly, expressly or by implication, be deemed to
be, or make any representation or take any action which may give rise to
the existence of, any employment, agent, partnership, or other like
relationship as between CAL and AWA but each carrier's relationship as
respects the other carrier in connection with this Agreement is and shall
remain that of an independent contractor.
(b) Status of Employees. The employees, agents and/or independent
contractors of AWA shall be employees, agents, and independent contractors
of AWA for all purposes, and under no circumstances
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shall be deemed to be employees, agents or independent contractors of CAL.
The employees, agents and independent contractors of CAL for all purposes,
and under no circumstances shall be deemed to be employees, agents or
independent contractors of AWA. In its performance under this Agreement,
each carrier shall act as an independent contractor and not as an agent for
the other. CAL shall have no supervisory power or control over any
employees, agents or independent contractors employed by AWA, and AWA shall
have no supervisory power or control over any employees, agents and
independent contractors employed by CAL.
(c) Liability For Employee Costs. Each carrier, with respect to its
own employees (hired directly or through a third party), accepts full and
exclusive liability for the payment of worker's compensation and/or
employer's liability (including insurance premiums where required by law)
and for the payment of all taxes, contributions or other payments for
unemployment compensation, vacations, or old age benefits, pensions and all
other benefits now or hereafter imposed upon employers with respect to its
employees by any government or agency thereof or any other party (whether
measured by the wages, salaries, compensation or other remuneration paid to
such employees or otherwise) and each carrier further agrees to make such
payments and to make and file all reports and returns, and to do everything
necessary to comply with the laws imposing such taxes, contributions or
other payments.
17. Indemnification and Insurance.
(a) Indemnification.
(i) AWA hereby assumes liability for, and shall indemnify, defend,
protect, save and hold harmless CAL, its officers, agents, and employees
from and against any and all liabilities, claims, judgments, damages,
and losses, including all costs, fees, and expenses incidental thereto,
of every type and nature whatsoever, including without limitation those
involving (i) death of or injury to any person including, but not
limited to, AWA's officers, employees and agents, (ii) loss of, damage
to, or destruction of any property whatsoever, including any loss of use
thereof, and (iii) trademark, service mark or trade name infringement,
provided that such liabilities, claims, judgments, damages or losses are
caused by or arise out of (or are alleged to be caused by or arise out
of) any alleged acts or omissions of AWA or its officers, employees, or
agents which are in any way related to the services contemplated by this
Agreement. CAL shall give AWA prompt notice of any claim made or suit
instituted against CAL which, if successful, would result in
indemnification of CAL hereunder, and CAL shall have the right to
compromise or participate in the defense of same to the extent of its
own interest.
(ii) CAL hereby assumes liability for, and shall indemnify, defend,
protect, save and hold harmless AWA, its officers, agents, and employees
from and against any and all liabilities, claims, judgments, damages,
and losses, including all costs, fees, and expenses incidental thereto,
of every type and nature whatsoever, including without limitation those
involving (i) death of or injury to any person including, but not
limited to, CAL's officers, employees and agents, (ii) loss of, damage
to, or destruction of any property whatsoever, including any loss of use
thereof, and (iii) trademark, service mark or trade name infringement,
provided that such liabilities, claims, judgments, damages or losses are
caused by or arise out of (or are alleged to be caused by or arise out
of) any alleged acts or omissions of CAL or its officers, employees, or
agents which are in any way related to the services contemplated by this
Agreement. AWA shall give CAL prompt notice of any claim made or suit
instituted against AWA which, if successful, would result in
indemnification hereunder, and AWA shall have the right to compromise or
participate in the defense of same to the extent of its own interest.
(b) Insurance Coverage.
(i) Each carrier shall, at all time during the term of this
Agreement, maintain in full force and effect policies of insurance as
follows:
1. Comprehensive Airline Liability Insurance, including Aircraft
Third Party, Passenger, including Passengers' Baggage and Personal
Effects, Cargo and Mail Legal Liability for a
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Combined Single Limit (CSL) of not less than $500 million per
occurrence per Aircraft. In respect of Personal Injury the
maximum limit is $25 million per offense and in the aggregate.
The minimum amounts of insurance coverage required under this
paragraph 1 shall be per occurrence, combined single limit for all
coverage required under this paragraph 1.
<TABLE>
<S> <C> <C>
2. Workmen's Compensation Insurance Per Accident
(Company Employee) Statutory
3. Employer's Liability $1,000,000 (combined single limit)
</TABLE>
(ii) Subject to Section 17(b)(i) above, each carrier as appropriate
shall cause the policies of insurance described in such Section 17(b)(i)
to be duly and properly endorsed by that carrier's insurance
underwriters as follows:
1. as to the policies of insurance described in paragraphs
(b)(i)1 and (b)(i)2 of Section 17:
(A) to provide that any waiver of rights of subrogration
against other parties by one party will not affect the coverage
provided thereunder with respect to the other party; and
(B) to provide that the one party's underwriters shall waive
any and all subrogation rights against the other party, its
directors, officers, agents, employees and other authorized
representatives, except for gross negligence or wilful
misconduct, with regard to any breach of warranty on the part of
the other party or to provide other evidence of such waiver or
recourse against the other party, its directors, officers,
agents, employees and other authorized representatives.
(C) to provide that each party, its directors, officers,
agents, employees and other authorized representatives shall be
endorsed as named insured parties thereunder, except for gross
negligence or wilful misconduct; and
(D) to provide that said insurance shall be primary
insurance and to acknowledge that any other insurance policy or
policies of each party shall be secondary or excess insurance.
2. as to policies of insurance described in paragraph (b)(i)1 of
Section 17 to provide a breach of warranty clause to said policies;
and
(iii) Each party shall cause each of the insurance policies
referred to in Section 17(b)(i) to be duly and properly endorsed to
provide that said policy or policies or any part or parts thereof shall
not be canceled, terminated or materially altered, changed or amended by
each party's insurance underwriters, until after 30 days' prior notice
to the other party, such notice period to commence when such other party
actually receives such notice.
(iv) Simultaneously with the commencement of this Agreement, and
from time to time thereafter upon request by either party, the other
party shall furnish to the requesting party evidence reasonably
satisfactory to the requesting party of the aforesaid insurance coverage
and endorsements, including certificates certifying that the aforesaid
insurance and endorsements are in full force and effect. Initially, this
evidence shall be a certificate of insurance required hereunder.
(v) In the event either party fails to maintain in full force and
effect any of the insurance and endorsements required in terms of these
sections, the other party shall have the right (but not the obligation)
to procure and maintain such insurance or any part thereof. The cost of
such insurance shall be payable by the first party to the other party
upon demand by the other party. The procurement of such insurance or any
part thereof by the other party shall not discharge or excuse the first
party's obligation to comply with the provisions of Sections 17(b)(i)
and 17(b)(ii)
(c) Survival of Rights and Obligations. The rights and obligations of
Section 18(a) shall survive the expiration or termination of this
Agreement.
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18. Term and Termination.
(a) Term. Unless the carriers agree to an earlier commencement date,
the term of this Agreement shall commence as soon as practicable after the
date that is the later of the date that this Agreement is signed by both
parties or the date that the investment agreement between AWA and AmWest
partners, L.P. (the "Investment Agreement") is consummated and shall
continue until the date immediately preceding the tenth anniversary of the
commencement date, unless earlier terminated as provided herein, and shall
continue thereafter until either carrier gives the other carrier notice of
termination at least 90 days prior to the effective date of such
termination. In no event shall termination or expiration pursuant to this
Section 18(a) be effective unless such 90 days' notice is provided.
(b) Termination as a Result of Changes of Law. In the event there is
any change in treaties, statutes or regulations of air transportation that
materially affects the rights and/or obligations presently in force with
respect to the air transportation services of CAL or AWA or both, relating
to CO* or HP* Flights, then the carriers will consult, within 30 days after
any of the occurrences described herein, in order to determine or seek
mutual agreement as to what, if any changes to this Agreement are necessary
or appropriate, including but not limited to the early termination and
cancellation of this Agreement.
(c) Other Termination Rights. In addition to any other provisions of
this Agreement, this Agreement may be terminated, without liability, as
follows:
(i) By either carrier on 30 days' prior written notice, if the
other carrier has breached any material provision of this Agreement
unless such other carrier cures such breach within such 30 day period;
(ii) By either carrier immediately on notice, if the other carrier
shall be dissolved or shall fail to maintain its corporate existence in
good standing, or shall have its authority to operate as a scheduled
airline suspended or revoked, either in whole or with respect to the CO*
or HP* Flights, or shall cease operations as a scheduled airline.
(iii) By either carrier immediately on notice if the other carrier
shall be cited by any government authority for any significant
noncompliance with a material law, rule or regulation with respect to
the marketing or operation of a CO* or HP* Flight;
(iv) By either carrier immediately on notice, in the event that the
commencement date of this Agreement is prior to the date that the
Investment Agreement is consummated, if the Investment Agreement is
terminated prior to its having been consummated;
(v) Except for AWA's currently pending Chapter 11 proceeding, by
either carrier if a petition is filed by or against the other carrier
under bankruptcy law, or any other law providing for the relief of
debtors, and the affected party does not succeed in having such petition
lifted or stayed within sixty days from the date of entry; the carrier
at its option may cancel this Agreement immediately and exercise such
other remedies as may be available at law and/or in equity;
(vi) By either carrier on six months' prior written notice, if a
carrier, foreign or domestic, that competes with the terminating carrier
on a material basis, acquires majority ownership of or substantial
control over the other carrier.
(vii) By CAL immediately on notice if
1. AWA shall fail to maintain any of its aircraft in an
airworthy condition and conduct its flight operations in accordance
with the standards, rules and regulations promulgated by any
government authority; or
2. AWA shall have a completion factor of less then 80% during
any 20 day period with respect to CO* Flights (including in such
calculations all flights canceled less than one week prior to the
date of its scheduled operation and excluding flights not completed
due to weather or labor stoppages); and
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(viii) By AWA immediately on notice if
1. CAL shall fail to maintain any of its aircraft in an
airworthy condition and conduct its flight operations in accordance
with the standards, rules and regulations promulgated by any
government authority; or
2. CAL shall have a completion factor of less then 80% during
any 20 day period with respect to HP* Flights (including in such
calculations all flights canceled less than one week prior to the
date of its scheduled operation and excluding flights not completed
due to weather or labor stoppages).
19. Booking Fee. The carrier operating over any segment of a Shared Code
Flight will be responsible for any booking fee relating to such segment charges
by the vendor of a computer reservation system used to create a booking on that
flight. If the booking fee relating to such segment is billed to the carrier
whose designator code is also used for that flight, the operating carrier will
reimburse the carrier whose designator code is also used for that flight.
20. Entire Agreement, Waivers and Amendments. This Agreement constitutes
the entire understanding of the carriers with respect to the subject matter
hereof superseding all prior discussions and agreements, written or oral. This
Agreement may not be amended, nor may any of its provisions be waived, except by
writing signed by both carriers. No delay on the part of either carrier in
exercising any right power or privilege hereunder shall operate as a waiver
hereof, nor shall any waiver operate as a continuing waiver of any right, power
or privilege.
21. Notices. All notices given hereunder shall be in writing delivered by
hand, certified mail, telex, or telecopy to the carriers at the following
addresses:
If to CAL:
Continental Airlines, Inc. Telephone No.: 713-834-2950
2929 Allen Parkway Telecopier No.: 713-520-6329
Houston, Texas 77019
Attention: Vice Chairman & CEO
With copy to:
Continental Airlines, Inc. Telephone No.: 713-834-5149
2929 Allen Parkway Telecopier No.: 713-834-5161
Houston, Texas 77019
Attention: Senior Vice President
and General Counsel
If to AWA:
America West Airlines, Inc. Telephone No.: (602) 693-5880
4000 E. Sky Harbor Blvd. Telecopier No.: (602) 693-5950
Phoenix, AZ 85034
Attention: President & COO
With copy to:
America West Airlines, Inc. Telephone No.: (602) 693-5750
4000 E. Sky Harbor Blvd. Telecopier No.: (602) 593-5904
Phoenix, AZ 85034
Attention: Vice President
and General Counsel
22. Successors and Assigns. Neither carrier may assign its rights or
delegate its duties under this Agreement without the prior written consent of
the other carrier, and any such purported assignment or delegation shall be
void. This Agreement shall be binding on the lawful successors of each carrier.
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23. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
24. Headings. The headings in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
25. Counterparts. This Agreement may be executed in counterparts, all of
which taken together shall constitute one agreement.
26. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
principles of choice or conflicts of law.
27. Equal Opportunity. EEO clauses contained at 11 C.F.R. sec.sec. 60-1.4,
60-250.4 and 60-741.4 are hereby incorporated by reference. Each party shall
comply with all equal opportunity laws and regulations which apply to or must be
satisfied by that party as a result of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
<TABLE>
<S> <C>
CONTINENTAL AIRLINES, INC. AMERICA WEST AIRLINES, INC.
By: /s/ BARRY P. SIMON By: /s/ A. MAURICE MYERS
__________________________________________ __________________________________________
Title: Senior Vice President Title: President & CEO
_______________________________________ _______________________________________
</TABLE>
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SCHEDULE 1
INITIAL SHARED CODE SEGMENTS
[CONFIDENTIAL PORTION DELETED]
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SCHEDULE 2
[CONFIDENTIAL PORTION DELETED]
11
<PAGE> 65
EXHIBIT 10.13
AGREEMENT
BETWEEN
AMERICA WEST AIRLINES, INC.
AND
MESA AIRLINES, INC.
<PAGE> 66
AMERICAN WEST EXPRESS
SERVICE AGREEMENT
AGREEMENT made this 4th day of September, 1992 by and between America West
Airlines, Inc. ("AWA"), Debtor-In-Possession, a Delaware corporation having a
principal place of business at 4000 East Sky Harbor Boulevard, Phoenix, Arizona,
and Mesa Airlines, Inc. ("Contractor"), a New Mexico corporation having a
principal place of business at 2325 E. 30th Street, Farmington, New Mexico:
WITNESSETH:
WHEREAS, AWA holds a certificate of public convenience and necessity issued
by the Department of Transportation ("DOT") authorizing AWA to engage in the
interstate and overseas air transportation of persons, property and mail between
all points in the United States, its territories and possessions;
WHEREAS, Contractor holds a certificate of public convenience and necessity
issued by the Department of Transportation ("DOT") authorizing it to engage in
the interstate air transportation of persons, property and mail between all
points in the United States, its territories and possessions;
WHEREAS, AWA owns various trademarks, service marks and logos, including
"America West Airlines" and distinctive exterior color decor and patterns on its
aircraft, hereinafter referred to individually and collectively as the "AWA
Trademarks;"
WHEREAS, Contractor wishes to acquire a non-exclusive license to use one or
more of AWA's Trademarks in connection with the scheduled air transportation
services operated by Contractor pursuant to this Agreement, including the use of
the "HP" designator code used to identify, in computer systems and elsewhere,
Contractor's scheduled flights operated pursuant to this Agreement;
WHEREAS, Contractor desires to operate, and AWA is willing to contract for,
AMERICA WEST EXPRESS operations in the manner and to the extent hereinafter
described;
NOW, THEREFORE, for and in the consideration of the foregoing premises and
the mutual covenants and obligations hereinafter set forth, the parties to this
Agreement hereby agree as follows:
ARTICLE 1 -- COMPLIANCE WITH REGULATIONS
Contractor hereby represents, warrants, and agrees that all air
transportation services performed by it pursuant to this Agreement or otherwise
shall be conducted in full compliance with any and all applicable statutes,
orders, rules, and regulations, whether now in effect of hereafter promulgated,
of all governmental agencies having jurisdiction over Contractor's operations,
including but not limited to, the Federal Aviation Administration ("FAA") and
the DOT. Contractor's compliance with such governmental statutes, orders, rules,
and regulations shall be the sole and exclusive obligation of Contractor, and
AWA will have no obligations or responsibilities, whether direct or indirect,
with respect to such matters.
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<PAGE> 67
ARTICLE 2 -- AIR SERVICES TO BE PROVIDED BY CONTRACTOR
Section 2.01 Schedules To Be Operated
(a) Throughout the term of this Agreement and any amendment or extension
thereof, Contractor shall schedule and operate, subject to Paragraph 2.01(c)
below, AMERICA WEST EXPRESS service in the following markets:
<TABLE>
<CAPTION>
MINIMUM # OF
MARKETS FREQUENCIES
- --------------------------------------------------------------------------- ------------
<S> <C> <C> <C>
Bullhead City, AZ -- Phoenix, AZ.......................................
Lake Havasu, AZ -- Phoenix, AZ.......................................
Prescott, AZ -- Phoenix, AZ.......................................
Kingman, AZ -- Phoenix, AZ.......................................
Fort Huachuca, AZ -- Phoenix, AZ.......................................
Flagstaff, AZ -- Phoenix, AZ.......................................
Yuma, AZ -- Phoenix, AZ.......................................
Farmington, NM -- Phoenix, AZ.......................................
Gallup, NM -- Phoenix, AZ.......................................
Durango, CO -- Phoenix, AZ.......................................
Grand Junction, CO -- Phoenix, AZ.......................................
Palm Springs, CA -- Phoenix, AZ.......................................
Telluride, CO -- Phoenix, AZ.......................................
</TABLE>
(b) All published schedules to be operated by Contractor pursuant to
Section 2.01(a) above or to add new markets other than those listed in Section
2.01(a) above must be submitted to AWA at least 30 days prior to the effective
date of such schedule. Contractor agrees that in the development of its
schedules, it shall consult with AWA and use its best reasonable efforts to
ensure that the primary needs of both local and connecting traffic in AWA
markets are being met. AWA shall not have the right to approve or disapprove
such schedules. AWA retains the right to withhold the use of its code, logo or
trademarks from any flight operated by the Contractor. AWA shall timely file
Contractor's code-shared schedules with its own schedules in accordance with
industry standards provided Contractor's schedules are timely received by AWA.
(c) Notwithstanding anything to the contrary contained in this Section
2.01, Contractor shall be entitled to operate additional services under its own
name in the markets covered by this Agreement; provided that any aircraft used
in providing such services shall not bear AWA's logo or markings.
(d) Contractor shall be the sole and exclusive air carrier authorized by
AWA to operate as AMERICA WEST EXPRESS (or operate by similar AWA turbo-prop
feeder-operation-designation) for all AMERICA WEST EXPRESS flights serving the
Phoenix hub. In consideration of their exclusive air carrier status, Contractor
shall have a right of first refusal to institute any new services (cities or
flights) which are forecast by AWA to be profitable. Such services shall be
inaugurated within 90 days of recommendation by AWA. If Contractor refuses to
provide the requested service, AWA shall have the right to contract with another
carrier to operate that route as an AMERICA WEST EXPRESS, provided that the
service shall be the same as that proposed to Contractor. Contractor shall have
the right of first refusal to provide service to any additional major cities or
hubs wherein AWA may desire to establish a code-sharing agreement. Contractor
shall have 30 days from the time it is offered the additional agreement to
accept or decline such opportunity. If accepted, Contractor shall have 120 days
to prepare itself to fulfill its obligations at the additional city or hub.
(e) Contractor may withdraw from, reduce service, or suspend service in any
of its AMERICA WEST EXPRESS markets listed in Section 2.01(a) after
[CONFIDENTIAL PORTION DELETED]
Contractor shall then give 30 days' notice to AWA of its desire to affect
service to that market.
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<PAGE> 68
(f) Inauguration of services listed in Section 2.01(a) will be accomplished
according to the transition schedule contained in Exhibit A, made a part of this
agreement and attached hereto.
Section 2.02 Aircraft To Be Used
(a) Contractor will provide the scheduled air services described in Section
2.01 with short-to-medium range, multi-engine, turbine-propeller aircraft. Such
aircraft shall have a minimum of 19 seats and appropriate capacity for passenger
baggage, freight and mail.
(b) Upon filing a Plan of Reorganization with the Bankruptcy Court,
Contractor shall begin to repaint its aircraft used in connection with the
services provided under this Agreement with exterior color decor and Trademarks
to be designed by AWA in consultation with Contractor. The Contractor shall
provide the paint and other materials for the exterior aircraft decor and AWA
shall paint the aircraft in its painting facility. Any change to the exterior
color decor and pattern of the aircraft subsequent to the original design shall
be made at the expense of AWA. AWA understands that the flowage of Contractor's
aircraft prevents Contractor from painting all of its aircraft in AWA colors.
Contractor will attempt to maximize the utilization of AWA painted aircraft on
code-shared routes. AWA understands that on occasion an AWA-colored aircraft may
be used in Contractor's "Mesa" system due to aircraft flowage requirements.
In addition to the use of the AWA Trademarks on its aircraft, Contractor
shall use and display a suitable sign on the exterior of its aircraft
identifying Contractor as the operator of the services being provided pursuant
to this Agreement. The use and display of such sign shall be in compliance with
any applicable FAA rule or directive, shall be visible to passengers approaching
the aircraft for boarding and shall be subject to the prior written approval of
AWA as to its nature, size and location on Contractor's aircraft.
Section 2.03 Flight Crews To Be Used
All services performed by Contractor pursuant to this Agreement shall be
operated with crews consisting of a captain or pilot, and a first officer or
co-pilot. All such crew members shall at all times meet all currently applicable
governmental requirements, as such requirements may be amended from time to time
during the life of this Agreement, and shall be fully licensed and qualified for
the services to be performed hereunder.
ARTICLE 3 -- SUPPORT SERVICES AND FACILITIES
Section 3.01 General Provision
AWA and Contractor shall provide support services and facilities to the
extent and in the manner set forth in the subsequent sections of this Article 3.
Such support services and facilities, when furnished by AWA, shall be furnished
only with respect to Contractor's scheduled air services described in Article 2.
Section 3.02 Communications and Reservations
Reservation telephone lines will be maintained by AWA at the points listed
in Article 2 connecting those cities with AWA's reservations center.
Reservations for passengers using the services described in Article 2 and
connecting reservations to AWA or to other air carriers will be made by AWA on a
non-discriminatory basis in accordance with AWA's established methods and
procedures. For passengers originating their travel at points other than those
served by Contractor pursuant to Article 2, either on AWA's system or on the
systems of other airlines, connecting reservations to the services of Contractor
will also be made on a non-discriminatory basis in accordance with currently
established industry methods and procedures. In all cases, AWA will confirm the
reservations of Contractor's passengers through the entire itinerary of their
scheduled trips. When a contact number is supplied by the passengers making such
reservations, AWA will assume the responsibility of notifying passengers of any
changes in Contractor's schedules or operations, provided that Contractor
furnishes AWA with sufficient advance notice of such changes. Contractor will
provide AWA with parameters of Contractor's flight capacity and discount seat
inventory levels and AWA will use its best efforts to accommodate Contractor's
directions as to these levels.
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<PAGE> 69
Section 3.03 Operations
(a) In the event of flight delays, cancellations or other schedule
irregularities affecting Contractor's scheduled services, and as soon as
information concerning such irregularities is available, Contractor shall notify
AWA's flight control center and furnish AWA such information in as much detail
as possible.
(b) Contractor shall be solely responsible for, and AWA shall have no
obligations or duties with respect to the dispatch of Contractor's flights
operated pursuant to this Agreement or otherwise. For the purposes of this
Section 3.03(b), the term "flight dispatch" shall include, but shall not be
limited to, all planning of flight itineraries and routings, fueling and flight
release.
(c) From time to time, and solely upon request of Contractor or its flight
crews, AWA shall provide to Contractor at its cost, such U.S. Weather Bureau
information or data as may be available to AWA; provided that, in furnishing any
such weather information or data to Contractor, neither AWA nor its employees or
agents will be responsible or liable for the accuracy thereof.
Section 3.04 Services
(a) AWA will provide the following services at Sky Harbor International
Airport (PHX) in Phoenix, Arizona:
(1) check-in and ticketing of passengers of AWA's ticket counters and
Fast Check facilities;
(2) use of AWA's passenger facilities by Contractor's passengers;
(3) passenger holding facilities and boarding gates;
(4) interline transfer of baggage, mail, and freight in accordance
with currently established industry methods and procedures;
(5) such security facilities, personnel, and passenger screening
procedures which may be required (a) by applicable orders, rules, and
regulations of the FAA, and (b) by AWA's FAA-approved aircraft security
plan for passengers originating at PHX; and
(6) arrangements, made at Contractor's request and its sole cost and
expense, for alternate transportation, meals, lodging, and other
accommodations for Contractor's passengers as the need therefore may arise
from time to time due to schedule irregularities in Contractor's
operations.
(b) Contractor shall provide its own services and facilities at all
airports other than Phoenix, Arizona and will provide the following services at
PHX:
(1) all passenger screening for passengers arriving on Contractor's
flights in PHX;
(2) all ramp activities for Contractor's flights; and,
(3) check-in Ticketing and Boarding of passengers at its gate or gates
in PHX.
(c) Contractor shall purchase from AWA, at AWA's cost, the CRT's and
reservations lines necessary at each Station.
Section 3.05 Terms of Transportation, Sales and Timetables
(a) AWA's Terms of Transportation, with certain exceptions as listed
therein, shall be applicable to services provided by Contractor pursuant to this
Agreement. Such Terms of Transportation shall at all times be available for
public inspection at Contractor's corporate offices and at each airport ticket
counter and sales office maintained and operated by or on behalf of Contractor.
(b) AWA and Contractor agree that each carrier is authorized to sell air
transportation of passengers and property on the schedule flights operated by
the other carrier utilizing the AWA ticket stock, airbill, forms and other
documentation. Contractor will issue tickets on its own ticket stock and
airbills only for tickets or airbills issued at Contractor's counter or for
non-revenue passengers.
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<PAGE> 70
(c) The party issuing a ticket or exchange order for passenger
transportation shall
[CONFIDENTIAL PORTION DELETED]
(d) With respect to airbills issued by Contractor for transportation of
property on Contractor, AWA and other air carriers, and with respect to inbound
collect shipments, handled by Contractor, Contractor shall retain possession of
all cash proceeds collected and received by Contractor throughout the month in
connection with such transactions and all such cash proceeds shall be remitted
to AWA through the Clearing House in accordance with the procedures set forth in
the currently effective Manual of Procedures issued by said Clearing House, but
in no event later than the 28th day of the month following the month in which
such monies or proceeds were collected. Inbound C.O.D. shipments shall be
handled in accordance with established AWA policy. In addition, Contractor shall
prepare and furnish to AWA all written reports, accounts and documents that AWA
may require, on a weekly basis or at such lesser frequency as AWA may prescribe,
at its sole discretion, from time to time during the life of this Agreement.
(e) AWA and Contractor, by mutual agreement, may establish such new or
different passenger and air freight sales and accounting procedures as may be
required by experience or changed circumstances. In addition, AWA and Contractor
by mutual agreement, may establish alternative or modified passenger sales and
accounting procedures in order to accommodate tickets or exchange orders by air
carriers which are not participants in the Clearing House.
(f) Each party shall assume full liability for and shall indemnify, defend,
protect, save, and hold harmless the other party, its directors, officers,
agents, and employees from any and all liabilities, damages, claims, suits,
judgments, and all related expenses or losses on account of the loss,
misapplication, theft or forgery of passenger tickets, exchange orders, airbills
or other supplies furnished by or on behalf of each party to the other, or the
proceeds thereof, whether or not such loss is occasioned by the insolvency of
either the purchaser of the aforesaid passenger tickets, exchange orders,
airbills or other documents or of a bank in which the party may have deposited
such proceeds. Each party's responsibility hereunder for passenger tickets,
exchange orders, airbills, and other supplies shall commence immediately upon
delivery of said passenger tickets, exchange orders, airbills, and other
supplies into the possession of that party or any duly authorized officer, agent
or employee of the party. Each party shall furnish the other party prompt and
timely notice of any claims made, or suits instituted against it which in any
way may result in the indemnification hereunder, and the indemnifying party
shall have the right to compromise or participate in the defense of same to the
extent of its own interest.
(g) AWA will include the schedule air services provided by Contractor
pursuant to Article 2 in its public timetables (including Contractor's
connecting schedules on the same basis as it does its own). All references in
AWA's public timetables to Contractor's AMERICA WEST EXPRESS services shall also
contain notations indicating that such scheduled services are performed by
Contractor as an independent contractor under the appropriate AWA Trademarks.
Section 3.06 Advertising
The parties will establish for the purpose of advertising the AWA product
in the cities served by Contractor under this Agreement, a pool funded by each
of the parties by each contributing to this pool. Contractor shall decide on the
amount of its contribution, up to one percent (1%) of the revenue it derives
from markets covered under this Agreement. Contractor will advise AWA of the
amount and percentage of its contribution. AWA will then contribute the same
percentage of revenue it derives under this Agreement, and advise Contractor of
the percentage and amount. Contractor will then develop and propose an
advertising program to be funded by the contribution which will then be
submitted to AWA for approval.
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ARTICLE 4 -- JOINT PASSENGER FARES AND DIVISION OF REVENUES
Section 4.01 Joint Fares
Joint (through) passenger fares involving travel on AWA and Contractor
shall be established as mutually agreed upon by AWA and Contractor and published
by AWA. [Confidential Portion Deleted].
Section 4.20 Local Fares
Contractor shall establish and AWA shall publish local fares applicable to
AMERICA WEST EXPRESS markets and Contractor shall [Confidential Portion
Deleted].
ARTICLE 5 -- AIR FREIGHT RATES
Section 5.01 Joint Air Freight Rates
Throughout the life of this Agreement, AWA and Contractor shall establish
and maintain joint air freight rates, including rates covering general
commodity, small package, and priority air freight shipments.
Section 5.02 Compensation to Carrier for Air Freight
For the transportation of air freight on the scheduled services to be
operated by Contractor pursuant to Article 2 above, the Contractor will receive
[Confidential Portion Deleted]. Changes in Contractor-established local rates
must be provided to AWA 45 days in advance of the effective date.
ARTICLE 6 -- U.S. MAIL
Contractor will execute separate contracts with the U.S. Postal Service
(USPS).
ARTICLE 7 -- LIABILITY, INDEMNIFICATION AND INSURANCE
Section 7.01 Contractor Shall Act As An Independent Contractor
(a) The employees, agents, and/or independent contractors of Contractor
engaged in performing any of the services Contractor is to perform pursuant to
this Agreement shall be employees, agents, and independent contractors of
Contractor for all purposes, and under no circumstances shall be deemed to be
employees, agents or independent contractors of AWA. In its performance under
this Agreement, Contractor shall act, for all purposes, as an independent
contractor and not as an agent for AWA. AWA shall have no supervisory power or
control over any employees, agents or independent contractors engaged by
Contractor in connection with its performance hereunder, and all complaints or
requested changes in procedures shall, in all events, be transmitted by AWA to a
designated officer of Contractor. Nothing contained in this Agreement is
intended to limit or condition Contractor's control over its operations or the
conduct of its business as a commuter air carrier, and Contractor and its
principals assume all risks of financial losses which may result from the
operation of the air services to be provided by Contractor hereunder.
(b) The employees and agents of AWA engaged in performing any of the
services AWA is to perform pursuant to this Agreement shall be employees and
agents of AWA for all purposes, and under no circumstances shall be deemed to be
employees and agents of Contractor. Contractor shall have no supervision or
control over any such AWA employees and agents and any complaint or requested
change in procedure shall be transmitted by Contractor to AWA's designated
representative.
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Section 7.02 Liability and Indemnification
(a) Each party hereto assumes full responsibility for any and all liability
to its own directors, officers, employees, or agents on account of injury, or
death resulting from or sustained in the performance of their respective
services under this Agreement.
(b) Contractor shall indemnify, defend, protect, save, and hold harmless
AWA, its directors, officers, employees, and agents from and against any and all
liabilities, claims, demands, suits, judgments, damages, and losses (including
the costs, fees, and expenses in connection therewith and incident thereto),
brought against AWA, its directors, officers, employees or agents by or on
behalf of any director, officer, employee, agent or independent contractor of
Contractor or anyone else claiming through such persons, or by reason of damage
or destruction of property of any such person, or injury to or death of such
person, caused by or arising out of any act or omission of Contractor occurring
while this Agreement is in effect. AWA shall give Contractor prompt and timely
notice of any claim made or suit instituted against AWA which in any way results
in indemnification hereunder, and Contractor shall have the right to compromise
or participate in the defense of same to the extent of its own interest.
(c) AWA shall indemnify, defend, protect, save, and hold harmless
Contractor, its directors, officers, employees, and agents from and against any
and all liabilities, claims, demands, suits, judgments, damages, and losses
(including the costs, fees, and expenses in connection therewith and incident
thereto), brought against Contractor, its directors, officers, employees or
agents by or on behalf of any director, officer, employee, agent or independent
contractor of AWA or anyone else claiming through such persons, or by reason of
damage or destruction of property of any such person, or injury to or death of
such person, caused by or arising out of any act or omission of AWA occurring
while this Agreement is in effect. Contractor shall give AWA prompt and timely
notice of any claim made or suit instituted against Contractor which in any way
results in indemnification hereunder, and AWA shall have the right to compromise
or participate in the defense of same to the extent of its own interest.
(d) Each party, with respect to its own employees, accepts full and
exclusive liability for the payment of workers' compensation and/or employer's
liability insurance premiums with respect to such employees, and for the payment
of all taxes, contributions or other payments for unemployment compensation or
old-age benefits, pensions or annuities now or hereafter imposed upon employers
by the government of the United States or by any state or local governmental
body with respect to such employees measured by the wages, salaries,
compensation or other remuneration paid to such employees, or otherwise, and
each party further agrees to make such payments and to make and file all reports
and returns, and to do everything necessary to comply with the laws imposing
such taxes, contributions or other payments.
Section 7.03 Insurance Coverage
(a) In consideration of the privileges granted herein, Contractor shall, at
all times during the effectiveness of this Agreement, commencing with the first
day thereof, have and maintain in full force and effect policies of insurance
reasonably satisfactory to the other, of the types of coverages, including
coverage on all aircraft described in Section 2.02, and in the minimum amounts
stated below with companies reasonably satisfactory to AWA and under terms and
conditions reasonably satisfactory to AWA as follows:
<TABLE>
<S> <C> <C>
1. AIRCRAFT LIABILITY AND GROUND LIABILITY $50,000,000 Per Occurrence Combined
INSURANCE (Including Comprehensive Public Single Limit of Liability
Liability)
a. Bodily Injury and Personal Injury -- Included in Combined Single Limit
Passengers
b. Bodily Injury and Personal Included in Combined Single Limit
Injury -- Third Parties
c. Property Damage Included in Combined Single Limit
</TABLE>
The minimum amounts of insurance coverages required for Contractor under
this paragraph 1 shall be $50,000,000 per occurrence, combined single limit for
all coverages required under this paragraph 1, provided,
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<PAGE> 73
however, that before Contractor adds aircraft with more than 19 seats to its
AMERICA WEST EXPRESS operations hereunder, Contractor shall obtain insurance
coverage of $100,000,000 per occurrence per aircraft having greater than 19
seats. AMERICA WEST EXPRESS shall obtain insurance coverage of $100,000,000 per
occurrence or $1 million per seat, whichever is greater.
<TABLE>
<CAPTION>
PER ACCIDENT
------------
<S> <C> <C>
2. WORKERS' COMPENSATION INSURANCE: (Company Statutory
Employees)
3. EMPLOYERS' LIABILITY: (Company Employees) $100,000
4. ALL RISK HULL INSURANCE ON AIRCRAFT PERFORMING Replacement cost or Such Lesser Amount As
SERVICES HEREUNDER: May Be Consented To By AWA
5. BAGGAGE LIABILITY: $1,250 (Per Passenger)
6. CARGO LIABILITY: $100,000 Any One Aircraft
$100,000 Any One Disaster With Terms,
Limitations, and Conditions Acceptable To
AWA
</TABLE>
(b) The parties hereby agree that from time to time during the life of this
Agreement, the parties may negotiate with the other to have and maintain amounts
set forth in paragraph (a) above, should the circumstances and conditions of
operations under this Agreement be deemed, in a reasonable person's judgment, to
require reasonable increases in any or all of the foregoing minimum insurance
coverages.
Section 7.04 Additional Requirement
(a) The Contractor shall cause the policies of insurance described in
Section 7.03 to be duly and properly endorsed by that party's insurance
underwriters as follows:
(1) as to the policies of insurance described in paragraphs 1, 2, 3,
4, 5, and 6 of said Section 7.03(a):
(A) to provide that any waiver of rights of subrogation against
other parties by the covered party will not affect the coverage provided
hereunder with respect to the other party; and
(B) with respect to the services performed by the parties pursuant
to this Agreement to provide that the covered party's underwriters shall
waive any and all subrogation rights against the other, its directors,
officers, agents, and employees without regard to any breach of warranty
on the part of Contractor or to provide other evidence of such waiver of
recourse against the other party, its directors, officers, agents, or
employees as shall be acceptable to AWA.
(2) as to policies of insurance described in paragraph 1, 5, and 6 of
said Section 7.03(a):
(A) to provide that the other party, its directors, officers,
agents, and employees shall be endorsed as Additional Insured parties
thereunder; and
(B) to provide that said insurance shall be primary insurance and
to acknowledge that any other insurance policy or policies of the other
party shall be secondary or excess insurance;
(3) as to policies of insurance described in paragraphs 1 and 4 of
said Section 7.03(a) to provide a breach of warranty clause to said
policies acceptable to AWA;
(4) as to policies of insurance described in paragraph 1 only of said
Section 703(a):
(A) to provide, with respect to claims in favor of the other party,
its directors, officers, agents and employees against the covered party,
its directors, officers, agents and employees, that the other party, its
directors, officers, agents and employees shall not be deemed to be
insured under the said insurance policies, and to this end to provide a
cross-liability clause as though separate policies were issued for each
party and to provide a reciprocal cross-liability clause in favor of
each other; and
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(B) to provide contractual liability insurance coverage for
liability assumed by Contractor under this Agreement.
(5) as to policies of insurance described in paragraph 4 above of said
Section 7.03(a), to provide that said Aircraft Hull Insurance shall be on
an agreed value basis, and shall not be subject to more than the standard
market deductibles without the consent of the other party; in the event of
loss, settled on the basis of a total loss, all losses shall be payable in
full;
(6) as to any insurance obtained directly from foreign underwriters,
to provide that the non-covered party may maintain against the covered
party's underwriters a direct action in the United States upon said
insurance policies and to this end provide a standard service of suit
clause designating a United States attorney in Phoenix, Arizona or
Farmington, New Mexico.
(b) The Contractor shall cause each of the insurance policies referred to
in Section 7.03 to be duly and properly endorsed to provide that said policy or
policies or any part or parts thereof shall not be cancelled, terminated or
materially altered, changed or amended by the insurance underwriters until after
30 days' written notice to the other party, which 30-day notice period shall
commence to run from the date such notice is actually received by the other
party.
(c) Upon the effective date of this Agreement, and from time to time
thereafter upon request, the Contractor shall furnish to AWA evidence
satisfactory to AWA of the aforesaid insurance coverages and endorsements,
including certificates certifying that the aforesaid insurance policy or
policies with the aforesaid policy limits are duly and properly endorsed as
aforesaid and are in full force and effect.
(d) In the event the Contractor fails to maintain in full force and effect
any of the insurance and endorsements described in Sections 7.03 and 7.04, AWA
shall have the right (but not the obligation) to procure and maintain such
insurance or any part thereof. The cost of such insurance shall be payable by
the defaulting party to the other upon demand. The procurement of such insurance
or any part thereof by the Contractor does not discharge or excuse the
defaulting party's obligation to comply with the provisions of Sections 7.03 and
7.04. The Contractor agrees not to cancel, terminate or materially alter, change
or amend any of the policies referred to in Section 7.03 until after providing
30 days' advance written notice to AWA of its intent to so cancel, terminate or
materially alter, change or amend said policies of insurance, which 30-day
notice period shall commence to run from the date notice is actually received by
the party.
ARTICLE 8 -- CONSIDERATION, RECORDS AND REPORTS
Section 8.01 Consideration
(a) For and in consideration of the reservations services to be provided to
Contractor hereunder, the non-exclusive, non-transferable license granted to
Contractor authorizing the specified uses of AWA's Trademarks and other valuable
consideration provided by this Agreement, Contractor shall pay to AWA
[CONFIDENTIAL PORTION DELETED]
year. AWA shall bill Contractor for such Service Charges through the Clearing
House referred to in Article 3 in accordance with the procedures set forth in
the currently effective Manual of Procedures issued by said Clearing House, but
in no event later than the 28th day of month following the month in which
services were provided. In the event Contractor fails to pay AWA in full all
Service Charges payable hereunder when due, Contractor agrees to pay to AWA, in
addition to such Service Charges, interest on the unpaid balance of such Service
Charges computed at the rate per annum of one percent (1%) plus the prime rate
which the Chase Manhattan Bank (National Association) from time to time charges
at its principal office in New York on short-term loans to large businesses with
the highest credit standing, with a minimum rate per annum of
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<PAGE> 75
10 percent, from the due date thereof to the date of payment. It is hereby
mutually agreed and understood by the parties hereto that the aforesaid Service
Charges
[CONFIDENTIAL PORTION DELETED]
AWA will use only the personnel in its employ and the equipment and facilities
which it owns or leases. In the event AWA is required to employ, retain or
otherwise furnish additional personnel or obtain, by purchase, lease or
otherwise any additional facilities or equipment, or incur in any manner
whatsoever any expenses or disbursements in connection with its performance of
this Agreement in excess of the personnel, facilities or equipment being
provided in the normal course of business, Contractor shall reimburse AWA in
full, through the Clearing House for the actual costs of such additional
personnel, facilities and/or equipment, and for any actual expenses or
disbursements incurred by AWA in connection with its performance under this
Agreement; provided that, prior to incurring any such additional costs or
expenses or making any such disbursements, AWA shall first obtain a written
approval therefor from Contractor.
(b) All payments and/or reimbursements contemplated in this Article shall
be deemed to be in addition to and not in lieu of any other payments and/or
reimbursements required of either party hereto by other articles of this
Agreement.
Section 8.02 Records and Reports
(a) Upon either party's request, and until such time as the party advises
the other that such reports are no longer necessary, each party shall furnish to
the requesting party, within 60 days following the close of the first three
fiscal quarters of the party, unaudited financial statements including the
party's current corporate balance sheets and profit and loss statements, and
within 120 days after the close of its fiscal year, each party shall furnish the
other with audited financial statements of such party (or its parent company)
including, either separately or on a consolidated basis, the balance sheet and
profit and loss statements of that party. The appropriate reports filed on Form
10-Q or 10-K shall be satisfactory to fulfill such obligation.
(b) Each party shall also promptly furnish the other with a copy of every
report that it prepares and is required to submit to the FAA, National
Transportation Safety Board ("NTSB") or any other governmental agency, relating
to any accident or incident involving an aircraft used by it in performing
services under this Agreement, when such accident or incident is claimed to have
resulted in the death of or substantial injury to any person or the loss of,
damage to, or destruction of any property.
(c) Each party shall promptly notify the other in writing of (i) any change
in or relinquishment of control of it, (ii) any agreement contemplating such a
change or relinquishment with a copy of such agreement, if in writing, to the
other party, or (iii) any change or contemplated change in the Chief Executive
Officer position of it.
ARTICLE 9 -- EFFECTIVE DATE, TERMINATION AND CANCELLATION
Section 9.01 Effective Date and Term
(a) This Agreement will become effective on October 1, 1992 and will
continue in effect thereafter for a period of ten years, unless it is terminated
at an earlier date pursuant to one or more of the provisions of this Article 9.
The AMERICA WEST EXPRESS service described in Section 2 shall commence on the
dates specified in Section 2 and the applicable reservations and ticketing
services shall be made available 30 days in advance of the start of such
services.
(b) In the event there is any change in the statutes governing the economic
regulation of air transportation, or in the applicable rules, regulations or
order of the DOT or some successor agency or department of the government having
jurisdiction over air transportation which change or changes materially affect
the rights and/or obligations presently in force with respect to the air
transportation services of AWA or Contractor, or both, then the parties hereto
will consult, within 30 days after any of the occurrences described
10
<PAGE> 76
herein, in order to determine what, if any, changes to this Agreement are
necessary or appropriate, including but not limited to, the early termination
and cancellation of this Agreement. If the parties hereto are unable to agree
whether any change or changes to this Agreement are necessary and proper, or as
to the terms of such changes, or whether this Agreement should be cancelled in
light of the occurrences described above, and such failure to reach agreement
shall continue for a period of 30 days following the commencement of the
consultations provided for by this Section 9.01(c), then this Agreement may be
cancelled by either AWA or Contractor upon providing the other party a minimum
of 90 days' written notice of such cancellation.
Section 9.02 Termination
(a) In addition to the foregoing provisions of this Article, this Agreement
may be cancelled or terminated by either AWA or Contractor if there is an
assignment of this Agreement or any of its rights, duties or obligations created
hereunder with respect to any party to this Agreement without the written
consent of the other party. In the event that this Agreement is assigned,
whether by operation of law or otherwise, without such consent having been given
in writing, the party not making the assignment shall have the right immediately
to terminate the Agreement by telegraphic or written notice to the other party.
If AWA merges, combines or consolidated with another carrier, or if
substantially all of AWA's assets are acquired by another carrier and the "HP"
designator code or the AMERICA WEST EXPRESS will thereafter not be used for the
services of AWA or such other carrier at the Hub, Contractor shall have the
right to use, in accordance with this Agreement, such replacement or substitute
designator code and related trademarks as are utilized by AWA or such other
acquiring or new carrier for its primary services at the Hub. A merger,
combination, or consolidation by or with another person, company or corporation
by Contractor shall be considered an assignment by Contractor; provided,
however, a merger, combination, or consolidation by or with a subsidiary or
affiliate of Contractor or with another corporation in which Contractor is the
surviving corporation and in which there is no substantial change in the
ownership or control of Contractor shall not be considered an assignment by
Contractor.
(b) Recognizing that AWA is presently operating as a Chapter 11 company,
under reorganization, in the event that Contractor shall file a voluntary
petition in bankruptcy or that proceedings in bankruptcy shall be instituted
against it and such party shall be adjudged bankrupt, or that a court shall take
jurisdiction of such party and its assets pursuant to proceedings brought under
the provisions of any federal reorganization act, or that a receiver of such
party's assets shall be appointed and such taking or appointment shall not be
stayed or vacated within a period of 60 days, or if AWA should change to a
Chapter 7 proceeding or re-enter bankruptcy after its discharge from its current
bankruptcy, the other party may thereupon terminate this Agreement by 15 or more
days' prior written notice to the other party.
(c) Except as otherwise provided herein, if either party shall fail to
perform, keep, and observe any of the terms, covenants or conditions herein
contained on the part of such party to be performed, kept or observed, the
non-breaching party may give the breaching party notice in writing to correct
such condition or cure such default and, if any such condition or default shall
continue for 30 days after the receipt of such notice by the breaching party
and, if within such period of time the breaching party has not prosecuted with
diligence the correction of such condition or default, the non-breaching party
may then terminate this Agreement upon 15 or more days' prior written notice,
and this Agreement shall thereupon cease and expire at the end of such 15 or
more days in the same manner and to the same effect as if it were the expiration
of the original term.
(d) If either party is required by the FAA or DOT to suspend a substantial
portion of its operations for any safety reason, and has not resumed a major
portion of such operations hereunder within 30 days of suspension, the other
party may terminate this Agreement upon five or more days' prior written notice.
(e) AWA, in addition to the other provisions of this section and Section
9.01 above, may terminate this Agreement upon not less than 30 days' written
notice to the other party hereto should any one of the following conditions
occur during the time this Agreement is in effect:
(1) if, during any two consecutive calendar months during the life of
this Agreement, Contractor's flight completion factor shall fall below 97%
due to cancellations attributable to maintenance or operational
deficiencies within Contractor's normal management control;
11
<PAGE> 77
(2) if, for any two consecutive calendar months during the life of
this Agreement, Contractor's on-time performance falls below the lower of
either: a.) 75 percent of arrivals within 15 minutes; or b.) AWA's actual
on-time performance during the same period;
(3) if, Contractor fails to comply with the trademark license
provisions of Article 11 of this Agreement;
(f) Either AWA or Contractor may terminate this Agreement without cause at
any time after the third year from the effective date hereof upon 180 days'
written notice to the other party.
(g) Any early termination or cancellation of one or more of the provisions
of this Article 9 shall not be construed so as to relieve any party hereto of
any debts or monetary obligations to the other party that shall have accrued
hereunder prior to the effective date of such termination or cancellation.
Section 9.03 Force Majeure
Neither AWA nor Contractor shall be liable for any failure to perform under
this Agreement if such failure is due to causes beyond its control, including,
but not limited to, acts of God or the public enemy, fire, floods, epidemics,
quarantine or strikes; provided, however, that the foregoing shall not apply to
the obligations described under Article 7 of this Agreement.
ARTICLE 10 -- USE OF CONTRACTOR'S AIRCRAFT
In the event that aircraft owned and/or operated by Contractor bearing the
AMERICA WEST EXPRESS are available and can be utilized without adversely
affecting in any manner the regular scheduled services operated pursuant to
Section 2, such aircraft may be used:
(1) for non-scheduled planeload passenger charters; or
(2) for scheduled or non-scheduled services limited to the
transportation of freight and/or mail in markets other than the markets
described in Section 2.01; or
(3) on an emergency basis in operations in other parts of Contractor's
system not covered by this Agreement.
ARTICLE 11 -- TRADEMARK LICENSE FOR OPERATIONS TO BE CONDUCTED
BY CONTRACTOR PURSUANT TO THIS AGREEMENT
Section 11.01 Grant of Trademark License
Contractor will conduct all operations described in Section 2 above, and
any additional operations undertaken by subsequent amendment hereto under the
servicemark "AMERICA WEST EXPRESS" and shall utilize the AMERICA WEST EXPRESS
Servicemarks consisting of the exterior color decor and patterns on its aircraft
as prescribed by AWA. AWA hereby grants to Contractor a non-exclusive, non-
transferable license to use such AMERICA WEST EXPRESS Servicemarks in connection
with the services to be rendered by Contractor under this Agreement; provided,
however, that subject to the provisions of Section 202(b) hereof, at any time
during the life of this Agreement, AWA may alter, amend or revoke the license
hereby granted and require Contractor's use of any new or different AWA
Servicemarks in conjunction with the air transportation services provided
hereunder as AWA may determine in the exercise of its sole discretion and
judgment.
Section 11.02 Terms and Conditions Governing Trademark License
(a) Contractor hereby acknowledges AWA's ownership of the AWA Servicemarks,
further acknowledges the validity of the AWA Servicemarks, and agrees that it
will not do anything in any way to infringe or abridge AWA's rights in its
Servicemarks or directly or indirectly to challenge the validity of the AWA
Servicemarks.
12
<PAGE> 78
(b) Contractor agrees that, in providing the services to be provided under
this Agreement in conjunction with one or more of the AWA Servicemarks, it will
conform to such customer service standards (including professional appearance
guidelines and uniform standards; ground equipment appearance standards; ticket
counter and gate area image standards; and other reasonable quality control
measures) as may be reasonably prescribed by AWA either specifically in this
Agreement or by subsequent communications to Contractor. AWA shall have the
rights, through such agents or representatives as it may designate, to inspect
the services and standards being performed by Contractor under this Agreement,
and in the event that, in AWA's opinion, there has been some deviation from such
services and/or standards, Contractor agrees upon written notice from AWA to
rectify promptly any such deviation.
(c) Contractor shall not, without AWA's express written consent, advertise
the services to be rendered hereunder, nor make use of the AWA Servicemarks
referred to in Section 11.01 above in any advertising. AWA shall have absolute
discretion to withhold its consent concerning any and all such advertising and
use of the AWA Servicemarks in advertising by Contractor. In the event AWA
approves the use of such AWA Servicemarks in any advertising, such advertising
shall identify AWA as the owner of such servicemark(s), and to the extent that
any mark is registered, shall so specify.
(d) To the extent that Contractor is licensed to use the mark "AMERICA WEST
EXPRESS," Contractor will use said mark only in the mark "AMERICA WEST EXPRESS"
and then only in conjunction with the services specifically embraced by this
Agreement.
(e) Nothing in this Agreement shall be construed to give Contractor the
exclusive right to use the AWA Servicemarks, or to abridge AWA's right to use
and/or to license its Servicemarks, and AWA hereby reserves the right to
continue use of the AWA Servicemarks as AWA may desire.
(f) No term or provision of this Agreement shall be construed to preclude
the use of the servicemarks "AMERICA WEST EXPRESS" or the aircraft exterior
color decor and patterns by other individuals or corporations not covered by
this Agreement so long as such use does not place such persons so authorized in
direct competition with Contractor in the markets covered by this Agreement,
subject to Contractor's right of first refusal set forth in Article 2.
(g) Should this Agreement be cancelled or otherwise terminated for any
reason as set forth in Article 9 hereof, the AWA Servicemarks shall revert to
AWA and shall not thereafter be used by Contractor in connection with any
operations of Contractor.
ARTICLE 12 -- ENTIRE AGREEMENT, AMENDMENT, NOTICES AND TITLES
Section 12.01 Entire Agreement and Amendments
(a) This Agreement represents the entire agreement between the parties
hereto unless subsequently amended as hereinafter provided, and said Agreement
shall not be modified or cancelled by mutual agreement or in any manner except
by an instrument in writing, executed by the parties or their respective
successors in interest.
(b) The parties hereto may by mutual agreement amend any provision of this
Agreement, or delete or add any provision to this Agreement by an instrument in
writing, executed by each of the parties or their authorized representatives or
successors in interest. Any amendment, deletion or additions executed as
prescribed herein shall become a part of and shall be construed as part of this
Agreement.
13
<PAGE> 79
Section 12.02 Notices and Miscellaneous Provisions
(a) Any and all given notices, approvals or demands required or permitted
to be given by the parties hereto shall be sufficient if sent by certified mail,
postage prepaid, or facsimile machine or in person to AWA addressed to:
AMERICA WEST AIRLINES, INC.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
ATTN: Peter J. Otradovec
Vice President-Planning
and to Contractor, addressed to:
MESA AIRLINES, INC.
2325 East 30th Street
Farmington, New Mexico 87401
ATTN: Larry L. Risley
President/Chief Executive Officer
or to such other addresses in the continental United States as the parties may
specify by notice as provided herein.
(b) Description titles contained in this Agreement are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
(c) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New Mexico.
14
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
entered into and signed as of the day and year first written above.
AMERICA WEST AIRLINES, INC.
/s/ MICHAEL J. CONWAY
--------------------------------------
Name: Michael J. Conway
Title: President
Attest:
/s/ PETER OTRADOVEC
- --------------------------------------
Peter Otradovec
MESA AIRLINES, INC.
/s/ LARRY L. RISLEY
--------------------------------------
Name: Larry L. Risley
Title: President and Chief Executive
Officer
Attest:
/s/ GARY RISLEY
- --------------------------------------
Gary Risley
15
<PAGE> 81
EXHIBIT A
AMERICA WEST EXPRESS SERVICE AGREEMENT
BETWEEN AMERICA WEST AIRLINES, INC. AND MESA AIRLINES, INC.
Exhibit A set forth the transition schedule for the operation of flights
with an HP* code.
<TABLE>
<CAPTION>
TRANSITION FROM
-----------------------
HP TO HP* YV TO HP*
--------- ---------
<S> <C> <C> <C>
Bullhead City, AZ................... BHC 15-Nov-92
Durango, CO......................... DRO 01-Oct-92
Farmington, NM...................... FMN 01-Oct-92
Flagstaff, AZ....................... FLG 01-Nov-92
Fort Huachuca, AZ................... FHU 01-Nov-92
Gallup, NM.......................... GUP 01-Oct-92
Grand Junction, CO.................. GJT 01-Oct-92
Kingman, AZ......................... IGM 15-Oct-92
Lake Havasu, AZ..................... HII 15-Nov-92
Palm Springs, CA.................... PSP 01-Dec-92
Prescott, AZ........................ PRC 15-Oct-92
Telluride, CO....................... TEX Seasonal
Yuma, AZ............................ YUM 01-Oct-92
</TABLE>
16
<PAGE> 82
AMENDMENT TO AGREEMENT BETWEEN
AMERICA WEST AIRLINES, INC.
AND MESA AIRLINES, INC.
THIS AMENDMENT entered into this 31st day of March, 1993, by and between
America West Airlines, Inc. ("AWA"), Debtor-in-Possession, a Delaware
corporation, having its principal place of business at 4000 East Sky Harbor
Boulevard, Phoenix, Arizona, and Mesa Airlines, Inc. ("Contractor"), a New
Mexico corporation, having its principal place of business at 2325 East 30th
Street, Farmington, New Mexico.
WHEREAS, the parties have previously entered into a Service Agreement,
dated the 4th day of September, 1992 and
WHEREAS, Contractor desires to expand the number of gates under its control
at Sky Harbor International Airport (PHX), and AWA is agreeable to sub-leasing
additional PHX facilities to Contractor, and the parties find it necessary to
amend their original agreement to reflect that change,
NOW, THEREFORE, for and in consideration of the foregoing premises, the
parties agree to amend their original agreement as follows:
(1) [CONFIDENTIAL PORTION DELETED]
(2) All other provisions of the original agreement shall remain in
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
entered into and signed as of the day and year first written above.
<TABLE>
<S> <C>
AMERICA WEST AIRLINES, INC. MESA AIRLINES, INC.
By: /s/ PETER OTRADOVEC By: /s/ BLAINE JONES
- --------------------------------------------- ---------------------------------------------
Title: Vice President -- Planning Title: CFO/Treasurer
- --------------------------------------------- ---------------------------------------------
</TABLE>
<PAGE> 83
SECOND AMENDMENT TO THE AGREEMENT BETWEEN
AMERICA WEST AIRLINES, INC.
AND MESA AIRLINES, INC.
THIS AMENDMENT entered into this 31st day of July, 1993, by and between
America West Airlines, Inc. ("AWA"), a Delaware corporation,
Debtor-in-Possession, having its principal place of business at 4000 East Sky
Harbor Boulevard, Phoenix, Arizona, and Mesa Airlines, Inc. ("Contractor"), a
New Mexico corporation, having its principal place of business at 2325 East 30th
Street, Farmington, New Mexico.
WHEREAS, the parties have previously entered into a Service Agreement,
dated the 4th day of September, 1992, which was amended on March 31, 1993, and
WHEREAS, AWA and Contractor desire to establish
[CONFIDENTIAL PORTION DELETED]
NOW, THEREFORE, for and in consideration of the foregoing premises, the
parties agree to amend their original agreement as amended, as follows:
(1) Article 3 -- SUPPORT SERVICES AND FACILITIES shall be amended to
include a new section 3.07.
[CONFIDENTIAL PORTION DELETED]
(2) All other provisions of the original agreement, as previously
amended, shall remain in force and effect.
IN WITNESS WHEREOF, the parties have caused this amendment to be entered
into and signed as of the day and year first written above.
<TABLE>
<S> <C>
AMERICA WEST AIRLINES, INC. MESA AIRLINES, INC.
Debtor-In-Possession
By: /s/ PETER OTRADOVEC By: /s/ BLAINE JONES
Title: Vice President -- Planning Title: CFO/Treasurer
</TABLE>
<PAGE> 84
[LOGO]
March 31, 1994
Mr. Larry L. Risley
President and Chief Executive Officer
Mesa Airlines, Inc.
2225 East 30th Street
Farmington, New Mexico
Re: AMERICA WEST EXPRESS CODE-SHARE AGREEMENT ADDENDUM
Dear Mr. Risley:
[CONFIDENTIAL PORTION DELETED]
6. The provisions of this Addendum will expire on June 30, 1994, unless the
parties agree in writing to an extension or modification of these terms.
7. All other terms and conditions of the Code-Share Agreement between Mesa and
AWA, as amended, shall remain in full force and effect.
Sincerely,
/s/
- --------------------------------------
PETER J. OTRADOVEC
Agreed to by:
Mesa Airlines, Inc.
/s/
- --------------------------------------
By: LARRY L. RISLEY
President and Chief Executive
Officer
Date: 4-18-94
---------------------------------
<PAGE> 1
EXHIBIT 10.14
GPA TERM SHEET
This Term Sheet, dated as of June 13, 1994, sets forth the principal terms
and conditions (the "Terms and Conditions") of the treatment to be afforded to
the claims and interests of GPA Group plc and its affiliates (individually and
collectively, "GPA") pursuant to a joint plan of reorganization (the "Plan") of
America West Airlines, Inc. (the "Company") to be proposed and sponsored by the
Company in conjunction with AmWest Partners, L.P. ("AmWest") under and in
accordance with the Third Revised Investment Agreement, dated as of April 21,
1994, between the Company and AmWest (the "Investment Agreement") and the Third
Revised Interim Procedures Agreement, dated as of April 21, 1994, between the
Company and AmWest (the "Interim Procedures Agreement"). Except as otherwise
defined herein, capitalized terms used herein have the meanings stated in the
Investment Agreement.
Termination of
Put Agreement............ On the Effective Date, GPA shall (i) cancel all
rights of GPA to put any aircraft to the Company
pursuant to the A320 Put Agreement, dated as of
June 25, 1991, between the Company and GPA, as
amended by the First Amendment thereto, dated as of
September 1, 1992 (as so amended, the "Put
Agreement") and the related Agreement Regarding
Rights of First Refusal for A320 Aircraft, dated as
of September 1, 1992 (the "First Refusal
Agreement"), among the Company, GPA and Kawasaki
Leasing International Inc., and (ii) waive, and
covenant not to seek or assert, any and all claims
of any kind or nature arising out of or in
connection with the Put Agreement and/or the First
Refusal Agreement, other than claims for
reimbursement of expenses incurred by GPA in
connection therewith. As of the date of this Term
Sheet, GPA has been fully reimbursed by the Company
for all expenses incurred by GPA in connection with
the Put Agreement and the First Refusal Agreement.
Aircraft and Engine
Subleases................ On the Effective Date, the Company shall ratify
(without modification or amendment) all of its
obligations (including, without limitation, rental
obligations) under and in connection with (i) the
sixteen separate Aircraft Sublease Agreements
between the Company and GPA, and (ii) the three
separate Engine Sublease Agreements between the
Company and GPA (in each case, as such Sublease
Agreement is more fully described on Schedule I to
the Put Agreement and, in each case, as such
Sublease Agreement was assumed by the Company
pursuant to Section 365 of the Bankruptcy Code).
DIP Financing.............. On the Effective Date, all amounts due and owing by
the Company under the debtor-in-possession
financing provided to the Company by GPA and other
debtor-in-possession lenders shall be paid in full
(it being understood that, upon receipt of such
amounts, GPA shall take all such actions as are
required to be taken by GPA pursuant to the
documents relating to such financing to cause and
evidence the release of all liens securing such
financing and the termination of the transactions
relating to such financing).
Common Stock............... On the Effective Date, GPA shall receive 900,000
shares of the Class B Common Stock of the Company
(the "Class B Common Stock"), which shares shall
represent two percent of the total amount of the
Common Stock of the Company (without giving effect
to exercise of the warrants described below and in
the Investment Agreement) and which Class B
<PAGE> 2
Common Stock shall have the terms and provisions
contemplated in the Investment Agreement.
Warrants................... On the Effective Date, GPA shall receive warrants
to purchase up to 1,384,615 shares of Class B
Common Stock, which shares shall represent 2.5% of
the Common Stock of the Company on a fully diluted
basis and which warrants shall be exercisable at a
price determined in accordance with, and have such
other terms and provisions as are described in, the
Plan.
Cash....................... On the Effective Date, GPA shall receive
$30,525,000 in cash.
Board Seat................. Pursuant to and in accordance with the terms,
provisions and conditions to be contained in a
Stockholders' Agreement to be entered into among
the reorganized Company, AmWest, GPA and certain
other parties, and for so long as GPA owns at least
two percent of the voting equity securities of the
Company (on a fully diluted basis), GPA shall be
allocated one seat, out of a total of fifteen
seats, on the Board of Directors of the reorganized
Company. The member of the Board of Directors of
the reorganized Company designated by GPA shall be
reasonably acceptable to AmWest at the time of his
or her initial designation (it being understood
that each of the persons currently serving as
"independent directors" of AWA, Patrick Blaney,
John Tierney and Declan Traecy shall be acceptable
to AmWest for such purposes). AmWest and GPA will
execute a voting agreement or similar arrangement
pursuant to which (i) AmWest will agree to vote in
favor of GPA's nominee to the Board of Directors of
the reorganized Company, and (ii) GPA will agree to
vote in favor of AmWest's nine nominees to the
Board of Directors of the reorganized Company, in
each case, for so long as (a) AmWest owns at least
five percent of the voting equity securities of the
Company (on a fully diluted basis), and (b) GPA
owns at least two percent of the voting equity
securities of the Company (on a fully diluted
basis).
New Puts................... GPA will be granted the right to deliver or put to
the Company, and the Company will be obligated to
lease from GPA, during the period beginning not
later than June 30, 1995 and ending on June 30,
1999 (the "New Put Period"), up to eight new or
used aircraft of types consistent with the
Company's fleet plan and requirements (such right
being referred to herein as the "New Put Right").
Each lease entered into by the Company in
connection with the exercise by GPA of the New Put
Right shall provide for the payment by the Company
of a fair market rental for the related aircraft,
taking into consideration whether the related
aircraft is new or used, the specifications and
condition of the related aircraft and all
provisions of such lease that are relevant to the
overall cost to the Company of the related
aircraft, and determined at or about the time of
delivery of such aircraft to the Company on the
basis of operating lease rentals then prevailing in
the marketplace for comparable operating leases of
comparable aircraft to airlines of comparable
creditworthiness to the Company (at or about the
time of delivery of such aircraft to the Company
and without regard to the prior pendency of the
Case); each such lease will be for a lease term
determined as hereinafter described; and each such
lease shall have such other terms and provisions
and be in such form as is agreed upon by
<PAGE> 3
the Company and GPA and attached to the agreement
between the Company and GPA pursuant to which GPA
is granted the New Put Right (such agreement being
referred to herein as the "New Put Agreement").
The specific number, types and delivery dates for
the aircraft which GPA will be entitled to deliver
to the Company (and which the Company will be
obligated to lease from GPA) in a particular year
during the New Put Period (as well as whether such
aircraft will be new or used aircraft) will be
determined on the basis of mutual agreement by the
Company and GPA, taking into account the Company's
fleet requirements for such year, the availability
to GPA for purposes of the New Put Agreement (in
light of applicable commercial constraints) of
aircraft during such year and the number of
aircraft theretofore delivered and thereafter
remaining to be delivered by GPA to the Company
under the New Put Agreement; provided, however,
that if, on or prior to the Mutual Agreement
Deadline (as such term is hereinafter defined) for
a particular year, the Company and GPA shall not
have mutually agreed upon the specific number,
types and delivery dates for the aircraft which GPA
will be entitled to deliver to the Company (and
which the Company will be obligated to lease from
GPA) during such year (as well as whether such
aircraft will be new or used aircraft), GPA will
have the right to put to the Company (and the
Company will be obligated to lease from GPA without
any necessity for further agreement of the Company)
up to the Maximum Number (as such term is
hereinafter defined) of aircraft for such year,
with (i) the specific types of such aircraft being
selected by GPA from among the Eligible Types (as
such term is hereinafter defined), (ii) such
aircraft being new or used aircraft as selected by
GPA, and (iii) the specific delivery dates for such
aircraft being selected by GPA, in each case, upon
at least 150 days' prior written notice by GPA to
the Company; and provided further, however, that,
unless GPA and the Company shall otherwise agree in
writing (whether by reason of mutual agreement
relevant to a particular year or otherwise), GPA
will not have the right to put to the Company more
than five used aircraft during the New Put Period.
As used herein, the term "Mutual Agreement
Deadline" means (i) with respect to each of 1995
and 1996, January 31, 1995, and (ii) with respect
to each ensuing year during the New Put Period,
January 1st of the preceding year. As used herein,
the term "Maximum Number" means (i) with respect to
1995, two, and (ii) with respect to each ensuing
year during the New Put Period, three. As used
herein, and unless GPA and the Company shall
otherwise agree in writing, the term "Eligible
Types" means, with respect to the types of aircraft
which GPA will be entitled to put to the Company
without the necessity for further agreement of the
Company, Boeing 737-300 aircraft, Boeing 757
aircraft and Airbus A320 aircraft.
The aircraft which GPA will be entitled to deliver
or put to the Company (and which the Company will
be obligated to lease from GPA) may be new or used
aircraft; provided, however, that unless GPA and
the Company shall otherwise agree in writing, GPA
will not have the right to deliver or put to the
Company more than five used aircraft during the New
Put Period; and provided further, however, that any
such aircraft which is an Airbus A320 aircraft will
(i) be new ex factory or like-new having no greater
than 100 flight hours of commercial service, (ii)
have
<PAGE> 4
IAE V2500A-5 engines if (a) the Company has or is
scheduled to have IAE V2500A-5 engines in its
fleet on the delivery date for such aircraft, (b)
the Company is scheduled to have IAE V2500A-5
engines in its fleet within 24 months of the
delivery date for such aircraft, or (c) if new
A320 aircraft powered with IAE V2500A-1 engines
are not or are not scheduled to be generally
available from the airframe and engine
manufacturers on the delivery date for such
aircraft, or have IAE V2500A-1 Engines (upgraded
to maximum performance) if any of the conditions
described in the preceding clauses (a), (b) and
(c) is not fulfilled, and (iii) have such other
specifications (including configuration) as are
substantially the same as those of other A320
aircraft in the Company's fleet or as are
otherwise mutually agreed upon by GPA and the
Company and, in either case, incorporated in the
New Put Agreement; and provided further, however,
that any such aircraft which is not an A320
aircraft will have such specifications (including
configuration and engines) as are substantially
the same as those of other aircraft of the same
type in the Company's fleet or as are otherwise
mutually agreed upon by GPA and the Company and,
in either case, incorporated in the New Put
Agreement; and provided further, however, that any
such aircraft which is a used aircraft will (i) be
fresh from (or have no more than 150 flight hours
beyond) "C" or annual check, (ii) if maintained
under a program involving block "D" check, be in
at least half-time condition or if maintained
under a program involving segmentation of "D"
check, be no more than 12 months from next
scheduled major check on airframe and engines, and
(iii) be in such other condition (consistent with
operating lease return conditions currently
prevailing in the operating lease marketplace) as
is mutually agreed upon by GPA and the Company and
incorporated in the New Put Agreement.
The lease term shall be (i) not more than eighteen
years and not less than (a) ten years for any new
A320 aircraft, or (b) seven years for any other new
aircraft, and (ii) not more than seven years and
not less than three years for any used aircraft.
Unless otherwise mutually agreed in writing by the
Company and GPA, (i) the lease term for a new
aircraft shall be the minimum term applicable to
such aircraft, and (ii) the lease term for a used
aircraft shall be five years.
Conditions................. The obligation of GPA to consummate the
transactions contemplated by this Term Sheet
(including, without limitation, the cancellation of
GPA's rights and claims under and in respect of the
Put Agreement and the First Refusal Agreement)
shall be subject to the satisfaction of the
following conditions: (i) the Plan shall provide
for, and be consummated in accordance with, all of
the Terms and Conditions (it being understood that
all of the Terms and Conditions are integral to the
treatment of GPA's claims and interests and that no
one Term or Condition is of greater significance
than any other Term or Condition); (ii) the Plan
shall provide for, and be consummated with, the
capital structure of the reorganized Company being
as described in the Investment Agreement, the
consideration distributed pursuant to the Plan
being as described in the Investment Agreement
(except for changes approved in writing by GPA and
Permitted Reallocations (as such term is
hereinafter defined), and the economic interests of
GPA not being diluted from those contained in the
Investment Agreement and this Term Sheet; (iii) the
Company shall have paid or reimbursed GPA for all
expenses reasonably
<PAGE> 5
incurred by GPA in connection with the
transactions contemplated by this Term Sheet,
including, without limitation, the reasonable fees
and expenses of GPA's counsel and financial
advisor (other than the fees of such financial
advisor that are in the nature of "success fees");
(iv) there shall have been executed and delivered,
in form and substance reasonably satisfactory to
GPA, all such definitive documentation as is
necessary or reasonably advisable to implement the
transactions contemplated by this Term Sheet
(including, without limitation, documentation
providing to GPA such registration rights as are
reasonably acceptable to GPA with respect to the
securities of the reorganized Company that are
acquired by GPA in the transactions contemplated
by this Term Sheet); and (v) the Board of
Directors of GPA (or an appropriate committee
thereof) shall have approved the execution and
delivery by GPA of the aforesaid definitive
documentation (it being understood that, within
ten business days following the date of this Term
Sheet, GPA shall deliver to AmWest and the Company
a certified copy of a resolution evidencing the
approval by the Board of Directors of GPA (or an
appropriate committee thereof) of this Term Sheet
and the transactions contemplated hereby). As used
herein, the term "Permitted Reallocation" shall
mean changes in the allocation among the Unsecured
Creditors, AmWest (and its Affiliates) and the
Equity Holders of the aggregate consideration
payable to such persons and entities as set forth
in the Investment Agreement, without (i) increase
or decrease in the aggregate amount thereof, or
(ii) change in the terms and conditions of such
consideration from those set forth in the
Investment Agreement unless, in any such case,
AmWest shall have obtained the prior written
consent of GPA.
The obligations of the Company and AmWest to
consummate the transactions contemplated by this
Term Sheet shall be subject to the satisfaction of
the following conditions: (i) the transactions
contemplated by the Investment Agreement (other
than those contemplated by this Term Sheet) shall
have been consummated; (ii) there shall have been
executed and delivered, in form and substance
reasonably satisfactory to the Company and AmWest,
all such definitive documentation as is necessary
or reasonably advisable to implement the
transactions contemplated by this Term Sheet; and
(iii) there shall have been delivered to the
Company and AmWest a certified copy of a resolution
evidencing the approval by the Board of Directors
of GPA (or an appropriate committee thereof) of
this Term Sheet and the transactions contemplated
hereby.
Other...................... Nothing contained in this Term Sheet shall limit,
restrict or impair in any manner or to any extent
the treatment afforded by the Plan to any allowed
administrative claim of GPA arising from the
fulfillment by GPA of its deficiency guarantee
obligations to General Electric Capital Corporation
with respect to aircraft formerly leased by the
Company from General Electric Capital Corporation
(it being acknowledged that such treatment shall be
in accordance with Section 1129(a)(9)(A) of the
Bankruptcy Code).
<PAGE> 1
EXHIBIT 11.1
AMERICA WEST AIRLINES, INC., D.I.P.
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1993
-------------------------
PRO
1989 1990 1991 1992 HISTORICAL FORMA
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Computation for Statements of
Operation:
Income (loss) before
extraordinary item............. $ 12,803 $ (76,695) $ (222,016) $ (131,761) $ 37,165 $ 19,824
Adjustment for interest on debt
reduction...................... 1,414 -- -- -- 4,210 --
Preferred stock dividend
requirement.................... (1,673) (1,673) (1,673) (1,672) -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) applicable to
common stock before
extraordinary item............. 12,544 (78,368) (223,689) (133,433) 41,375 19,824
Extraordinary item, tax
benefit........................ 795 -- -- -- -- --
Extraordinary item, net.......... 7,215 2,024 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) applicable to
common stock................... $ 20,554 $ (76,344) $ (223,689) $ (133,433) $ 41,375 $ 19,824
============ ============ ============ ============ ============ ============
Weighted average number of common
shares outstanding............. 16,761,622 18,395,970 21,533,992 23,914,298 24,480,487 45,125,000
Assumed exercise of stock options
and warrants(a)................ 3,864,273 -- -- -- 3,044,504 (d)
----------- ----------- ----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding as
adjusted....................... 20,625,895 18,395,970 21,533,992 23,914,298 27,524,991 45,125,000
============ ============ ============ ============ ============ ============
Primary earnings per common share:
Income (loss) before
extraordinary item............. $ 0.61 $ (4.26) $ (10.39) $ (5.58) $ 1.50 $ 0.44
Extraordinary item............... 0.39 0.11 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)................ $ 1.00 $ (4.15) $ (10.39) $ (5.58) $ 1.50 $ 0.44
============ ============ ============ ============ ============ ============
Income (loss) before
extraordinary item............. $ (76,695) $ (222,016) $ (131,761)
Preferred stock dividend
requirement.................... (1,673) (1,673) (1,672)
Interest adj net of taxes........ 2,818 4,408 4,964
----------- ----------- -----------
Income (loss) applicable to
common stock before
extraordinary item............. (75,550) (219,281) (128,469)
Extraordinary item, tax
benefit........................ 1,490 2,448 2,756
Extraordinary item, net.......... 2,024 -- --
----------- ----------- -----------
Income (loss) applicable to
common stock................... $ (72,036) (216,833) $ (125,713)
============ ============ ============
Weighted average number of common
shares outstanding............... 18,395,970 21,533,992 23,914,298
Assumes exercise of stock options
and warrants..................... 4,922,120 6,704,746 7,383,922
----------- ----------- -----------
Weighted average number of common
shares as adjusted............... 23,318,090 28,238,738 31,298,220
============ ============ ============
Primary earnings per common share:
Income (loss) before
extraordinary item............. $ (3.24) $ (7.77) $ (4.10)
Extraordinary item............... 0.15 0.09 0.09
----------- ----------- -----------
Net income (loss)(c)............... $ (3.09) $ (7.68) $ (4.01)
============ ============ ============
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------
1994
-------------------------
PRO
1993 HISTORICAL FORMA
----------- ----------- -----------
<S> <<C> <C> <C>
PRIMARY EARNINGS PER SHARE
Computation for Statements of
Operation:
Income (loss) before
extraordinary item............. $ 12,394 $ 35,311 $ 23,991
Adjustment for interest on debt
reduction...................... 2,942 2,050 --
Preferred stock dividend
requirement.................... -- -- --
----------- ----------- -----------
Income (loss) applicable to
common stock before
extraordinary item............. 15,336 37,361 23,991
Extraordinary item, tax
benefit........................ -- -- --
Extraordinary item, net.......... -- -- --
----------- ----------- -----------
Income (loss) applicable to
common stock................... $ 15,336 $ 37,361 $ 23,991
============ ============ ============
Weighted average number of common
shares outstanding............. 24,202,672 25,348,572 45,125,000
Assumed exercise of stock options
and warrants(a)................ 5,465,913 3,355,748 (d)
----------- ----------- -----------
Weighted average number of common
shares outstanding as
adjusted....................... 29,668,585 28,704,320 45,125,000
============ ============ ============
Primary earnings per common share:
Income (loss) before
extraordinary item............. $ .52 $ 1.30 $ .53
Extraordinary item............... -- -- --
----------- ----------- -----------
Net income (loss)................ $ .52 $ 1.30 $ .53
============ ============ ============
Income (loss) before
extraordinary item.............
Preferred stock dividend
requirement....................
Interest adj net of taxes........
Income (loss) applicable to
common stock before
extraordinary item.............
Extraordinary item, tax
benefit........................
Extraordinary item, net..........
Income (loss) applicable to
common stock...................
Weighted average number of common
shares outstanding...............
Assumes exercise of stock options
and warrants.....................
Weighted average number of common
shares as adjusted...............
Primary earnings per common share:
Income (loss) before
extraordinary item.............
Extraordinary item...............
Net income (loss)(c)...............
</TABLE>
<PAGE> 2
AMERICA WEST AIRLINES, INC., D.I.P.
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
off]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1993
-------------------------
PRO
1989 1990 1991 1992 HISTORICAL FORMA
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FULLY DILUTED EARNINGS PER SHARE
Computation for Statements of
Operations:
Income (loss) before extraordinary
items............................ $ 12,803 $ (76,695) $ (222,016) $ (131,761) $ 37,165 $ 19,824
Adjustment for interest on debt
reduction........................ 1,219 -- -- -- 5,812 --
Preferred stock dividend
requirement...................... (1,673) (1,673) (1,673) (1,672) -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) applicable to common
stock before extraordinary
items............................ $ 12,349 $ (78,368) $ (223,689) $ (133,433) $ 42,977 $ 19,824
Extraordinary items, tax benefit... 7,902 2,024 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss).................. $ 20,251 $ (76,344) $ (223,689) $ (133,433) $ 42,977 $ 19,824
============ ============ ============ ============ ============ ============
Weighted average number of common
shares outstanding............... 16,761,622 18,395,970 21,533,992 23,914,298 24,480,487 45,125,000
Assumed exercise of stock options
and warrants(a).................. 3,864,273 -- -- -- 4,240,761 (d)
----------- ----------- ----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding as adjusted... 20,625,895 18,395,970 21,533,992 23,914,298 28,721,248 45,125,000
============ ============ ============ ============ ============ ============
Fully diluted income (loss) per
common share:
Income (loss) before extraordinary
items............................ $ 0.60 $ (4.26) $ (10.39) $ (5.58) $ 1.50 $ 0.44
Extraordinary items................ 0.38 0.11 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss).................. $ 0.98(b) $ (4.15) $ (10.39) $ (5.58) $ 1.50 $ 0.44
============ ============ ============ ============ ============ ============
Additional Fully Diluted
Computation:
Additional adjustment to net income
(loss) as adjusted per fully
diluted computation above
Income (loss) before extraordinary
items as adjusted per fully
diluted computation above........ $ 12,803 $ (76,695) $ (222,016) $ (131,761) $ 37,165 $ 19,824
Add -- Interest on 7.75%
subordinated debentures, net of
taxes............................ 1,853 1,829 869 -- -- --
Add -- Interest on 7.5%
subordinated debentures, net of
taxes............................ 1,735 1,712 806 -- -- --
Add -- Interest on 11.5%
subordinated debentures, net of
taxes............................ 6,948 7,629 3,506...... -- -- --
Add interest on debt reduction, net
of taxes......................... 1,219 2,777 4,352 4,964 5,812 --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary
items as adjusted................ 24,558 (62,748) (212,483) (126,797) 42,977 19,824
Extraordinary items................ 13,828 9,399 5,293 2,756 -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss).................. $ 38,386 $ (53,349) $ (207,190) $ (124,041) $ 42,977 $ 19,824
============ ============ ============ ============ ============ ============
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------
1994
-------------------------
PRO
1993 HISTORICAL FORMA
----------- ----------- -----------
<S> <<C> <C> <C>
FULLY DILUTED EARNINGS PER SHARE
Computation for Statements of
Operations:
Income (loss) before extraordinary
items............................ $ 12,394 $ 35,311 $ 23,991
Adjustment for interest on debt
reduction........................ 2,914 1,988 --
Preferred stock dividend
requirement...................... -- -- --
----------- ----------- -----------
Income (loss) applicable to common
stock before extraordinary
items............................ $ 15,308 37,299 $ 23,991
Extraordinary items, tax benefit... -- -- --
----------- ----------- -----------
Net income (loss).................. $ 15,308 $ 37,299 $ 23,991
============ ============ ============
Weighted average number of common
shares outstanding............... 24,202,672 25,348,572 45,125,000
Assumed exercise of stock options
and warrants(a).................. 5,465,913 3,355,748 (d)
----------- ----------- -----------
Weighted average number of common
shares outstanding as adjusted... 29,668,585 28,704,320 45,125,000
============ ============ ============
Fully diluted income (loss) per
common share:
Income (loss) before extraordinary
items............................ $ 0.52 $ 1.30 $ 0.53
Extraordinary items................ -- -- --
----------- ----------- -----------
Net income (loss).................. $ 0.52(c) $ 1.30 $ 0.53
============ ============ ============
Additional Fully Diluted
Computation:
Additional adjustment to net income
(loss) as adjusted per fully
diluted computation above
Income (loss) before extraordinary
items as adjusted per fully
diluted computation above........ $ 12,394 $ 35,311 $ 23,991
Add -- Interest on 7.75%
subordinated debentures, net of
taxes............................ -- -- --
Add -- Interest on 7.5%
subordinated debentures, net of
taxes............................ -- -- --
Add -- Interest on 11.5%
subordinated debentures, net of
taxes............................ -- -- --
Add interest on debt reduction, net
of taxes......................... 2,914 1,988 --
----------- ----------- -----------
Income (loss) before extraordinary
items as adjusted................ 15,308 37,299 23,991
Extraordinary items................ -- -- --
----------- ----------- -----------
Net income (loss).................. $ 15,308 $ 37,299 $ 23,991
============ ============ ============
</TABLE>
<PAGE> 3
AMERICA WEST AIRLINES, INC., D.I.P.
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
off]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1993
-------------------------
PRO
1989 1990 1991 1992 HISTORICAL FORMA
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Additional adjustment to weighted
average number of shares
outstanding
Weighted average number of shares
outstanding as adjusted per fully
diluted computation above........ 20,625,895 18,395,970 21,533,992 23,914,298 28,721,248 45,125,000
Additional dilutive effect of
outstanding options and
warrants......................... -- 5,266,266 6,704,746 7,383,922 -- (d)
Additional dilutive effect of
assumed conversion of preferred
stock:
Series A 9.75%................... -- -- -- -- -- --
Series B 10.5%................... 1,164,596 1,164,596 1,164,596 1,164,596 851,294 --
Series C 9.75%................... 73,099 73,099 73,099 73,099 73,099 --
Additional dilutive effect of
assumed conversion of 7.75%
subordinated debentures.......... 2,767,111 2,735,200 2,483,528 2,278,151 2,263,007 --
Additional dilutive effect of
assumed conversion of 7.5%
subordinated debentures.......... 2,582,357 2,551,060 2,347,604 2,291,607 2,272,548 --
Additional dilutive effect of
assumed conversion of 11.5%
subordinated debentures.......... 8,995,021 9,866,509 9,081,162 7,486,391 7,328,201 --
----------- ----------- ----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding as adjusted... 36,208,079 40,052,700 43,388,727 44,592,064 41,509,397 45,125,000
============ ============ ============ ============ ============ ============
Fully diluted income (loss) per
common share:
Income (loss) before extraordinary
items............................ $ 0.68 $ (1.57) $ (4.90) $ (2.84) $ 1.04 $ 0.44
Extraordinary items................ 0.39 0.23 0.12 0.06 -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)(e)............... $ 1.07(c) $ (1.34)(c) $ (4.78)(c) $ (2.78)(c) $ 1.04 $ 0.44
============ ============ ============ ============ ============ ============
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------------
1994
-------------------------
PRO
1993 HISTORICAL FORMA
----------- ----------- -----------
<S> <<C> <C> <C>
Additional adjustment to weighted
average number of shares
outstanding
Weighted average number of shares
outstanding as adjusted per fully
diluted computation above........ 29,668,585 28,704,320 45,125,000
Additional dilutive effect of
outstanding options and
warrants......................... -- -- (d)
Additional dilutive effect of
assumed conversion of preferred
stock:
Series A 9.75%................... -- -- --
Series B 10.5%................... 1,164,596 -- --
Series C 9.75%................... 73,099 73,099 --
Additional dilutive effect of
assumed conversion of 7.75%
subordinated debentures.......... 2,268,455 2,257,558 --
Additional dilutive effect of
assumed conversion of 7.5%
subordinated debentures.......... 2,280,078 2,264,932 --
Additional dilutive effect of
assumed conversion of 11.5%
subordinated debentures.......... 7,349,425 7,306,864 --
----------- ----------- -----------
Weighted average number of common
shares outstanding as adjusted... 42,804,238 40,606,773 45,125,000
============ ============ ============
Fully diluted income (loss) per
common share:
Income (loss) before extraordinary
items............................ $ 0.36 $ 0.92 $ 0.53
Extraordinary items................ -- -- --
----------- ----------- -----------
Net income (loss)(e)............... $ 0.36 $ 0.92 $ 0.53
============ ============ ============
</TABLE>
- ---------------
(a) The stock options and warrants are included only in the periods in which
they are dilutive.
(b) The calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
(c) The calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an antidilutive result.
(d) 10,384,615 warrants are available for exercise and as such the EPS
calculation should follow the modified treasury stock method. However since
the exercise price of the warrants will not be determined until a later
date, the EPS computation is presented without the effect of the exercise of
the warrants for both primary and fully diluted earnings per share.
<PAGE> 1
EXHIBIT 12.1
AMERICA WEST AIRLINES, INC., D.I.P.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------------- --------------------------------
1993 1994
---------------------- ----------------------
PRO PRO
1989 1990 1991 1992 HISTORICAL FORMA 1993 HISTORICAL FORMA
-------- -------- --------- --------- ----------- -------- ------- ----------- --------
(IN THOUSANDS EXCEPT RATIO OF EARNINGS TO FIXED CHARGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Computation of Earnings:
Income (loss) before
income taxes and
extraordinary
item................ $ 20,040 $(76,695) $(222,016) $(131,761) $ 37,924 $ 54,147 $12,647 $ 36,782 $ 50,001
Add:
Interest expense
including
amortization
of debt issuance
costs............... 43,934 61,239 63,991 55,886 54,252 65,743 27,593 26,098 31,493
Interest portion of
rent expense........ 58,759 77,537 106,414 102,314 81,795 80,680 42,034 39,433 38,707
-------- -------- --------- --------- ----------- -------- ------- ----------- --------
Income (loss), as
adjusted.............. $122,733 $ 62,081 $ (51,611) $ 26,439 $ 173,971 $200,570 $82,274 $ 102,313 $120,201
======== ======== ========= ========= ========= ======== ======= ========= ========
Computation of Fixed
Charges:
Interest expense
including
amortization
of debt issuance
costs............... $ 43,934 $ 61,239 $ 63,991 $ 55,886 $ 54,252 $ 65,743 $27,593 $ 26,098 $ 31,493
Interest portion of
rent expense........ 58,759 77,537 106,414 102,314 81,795 80,680 42,034 39,433 38,707
Capitalized
interest............ 7,250 6,375 6,664 -- -- -- -- -- --
-------- -------- --------- --------- ----------- -------- ------- ----------- --------
Fixed charges........... $109,943 $145,151 $ 177,069 $ 158,200 $ 136,047 $146,423 $69,627 $ 65,531 $ 70,200
======== ======== ========= ========= ========= ======== ======= ========= ========
Ratio of earnings to
fixed charges......... 1.12 (*) (*) (*) 1.28 1.37 1.18 1.56 1.71
</TABLE>
- ---------------
(*) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes and extraordinary
item plus fixed charges less capitalized interest. "Fixed charges" consist
of interest expense including amortization of debt issuance costs, a portion
of rent expense which is deemed to be representative of an interest factor,
and capitalized interest. For the years ended December 31, 1990, 1991 and
1992 earnings were insufficient to cover fixed charges by $83,070,000,
$228,680,000 and $131,761,000 respectively.
<PAGE> 1
EXHIBIT 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------
AMERICAN BANK NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION
(STATE OF INCORPORATION IF NOT A NATIONAL BANK)
101 EAST FIFTH STREET
CORPORATE TRUST DEPARTMENT
ST. PAUL, MINNESOTA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
41-0122055
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
55101
(ZIP CODE)
------------------------
AMERICAN BANK NATIONAL ASSOCIATION
101 EAST FIFTH STREET
ST. PAUL, MINNESOTA 55101
(612) 298-6280
(EXACT NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
AMERICA WEST AIRLINES, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION)
4000 EAST SKY HARBOR BOULEVARD
PHOENIX, ARIZONA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
86-0418245
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
85034
(ZIP CODE)
% SENIOR UNSECURED NOTES DUE 2001
(TITLE OF THE INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
Comptroller of the Currency, Treasury Department, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington,
D.C.
GENERAL
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR OR ANY UNDERWRITER FOR THE OBLIGOR IS AN AFFILIATE OF THE
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
None.
See Note following Item 16.
ITEMS 3-15 ARE NOT APPLICABLE BECAUSE TO THE BEST OF THE TRUSTEE'S KNOWLEDGE THE
OBLIGOR IS NOT IN DEFAULT UNDER ANY INDENTURE FOR WHICH THE TRUSTEE ACTS AS
TRUSTEE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY AND QUALIFICATION.
Exhibits listed below are incorporated by reference from previous
filing #33-79088. American Bank National Association was formerly known
as American National Bank and Trust Company. The entity has remained
the same, only the name has changed as noted by the attached letter
from O.C.C.
Exhibit 1. Copy of Articles of Association of the trustee now in effect.
Exhibit 2. a. A copy of the certificate of the Comptroller of Currency
dated June 1, 1965, authorizing American Bank National
Association to act as fiduciary.
b. A copy of the certificate of authority of the trustee to
commence business issued June 9, 1903, by the Comptroller of
the Currency to American Bank National Association of St.
Paul.
Exhibit 3. A copy of the authorization of the trustee to exercise corporate
trust powers issued by the Federal Reserve Board.
Exhibit 4. Copy of By-laws of the trustee as now in effect.
Exhibit 5. Copy of each Indenture referred to in Item 4. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the
Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority.
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NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligor, or affiliates, are based
upon information furnished to the Trustee by the obligor. While the Trustee has
no reason to doubt the accuracy of any such information it cannot accept any
responsibility.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE TRUSTEE, A
NATIONAL BANKING ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED
STATES, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY AND QUALIFICATION TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, AND ITS SEAL
TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE CITY OF SAINT PAUL AND STATE OF
MINNESOTA ON THE 11TH DAY OF AUGUST, 1994.
AMERICAN BANK NATIONAL
ASSOCIATION
By /s/ FRANK P. LESLIE III
------------------------------------
Frank P. Leslie III
Assistant Vice President
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EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, American Bank National Association, hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: August 11, 1994
AMERICAN BANK NATIONAL
ASSOCIATION
By /s/ FRANK P. LESLIE III
Frank P. Leslie III
Assistant Vice President
<PAGE> 5
Comptroller of the Currency
Administrator of National Banks
Midwestern District Office
2345 Grand Avenue, Suite 700
Kansas City, Missouri 64108
July 7, 1994
Mr. Robert T. Lund
Senior Vice President and General Counsel
American Bank National Association
101 East Fifth Street
St. Paul, Minnesota 55101-1860
Dear Mr. Lund:
The Office of the Comptroller of the Currency (OCC) has received your
letter concerning the title change and the appropriate amendment to the Articles
of Association. The OCC has recorded that as of July 1, 1994, the title of
American National Bank and Trust Company, St. Paul, Minnesota, Charter No. 6828,
was changed to "American Bank National Association".
As a result of Garn-St Germain Depository Institutions Act of 1982, the OCC
is no longer responsible for the approval of national bank name changes nor does
it maintain official records on the use of alternate titles. The use of other
titles or the retention of the rights to any previously used title is the
responsibility of the bank's board of directors. Legal counsel should be
consulted to determine whether or not the new title, or any previously used
title, could be challenged by competing institutions under the provisions of
federal or state law.
Sincerely,
/s/ JUDITH A. BOLLIG
Judith A. Bollig
Analysis Specialist
