SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
====== Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994 or
----------------
Transition report pursuant to Section 13 or 15(d) of the
====== Securities Exchange Act of 1934
For the transition period from to
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Commission file number 1-10140
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AMERICA WEST AIRLINES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 86-0418245
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4000 EAST SKY HARBOR BLVD, PHOENIX, ARIZONA 85034
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 693-0800
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N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes XX No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No (Not Applicable)
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The number of shares of the Company's common stock outstanding as of April
30, 1994 was 25,294,870 shares.
AMERICA WEST AIRLINES, INC., D.I.P.
CONDENSED BALANCE SHEETS
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (in thousands of dollars)
----------------------------
March 31, December 31,
ASSETS 1994 1993
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(Unaudited)
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . $ 151,452 $ 99,631
Accounts receivable, less allowance for
doubtful accounts of $3,209,000 in 1994
and $3,030,000 in 1993 . . . . . . . . . . 88,542 65,744
Expendable spare parts and supplies,
less allowance for obsolescence of
$7,466,000 in 1994 and $7,231,000 in 1993 29,303 28,111
Prepaid expenses . . . . . . . . . . . . . . 40,118 34,939
----------- -----------
Total current assets . . . . . . . . . 309,415 228,425
----------- -----------
PROPERTY AND EQUIPMENT
Flight equipment . . . . . . . . . . . . . . 881,478 872,104
Other property and equipment . . . . . . . . 182,313 180,607
----------- -----------
1,063,791 1,052,711
Less accumulated depreciation and
amortization . . . . . . . . . . . . . . 404,947 385,776
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658,844 666,935
Equipment purchase deposits . . . . . . . . 51,836 51,836
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710,680 718,771
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RESTRICTED CASH . . . . . . . . . . . . . . . . 39,425 46,296
OTHER ASSETS . . . . . . . . . . . . . . . . . 23,641 23,251
----------- -----------
$ 1,083,161 $ 1,016,743
=========== ===========
See accompanying notes to condensed financial statements.
<PAGE>
AMERICA WEST AIRLINES, INC., D.I.P.
CONDENSED BALANCE SHEETS
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (in thousands of dollars)
----------------------------
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' DEFICIENCY 1994 1993
- - ------------------------------------------------- ------------ ------------
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt . . . . $ 119,727 $ 125,271
Accounts payable . . . . . . . . . . . . . . 67,402 62,957
Air traffic liability . . . . . . . . . . . 165,022 118,479
Accrued compensation and vacation benefits . 12,390 11,704
Accrued interest . . . . . . . . . . . . . . 7,107 8,295
Accrued taxes . . . . . . . . . . . . . . . 24,870 14,114
Other accrued liabilities . . . . . . . . . 15,242 11,980
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Total current liabilities . . . . . . 411,760 352,800
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ESTIMATED LIABILITIES SUBJECT TO
CHAPTER 11 PROCEEDINGS . . . . . . . . . . . 383,914 381,114
LONG-TERM DEBT, LESS CURRENT MATURITIES . . . . 390,358 396,350
MANUFACTURERS' AND DEFERRED CREDITS . . . . . . 72,478 73,592
OTHER LIABILITIES . . . . . . . . . . . . . . . 63,486 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, $.25 par value. Authorized
90,000,000 shares; issued and outstanding
25,289,270 shares in 1994 and 25,291,102
in 1993 . . . . . . . . . . . . . . . . . . 6,323 6,323
Additional paid-in capital . . . . . . . . . 196,986 197,010
Accumulated deficit . . . . . . . . . . . . . (423,451) (438,626)
----------- -----------
(220,124) (235,275)
Less deferred compensation and notes receivable -
employee stock purchase plans . . . . . . . 18,711 18,987
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Total stockholders' deficiency . . . (238,835) (254,262)
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$ 1,083,161 $ 1,016,743
=========== ===========
See accompanying notes to condensed financial statements.
<PAGE>
AMERICA WEST AIRLINES, INC., D.I.P.
CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(in thousands of dollars except per share amounts)
(unaudited)
Three Months Ended
March 31,
-------------------------
1994 1993
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OPERATING REVENUES
Passenger . . . . . . . . . . . . . . . . . . $ 324,427 $ 297,661
Cargo . . . . . . . . . . . . . . . . . . . . 10,491 9,595
Other . . . . . . . . . . . . . . . . . . . . 10,346 9,349
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Total operating revenues . . . . . . . . . 345,264 316,605
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OPERATING EXPENSES
Salaries and related costs . . . . . . . . . 79,471 74,160
Rentals and landing fees . . . . . . . . . . 66,259 72,490
Aircraft fuel . . . . . . . . . . . . . . . . 37,932 42,406
Agency commissions . . . . . . . . . . . . . 29,111 25,464
Aircraft maintenance materials and repairs . 7,929 7,194
Depreciation and amortization . . . . . . . . 21,153 19,723
Other . . . . . . . . . . . . . . . . . . . . 65,659 58,000
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Total operating expenses . . . . . . . . . 307,514 299,437
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Operating income . . . . . . . . . . . . . 37,750 17,168
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NONOPERATING INCOME (EXPENSES)
Interest income . . . . . . . . . . . . . . . 161 237
Interest expense . . . . . . . . . . . . . . (13,175) (13,897)
Loss on disposition of property and equipment (542) (198)
Reorganization expense, net . . . . . . . . . (8,396) (1,086)
Other, net . . . . . . . . . . . . . . . . . 9 (46)
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Total nonoperating expenses, net . . . . . (21,943) (14,990)
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INCOME BEFORE INCOME TAXES . . . . . . . . . . 15,807 2,178
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INCOME TAXES . . . . . . . . . . . . . . . . . 632 44
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NET INCOME . . . . . . . . . . . . . . . . . . 15,175 2,134
ACCUMULATED DEFICIT AT BEGINNING OF PERIOD . . (438,626) (475,791)
----------- -----------
ACCUMULATED DEFICIT AT END OF PERIOD . . . . . $ (423,451) $ (473,657)
=========== ===========
PRIMARY EARNINGS PER COMMON SHARE . . . . . . . $ 0.56 $ 0.09
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING PERIOD . . . . . . . . . . 29,152,729 24,020,266
=========== ===========
FULLY DILUTED EARNINGS PER COMMON SHARES . . . $ 0.40 $ 0.09
=========== ===========
WEIGHTED AVERAGE NUMBER OF F. D. SHARES
OUTSTANDING DURING PERIOD . . . . . . . . . . 41,055,183 42,864,353
=========== ===========
See accompanying notes to condensed financial statements.
<PAGE>
AMERICA WEST AIRLINES, INC., D.I.P.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
Three Months Ended
March 31,
-----------------------
1994 1993
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Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . $ 15,175 $ 2,134
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization . . . . . . 21,153 19,723
Amortization of manufacturers' and
deferred credits . . . . . . . . . . . . (1,114) (1,152)
Loss on disposition of property and equipment 542 198
Reorganization items . . . . . . . . . . . 3,703 -
Other . . . . . . . . . . . . . . . . . . (187) (122)
Changes in operating assets and liabilities:
Increase in accounts receivable, net . . . (22,798) (8,059)
Decrease (increase) in spare parts and
supplies, net . . . . . . . . . . . . . (1,192) 3,429
Increase in prepaid expenses . . . . . . . (5,179) (1,269)
Decrease in other assets and restricted cash 6,481 6,375
Increase (decrease) in accounts payable . 4,823 (2,859)
Increase in air traffic liability . . . . 45,325 14,216
Increase (decrease) in accrued compensation
and vacation benefits . . . . . . . . . 686 (358)
Increase in accrued interest . . . . . . . 1,530 1,572
Increase in accrued taxes . . . . . . . . 10,756 3,813
Increase in other accrued liabilities . . 3,139 2,295
Decrease in other liabilities . . . . . . (3,209) (2,792)
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Net cash provided by operating activities 79,634 37,144
Cash flows from investing activities:
Purchases of property and equipment . . . . . (13,665) (8,893)
Proceeds from disposition of property . . . . 172 223
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Net cash used in investing activities . (13,493) (8,670)
Cash flows from financing activities:
Repayment of debt . . . . . . . . . . . . . . (14,320) (14,730)
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Net cash used in financing activities . (14,320) (14,730)
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Net increase in cash and cash equivalents 51,821 13,744
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Cash and cash equivalents at beginning of period 99,631 74,383
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Cash and cash equivalents at end of period . $ 151,452 $ 88,127
========= =========
See accompanying notes to condensed financial statements.
<PAGE>
AMERICA WEST AIRLINES, INC., D.I.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1994
1. REORGANIZATION UNDER CHAPTER 11, LIQUIDITY AND FINANCIAL CONDITION
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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 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 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.
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
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. 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 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 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 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 March 31, 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 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 March 31, 1994, $115 million of the filed claims have 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
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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 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 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 funds managed or
advised by Fidelity Management & Research Company and its affiliates.
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 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 in the Company for $114.8 million and $100 million
in new senior unsecured debt securities which can be increased to $130
million by the Company depending upon certain other events, prior to
the date fixed for voting by the Bankruptcy Court. 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 in America West after the
Company is reorganized. The terms of the Third Revised Investment
Agreement will be incorporated into a plan of reorganization to be
filed with the Bankruptcy Court; however, modifications to the Third
Revised 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 Third
Revised Investment Agreement will be accepted by the parties entitled
to vote thereon or confirmed by the Bankruptcy Court. Moreover,
consummation of a Plan of Reorganization based on the Third Revised
Investment Agreement 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 Third Revised Investment
Agreement, the Third Revised 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 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 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 receive 5 percent of the new
common equity of the Company. In addition, holders of equity
interests would have the right to purchase up to $14.4 million of
the new common equity in 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 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.
4. In exchange for certain concessions principally arising from
cancellation of the right of Guiness 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 new unsecured debt securities or an
equivalent amount in cash, 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.
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 Third
Revised 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 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 Reorganization
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 Third Revised 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.
On March 11, 1994, the Company and AmWest also entered into an Interim
Procedures Agreement which was filed with the Bankruptcy Court on March
11, 1994 (the "Original Procedures Agreement"). The Original
Procedures Agreement was superseded by a Revised Interim Procedures
Agreement dated as of March 11, 1994 and filed with the Bankruptcy
Court on March 28, 1994 (the "Revised Procedures Agreement"). The
Revised Procedures Agreement was superseded by a Second Revised Interim
Procedures Agreement dated as of April 7, 1994 and filed with the
Bankruptcy Court on April 8, 1994 (the "Second Revised Procedures
Agreement"). The Second Revised Procedures Agreement was superseded by
a Third Revised Interim Procedures Agreement dated as of April 21, 1994
and filed with the Bankruptcy Court on April 26, 1994 (the "Third
Revised Procedures Agreement"). The Procedures Agreement 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 Third Revised Procedures Agreement is substantially identical to
the Second Revised Procedures Agreement except for the following
principal modifications:
1. All provisions of the Second Revised Procedures Agreement
providing for the payment to AmWest of a termination or break-up
fee were deleted. In lieu thereof, AmWest would be entitled, in
the event the Third Revised Investment Agreement is terminated on
account of the Company's acceptance of a qualified overbid or the
confirmation of a competing Plan of Reorganization, to seek
Bankruptcy Court approval of a special payment (not to exceed $4
million) to AmWest based on the "substantial contribution"
principle set forth in Section 503(b) of the Bankruptcy Code. The
Company is committed to cooperate in good faith as reasonably
requested by AmWest in obtaining Bankruptcy Court approval of any
special payment requested by AmWest and, should such approval be
granted, to make the special payment to AmWest without offset.
2. Under the Second Revised Procedures Agreement, the Company was
entitled to consider unsolicited competing bids regardless of when
received by the Company. The Third Revised Procedures Agreement
prohibits the Company from considering any unsolicited competing
bid received by the Company after the entry by the Bankruptcy
Court of an order approving a disclosure statement relating to
AmWest proposal. Should the Company breach the Procedures
Agreement at any time, AmWest has agreed that any damages it may
be entitled to seek shall be limited to an amount not to exceed $4
million.
3. The Third Revised Procedures Agreement grants to AmWest the right
to terminate the Third Revised Procedures Agreement and the Third
Revised Investment Agreement for any reason prior to the entry by
the Bankruptcy Court of an order approving a disclosure statement
relating to AmWest proposal. Should AmWest exercise such right,
it would become obligated to refund to the Company all expenses
incurred by AmWest after March 1, 1994 and previously reimbursed
or paid by the Company.
4. The Second Revised Procedures Agreement obligated the Company to
reimburse AmWest for all reasonable out-of-pocket or third-party
expenses incurred by AmWest in connection with the AmWest
investment proposal subject to certain limitations, including with
respect to expenses incurred after March 1, 1994 (i) a $250,000
monthly cap and (ii) a $3 million overall cap. The Third Revised
Procedures Agreement increased the monthly cap to $300,000 and
eliminated the $3 million overall cap.
The Third Revised Procedures Agreement was approved by the Bankruptcy
Court on May 4, 1994.
The Company is currently developing with AmWest a plan of
reorganization based upon the Third Revised Investment Agreement and
the Third Revised Procedures Agreement.
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 would be approved.
The Company is currently unable to predict when it may file a plan of
reorganization based upon the Third Revised 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 from 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 holders of
equity interests for voting, and 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 Third Revised Investment
Agreement might be submitted for voting and confirmation.
If at any time the Creditor's 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.
The plan to be based upon the Investment Agreement provides for a
substantial distribution to holders of equity interests, as noted
above. However, there can be no assurances that this plan will be
confirmed as currently configured.
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. 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 March 31,
1994 consisted of the following (in thousands):
March 31,
1994
----
(in thousands)
Long-term debt (including convertible
subordinated debentures of $138.9 million $223,609
Accounts payable and accrued liabilities 117,161
Accrued interest 17,425
Accrued taxes 25,719
--------
$383,914
========
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.
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:
March 31,
1994 1993
---- ----
(in thousands)
Provisions for pre-petition and
administrative claims $ 4,180 $ -
Professional fees 5,268 1,521
D.I.P. financing issuance costs 209 -
Interest income (848) (468)
Other (413) 33
------- -------
$ 8,396 $ 1,086
======= =======
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
reflects 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 1994 and 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 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 March 31, 1994, the Company made a principal payment of $5 million
as required under the amended D.I.P. loan agreement. Under the amended
terms of the D.I.P. financing, the Company also is required 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 March 31, 1994, the Company notified the
D.I.P. lenders that the Company's unrestricted cash exceeded $125
million; however, the D.I.P. lenders have not exercised their
prepayment right. The D.I.P. financing contains a minimum unencumbered
cash balance requirement of $55 million at March 31, 1994 and other
financial covenants. At March 31, 1994, the Company was in compliance
with these covenants.
At March 31, 1994, the outstanding balance of the D.I.P. loan was $78.6
million with a maturity date of June 30,1994. Presently, the Company
does not possess the liquidity to satisfy its D.I.P. loan obligation
and still maintain a sufficient level of working capital or does it
appear that a Plan of Reorganization could be confirmed prior to June
30,1994. Consequently, the Company is in negotiations with its current
D.I.P. lenders to obtain alternative repayment terms. Although there
can be no assurances that such alternative repayment terms will be
agreed to by the D.I.P. lenders, the Company is confident that such
revise terms will be granted based on its recent operating performance
and the progress it has achieved with respect to the reorganization
process.
4. EMPLOYEE STOCK PURCHASE PLANS
-----------------------------
As of March 31, 1994, 7,486,427 shares of common stock had been sold
under the plans. No shares were sold during the first quarter of 1994.
At March 31, 1994, the unamortized deferred compensation and
outstanding receivable balance relating to such plans amounted to
$1,083,000 and $17,624,000, respectively.
5. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
----------------------------------------------------
Cash paid for interest and income taxes during the three months ended
March 31, 1994 and 1993 was as follows:
1994 1993
---- ----
Interest (net of amounts
capitalized) $11,362,000 $12,291,000
Income taxes $ 221,000 $ -
In addition, during the three months ended March, 1994 and 1993, the
Company had the following non-cash financing and investing activities:
1994 1993
---- ----
Equipment acquired through
capital leases $ 111,000 $ -
Conversion of long-term debt to
common stock $ - $ 636,000
Accrued interest reclassified to
long-term debt $ 2,101,000 $ 8,831
6. INCOME TAX
----------
For the quarter ended March 31, 1994, the Company recorded income tax
expense as follows:
Current taxes
Federal $450
State 182
---
$632
====
Deferred taxes $ -
====
For the quarter ended March 31, 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 for an
effective tax rate of 4 percent.
As of March 31, 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 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.
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.
7. 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 interest at 10.5 percent over the remaining term of
the lease or secured borrowing with repayment commencing December
1991. At March 31, 1994 and December 31, 1993, the remaining
unpaid deferrals are reported as follows:
March 31, December 31,
1994 1993
-------- ------------
(in thousands)
Accounts payable $ 5,520 $ 5,744
Other liabilities 21,382 22,912
Long-term debt 18,196 18,671
------- -------
$45,098 $47,327
======= =======
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 March 31, 1994 and December 31, 1993, the remaining
unpaid deferrals are reported as follows:
March 31, December 31,
1994 1993
-------- -----------
(in thousands)
Accounts payable $ 1,823 $ 1,823
Other liabilities 8,058 8,513
Long-term debt 20,971 21,539
------- -------
$30,852 $31,875
======= =======
As of March 31, 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 lease certain terminal space, ground
facilities and computer and other equipment under noncancelable
operating leases.
In the first quarter of 1994, the Company entered into a lease
agreement for a B757 aircraft for a term of three years with
monthly payments in advance.
Future minimum rental payments for years ending December 31 under
noncancelable operating leases with initial terms of more that one
years are as follows:
(in thousands)
1994 $ 194,379
1995 186,978
1996 184,152
1997 171,357
1998 160,759
Thereafter 1,333,187
----------
$2,230,812
==========
Rent expense (excluding landing fees) was approximately $59
million and $65 million for the three months ended March 31, 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
certain spare rotable parts with a net book value of $35.8 million
and $17.6 million in restricted cash.
(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 March 31, 1994, 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.
Firm Orders
-----------------------------------------
Option
1994 1995 1996 1997 Thereafter Total Orders Total
---- ---- ---- ---- ---------- ----- ------ -----
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
= = = == == == == ==
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. As of
March 31, 1994, 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.
(d) Concentration of Credit Risk
----------------------------
The Company does not believe it is subject to any significant
concentration of credit risk. At March 31, 1994, approximately 82
percent 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 minimal in the past, have been considered
in establishing allowances for doubtful accounts.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
- - --------
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 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 approval of the Bankruptcy Court.
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 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.
Due to the bankruptcy proceedings, 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 might adversely impact the Company's
future operations are: economic recession; changes in the cost of fuel,
labor, capital and other operating items; increased level of competition
resulting in significant discounting of fares; changes in capacity, load
factors and yields; or reduced levels of passenger traffic due to war or
terrorist activities.
During the first quarter of 1994, the following significant bankruptcy
related events occurred.
PLAN PROPOSALS. 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 14, 1994 as the date for America
West to select a "Lead Plan Proposal" from among the proposals
submitted. This date was extended to February 24, 1994.
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 April 21, 1994 the Company and AmWest entered into
the Third Revised Investment Agreement (the "Investment Agreement")
which substantially incorporates the terms of the AmWest Investment
Proposal. The Investment Agreement provides that AmWest will purchase
from America West equity securities representing a 33.5 percent
ownership interest in the Company. AmWest would also obtain 71.2
percent of the total voting interest in America West after the Company
is reorganized. The terms of the Third Revised Investment Agreement
will be incorporated into a Plan of Reorganization to be filed with the
Bankruptcy Court. There can be no assurance that such Plan of
Reorganization 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 Third Revised 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 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 repurchase by AmWest of a portion of
the shares to be issued to unsecured creditors under the Plan of
Reorganization.
3. Holders of equity interest would receive 5 percent of the new
common equity of the Company. In addition, holders of equity
interests would have the right to purchase up to $14.4 million of
the new common equity (3.6 percent of the outstanding shares) in
the Company for $8.889 per share from AmWest, and would also
receive warrants entitling them to purchase up to 6,230,769 shares
of the reorganized Company's common stock, at a price to be set by
the Bankruptcy Court.
4. In exchange for certain concessions principally arising from
cancellation of the right of GPA affiliates to "put" to America
West 10 Airbus A320 aircraft at fixed rates, GPA, or certain
affiliates thereof, would receive (i) 2 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 new
unsecured debt securities or an equivalent amount in cash, 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.
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 the
Plan of Reorganization based upon the Third Revised 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 to the
Company of not less than $40 million per year.
6. The expansion of the Company's Board of Directors to 15 members
for a period of not less than three years following the
Reorganization Date. Nine members would be designated by AmWest
and other members reasonably acceptable to AmWest would include
three members designated by the Creditors' Committee, and one
member each designated by the Equity Committee, the Company's
current Board of Directors and GPA.
7. The Third Revised 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 re-lease of the
Company's employees from all currently exiting obligations arising
under the Company's stock purchase plans in consideration for the
cancellation of the shares of the Company stock securing such
obligations.
The Company has also entered into a Third Revised Procedures Agreement
(the "Procedures Agreement") with AmWest dated April 21, 1994. The
Procedures Agreement 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 Third Revised Investment
Agreement. The Procedures Agreement provides for the reimbursement of
expenses up to $550,000 for the period prior to March 1, 1994 and up to
$300,000 per month subsequent to March 31, 1994. The Third Revised
Procedures Agreement was approved by the Bankruptcy Court on May 4,
1994.
EXCLUSIVITY PERIOD. On February 2, 1994, the Bankruptcy Court approved
the Company's request to extend its exclusivity period to file a Plan
of Reorganization through June 10, 1994. In its motion, the Bankruptcy
Court confirmed the Official Committees' (Creditors' and Equity) right
to also file a Plan of Reorganization during this period of
exclusivity. Such period may be extended at the discretion of the
Bankruptcy Court, but only on a showing of good cause.
POSSIBLE LIMITATION ON NOL AND BUSINESS TAX CREDIT CARRYFORWARDS. As
of December 31, 1993, the Company has net operating loss ("NOL") and
general business tax credit carryforwards of approximately $530 million
and $12.7 million, respectively. Under Section 382 of the Internal
Revenue Code of 1986, if a loss corporation has an "ownership change"
within a designated testing period, its ability to use its NOL and
credit carryforwards are subject to certain limitations. The Company
is a loss corporation within the meaning of Section 382. To the best
of the Company's knowledge, the Company has not undergone an "ownership
change" that would result in any material limitation of the Company's
ability to use its NOL and business credit carryforwards in future tax
years as of March 31, 1994. However, should an "ownership change"
occur prior to the effective date of a Plan of Reorganization, the
Company's ability to utilize such carryforwards would be significantly
restricted. Further, any "ownership change" as a result of the
Company's reorganization under the Bankruptcy Code may result in carry
forward usage limitations.
In this regard, the Company filed a motion with the Bankruptcy Court on
February 10, 1994 to prohibit the sale or other transfers of any
general unsecured claims, the convertible subordinated debentures or
shares of any class of stock. The motion attempted to preserve the
Company's tax assets as such sales and transfers in sufficient numbers
and amounts could, under current tax laws, jeopardize the preservation
of the Company's net operating loss and general business tax credit
carryforwards. At the request of the official committees, the Company
withdrew its motion without prejudice on February 16, 1994. On March
11, 1994, the Company again filed a motion with the Bankruptcy Court to
prohibit the sale or other transfer of shares of any class of the
Company's stock to or from five percent or more shareholders. This
option was more limited in scope than the motion filed on February 10,
1994 in that it sought only to restrict transfers of stock which most
likely could have an adverse effect on the Company's ability to fully
utilize its NOL carryforwards. On March 15, 1994, the Bankruptcy Court
ordered that this motion be converted to an adversary proceeding under
the Bankruptcy rules. As of March 29, 1994, no hearing on such
proceeding had been held. Recently issued Treasury Regulations
indicate that the risk of net operating loss imitations is less than
before. There can be no assurance that the Company will continue to
pursue this matter and, if the Company continues to pursue this matter,
that it will be successful.
RESULTS OF OPERATIONS
- - ---------------------
The Company realized net income of $15.2 million ($.56 per common share) for
the first quarter of 1994, the Company's fifth consecutive quarter of
profitability. 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
three code sharing agreements. During first quarter of 1994, the Company
incurred $8.4 million of reorganization expenses. For the first quarter of
1993, the Company reported net income of $2.1 million ($.09 per common
share) which included reorganization expenses of $1.1 million.
Passenger revenues for the first three months of 1994 increased 9 percent to
$324.4 million compared to the corresponding period of 1993. The impact
resulting from a 4.5 percent decline in average passenger yield was more
than offset by the 14.1 percent increase in the level of traffic (RPMs). In
addition, available seat miles (ASMs) increased 1.1 percent to 4.302 billion
miles compared to the first quarter of 1993 in spite of having one less
aircraft in the fleet due to increased utilization.
Revenues from sources other than passenger fares increased during the 1994
quarter to $20.8 million compared to $18.9 million for 1993. This
improvement of 10 percent was primarily due to increases in freight and mail
revenues.
The following table details certain key operating statistics for the three
month periods ended March 31, 1994 and 1993.
FIRST QUARTER
--------------------------------
Pos.(Neg.)
1994 1993 Percent Change
---- ---- --------------
Number of Aircraft 85 86 (1.2)
ASMs (000,000) 4,302 4,254 1.1
RPMs (000,000) 2,917 2,558 14.1
Load Factor (percent) 67.8 60.1 12.8
Yield (cents) 11.12 11.64 (4.5)
Revenue Per ASM (cents):
Passenger 7.54 7.00 7.7
Total 8.03 7.44 7.9
Operating expense per available seat mile increased 1.6 percent to 7.15
cents for the first quarter of 1994 compared to the same period of the prior
year. The table below sets forth the major categories of operating expense
per available seat mile for the first quarter of 1994 and 1993.
FIRST QUARTER
-------------------------------
(in cents) Pos.(Neg.)
1994 1993 Percent Change
---- ---- --------------
Salaries and Related Costs 1.85 1.74 (6.3)
Rentals and Landing Fees 1.54 1.70 9.4
Aircraft Fuel .88 1.00 12.0
Agency Commissions .68 .60 (13.3)
Aircraft Maintenance Materials
and Repairs .18 .17 (5.9)
Depreciation & Amortization .49 .46 (6.5)
Other 1.53 1.37 (11.7)
---- ---- -----
7.15 7.04 (1.6)
==== ==== =====
The changes in the components of operating expense per available seat mile
between 1994 and 1993 are explained as follows:
* Approximately $3.3 million of the $5.3 million increase in salaries and
related costs is due to the performance and employment award
distributions under the transition pay program which was instituted in
the second quarter of 1993. The remaining balance is attributable to
increased costs associated with medical claims and a higher staffing
level.
* Rentals and landing fees decreased due to the return of a wet leased
aircraft which was used to service the Hawaii market through March 31,
1993, 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 of the Company's facilities
consolidation program.
* Aircraft fuel expense decreased due to the decline in the average price
per gallon to 54.71 cents from 63.34 cents for 1993.
* The increase in the level of agency commission expense is primarily due
to the significant increase in passenger revenue per available seat
mile from 7.00 cents for 1993 to 7.54 cents for 1994.
* The level of aircraft maintenance materials and repairs expense
remained relatively unchanged.
* 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 11.7 percent 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 $21.9
million and $15.0 million for the first quarter of 1994 and 1993,
respectively. Net interest expense for the first quarter of 1994 was $13.2
million, slightly below the $13.9 million for the same period of 1993. 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. Interest
expense for the first quarter of 1994 would have been $16.4 million, if the
Company had continued to accrue interest on such debt. The increase in the
loss on disposition of property and equipment from $200,000 for the first
quarter of 1993 to $500,000 for the first quarter of 1994 is primarily
attributable to the sale of spare parts and equipment rendered surplus as a
result of the downsizing of the aircraft fleet that occurred in the Fall of
1992.
During the first quarter, the Company incurred expenses of $8.4 million in
1994 and $1.1 million in 1993 in connection with its effort to reorganize
under Chapter 11. Such expenses for 1994 include charges of $4.2 million
related to the proposed settlement of an administrative claim.
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 method,
prior year financial statements have not been restated.
Additionally, Statements of Financial Accounting Standards No. 106 "Post
Retirement Benefits Other Than Pensions", (SFAS 106) became effective
January 1, 1993. The Company does not provide any post retirement benefits,
thus, the standard has no impact. Statement of Financial Accounting
Standard No. 112, "Employer's Accounting for Post Employment Benefits",
(SFAS 112) becomes effective January 1, 1994. This statement requires that
post employment benefits be treated as part of compensation provided to an
employee in exchange for service. Previously, most employers expensed the
cost of these benefits as the benefits were provided. The Company is still
reviewing the impact of SFAS 112, but does not believe it will have a
material effect.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
The Company had working capital deficiency of $102.3 million and $124.4
million at March 31, 1994 and December 31, 1993, respectively. The decline
in the deficiency is primarily due to the increase in its cash position and
receivable balances at March 31, 1994 resulting from improved operating
results.
Cash and cash equivalents increased to $151.5 million at March 31, 1994 from
$99.6 million at December 31, 1993. Cash generated from operating
activities for the three months ended March 31, 1994 and 1993 amounted to
$79.6 million and $37.1 million, respectively. During the first quarter of
1994, the Company incurred capital expenditures of $13.7 million compared to
$8.9 million in 1993. The capital expenditures for 1994 consisted largely
of aircraft spare parts and heavy engine overhauls.
The Company's transition pay program which was implemented in the second
quarter of 1993 is scheduled to terminate in the second quarter of 1994.
The Company announced certain amendments to its compensation program on
March 24, 1994. Effective April 1, 1994, employee base wages were increased
between two percent to eight percent depending on the employee's length of
service with the Company. Generally, each employee whose anniversary date
occurs between April and December 1994 will also receive an additional
increase on such date approximating 4 percent with certain exceptions. The
Chairman of the Board and the President will not participate in the salary
increase program. Due to the current collective bargaining process with the
representatives of the pilots, increase in pilots' salaries will not be paid
but will be accrued. The distribution of such amounts will be determined
through the collective bargaining discussions. The Company is currently in
the process of revising its entire compensation program with the assistance
of a consulting firm and anticipates implementing such program effective
January 1, 1995.
The Company has also announced that, effective April 1, 1994, matching
contributions by the Company under the America West 401(k) plan will be
increased from 25 percent to 50 percent of the first six percent contributed
by the employees, subject to certain limitations. This change restores the
Company's matching contribution to the level that existed prior to the
Chapter 11 filing.
The Company estimates that the implementation of the increases in pay and
the 401(k) matching contributions will result in increased costs of
approximately $18 million during the last nine months of 1994.
On March 31, 1994, the Company made a principal payment of $5 million as
required under the amended D.I.P. loan agreement. Under the amended terms
of the D.I.P. financing the Company is also required 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 March 31, 1994, the Company notified the D.I.P. lenders that
the Company's unrestricted cash exceeded $125 million; however, the D.I.P.
lenders have not exercised their prepayment right. The D.I.P. financing
contains a minimum unencumbered cash balance requirement of $55 million at
March 31, 1994 and other financial covenants. At March 31, 1994, the
Company was in compliance with these covenants.
At March 31, 1994, the outstanding balance of the D.I.P. loan was $78.6
million with a maturity date of June 30, 1994. Presently, the Company does
not possess the liquidity to satisfy its D.I.P. loan obligation and still
maintain a sufficient level of working capital nor does it appear that a
Plan of Reorganization could be confirmed prior to June 30, 1994.
Consequently, the Company is in negotiations with its current D.I.P. lenders
to obtain alternative repayment terms. Although there can be no assurances
that such alternative repayment terms will be agreed to by the D.I.P.
lenders, the Company is confident that such revised terms will be granted
based on its recent operating performance and the progress it has achieved
with respect to the reorganization process.
The reorganization process is expected to result in the cancellation and/or
restructuring of substantial debt obligations of the Company. Under the
Bankruptcy Code, the Company's pre-petition liabilities are subject to
settlement under a Plan of Reorganization. The Bankruptcy Code also
requires that all administrative claims be paid on the effective date of a
Plan of Reorganization unless the respective claimants agree to different
treatment. There are differences between the amounts at which claims
liabilities are recorded in the financial statements and the amounts claimed
by the Company's creditors and such differences are material. Significant
litigation may be required to resolve any disputes.
Due to the uncertain nature of many of the potential claims, America West 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 outcome.
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 difference 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
agree 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 the 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 March 31, 1994, $115
million of the filed claims have been allowed and settled for $50.2 million
in the aggregate. The Company is currently negotiating the resolution of a
$38 million filed administrative expense claim (which relates to a rejected
lease of a Boeing 737-300 aircraft). Other such claims have been or may be
asserted against the Company, subject to allowance by the Bankruptcy Court.
The amount of such unidentified administrative claims may be material.
As part of its claims administration procedure, the Company is reviewing
potential claims that could arise as a result of the Company's rejection of
executory contracts. The Company's Plan of Reorganization will provide for
the status of any executory contract not theretofore assumed by either
assuming or rejecting such contracts. The assumption or rejection of
certain executory contracts could result in additional claims against the
Company.
At March 31, 1994, the Company had a total of 93 aircraft on order, of which
51 are firm and 42 are options. 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 agreement to acquire 24 Boeing 737-300 aircraft was
previously assumed 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. As of March 31, 1994, eight Boeing 737 delivery
positions had been eliminated due to the lack of a required reconfirmation
notice by the Company to Boeing. The failure to reconfirm these 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 assumed or rejected. 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. The Company
believes it will be successful in negotiating new aircraft purchase
agreements that will meet its needs. However, there can be no assurances
that the Company will enter into such agreements. As of March 31, 1994, the
Company had deposits on aircraft orders of approximately $52 million of
which approximately $21 million were financed.
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 of all but one of the Airbus
A320 aircraft for terms ranging from one to three years. The Airbus A320
aircraft to be returned to the lessor will be replaced by a Boeing 757
aircraft which has been leased for a term of three years. In addition, up
to nine Airbus A320 aircraft may be put to the Company should GPA and/or
Kawasaki elect to exercise its put options in 1994. As of March 31, 1994,
none of the put options have been exercised. Lease agreements have been
arranged for such put aircraft for terms of five to eighteen years at
specified monthly lease rate factors. In addition, the put agreement with
GPA is anticipated to be cancelled in exchange for certain concessions on
the part of the Company as outlined in the Third Revised Investment
Agreement.
PART II - OTHER INFORMATION
Item 1. 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 Title 11 of the United States
Bankruptcy Code. See: Notes to Financial Statement under Item 1
and Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
In August 1991, the Securities and Exchange Commission ("SEC")
informally requested that the Company provide the SEC with certain
information and documentation underlying disclosures made by the
Company in annual and quarterly reports filed with the SEC by the
Company in 1991. The Company has cooperated with the SEC's
informal inquiry. On March 29, 1994, the Company submitted 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 Securities Exchange Act of
1934. On May 6, 1994, the Securities and Exchange Commission
accepted the Company's offer of settlement. In order to implement
the settlement, the SEC will issue an "Order Instituting
Proceedings Pursuant to Section 21C of the Securities Exchange Act
of 1934 and Opinion and Order of the Commission" finding that 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
1991 violated Section 13(a) of the Exchange Act and Rule 13a-13
thereunder, and ordering that the Company cease and desist from
future violations of such provisions. The Order does not contain
any findings of intentional wrongdoing and expressly provides that
the Company neither admits or denies any violation of the
securities laws.
Item 2. CHANGES IN SECURITIES
---------------------
None.
Item 3. DEFAULT UPON SENIOR SECURITIES
------------------------------
As a result of the Chapter 11 filing, the Company is in default of
substantially all of its debt and lease agreements. In addition,
the Company has not made scheduled dividend payments on its
outstanding preferred stock. Aggregate dividends, accrued and
unpaid at March 31, 1994, were $3,203,000.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
-------------------------------------------------
None.
Item 5. OTHER INFORMATION
-----------------
During the second quarter of 1994, the Company's Board of
Directors approved the acquisition by certain entities of shares
of the Company's Common Stock and Preferred Stock. Absent such
approval, such acquisitions may have resulted in a Triggering
Event under the terms of the Company's Amended and Restated Rights
Agreement. Such approval was also necessary in order to avoid
having the acquisition deemed a "business combination" (as such
term is defined under the General Corporation Law of the State of
Delaware) between the purchasers and the Corporation.
On October 26, 1993, the Air Line Pilots Association (ALPA) was
certified by the NMB as the collective bargaining representative
of America West's pilots. Negotiations with ALPA pursuant to the
Railway Labor Act as amended commenced on April 19, 1994 and
opening proposals covering certain provisions of a collective
bargaining agreement have been exchanged.
On April 15, 1994, the NMB advised the Company that it had
instituted an investigation in case number R-6277 to determine
whether the Company's Fleet Service employees should be
represented for collective bargaining purposes by the Transport
Workers Union of America. The NMB has not yet determined which
employees would be eligible as members of the class or craft of
Fleet Service employees, or whether there had been a sufficient
showing of interest to warrant an election.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a. Exhibits
EXHIBIT
NUMBER DESCRIPTION AND METHOD OF FILING
------- --------------------------------
10.A Form of Third Revised Investment Agreement
dated April 21, 1994 (Filed herewith).
10.B Form of Third Revised Procedures Agreement
dated April 21, 1994 (Filed herewith).
10.C Form of Employment Agreement between America
West Airlines, Inc. and A. Maurice Myers
effective as of January 1, 1994 (Filed
herewith).
b. Reports on Form 8-K
1. The Company filed with the Securities and Exchange
Commission a Form 8-K dated February 10, 1994 reporting
that it had filed a motion with the U.S. Bankruptcy
Court to prohibit the sale or other transfer of any
general unsecured claims, debentures or shares of any
class of stock.
2. The Company filed with the Securities and Exchange
Commission a Form 8K dated February 24, 1994, reporting
that it had selected a lead plan proposal.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICA WEST AIRLINES, INC.
By /s/ A.E. Frei
------------------------------
A. E. Frei
Senior Vice President and Chief
Financial Officer
DATED: May 12, 1994
FORM OF THIRD REVISED INTERIM PROCEDURES AGREEMENT
THIS THIRD REVISED INTERIM PROCEDURES AGREEMENT, entered into and
dated as of April 21, 1994 (this "Agreement"), between America West
Airlines, Inc., a Delaware corporation (including, on or after the effective
date of the Plan, as hereinafter defined, its successors, as reorganized
pursuant to Chapter 11 of the Bankruptcy Code, as hereinafter defined)
(hereinafter, the "Company"), operating as debtor-in-possession under
Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. Sections 101-1330
(the "Bankruptcy Code") and AmWest Partners, L.P., a Texas limited
partnership (hereinafter the "Investor"). All capitalized terms used in
this Agreement without definition shall have the meanings assigned to them
in the Third Revised Investment Agreement between the Company and Investor
dated as of the date hereof (the "Investment Agreement").
W I T N E S S E T H:
WHEREAS, the Company has 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 is operating its business as
debtor-in-possession;
WHEREAS, on December 8, 1993, the Bankruptcy Court entered an Order on
Motion to Establish Procedures for Submission of Investment Proposals (the
"Procedures Order");
WHEREAS, in accordance with the Procedures Order, Investor submitted on
February 22, 1994 a proposal for making an investment in the Company (the
"Investment") which, subject to certain changes approved by the Company,
Investor, the Creditors Committee and the Equity Committee, is set forth in
the Investment Agreement;
WHEREAS, pursuant to the Procedures Order, the Company has selected the
Investment Agreement as the Lead Plan Proposal (as defined in the Procedures
Order) and has provided appropriate notification of such selection to all
persons entitled to receive such notification; and
WHEREAS, the Investment Agreement contemplates, among other things, the
consummation of a plan of reorganization (the "Plan") that would, subject to
the terms and conditions set forth in the Investment Agreement, provide for
(i) a recapitalization of the Company, (ii) the execution and delivery of
the Alliance Agreements, the intended effect of which would be to improve
the financial performance of the Company and (iii) the execution and
delivery of the Governance Agreements;
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby agrees with Investor as follows:
SECTION 1. No Solicitation, etc. (a) Prior to the termination of this
Agreement, the Company shall not directly, or indirectly through any of its
officers, directors, employees, agents or otherwise, initiate or solicit any
offer or proposal providing for or in furtherance of any Prohibited
Transaction. The term "Prohibited Transaction" shall mean (i) any
transaction or transactions (A) similar to or in substitution for the
Investment contemplated by the Investment Agreement or (B) similar to or in
substitution for the issuance and sale by the Company of any of the
Contemplated Securities (as defined below); (ii) the designation as a Lead
Plan Proposal of any other proposal made by a party other than Investor; or
(iii) the execution of a contract with another airline or affiliate thereof
which would interfere with full implementation of the Alliance Agreements,
it being understood that normal course of business arrangements between and
among carriers that are either terminable on not more than 60 days notice
or entered into or continued with the consent of Investor (which consent
shall not be unreasonably withheld) shall not constitute Prohibited
Transactions. The "Prohibited Transactions," as defined above, shall also
include, without limitation, (1) any merger or consolidation of the Company,
(2) any issuance or sale of equity or debt securities of the Company, and
(3) any sale, encumbrance, lease or other disposition of material assets of
the Company or interest therein outside the ordinary and normal course of
the Company's business. Notwithstanding the foregoing, "Prohibited
Transactions" shall not include any Permitted Transaction (as hereinafter
defined).
(b) Nothing in this Agreement shall be construed to prohibit the
Company from soliciting proposals or entering negotiations for a Prohibited
Transaction if, at any time after the date hereof and prior to the Effective
Date, Investor or any of its partners shall (1) initiate proceedings in
bankruptcy or receivership or, voluntarily or involuntarily, be or become
subject to proceedings for protection from its creditors or (2) shall suffer
an adverse change in its condition (financial or otherwise), business,
assets, properties or prospects that, in the reasonable judgment of the
Company's board of directors, materially impairs (A) the ability of Investor
or such partner, as the case may be, to perform its obligations under this
Agreement, the Investment Agreement or the Related Agreements or (B) the
Company's ability to realize (1) the intended benefits and value of this
Agreement, the Investment Agreement or, the Related Agreements (other than
the Alliance Agreements) and (2) an increase in the Company's pretax income
of not less than 40 million per year from the Alliance Agreements as
contemplated by Section 9(g) of the Investment Agreement; provided, however,
that in no event shall the Company be entitled under this paragraph (b) to
solicit proposals for a Prohibited Transaction until after the Company shall
have given Investor not less than one business day s advance written notice
of the Company's intention to do so.
(c) If both of the following conditions are satisfied:
(i) the Company receives either (A) a proposal for a Prohibited
Transaction prior to the date (the "Cut-off Date") on which the
Bankruptcy Court enters an order approving a disclosure statement
with respect to the Plan (the "Disclosure Statement Order") or (B)
a proposal for a Prohibited Transaction after the Cut-off Date
under the circumstances contemplated by paragraph (b) above; and
(ii) the Company s board of directors (A) determines in good
faith, based on advice from the Company s independent financial
advisor, that such proposal (the "Alternate Proposal") satisfies the
criteria for qualification as an Overbid (as set forth below) and
(B) desires to accept the Alternate Proposal as being in the best
interests of the Company and its constituents,
then the Company shall promptly disclose the Alternate Proposal to
Investor and within two business days submit to Investor copies of all
documents or written information received by the Company from or on
behalf of the party making such proposal setting forth the terms of
such Alternate Proposal (the "Related Documentation"). In making the
determination required in clause (ii)(B) above, the Company's board of
directors shall consider all relevant considerations and factors,
including, without limitation, the form and value of consideration, the
extent to which the economic benefits of the Alternate Proposal, taken
as a whole, differ from the economic benefits to the Company
contemplated to be provided by the Investment Agreement, taken as a
whole, the likelihood that the party making the Alternate Proposal is
able to obtain financing to consummate the Alternate Proposal, the
proposed closing date, the certainty of consummation, competitive
issues and closing conditions. If within seven business days of
receipt by Investor of all Related Documentation and notice that the
Company deems such seven-day period to have started, Investor offers
amendments to the Investment Agreement and/or the Alliance Agreements
that, taken as a whole, satisfy the criteria for qualification as a
Matching Bid in respect of the Alternate Proposal, then Investor s
offer will continue as the Lead Plan Proposal and all the terms of this
Agreement and the Investment Agreement, as so amended, will continue in
full force and effect. If (A) Investor offers no such amendments
within such seven business days or (B) in the event the Company
disagrees with Investor s characterization of its offer as a Matching
Bid and the Bankruptcy Court determines, upon petition by the Company,
that Investor s amended offer does not qualify as Matching Bid or (C)
in the event Investor disagrees with the Company's determination
referred to in clause (ii) above and the Bankruptcy Court determines,
upon petition by Investor, that the Alternate Proposal does qualify as
an Overbid, then the Company may terminate this Agreement in accordance
with Section 20(a)(v), provided that the Expenses have been paid to
Investor as provided in Section 2.
(d) For purposes of paragraph (c) above, the term "Overbid" shall
mean a proposal or offer that is presented to the Company entirely in
writing from one or more parties reasonably believed by the Company to be
financially capable of performing in full the provisions of its proposal,
which proposal:
(A) must provide overall economic benefits to the Company and its
constituents which are materially greater, in the Company's reasonable
judgment, than the overall economic benefits to be provided under this
Agreement, the Investment Agreement and the Related Agreements, taken
as a whole;
(B) is otherwise on terms and conditions that, taken as a whole,
are more favorable to the Company than those contained in this
Agreement, the Investment Agreement and the Related Agreements, taken
as a whole; and
(C) is not subject to any due diligence, litigation, environmental
or regulatory approval condition that is more favorable to the
proponent than those contained in this Agreement, the Investment
Agreement and the Related Agreements, taken as a whole.
(e) For purposes of paragraph (c) above, the term "Matching Bid"
shall mean an offer by Investor to amend the Investment Agreement and/or the
Related Agreements such that, after giving effect to such amendments, the
Investment Agreement and the Related Agreements, taken as a whole, will:
(A) provide overall economic benefits to the Company and its
constituents which are not less, in the Company's reasonable judgment,
than the overall economic benefits to be provided under the Alternate
Proposal;
(B) contain terms and conditions that, taken as a whole, are at
least as favorable to the Company as those contained in the Alternate
Proposal; and
(C) not be subject to any due diligence, litigation, environmental
or regulatory approval condition that is more favorable to Investor
than those contained in the Alternate Proposal.
Such offer shall be in writing and shall specify, in reasonable detail, the
amendments referred to therein.
(f) After the Cut-off Date and prior to the termination of this
Agreement in accordance with its terms, the Company shall not consider,
entertain or negotiate, or enter into or consummate any agreement in
furtherance of, any Prohibited Transaction except as expressly permitted by
paragraph (b) above.
(g) Nothing in this Agreement shall prohibit the Company from
consummating any Permitted Transaction (as defined in Section 4.2).
SECTION 2. Expenses. (a) Following the entry of the order
referred to in Section 16, the Company shall, immediately upon request and
upon receipt of an accounting reasonably acceptable to the Company,
reimburse Investor for all reasonable out-of-pocket or third-party expenses
actually paid by Investor or its partners in connection with efforts to
consummate the Investment, including the negotiation and preparation of
documents necessary or appropriate to consummate the Investment, and
including, without limitation, legal, investment banking, appraisal,
accounting and other similar professional fees (collectively, the
"Expenses"). Notwithstanding the preceding sentence, the aggregate of the
Expenses reimbursable in full to Investor and its partners pursuant to this
Agreement shall not exceed (i) $550,000 for the period prior to March 1,
1994 or (ii) $300,000 for any calendar month commencing on or after March 1,
1994; provided, that any unused portion of such $300,000 amount for any
month shall accumulate and be carried forward and be available in any
subsequent month to reimburse any Expenses. No inference shall be drawn
that the limitations set forth in the preceding sentence are indicative of a
reasonable level of expenses.
(b) In the event this Agreement is terminated pursuant to Section
20(a) (other than pursuant to clause (iv)(B) thereof) or pursuant to Section
20(c) for any reason, the Company shall pay to Investor, within 15 days of
such termination but subject to paragraph (f) below, all Expenses not
previously reimbursed under paragraph (a) above without regard to the
limitations set forth in the second sentence of such paragraph (a).
(c) Upon the Effective Date, the Company shall pay to Investor all
Expenses not previously reimbursed under paragraph (a) above subject only to
the limitation set forth in clause (i) of the second sentence of such
paragraph (a).
(d) Except to the extent otherwise provided herein, the Expenses
payable under this Agreement by the Company shall not be subject to any
offset, return, recoupment or counterclaim and shall be an allowed
administrative expense under Section 507(a)(1) of the Bankruptcy Code.
(e) The Company and Investor agree that the Expenses payable
hereunder are commercially reasonable and necessary to induce Investor to
continue pursuing and to attempt to consummate the transactions contemplated
by the Investment Agreement. The Company shall use all commercially
reasonable efforts, and endeavor in good faith and without unreasonable
delay, to obtain Bankruptcy Court approval of all Expenses payable to
Investor in accordance with paragraph (a), (b) or (c) above.
(f) Notwithstanding any provision of this Agreement to the
contrary, the Company shall have no obligation under this Agreement to pay,
or reimburse Investor or any other Person for, any Expenses unless
specifically approved by the Bankruptcy Court.
SECTION 3. Additional Payments. If (i) this Agreement is
terminated in accordance with the provisions of Section 20(a)(v) or (ii) a
competing plan of reorganization proposed by another party in interest
(excluding any Affiliate of Investor) is confirmed by the Bankruptcy Court
and Investor has not previously terminated this Agreement or breached any of
its obligations hereunder or under the Investment Agreement in any material
respect, then Investor shall be entitled, on a substantial contribution
basis consistent with 11 U.S.C. Section 503(b), to seek recovery of an
additional amount (not to exceed $4,000,000) as reasonable compensation for
Investor s actions in connection with the Investment and the benefits it
provided to the Company and its constituents in connection therewith and
with the Company's bankruptcy proceedings; provided, however, that making
the proposed Investment will not, in and of itself, entitle Investor to any
additional payment. Notwithstanding the termination of this Agreement as
aforesaid, the Company agrees (i) to cooperate in good faith as reasonably
requested by Investor in obtaining Bankruptcy Court approval of any
additional amount sought by Investor as contemplated by the preceding
sentence and (ii) in the event such approval is obtained, to promptly pay
the amount so approved by the Bankruptcy Court to Investor without offset.
Any such additional amount so approved by the Bankruptcy Court shall be an
allowed administrative expense under Section 507(a)(1) of the Bankruptcy
Code.
SECTION 4. Interim Period. The Company covenants as follows with
respect to the period prior to the earlier of (a) the Effective Date and (b)
the termination of this Agreement:
4.1. The Company shall use all commercially reasonable efforts
and shall take all actions reasonably necessary or appropriate to preserve
the value of the business, assets and goodwill of the Company and to operate
the business of the Company in the ordinary and normal course consistent in
all material respects with prior practices.
4.2. Except as expressly permitted hereunder or with the written
consent of Investor (which consent shall not be unreasonably withheld or
delayed), the Company (a) shall not implement any material changes to the
operation of its business (such as material route deletions, transfers of
international route authorities, material changes in marketing or
advertising, or abandoning material franchises); (b) shall not enter into
any new material contracts (such as labor union contracts and employment
contracts) or amend, modify or terminate any such contracts, or waive any of
its material rights thereunder; and (c) shall not modify its business plans
or budgets in any material respect; provided, however, that nothing in this
Agreement shall be construed to prohibit the Company from taking any of the
following actions (collectively, the "Permitted Transactions"), none of
which will be deemed to be a Prohibited Transaction:
(i) entering into any material modification of any existing leases,
loan agreements and/or security agreements provided that the Company
will obtain the approval of Investor (which approval shall not be
unreasonably withheld or delayed) before entering into any such
modification;
(ii) renewing or extending existing contracts for products and
services, or entering into replacement contracts for such products and
services, in the ordinary course of business and upon terms and
conditions available in the market place in arms -length transactions
with non-affiliates;
(iii) entering into agreements with respect to 11 leased aircraft
which provide in August 1994 for reset of lease rentals (as heretofore
stipulated in the Bankruptcy Court and as described in Plan R-2) to the
higher of the current rate and fair market rental value;
(iv) entering into a 3-year lease agreement, on terms currently
available, for a Boeing 757-200 aircraft in replacement of an A-320
aircraft to be returned in April 1994;
(v) selling to AVSA, S.A.R.L. or its affiliates surplus A-320 parts
for approximately $1.3 million, with the proceeds thereof to be applied
against amounts due to AVSA, S.A.R.L. or its affiliates under existing
spare parts agreements with the Company;
(vi) entering into a $12.8 million settlement with the Internal
Revenue Service relating to certain priority tax claims for
pre-petition transportation taxes, with approximately $1 million of the
settlement amount payable prior to the Effective Date and the balance
payable after the Effective Date in accordance with the provisions of
the Bankruptcy Code;
(vii) entering into one or more settlement agreements with taxing
authorities relating to certain priority tax claims for prepetition ad
valorem taxes as contemplated by Plan R-2, provided that the Company
will not be permitted to enter into settlement agreements pursuant to
this clause (vii) for more than $11.5 million without the prior consent
of Investor;
(viii) extending the Company's existing approximately $83.6
debtor-in-possession loan ("Present DIP Financing") through December
31, 1994, provided that at no time will the principal amount of the
Present DIP Financing, together with any other loan for similar
purposes, including any renewal, extension, modification or replacement
thereof, exceed $83.6 million;
(ix) extending the terms of the existing leases between the
Company and Canadian Airlines covering three Boeing 737-200 aircraft as
contemplated by Plan R-2 but in no event at rentals greater than as
currently provided for in such leases;
(x) entering into an employment contract with the individual to be
hired by the Company to fill the vacancy created by the resignation of
the Company's Senior Vice President - Operations;
(xi) entering into a settlement agreement or stipulation with
International Aero Engines relating to the terms under which the
Company will exercise its existing purchase option for one aircraft
engine currently held by the Company under lease, provided that the
Company will consult with Investor before entering into any such
settlement agreement or stipulation;
(xii) consummating the "Real Property Consolidation Project"
initiated in 1993 with the approval of the Bankruptcy Court;
(xiii) making the capital expenditures contemplated by Plan R-2,
provided that the Company shall consult with Investor before making any
such capital expenditure in excess of $250,000;
(xiv) selling or otherwise disposing of surplus assets within the
limits specified in the Present DIP Financing;
(xv) implementing increases in employee compensation through
1995 as contemplated by Plan R-2, provided that the Company will
consult with Investor before implementing any such increases;
(xvi) issuing common stock of the Company upon the exercise of
options or conversion rights under securities of the Company currently
outstanding;
(xvii) paying and/or compromising administrative claims as
contemplated by Plan R-2; or
(xviii) negotiating a collective bargaining agreement with the
International Air Line Pilots Association on behalf of the Company's
flight deck crew members prusuant to the Railway Labor Act, as amended,
provided that the terms, conditions and provisions of such collective
bargaining agreement shall be subject to the approval of Investor
(which approval shall not be unreasonably withheld or delayed). It is
understood and agreed that Investor s approval of the matters set forth
in this clause (xviii) is without prejudice to the position of any
party regarding whether such approval is or is not in conformity with
the provisions of the Railway Labor Act, as amended.
4.3. The Company shall provide Investor and its Representatives
(as hereinafter defined) with full access to all the Company data reasonably
requested by them, with reasonable access to the Company officers and with
full opportunity to complete an investigation of the Company's business and
assets and shall keep Investor fully informed in reasonable detail and with
all reasonable promptness regarding (i) negotiations with its creditors,
employees, labor unions and other interested parties in the Company's
bankruptcy case; (ii) the nature of, and any material changes to, its
condition (financial or other), business, assets, liabilities (including
contingencies), properties, prospects (including forecasts and projections),
net worth, working capital, results of operations and cash flows; and (iii)
the nature of any material actions to be taken or omitted by the Company
with respect to any environmental claim or threatened claim, proceedings or
notifications and all known material instances of noncompliance with
environmental laws.
4.4. The Company shall provide Investor with reports that
include a comparison of actual operating performance with the Projections
and Monthly Targets, in form and substance reasonably satisfactory to
Investor, on a monthly basis no later than 30 days after the end of each
month or daily basis not less than the end of the business day following
each day, as appropriate.
4.5. The Company will promptly advise Investor, and (other than
with respect to actions respecting environmental concerns and actions which
are disclosed in Plan R-2) will afford Investor with reasonable and timely
opportunities to consult (as deemed appropriate by Investor), regarding any
material actions to be taken or omitted by the Company with respect to the
proceedings in the Bankruptcy Court or with respect to any material changes
in its charter or bylaws, material capital commitments, material capital
expenditures, material financing transactions (including renegotiations or
other modifications to existing material debt, credit or lease liabilities
or arrangements, material purchases or sales of assets, material contracts
or material litigation); provided, however, that, notwithstanding anything
else in this Agreement, ultimate control of the business of the Company
shall remain exclusively with the Company until the Effective Date.
4.6. As soon as practicable, the Company and Investor will make,
and cooperate in making, all filings, applications, requests for consents or
similar authorizations for Regulatory Approvals; provided that the Company
and Investor each agrees to make such filings and request any such
Regulatory Approvals required on its part by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or from the United States Department
of Transportation no later than May 15, 1994.
SECTION 5. Cooperation. (a) The Company shall use all
commercially reasonable efforts and endeavor in good faith and without
unreasonable delay (i) to develop with Investor and jointly file a Plan
consistent with the provisions of the Investment Agreement, (ii) to obtain
the order described in Section 16, (iii) to obtain the Disclosure Statement
Order, (iv) to obtain the Confirmation Order and (v) subject to the entry of
the Confirmation Order, to consummate the transactions contemplated by the
Investment Agreement and the Related Agreements, all within the respective
time periods set forth in the Investment Agreement. Investor agrees to
cooperate in good faith as reasonably requested by the Company in performing
the obligations in the preceding sentence.
(b) The Company shall consult and coordinate with Investor with
respect to all material filings, hearings and other proceedings in the
Bankruptcy Court, including, without limitation, those that are pertinent
(i) to the Company's performance of its obligations under the Investment
Agreement, this Agreement and the Related Agreements, or to the satisfaction
of the conditions to the consummation of the transactions contemplated
hereby or thereby or (ii) to the entry of the orders described above. Such
consultation and coordination shall include providing Investor with
reasonable opportunity to review and comment on all significant drafts of
the Plan and the disclosure statement accompanying the Plan (the "Disclosure
Statement").
(c) Anything in this Agreement or elsewhere to the contrary
notwithstanding, neither the refusal or failure of the Bankruptcy Court to
enter the Disclosure Statement Order or the Confirmation Order nor the
confirmation of a plan of reorganization relating to the Company (other than
the Plan) shall consitute a breach of this Agreement or the Investment
Agreement by either party except to the extent that such refusal or failure
resulted primarily from the breach by such party of one or more of its
obligations under this Agreement.
SECTION 6. Public Announcements. Unless otherwise mutually
agreed, neither party hereto shall make or authorize any public release of
information regarding the matters contemplated by this Agreement, the
Investment Agreement and any Related Agreement except (i) that a press
release or press releases in mutually agreed-upon form shall be issued by
the parties as promptly as is practicable following the execution of this
Agreement, (ii) that the parties may communicate with employees, creditors
and other parties in interest in the Company's bankruptcy case, customers,
suppliers, stockholders, bondholders, lenders, lessors, regulatory
authorities, analysts, stock exchanges and other particular groups including
prospective lenders and investor groups, as may be necessary or appropriate
and not inconsistent with the provisions of Section 1 and the prompt
consummation of the transactions contemplated by this Agreement, the
Investment Agreement and any Related Agreement, it being understood that
each party hereto will keep the other reasonably informed with respect to
such communications which are material and not confidential and (iii) as
either party on advice of legal counsel shall reasonably deem necessary in
complying with applicable law.
SECTION 7. Confidentiality. (a) Neither party (the "Recipient")
will in any manner, directly or indirectly, disclose in whole or in part,
any confidential or proprietary information (including, without limitation,
information concerning the Alliance Agreements) of the other party (the
"Protected Party") that comes, or has come, into the possession of the
Recipient in connection with the transactions contemplated hereby (the
"Confidential Information") to any Person or use such Confidential
Information for commercial gain or competitive advantages or in any way
detrimental to the Protected Party; provided, however, that Confidential
Information may be disclosed to Representatives (as defined below) of the
Recipient, to any prospective investor in the Contemplated Securities or to
any prospective lender to Investor or the Company who needs to know the
Confidential Information for purposes of participating in or financing the
transactions contemplated hereby, it being understood that all such
Representatives will be advised by the Recipient of the confidential nature
of such Confidential Information and that, by receiving such Confidential
Information, they are agreeing to be bound by this Section. The Company and
Investor shall use their commercially reasonable efforts to assure that
their respective Representatives adhere to the terms of this Section.
(b) As used herein with respect to any Person, the term
"Representative" shall include (i) any and all officers, directors,
employees, affiliates, agents, partners and representatives of such Person,
(ii) all lawyers, financial advisers, appraisers, accountants, other
professionals or consultants (and their respective officers, directors,
employees, affiliates, agents, partners and representatives) engaged by such
Person and (iii) any prospective purchaser of any Contemplated Securities
and any prospective lender that is considering making a loan to the Company
or Investor to assist in the consummation of the transactions contemplated
hereby, by the Investment Agreement or by the Related Agreements and their
respective lawyers, financial advisers, appraisers, accountants, other
professionals or consultants (and their respective officers, directors,
employees, affiliates, agents, partners and representatives) engaged by such
prospective purchaser or lender.
(c) The Recipient shall not be obligated to maintain any
Confidential Information in confidence to the extent that (i) the
Confidential Information is or becomes public knowledge other than through
the breach by the Recipient of this Section or any other similar agreement
binding on the Recipient, (ii) the Confidential Information is or becomes
available on an unrestricted basis to the Recipient from a source other than
the Protected Party (or its Representatives), or (iii) the Confidential
Information is required to be disclosed pursuant to court order or
government action.
(d) Upon termination of this Agreement (i) if requested by the
Company, and if no dispute between Investor and the Company or any other
Person is pending or in the reasonable judgment of Investor foreseeable,
Investor will destroy all Confidential Information (including any analyses
or reports that incorporate any Confidential Information) in its possession
relating to the Company and shall certify such destruction and (ii) if
requested by Investor, and if no dispute between Investor or any other
Person and the Company is pending or in the reasonable judgment of the
Company foreseeable, the Company will destroy all Confidential Information
(including any analyses or reports that incorporate any Confidential
Information) in its possession relating to Investor and shall certify such
destruction.
(e) The foregoing provisions of this Section shall not apply to any
partner of Investor if and to the extent such provisions are inconsistent
with any written agreement relating to the subject matter of this Section
between the Company and such partner.
(f) The Company shall, upon the request of the Creditors Committee
or Equity Committee, provide such Committee with copies of the Confidential
Information which is provided to and/or by Investor pursuant to the
provisions of this Agreement, the Investment Agreement and the Related
Agreements following receipt from such Committee and each of its
Representatives who will have access to such Confidential Information of a
written confidentiality agreement which contains provisions which provide
the Company and Investor protection for such Confidential Information at
least equivalent, in all material respects, to that provided pursuant to
this Section 7 and which contains other terms and conditions which are
reasonably required by the Company and Investor.
(g) This Section shall survive termination of this Agreement.
SECTION 8. Liability. Notwithstanding any provision hereof or in
the Investment Agreement (or any implication of such provision) to the
contrary, it is expressly agreed that:
8.1. Investor and its permitted assigns (including any
affiliate, partner, agent, advisor or Representative thereof) shall not
have nor be under any liability of any nature whatsoever to the
Company, the estate of the Company, any trustee, any committee of
creditors or of equity security holders or any party in interest in the
bankruptcy case concerning the Company, nor to any other Person
whatsoever, arising out of or in any manner connected with this
Agreement, the Investment Agreement or any Related Agreement, or any
actions, inactions or omissions in any manner relating hereto or
thereto or to any actions or transactions contemplated hereby or
thereby, whether occurring prior to or after the date hereof, except to
the extent that Investor is liable to the Company for damages which are
found in a final judgment by a court of competent jurisdiction to have
resulted from (i) any material breach by Investor of an express
obligation or undertaking contained in this Agreement, the Investment
Agreement or any Related Agreement or any material breach (as of the
date made) by Investor of an express representation or warranty
contained in this Agreement, the Investment Agreement or any Related
Agreement or for any act of bad faith or willful or deliberate
wrongdoing by Investor, which bad faith, breach or wrongdoing is not
discontinued or remedied promptly (and in any event within seven days)
after written notice thereof specifying the same in reasonable detail
from the Company or (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Disclosure Statement or
in any offering document pursuant to which any or all of the securities
of the Company in connection with and as part of the transactions
contemplated by the Agreements (the "Contemplated Securities") may be
placed or offered or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such offering document in
reliance upon and in conformity with written information furnished by
Investor or any of its partners specifically for inclusion therein or
(iii) any action or inaction in respect of which the Company is
entitled to indemnification under Section 9.
8.2. The Company and its permitted assigns (including any
affiliate, stockholder, director, officer, agent, advisor or
Representative thereof) shall not have nor be under any liability of
any nature whatsoever to Investor or any of its partners or affiliates,
nor to any other Person whatsoever, arising out of or in any manner
connected with this Agreement, the Investment Agreement or any Related
Agreement, or any actions, inactions or omissions in any manner
relating hereto or thereto or to any actions or transactions
contemplated hereby or thereby, whether occurring prior to or after the
date hereof, except to the extent that the Company is liable to
Investor for damages which are found in a final judgment by a court of
competent jurisdiction to have resulted from (i) any material breach by
the Company of an express obligation or undertaking contained in this
Agreement, the Investment Agreement or any Related Agreement or any
material breach (as of the date made) by the Company of an express
representation or warranty contained in this Agreement, the Investment
Agreement or any Related Agreement or for any act of bad faith or
willful or deliberate wrongdoing by the Company, which bad faith,
breach or wrongdoing is not discontinued or remedied promptly (and in
any event within seven days) after written notice thereof specifying
the same in reasonable detail from Investor or (ii) any untrue
statement or alleged untrue statement of a material fact contained in
the Disclosure Statement or in any offering document pursuant to which
any or all of the Contemplated Securities may be placed or offered or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such offering document in reliance upon
and in conformity with written information furnished by Investor or any
of its partners specifically for inclusion therein or (iii) any action
or inaction in respect of which Investor is entitled to indemnification
under Section 9.
8.3. No partner or assignee of the Investor shall have or be
under any liability by reason of any negligence or asserted negligence
or any material breach or willful or deliberate wrongdoing of any other
partner or assignee of Investor.
8.4. No consequential, exemplary or punitive damages shall under
any circumstances be recoverable against Investor, the Company or any
other Indemnified Party (as defined in Section 9) in respect of any
claim relating to this Agreement or the Investment Agreement or in
connection with the consummation of or any failure to consummate the
transactions contemplated hereby or thereby.
8.5. If Investor seeks Bankruptcy Court approval of an
additional amount as contemplated by Section 3 and if such additional
amount is approved by the Bankruptcy Court and paid to Investor by the
Company, such payment shall be in full satisfaction of any and all
claims (other than for Expense reimbursement under Section 2 and for
indemnification under Section 9) that Investor shall have against the
Company.
8.6. In no event will Investor seek to recover damages against
the Company, nor will the Company be liable under any circumstances
for, more than $4,000,000 (less any amount paid to Investor pursuant to
Section 3) in damages on account of any breach, misconduct or bad faith
on the part of the Company or any other Person relating to this
Agreement or the Investment Agreement or any of the transactions
contemplated hereby or thereby. Nothing in this Agreement or elsewhere
shall be construed to be an admission by the Company that Investor is
or shall be entitled under any circumstances to recover any amount of
damages from the Company.
SECTION 9. Indemnity.
9.1. As used herein:
(a) "Losses" means (i) in the case of any Investor Indemnified
Party, any and all losses, claims, damages, liabilities, fines,
fees, penalties, deficiencies and expenses (including, but not
limited to, interest, court costs, fees and expenses of attorneys,
accountants, and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment) incurred
by such Investor Indemnified Party as a result of any third party
claim asserted against such Investor Indemnified Party on account
of any breach of any representation or warranty of the Company
contained in this Agreement, the Investment Agreement or any
Related Agreement, or any breach or alleged breach of any of the
Company's covenants or obligations contained herein or therein and
(ii) in the case of any Company Indemnified Party, any and all
losses, claims, damages, liabilities, fines, fees, penalties,
deficiencies and expenses (including, but not limited to,
interest, court costs, fees and expenses of attorneys, accountants,
and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment) incurred by
such Company Indemnified Party as a result of any third party claim
asserted against such Company Indemnified Party on account of any
any breach or alleged breach of any representation or warranty of
Investor contained in this Agreement, the Investment Agreement or
any Related Agreement, or any breach or alleged breach of any of
Investor s covenants or obligations contained herein or therein.
(b) "Investor Indemnified Party" means Investor or any of its
partners, assignees, affiliates, controlling persons or employees.
(c) "Company Indemnified Party" means the Company or any of
its partners, assignees, affiliates, controlling persons, directors
or employees.
(d) "Indemnified Party" means a Company Indemnified Party or an
Investor Indemnified Party, as the case may be.
(e) "Indemnifying Party" means the Company or Investor, as the
case may be.
9.2. Subject to Section 9.4 and to Section 3(e), the Company
agrees to indemnify each Investor Indemnified Party from and against
any and all Losses incurred by such Investor Indemnified Party, whether
prior to or after the date hereof.
9.3.Subject to Section 9.5, Investor agrees to indemnify each
Company Indemnified Party from and against any and all Losses incurred
by such Company Indemnified Party, whether prior to or after the date
hereof.
.
9.4. The Company will not be liable under this Section 9 for
Losses which consist of Expenses covered by Section 2 (which Expenses
shall only be payable in the manner and subject to the limitations set
forth in Sections 2 and 3), nor shall the Company be liable to any
Investor Indemnified Party to the extent that any Loss is found in a
final judgment by a court of competent jurisdiction to have resulted
from (i) any breach by such Investor Indemnified Party of an express
obligation or undertaking pursuant to this Agreement, the Investment
Agreement or any of the Related Agreements or any act of bad faith or
willful or deliberate wrongdoing by such Investor Indemnified Party,
which bad faith, breach or wrongdoing is not discontinued or remedied
promptly (and in any event within seven days) after written notice
thereof specifying the same in reasonable detail from the Company or
(ii) any untrue statement or alleged untrue statement of a material
fact contained in any offering document pursuant to which any or all of
the Contemplated Securities may be placed or offered or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if,
and to the extent that, such untrue statement or alleged untrue
statement or omission or alleged omission was made in such offering
document in reliance upon and in strict conformity with written
information furnished by such Investor Indemnified Party specifically
for inclusion therein, or (iii) investment losses in respect of the
Contemplated Securities incurred by such Investor Indemnified Party.
9.5. Investor will not be liable under this Section 9 to any
Company Indemnified Party to the extent that any Loss is found in a
final judgment by a court of competent jurisdiction to have resulted
from (i) any breach by such Company Indemnified Party of an express
obligation or undertaking pursuant to this Agreement, the Investment
Agreement or any of the Related Agreements or any act of bad faith or
willful or deliberate wrongdoing by such Company Indemnified Party,
which bad faith, breach or wrongdoing is not discontinued or remedied
promptly (and in any event within seven days) after written notice
thereof specifying the same in reasonable detail from Investor or (ii)
any untrue statement or alleged untrue statement of a material fact
contained in any offering document pursuant to which any or all of the
Contemplated Securities may be placed or offered or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in such offering document in reliance upon and in strict
conformity with written information furnished by such Investor
Indemnified Party specifically for inclusion therein or (iii)
investment losses in respect of the Contemplated Securities incurred by
such Company Indemnified Party.
9.6. If the indemnification of an Indemnified Party provided for
in this Section 9 is for any reason held unenforceable, the
Indemnifying Party agrees to contribute to the Losses for which such
indemnification is held unenforceable (x) in such proportion as is
appropriate to reflect the relative benefits or proposed benefits to
the Indemnifying Party, on the one hand, and such Indemnified Party, on
the other hand, of the Agreements (whether or not the Agreements are
entered into and whether or not any transaction or action pursuant
thereto is consummated) or (y) if (but only if) the allocation provided
for in clause (x) is for any reason held unenforceable, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (x) but also the relative fault of the
Indemnifying Party, on the one hand, and such Indemnified Party, on the
other hand, as well as any other relevant equitable considerations.
The Indemnifying Party agrees that for the purposes of this paragraph,
the relative benefits or proposed benefits to the Indemnifying Party
and such Indemnified Party of the Agreements shall be deemed to be in
the same proportion that the total value paid or issued to, or to be
paid or issued to, the Indemnifying Party, its creditors or its
security holders, as the case may be, as a result of or in connection
with the Agreements bears to the amount received by such Indemnified
Party pursuant to the Agreements (whether in the form of fees paid to
such Indemnified Party or the reimbursement of expenses provided by the
Indemnified Party to such Party).
9.7. Without the Indemnified Party s prior written consent
(which consent shall not be unreasonably withheld), no Indemnifying
Party will settle, compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding in respect of
which indemnification could reasonably be expected to be sought against
such Indemnifying Party by such Indemnified Party under this Section 9
(whether or not such Indemnified Party is an actual party to such
claims, action or proceeding), unless such settlement, compromise or
consent includes an unconditional release of such Indemnified Party
from all liability arising out of such claim, action or proceeding.
9.8. The provisions herein in respect of any Indemnified Party
shall not be affected, or the obligations of the Indemnifying Party
hereunder as to any Indemnified Party in any manner reduced or limited,
by any action, inaction, omission, breach or default of any Person
(other than of such Indemnified Party and its officers, directors,
employees, agents, advisors, Representatives and controlling Persons),
but then only to the extent provided hereby.
9.9. Without the prior written consent of the Indemnifying Party
(which consent shall not be unreasonably withheld), no Indemnified
Party shall settle, compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding in respect of
which indemnification from the Indemnifying Party could reasonably be
expected to be sought by such Indemnified Party under this Section 9
unless such Indemnified Party unconditionally releases the Indemnifying
Party from any and all indemnification obligations to it arising out of
such claim, action or proceeding.
9.10. Promptly after any Indemnified Party becomes aware of the
existence of facts or other information which could reasonably be
expected to give rise to a claim by such Indemnified Party for
indemnification under this Section 9, such Indemnified Party will
provide written notice thereof to the Indemnifying Party describing
such facts and other information in reasonable detail. The failure of
an Indemnified Party to give notice in the manner and at the time
provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 9, except to the extent that the
Indemnifying Party actually is prejudiced in any material respect by
such failure to give notice. Any notice given the Indemnifying Party
pursuant to this Section 9.10 shall contain a statement to the effect
that the Indemnified Party giving such notice is making or may in the
future make a claim pursuant to and a formal demand for indemnification
under this Section 9.
9.11. Upon the commencement of any claim, action or proceeding in
respect of which indemnification could be sought by an Indemnified
Party under this Section 9, the Indemnifying Party shall have the
right, with counsel selected by it (which counsel shall be reasonably
satisfactory to the Indemnified Party), to assume the defense of such
claim, action or proceeding and the Indemnified Party shall cooperate
with the Indemnifying Party, at the sole cost and expense of the
Indemnifying Party, in connection with such defense. In the event that
the Indemnifying Party selects counsel to defend any claim, action or
proceeding in respect of which indemnification could be sought by any
Indemnified Party under this Section 9 and such counsel determines (or
such Indemnified Party reasonably determines) that issues exist with
respect to such claim, action or proceeding which give rise to a
conflict between the interests of the Indemnifying Party and such
Indemnified Party, then such Indemnified Party shall be entitled, at
the Company's expense, to retain separate counsel regarding such
issues.
SECTION 10. Assignment of this Agreement. This Agreement shall
be binding upon and shall inure to the benefit of the parties to this
Agreement and their successors and permitted assigns without limitation.
Neither this Agreement nor any of the rights and obligations of any party to
this Agreement may be assigned without the consent of the other party
hereto; provided, however, that Investor may assign any or all of its rights
under this Agreement to any partner, affiliate, related party, or
representative of Investor or to any fund or account managed or advised by
Fidelity Management Trust Company or any of its affiliates. No such
assignment shall relieve either party hereto of any obligations hereunder,
under the Investment Agreement or under any Related Agreement.
SECTION 11. Notices. All notices required to be given under this
Agreement shall be in writing (including telecommunication transmission),
shall be effective when received and shall be addressed as follows:
If to the Company:
America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
Attention: W. A. Franke and Martin J. Whalen
Fax Number: (602) 693-5904
with a copy to:
LeBoeuf, Lamb, Greene & MacRae
633 17th Street, Suite 2800
Denver, Colorado 80202
Attention: Carl A. Eklund
Fax Number: (303) 297-0422
and a copy to:
Andrews & Kurth, L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: David G. Elkins
Fax Number: (713) 220-4285
and a copy to:
Lord, Bissell and Brook
115 South LaSalle Street
Chicago, Illinois 60603
Attention: Benjamin Waisbren
Fax Number: (312) 443-0336
and a copy to:
Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Patrick A. Murphy
Fax Number: (415) 421-7879
If to Investor:
AmWest Partners, L.P.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Attention: James G. Coulter
Fax Number: (817) 338-2064
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
and a copy to:
Lord Bissell and Brook
115 South LaSalle Street
Chicago, IL 60603
Attention: Benjamin Waisbren
Fax Number: (312) 443-0336
and a copy to:
Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Patrick A. Murphy
Fax Number: (415) 421-7879
and a copy to:
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Attention: Laura Hodges Taylor, P.C.
Fax Number: (617) 523-1231
or to such other address as either party hereto may designate to the other
party to this Agreement in accordance with this Section.
SECTION 12. Counterparts. This Agreement may be executed in one
or more counterparts and by telecopy, each of which shall be deemed to
constitute an original and all of which shall be considered one and the same
instrument. With respect to signatures transmitted by telecopy, upon
request by either party to the other party, an original signature of such
other party shall promptly be substituted for its facsimile.
SECTION 13. Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties with respect to the
subject matter of this Agreement and, except as otherwise set forth herein,
supersedes all prior agreements and understandings with respect to the
subject matter thereof (including, without limitation, the Expense
Reimbursement Agreement previously entered into by the Company and Investor
but excluding any existing confidentiality agreement between the Company and
any Affiliate of Investor). This Agreement may only be amended,
supplemented or modified by a written instrument signed by authorized
representatives of each of the parties hereto.
SECTION 14. Governing Law, etc. Except to the extent inconsistent
with the Bankruptcy Code, this Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona, without reference to
principles of choice or conflicts of laws under which the law of any other
jurisdiction would apply.
SECTION 15. Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present
or future laws, rules or regulations, and if the rights or obligations of
Investor and the Company under this Agreement will not be materially and
adversely affected thereby, (a) such provision will be fully severable, (b)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) 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 (d) 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 of such illegal,
invalid or unenforceable provision as may be possible. If the rights and
obligations of Investor or the Company will be materially and adversely
affected by any such provision held to be illegal, invalid or unenforceable,
then unless such provision is waived in writing by the affected party in its
sole discretion, this Agreement shall be null and void.
SECTION 16. Bankruptcy Court Approval. This Agreement shall not
become effective for any purpose unless and until the Bankruptcy Court shall
have entered an order approving this Agreement.
SECTION 17. Jurisdiction of Bankruptcy Court. The parties agree
that the Bankruptcy Court shall have and retain jurisdiction to enforce and
construe the provisions of this Agreement.
SECTION 18. No Third Party Beneficiary. This Agreement and the
Investment Agreement are made solely for the benefit of the Company and
Investor and their respective permitted assignees, and no other Person
(including, without limitation, employees, shareholders and creditors of the
Company) shall have any right, claim or cause of action under or by virtue
of this Agreement or the Investment Agreement, except to the extent such
Person is entitled to expense reimbursement pursuant to this Agreement or
may assert a claim for indemnity pursuant to this Agreement.
SECTION 19. Interpretation. In this Agreement, unless a contrary
intention appears, (i) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to
any particular Section or other subdivision and (ii) reference to any
Section means such Section hereof. The Section headings herein are for
convenience only and shall not affect the construction hereof. No provision
of this Agreement shall be interpreted or construed against either party
solely because such party or its legal representative drafted such
provision. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Investment Agreement unless otherwise
provided or the context otherwise requires.
SECTION 20. Termination. (a) Anything herein or elsewhere to the
contrary notwithstanding, this Agreement and the Investment Agreement may be
terminated at any time prior to the Effective Date:
(i) by mutual consent of Investor and the Company;
(ii) by either Investor or the Company if a domestic court of
competent jurisdiction or a domestic Regulatory Authority of competent
jurisdiction shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or
otherwise prohibiting the Investment, and such order, decree or ruling
or other action shall have become final and non-appealable; provided,
however, that in no event shall Investor be entitled to terminate this
Agreement or the Investment Agreement pursuant to this clause (ii) on
account of the issuance of any order, decree or ruling or the taking of
any other action relating to antitrust laws or regulations;
(iii) by Investor if:
(A) any of the conditions specified in Section 8(a), 8(g),
8(n), 8(p), 8(r) or 8(s) of the Investment Agreement has not been
satisfied by the respective deadlines (as extended from time to
time) set forth with respect thereto in such clauses for any reason
other than (1) a material breach by Investor of any of its
representations, warranties, covenants or obligations under this
Agreement, the Investment Agreement or any Related Agreement or (2)
the issuance of any order, decree or ruling or the taking of any
other action relating to antitrust laws or regulations;
(B) any of the other conditions precedent set forth in Section
8 of the Investment Agreement has not been or, in the reasonable
good faith determination of Investor, will not be able to be
satisfied by the Outside Date for any reason other than (1) a
material breach by Investor of any of its representations,
warranties, covenants or obligations under this Agreement, the
Investment Agreement or any Related Agreement or (2) the issuance
of any order, decree or ruling or the taking of any other action
relating to antitrust laws or regulations; or
(C) any of the Company's representations or warranties made
herein, in the Investment Agreement or in any Related Agreement
prove to have been inaccurate in any material respect when made;
provided, however, that Investor shall not be entitled to terminate
this Agreement pursuant to this clause (iii) at a time when Investor
(or its Affiliates) shall be in material breach of any of its
representations, warranties, covenants or obligations under this
Agreement, the Investment Agreement or any Related Agreement; and,
provided further, however, that upon Investor becoming aware of any
breach by the Company of any of its representations, warranties,
covenants or obligations hereunder or under the Investment Agreement or
any of the Related Agreements, or the occurrence or nonoccurrence of
any other event, in any such case which would give Investor the ability
to terminate this Agreement pursuant to the provisions of this clause
(iii), Investor promptly shall notify the Company, the Equity Committee
and the Creditors Committee of the existence of such breach and
provide the Company seven business days to cure such breach or remedy
such occurrence or nonoccurrence before exercising the termination
right granted hereunder;
(iv) by the Company if:
(A) any of the conditions specified in Section 9 of the
Investment Agreement has not been or, in the reasonable good faith
determination of the Company, will not be able to be satisfied by
the Outside Date for any reason other than a material breach by
the Company of any of its representations, warranties, covenants or
obligations under this Agreement, the Investment Agreement or any
Related Agreement; or
(B) any of the Investor s representations or warranties made
herein, in the Investment Agreement or in any Related Agreement
prove to have been inaccurate in any material respect when made;
provided, however, that the Company shall not be entitled to terminate
this Agreement pursuant to this clause (iv) at a time when the Company
shall be in material breach of any of its representations, warranties,
covenants or obligations under this Agreement, the Investment Agreement
or any Related Agreement; and, provided further, however, that upon the
Company becoming aware of any breach by Investor of any of its
representations, warranties, covenants or obligations hereunder or
under the Investment Agreement or any of the Related Agreements, or the
occurrence or nonoccurrence of any other event, in any such case which
would give the Company the ability to terminate this Agreement pursuant
to the provisions of this clause (iv), the Company promptly shall
notify Investor, the Equity Committee and the Creditors Committee of
the existence of such breach and provide Investor seven business days
to cure such breach or remedy such occurrence or nonoccurrence before
exercising the termination right granted hereunder;
(v) by the Company in the event of an Overbid as contemplated by
Section 1(c);
(vi) by either the Company or the Investor if the Effective Date
has not occurred by December 31, 1994; or
(vii) by Investor for any reason; provided, however, that
Investor shall not be entitled to terminate this Agreement pursuant to
this clause (vii) after the Cut-off Date or at any time when Investor
(or its Affiliates) shall be in material breach of any of its
representations, warranties, covenants or obligations under this
Agreement, the Investment Agreement or any Related Agreement and,
provided further, that promptly after any termination of this Agreement
pursuant to this clause (vii), Investor shall refund to the Company the
aggregate amount of all Expenses previously paid or reimbursed by the
Company purusnat to Section 2 which were incurred by Investor after
March 1, 1994. Any such termination shall constitute an unconditional
waiver by Investor of all claims it may have under this Agreement or
the Investment Agreement other than for Expense reimbursement under
Section 2.
(b) In the event of the termination of this Agreement by either
party pursuant to paragraph (a) above, written notice thereof shall be
promptly given to the other party and, subject to paragraph (d) below, this
Agreement and the Investment Agreement shall terminate and the transactions
contemplated hereby and thereby shall be abandoned without further action by
Investor or the Company.
(c) This Agreement shall automatically terminate upon confirmation
of a plan of reorganization for the Company (other than the Plan) prior to
the Outside Date.
(d) In the event of the termination of this Agreement as provided
in paragraph (a) or (c) above, (i) this Agreement, the Investment Agreement
and the Related Agreements shall forthwith become null and void, and there
shall be no liability on the part of any Investor or the Company or any of
their respective partners, officers, directors, employees, agents or
stockholders, except for fraud or for willful breach of this Agreement, the
Investment Agreement (but only if the Confirmation Order is entered) or the
Related Agreements and except that the parties shall continue to be
obligated as set forth in Sections 2, 3, 7, 8, 9, 17 and 18 of this
Agreement and in Sections 28(b) and 30 of the Investment Agreement, all of
which Sections shall survive the termination of this Agreement.
(e) The termination of this Agreement and the Investment Agreement
pursuant to paragraph (a) above shall become effective when (i) in the case
of a termination pursuant to clause (i) of paragraph (a) above, the required
consent is executed and (ii) in the case of a termination pursuant to any
other clause of paragraph (a) above, the required notice is given by the
terminating party.
(f) No termination of this Agreement pursuant to this Section 20
shall constitute a breach of this Agreement. The termination of this
Agreement and the Investment Agreement shall not cause or constitute a
termination of any existing confidentiality agreement between the Company
and one or more Affiliates of Investor.
SECTION 21. Privileged Communication. The parties hereto
anticipate that, being similarly situated and having a common interest in
the Company's bankruptcy case with respect to the Plan, and in anticipation
of potential litigation with other constituents of the Company, they may
share certain documents, information, factual materials, mental impressions,
memoranda, reports, and attorney-client communications that may be
privileged from disclosure to adverse or other parties as a result of the
attorney-client privilege, the attorney work product privilege, or other
applicable privileges. The parties hereto agree that the sharing of such
information or materials shall not diminish in any way the confidentiality
of such information or materials and shall not constitute a waiver of any
applicable privilege.
IN WITNESS WHEREOF, the Company and Investor, by their respective
officers thereunto duly authorized, have executed this Agreement as of the
date first above written.
AMERICA WEST AIRLINES, INC.
as Debtor and Debtor-in-Possession
By:
Title:
AMWEST PARTNERS, L.P.
By: AmWest Genpar, Inc.,
its General Partner
By:
Title:
FORM OF THIRD REVISED INVESTMENT AGREEMENT
April 21, 1994
America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, AZ 85034
Attention: William A. Franke
Chairman of the Board
Gentlemen:
This letter agreement (this "Agreement") sets forth the agreement
between America West Airlines, Inc., a Delaware corporation (including, on
or after the effective date of the Plan, as defined herein, its successors,
as reorganized pursuant to the Bankruptcy Code, as defined herein) (the
"Company"), and AmWest Partners, L.P., a Texas limited partnership
("Investor").
The Company will issue and sell to Investor, and Investor hereby
agrees and commits to purchase from the Company, a package of securities of
the Company for $244,857,000 in cash (subject to adjustment as herein
provided), consisting of (i) shares of Class A Common Stock of the Company
("Class A Common"), (ii) shares of Class B Common Stock of the Company
("Class B Common" and, together with the Class A Common, "Common Stock"),
(iii) senior unsecured notes of the Company ("Notes") and (iv) warrants to
purchase shares of Class B Common ("Warrants"), all on the terms and subject
to the terms and conditions hereinafter set forth.
Investor s purchase of the securities referred to above (the
"Investment") will be made in connection with and as part of the
transactions to be consummated pursuant to a joint Plan of Reorganization of
the Company (the "Plan") and an order (the "Confirmation Order") confirming
the Plan issued by the Bankruptcy Court, as defined herein. The Plan will
contain provisions called for by, or otherwise consistent with, this
Agreement.
In consideration of the agreements of Investor hereunder, and as a
precondition and inducement to the execution of this Agreement by Investor,
the Company has entered into the Third Revised Interim Procedures Agreement
with Investor, dated the date hereof (the "Procedures Agreement").
SECTION 1. Definitions. For purposes of this Agreement, except as
expressly provided herein or unless the context otherwise requires, the
following terms shall have the following respective meanings:
"Affiliate" shall mean (i) when used with reference to any
partnership, any Person that, directly or indirectly, owns or controls
10% or more of either the capital or profit interests of such
partnership or is a partner of such partnership or is a Person in which
such partnership has a 10% or greater direct or indirect equity
interest and (ii) when used with reference to any corporation, any
Person that, directly or indirectly, owns or controls 10% or more of
the outstanding voting securities of such corporation or is a Person in
which such corporation has a 10% or greater direct or indirect equity
interest. In addition, the term "Affiliate," when used with reference
to any Person, shall also mean any other Person that, directly or
indirectly, controls or is controlled by or is under common control
with such Person. 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, the Company will be deemed not to be an Affiliate of
Investor or any of its partners or assignees.
"Alliance Agreements" shall have the meaning specified in Section
5.
"Approvals" shall have the meaning specified in Section 8(b).
"Bankruptcy Code" shall mean Chapter 11 of the United States
Bankruptcy Code.
"Bankruptcy Court" shall mean the United States Bankruptcy Court
for the District of Arizona.
"Business Combination" means:
(i) any merger or consolidation of the Company with or into
Investor or any Affiliate of Investor;
(ii) any sale, lease, exchange, transfer or other disposition
of all or any substantial part of the assets of the Company to
Investor or any Affiliate of Investor;
(iii) any transaction with or involving the Company as a result
of which Investor or any of Investor 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 pursuant to a transaction open on a pro rata
basis to all holders of Class B Common; or
(iv) any related series or combination of
transactions having or which will have, directly or indirectly, the
same effect as any of the foregoing.
"Class A Common" shall have the meaning specified in the second
paragraph of this Agreement.
"Class B Common" shall have the meaning specified in the second
paragraph of this Agreement.
"Common Stock" shall have the meaning specified in the second
paragraph of this Agreement.
"Company" shall have the meaning specified in the first paragraph
of this Agreement.
"Confirmation Date" shall mean the date on which the Confirmation
Order is entered by the Bankruptcy Court.
"Confirmation Order" shall have the meaning specified in the third
paragraph of this Agreement.
"Continental" shall mean Continental Airlines, Inc.
"Creditors Committee" shall mean the Official Committee of the
Unsecured Creditors of America West Airlines, Inc. appointed in the
Company's Chapter 11 case pending in the Bankruptcy Court.
"Disclosure Statement" shall mean a disclosure statement with
respect to the Plan.
"Effective Date" shall mean the effective date of the Plan;
provided that in no event shall the Effective Date be (a) earlier than
11 days after the Bankruptcy Court approves and enters the Confirmation
Order providing for the confirmation of the Plan or (b) before all
material Approvals are obtained.
"Electing Party" shall have the meaning specified in Section
4(a)(2)(ii).
"Equity Committee" shall mean the Official Committee of Equity
Holders of America West Airlines, Inc. appointed in the Company's
Chapter 11 case pending in the Bankruptcy Court.
"Equity Holders" shall mean the Company's equity security holders
(including holders of common stock and preferred stock) of record as of
the applicable record date fixed by the Bankruptcy Court.
"Governance Agreements" shall have the meaning specified in Section
6.
"GPA" shall mean GPA Group plc or, if applicable, any direct or
indirect subsidiary thereof.
"GPA Put Agreement" shall have the meaning specified in Section
7(j).
"Independent Directors" shall have the meaning specified in Section
6(a)).
"Initial Order" shall have the meaning specified in Section 8(a).
"Investment" shall have the meaning specified in the third
paragraph of this Agreement.
"Investor" shall have the meaning specified in the first paragraph
of this Agreement.
"Mesa" shall mean Mesa Airlines, Inc.
"Monthly Targets" shall mean the amounts specified in the Monthly
Targets Schedule.
"Monthly Targets Schedule" shall mean the letter agreement between
the Company and Investor dated the date hereof.
"Notes" shall have the meaning specified in the second paragraph of
this Agreement. The Notes shall be subject to the terms and conditions
set forth in Exhibit B hereto.
"Outside Date" shall mean August 31, 1994; provided that Investor
shall have the right from time to time to irrevocably extend the
Outside Date to a date not later than November 30, 1994, but only if
Investor gives the Company prior written notice of its election to
extend the then current Outside Date (which notice shall specify the
new Outside Date) and then only if, at the time of the giving of such
notice, Investor is not in breach of any of its representations,
warranties, covenants or obligations under this Agreement, the
Procedures Agreement or any Related Agreement (excluding any breach by
Investor which is not willful or intentional and which is capable of
being cured on or before the new Outside Date). Unless waived by the
Company, any notice given pursuant to this definition shall be
delivered to the Company not less than 15 days prior to the then
current Outside Date except that, in the event the Effective Date has
not occurred for any reason arising within such 15-day period not due
to a breach by Investor of any of its representations, warranties,
covenants or agreements hereunder, such notice shall be given as soon
as practicable but in no event later than the then current Outside
Date.
"Person" means a natural person, a corporation, a partnership, a
trust, a joint venture, any Regulatory Authority or any other entity or
organization.
"Plan" shall have the meaning specified in the third paragraph of
this Agreement.
"Plan 9" means the Company's Plan Revision No. 9 which consists of
the Summary Pro Forma Financial Statements: June 1993 Through December
1994, dated July 15, 1993.
"Plan R-2" shall mean the Company's Summary Pro Forma Financial
Statements, 5 Year Plan: 1994 Through 1998, Plan No. R-2, dated January
13, 1994.
"Procedures Agreement" shall have the meaning specified in the
fourth paragraph of this Agreement.
"Projections" shall mean the projections set forth in Plan 9 on
pages 15 and 18 of Tab E and pages 7 and 8 of Tab F.
"Purchase Price" shall have the meaning specified in Section 2.
"Regulatory Approvals" shall mean all approvals, permits,
authorizations, consents, licenses, rulings, exemptions and agreements
required to be obtained from, or notices to or registrations or filings
with, any Regulatory Authority (including the expiration of all
applicable waiting periods, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended) that are necessary or
reasonably appropriate to permit the Investment and the other
transactions contemplated hereby and by the Related Agreements and to
permit the Company to carry on its business after the Investment in a
manner consistent in all material respects with the manner in which it
was carried on prior to the Effective Date or proposed to be carried on
by the reorganized Company.
"Regulatory Authority" shall mean any authority, agency,
commission, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision.
"Related Agreements" shall have the meaning specified in Section 3.
"Securities" shall mean the securities of the Company issued to the
Unsecured Parties, Investor and its assigns and GPA under this
Agreement. The Securities are described in Section 4.
"Unsecured Creditors" shall mean, as of any date, the Persons
holding of record as of such date the allowed or allowable prepetition
unsecured claims without priority of the Company.
"Unsecured Parties" shall mean the Equity Holders and the Unsecured
Creditors.
"Warrants" shall have the meaning specified in the second paragraph
of this Agreement.
SECTION 2. Commitment to Make Investment. Subject to the terms
and conditions of this Agreement and the Procedures Agreement, on the
Effective Date, the Company shall issue and sell and Investor shall purchase
Securities in accordance with this Agreement and the Plan. Such Securities
shall be issued, sold and delivered to Investor, its designees and/or one or
more third party investors, and the $244,857,000 purchase price therefor, as
such purchase price may be adjusted pursuant hereto (the "Purchase Price"),
shall be paid by wire transfer of immediately available funds on the
Effective Date.
SECTION 3. Related Agreements. The
agreements necessary to effect the Investment (the "Related Agreements",
such term to include the Alliance Agreements and the Governance Agreements)
shall be in form and substance reasonably satisfactory to Investor and the
Company, and shall contain terms and provisions, including representations,
warranties, covenants, warranty termination periods, materiality exceptions,
cure opportunities, conditions precedent, anti-dilution provisions (as
appropriate), and indemnities, as are in form and substance reasonably
satisfactory to such parties; provided, however, that the Related Agreements
shall contain provisions called for by, or otherwise consistent with, this
Agreement.
SECTION 4. Capitalization. (a) Upon consummation of the Plan,
the capitalization of the Company shall be as follows:
(1) Class A Common. There shall be 1,200,000 shares of Class A
Common, all of which shares shall, in accordance with the Plan, be
issued to Investor. Investor shall pay $8,960,400 for the Class A
Common. At the option of the holders thereof, shares of Class A
Common shall be convertible into shares of Class B Common on a share
for share basis.
(2) Class B Common. There shall be 43,800,000 shares of Class B
Common, all of which shares shall, in accordance with the Plan, be
issued as follows:
(i) Investor. Investor shall be issued 13,875,000 shares
plus the number of shares (if any) to be acquired by Investor
pursuant to clause (ii) below minus the number of shares, if any,
purchased by the Equity Holders pursuant to the second sentence of
clause (iii) below. For each share of Class B Common issued to it,
Investor shall pay $7.467; provided that (A) for each share
acquired by Investor pursuant to clause (ii) below and (B) for each
share not purchased by the Equity Holders pursuant to clause (iii)
below, Investor shall pay $8.889.
(ii) Unsecured Creditors. The Unsecured Creditors (or a
trust created for their benefit) shall be issued 26,775,000 shares.
Notwithstanding the foregoing, each Unsecured Creditor shall have
the right to elect to receive cash equal to $8.889 for each share
of Class B Common otherwise allocable to it under this clause (ii).
The election of each such Person (the "Electing Party") must be
made on or before the date fixed by the Bankruptcy Court for voting
with respect to the Plan; provided, however, that in the event that
such elections of all Electing Parties aggregate to more than $100
million, then (A) the amount of cash so paid shall be limited to
$100 million and (B) the Electing Parties shall each receive
proportionate amounts of cash and Class B Common in accordance with
the Plan. Subject to the foregoing proviso, Investor shall
increase the Investment by the amount necessary to pay all Electing
Parties the cash amounts payable to them under this clause (ii) in
respect of the shares of Class B Common specified in their
elections and, upon payment of such amounts, such shares shall be
issued to Investor without further consideration. Notwithstanding
the foregoing, Investor s acquisition of shares of Class B Common
pursuant to this clause (ii) shall, if permitted by applicable
securities and other laws, be consummated immediately after the
issuance of such shares to the Electing Parties on the Effective
Date. If such shares are not so acquired post-consummation of the
Plan, all shares of Class B Common acquired by Investor pursuant to
this clause (ii) shall, for all purposes hereof, be deemed to be
part of the Securities acquired by Investor hereunder.
(iii) Equity Holders. The Equity Holders (or a trust created
for their benefit) shall be issued 2,250,000 shares. In addition,
the Equity Holders shall have the right to purchase up to 1,615,179
shares allocable to Investor pursuant to clause (i) above at $8.889
per share. Such election must be made by each Equity Holder on or
before the date fixed by the Bankruptcy Court for voting with
respect to the Plan. The Plan shall set forth the terms and
conditions on which the foregoing rights may be exercised.
(iv) GPA. 900,000 shares shall be issued to GPA.
(3) Warrants. There shall be Warrants to purchase 10,384,615
shares of Class B Common at the exercise price as specified in and
subject to the terms of Exhibit A hereto, and such Warrants shall, in
accordance with the Plan, be issued as follows:
(i) Warrants to purchase up to 2,769,231 shares of Class B
Common shall be issued to Investor; and
(ii) Warrants to purchase up to 6,230,769 shares of Class B
Common shall be issued to the Equity Holders or a trust or trusts
created for their benefit; and
(iii) Warrants to purchase up to 1,384,615 shares of Class B
Common shall be issued to GPA.
(4) Senior Unsecured Notes. Investor shall, in accordance with the
Plan and subject to the terms of Exhibit B hereto, be issued $100
million principal amount of Notes against payment in cash of not less
than 100% of the principal amount thereof to the Company; provided,
however, that the Company shall have the right, exercised at any time
prior to the date fixed by the Bankruptcy Court for voting with respect
to the Plan, to increase the principal amount of the Notes to be so
purchased by Investor to up to $130 million. GPA shall, in accordance
with the Plan, be issued $30,525,000 principal amount of Notes;
provided, however, that GPA shall have the right to elect to receive
cash in lieu of all or any portion of the Notes otherwise issuable to
it under this paragraph (4), such election to be made on or before the
date fixed by the Bankruptcy Court for voting with respect to the Plan.
(b) Holders of the Class A Common shall have fifty votes per share.
Holders of Class B Common shall have one vote per share. Holders of Class A
Common and holders of Class B Common shall vote together as a single class
except as otherwise required by law or the provisions of this Agreement.
Investor may elect, with respect to any shares of Class B Common held by it,
to suspend the voting rights relating to such shares by giving prior written
notice to the Company, which notice shall describe such shares in reasonable
detail and state whether or not the voting suspension is permanent or
temporary and, if temporary, specify the period thereof.
(c) Neither Investor nor any Affiliate of Investor or of any
partner of Investor will transfer or otherwise 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 beneficially owned by the transferor is less than 200% of the
total number of shares of Class A Common beneficially owned by the
transferor; provided, however, than nothing in this paragraph (c) shall
prohibit any Person from transferring or otherwise disposing, in a single
transaction or a series of concurrent transactions, of all shares of Common
Stock owned by such Person.
SECTION 5. Business Alliance Agreements. Continental and the
Company shall enter into mutually acceptable business alliance agreements on
the Effective Date, which agreements may include, but shall not be limited
to, agreements to share ticket counter space, ground handling agreements,
agreements to link frequent flier programs, and combined purchasing
agreements, and schedule coordination and code sharing agreements. On the
Effective Date, Mesa shall enter into agreements with the Company extending
the existing contractual arrangements between the Company and Mesa for five
years from the Effective Date and modifying the termination provisions
thereof consistent with such extension. Such agreements with Continental
and Mesa are herein collectively referred to as the "Alliance Agreements".
SECTION 6. Governance Agreements. On the Effective Date, the
Company, Investor and Investor s partners (other than any such partner
holding shares of Class B Common the voting rights with respect to which
have been suspended as contemplated by Section 4(b)) shall enter into one or
more written agreements (the "Governance Agreements") effectively providing
as follows:
(a) At all times during the three-year period commencing on the
Effective Date, the Company's board of directors shall consist of 15
members designated as follows:
(i) nine members (at least 8 of whom are U.S. citizens) shall
be designated by Investor, with certain of the partners of Investor
having the right to designate certain of Investor s designated
directors;
(ii) three members (at least two of whom are U.S. citizens)
shall be designated bythe Creditors Committee; provided that each
such member shall be reasonably acceptable to Investor at the time
of his or her initial designation;
(iii) one member shall be designated by the Equity Committee;
provided that such member shall be a U.S. citizen reasonably
acceptable to Investor at the time of his or her initial
designation;
(iv) one member shall be designated by the Company's board
of directors as constituted on the date preceding the Effective
Date; provided that such member shall be a U.S. citizen reasonably
acceptable to Investor at the time of his or her initial
designation; and
(v) one member shall be designated by GPA for so long as GPA
shall own at least 2% of the voting equity securities of the
Company; provided that such member shall be reasonably acceptable
to Investor at the time of his or her initial designation.
The directors (and their successors) referred to in clauses (ii), (iii)
and (iv) above are hereinafter referred to collectively as the
"Independent Directors".
(b) In the case of the death, resignation, removal or disability of
an Independent Director after the Effective Date, his or her successor
shall be designated by the Stockholder Representatives, except that if
such Independent Director was initially designated by the Creditors
Committee or the Equity Committee and if, at the time of such
Independent Director s death, resignation, removal or disability (as
the case may be), the Creditors Committee or the Equity Committee (as
the case may be) remains in effect, the successor to such Independent
Director shall be designated by the Creditors Committee or the Equity
Committee (as the case may be). As used herein, "Stockholder
Representatives" shall mean, collectively, (A) one individual who, on
the date hereof, is serving as a director of the Company, (B) one
individualwho, on the date hereof, is serving as a member of the
Creditors Committee and (C) one individual who, on the date hereof, is
serving as a member of the Equity Committee. The initial Stockholder
Representatives shall be selected on or before the Effective Date (x)
by the Company's board of directors in the case of the individual
referred to in clause (A) above, (y) by the Creditors Committee in the
case of the individual referred to in clause (B) above and (z) by the
Equity Committee in the case of the individual referred to in clause
(C) above. In case of the death, resignation, removal or disability of
a Stockholder Representative after the Effective Date, his or her
successor shall be designated by the remaining Stockholder
Representatives.
(c) Until the third anniversary of the Effective Date, Investor
will vote and cause to be voted all shares of Common Stock (other than
those the voting rights of which have been suspended) owned by Investor
or any of its partners or by the assignees or transferees of all or
substantially all of the Common Stock owned by Investor or any of its
partners (other than a Person who acquires such stock pursuant to a
tender or exchange offer open to all stockholders of the Company) in
favor of the election as directors of any and all individuals
designated for such election as contemplated by clauses (ii), (iii),
(iv) and (v) of paragraph (a) above.
(d) No director nominated by Investor shall be an officer or
employee of Continental. All Company directors, if any, who are
selected by, or who are directors of, Continental shall recuse
themselves from voting on, or otherwise receiving any confidential
Company information regarding, matters in connection with negotiations
between Continental and the Company (including, without limitation,
those relating to the Alliance Agreements) and matters in connection
with any action involving direct competition between Continental and
the Company. All Company directors, if any, who are selected by, or who
are directors, officers or employees of, Mesa shall recuse themselves
from voting on, or otherwise receiving any confidential Company
information regarding, matters in connection with negotiations between
Mesa and the Company (including, without limitation, those relating to
the Alliance Agreements) and matters in connection with any action
involving direct competition between Mesa and the Company.
(e) During the three-year period commencing on the Effective Date,
the Company will not consummate any Business Combination unless such
transaction shall be approved in advance by at least three
Independent Directors or by a majority of the stock voted at the
meeting held to consider such transaction which is owned by
stockholders of the Company other than Investor or any of its
Affiliates; provided, however, that neither Mesa nor any fund or
account managed or advised by Fidelity Management Trust Company or its
Affiliates (or any of their non-Affiliated transferees) will be deemed
an Affiliate of Investor for purposes of voting on any Business
Combination involving Continental.
SECTION 7. Plan of Reorganization. The Plan shall (i) be proposed
jointly by the Company and Investor, (ii) contain terms and conditions
reasonably satisfactory to Investor and the Company, and (iii) include the
following provisions; provided that Investor and the Company may, by mutual
agreement, modify the Plan or otherwise restructure the Investment in a
manner consistent with the contemplated economic consequences to the
Company, Investor, the Unsecured Parties and GPA in order to enable the
Company, as reorganized, to more fully utilize its existing tax attributes:
(a) Debtor-in-Possession Financing. The Company's
debtor-in-possession financing shall be repaid in full in cash on the
Effective Date.
(b) Administrative Claims. All allowed administrative claims shall
be paid as required pursuant to Section 1129(a) of the Bankruptcy Code,
provided that such claims do not exceed the amount set forth in Plan
R-2 plus $15 million, and provided further that payment of such claims
in excess of those set forth in Plan R-2 would not, if payment was to
be made in the month immediately preceding the Effective Date, cause
the Company to fail to meet any of the Monthly Targets for such month.
(c) Tax Claims. All priority tax claims shall be paid over the
maximum term permitted by the Bankruptcy Code, as determined by the
Bankruptcy Court, with interest accruing at a rate determined by the
Bankruptcy Court, provided that such claims do not exceed the amounts
set forth in Plan R-2 plus $8.5 million, and provided further that
payment of such claims in excess of those set forth in Plan R-2 would
not, if payment was to be made in the month immediately preceding the
Effective Date, cause the Company to fail to meet any of the Monthly
Targets for such month .
(d) Nontax Priority Claims. All nontax priority claims shall be
paid as required pursuant to Section 507 of the Bankruptcy Code,
provided that such claims do not exceed the amounts set forth in Plan
R-2.
(e) Secured Claims. Secured debt claims shall be treated as
provided in Plan R-2 subject to (i) modification based on updated
appraisals of collateral values to be conducted by the Company and
consistent with the applicable provisions of the Bankruptcy Code, or
(ii) such other terms as shall be reasonably satisfactory to the
Company and Investor.
(f) Unsecured Creditors. In consideration for the shares and cash
issued or paid, as the case may be, to the Unsecured Creditors pursuant
to Section 4(a)(2)(ii), the unsecured claims of the Unsecured Creditors
shall be cancelled as specified in the Plan.
(g) Equity Holders. In consideration for (A) the right to purchase
shares pursuant to Section 4(a)(2)(iii), (B) the shares issued to the
Equity Holders pursuant to Section 4(a)(2)(iii), and (C) the Warrants
issued to the Equity Holders pursuant to Section 4(a)(3)(ii), the
equity interests of the Equity Holders shall be cancelled as specified
in the Plan.
(h) Leases. All aircraft leases which have been assumed prior to
the date hereof will be honored by the Company in accordance with their
terms and without reduction of rentals thereunder, provided that with
the consent of the Company, Investor and any applicable lessor, any
such lease may be amended to reduce the rentals payable thereunder, it
being understood that, in consideration of any such amendment and with
the consent of the Creditors Committee, securities of the Company may
be issued to such lessors from securities otherwise allocable to the
Unsecured Parties to the extent consistent with any agreement in
writing entered into by Investor and the Equity Committee on or before
the date hereof.
(i) Kawasaki. The contractual right of Kawasaki Leasing
International Inc. ("Kawasaki") to require the Company to lease certain
aircraft and aircraft engines shall be modified on terms satisfactory
to the Company, Investor and Kawasaki or, in the absence of such
modification, honored.
(j) GPA. In consideration for (A) the shares issued to GPA
pursuant to Section 4(a)(2)(iv), (B) the Warrants issued to GPA
pursuant to Section 4(a)(3)(iii), (C) the Notes and cash issued or
paid, as the case may be, to GPA pursuant to Section 4(a)(4) and (D)
the granting to GPA on the Effective Date of the right (the "New GPA
Put") to require the Company to lease from GPA on or prior to June 30,
1999, up to eight aircraft of types consistent with the fleet currently
operated by the Company, GPA shall, as specified in the Plan, cancel
and waive all rights to put any aircraft to the Company which it may
have pursuant to the Put Agreement between GPA and the Company, dated
as of June 25, 1991 (the "GPA Put Agreement") and/or the related
Agreement Regarding Rights of First Refusal for A320 Aircraft, dated as
of September 1, 1992 (the "First Refusal Agreement") and all other
claims of any kind or nature arising out of or in connection with the
GPA Put Agreement and/or the First Refusal Agreement (other than claims
for reimbursement of expenses incurred by GPA in connection therewith).
Each such lease shall provide for the payment by the Company of a fair
market rental (determined at or about the time of delivery of the
related aircraft to the Company on the basis of rentals then prevailing
in the marketplace for comparable leases of comparable aircraft to
lessees of comparable creditworthiness); and each such lease shall have
such other terms and provisions and be in such form as is agreed upon
by the Company and GPA with the approval of Investor (which approval
shall not be unreasonably withheld or delayed) and attached to the
agreement pursuant to which GPA is granted the New GPA Put.
(k) Prepetition Aircraft Purchase Contracts. The prepetition
contract for the purchase of aircraft between the Company and The
Boeing Company shall either be modified on terms satisfactory to
Investor, the Company and The Boeing Company or, in the absence of such
agreement, rejected. The Company's aircraft purchase contract with
AVSA, S.A.R.L. ("Airbus") shall be amended on terms consistent with the
provisions of the AmWest - A320 Term Sheet, dated as of February 23,
1994 by and between Investor and Airbus.
(l) Employees. The Company shall have the right to release
employees from all currently existing obligations to the Company in
respect of shares of Company stock purchased by such employees pursuant
to the Company's stock purchase plan, such release to be in
consideration for the cancellation of such shares.
(m) Exculpation. The Plan will contain customary exculpation
provisions for the benefit of the Creditors Committee and the Equity
Committee and their respective professionals.
SECTION 8. Conditions to Investor s Obligations Relating to the
Investment. The obligations of Investor to consummate the Investment and
the other transactions contemplated herein shall be subject to the
satisfaction, or the written waiver by Investor, of the following
conditions:
(a) an initial order approving the Procedures Agreement, which
order shall be in form and substance reasonably satisfactory to
Investor (the "Initial Order"), shall have been entered by the
Bankruptcy Court on or prior to May 6, 1994 and, once entered, shall be
in effect and shall not be modified in any material respect or stayed;
(b) subject to Section 10(b), the Company and Investor, as
applicable, shall have received all Regulatory Approvals, which shall
have become final and nonappealable or any period of objection by
Regulatory Authorities shall have expired, as applicable, and all other
material approvals, permits, authorizations, consents, licenses and
agreements from other third parties that are necessary or appropriate
to permit the Investment and the other transactions contemplated hereby
and by the Related Agreements and to permit the Company to carry on its
business after the Effective Date in a manner consistent in all
material respects with the manner in which it was carried on prior to
the Effective Date (collectively with Regulatory Approvals, the
"Approvals"), which Approvals shall not contain any condition or
restriction that, in Investor s reasonable judgment, materially impairs
the Company's ability to carry on its business in a manner consistent
in all material respects with prior practice or as proposed to be
carried on by the reorganized Company;
(c) the certificate of incorporation and bylaws of the Company
shall contain the terms contemplated by this Agreement and shall
otherwise be reasonably satisfactory to Investor;
(d) there shall be in effect no injunction, stay, restraining order
or decree issued by any court of competent jurisdiction, whether
foreign or domestic, staying the effectiveness of any of the Approvals,
the Initial Order or the Confirmation Order, and there shall not be
pending any request or motion for any such injunction, stay,
restraining order or decree; provided, however, that the foregoing
condition shall not apply to any such injunction, stay, order or decree
requested, initiated or supported by Investor or any of its partners or
other Affiliates or to any such request or motion made, initiated or
supported by Investor or any its partners or other Affiliates;
(e) there shall not be threatened or pending any suit, action,
investigation, inquiry or other proceeding (collectively,
"Proceedings") by or before any court of competent jurisdiction or
Regulatory Authority (excluding the Company's bankruptcy case, but
including adversary proceedings and contested matters in such
bankruptcy case, and excluding any such Proceedings fully and
accurately disclosed by the Company in Schedule I hereto), or any
adverse development occurring since December 31, 1993 in any such
Proceedings, which Proceedings or development, singly or in the
aggregate, in the good faith judgment of Investor, are reasonably
likely to have a material adverse effect on the Company's ability to
carry on its business in a manner consistent in all material respects
with prior practices or are reasonably likely to impair in any material
respect Investor s ability to realize the intended benefits and value
of this Agreement, the Procedures Agreement or any Related Agreement;
provided, however, that the foregoing condition shall not apply to any
such Proceeding or development requested, initiated or supported by
Investor or any of its partners or other Affiliates;
(f) the Company shall have delivered to Investor appropriate
closing documents, including the instruments evidencing the Securities
being issued to Investor, certifications of the Company officers
(including, but not limited to, incumbency certificates, and
certificates as to the truth and correctness of statements made in the
Disclosure Statement or any other offering document distributed in
connection with any securities issued in respect of this Agreement or
the Related Agreements) and opinions of legal counsel, all of which
shall be reasonably satisfactory to Investor;
(g) by no later than March 31, 1994, the Company shall have
delivered to Investor audited financial statements as of December 31,
1993, and for the year then ended, which statements shall reflect a
financial performance and a financial position of the Company
consistent in all material respects with the unaudited results
previously announced by the Company for such year, and, if requested by
Investor, the Company shall have discussed such financial statements
with Investor and provided an opportunity for Investor to discuss such
financial statements with the Company's auditors;
(h) since December 31, 1993, except for the matters disclosed in
Schedule I hereto, no material adverse change in the Company's
condition (financial or otherwise), business, assets, properties,
operations or relations with employees or labor unions shall have
occurred and no matter (except for the matters disclosed in Schedule I
hereto) shall have occurred or come to the attention of Investor that,
in the reasonable judgment of Investor, is likely to have any such
material adverse effect;
(i) the following shall be true in all material respects (in each
case based on the Company's actual monthly or daily financial
statements, which shall be prepared by the Company in a manner
consistent in all material respects with its historical monthly and
daily financial statements previously furnished to Investor): (A) the
Company's actual monthly Operating Cash Flow (as defined on the Monthly
Targets Schedule) shall not, in any month, be less than the minimum
amount therefor established as part of the Monthly Targets, (B) the
Company's actual 4 month Rolling Cash Flow (as defined on the Monthly
Targets Schedule) shall not be less, as of the end of any four calendar
month period, than the minimum amount therefor established as part of
the Monthly Targets, (C) the Company's actual end of month Reported
Cash Balance (as defined in the Monthly Targets Schedule) shall not, as
of the end of any calendar month, be less than the minimum amount
therefor established as part of the Monthly Targets, (D) the Company's
actual five-day average Minimum Cash Balance (as defined in the Monthly
Targets Schedule) shall not be, as of the end of any five day period,
less than the minimum amount therefor established as part of the
Monthly Targets; (E) the Company shall not have taken any actions which
the Company knew or reasonably should have known would likely impair or
hinder in any material respect the Company's ability to achieve the
Projections; (F) the amount and nature of the obligations and
liabilities (including, without limitation, tax liabilities and
administrative expense claims) required to be paid by the Company on
the Effective Date or to be paid by the Company following the Effective
Date pursuant to obligations assumed by the Company during the course
of its bankruptcy proceedings shall not be in excess of the amounts
reflected in Plan R-2 plus any additional allowances provided in
Section 7 (as reduced by any repayments of the existing
debtor-in-possession loan made on or prior to the Effective Date) and
shall not be materially different in nature than those specified in
Plan R-2 (except with respect to administrative claims not known to the
Company when Plan R-2 was developed); and (G) the Company shall have
paid all fees and expenses due Investor under the Procedures Agreement;
(j) since the date hereof, there shall have occurred no outbreak or
escalation of hostilities or other international or domestic calamity,
crisis or change in political, financial or economic conditions or
other adverse change in the financial markets that impairs (or could
reasonably be expected to impair) in any material respect the Company's
ability to carry on its business in a manner consistent in all material
respects with prior practice or impairs (or could reasonably be
expected to impair) in any material respect Investor s ability to
realize the intended benefits and value of this Agreement or any
Related Agreement;
(k) the Related Agreements, including all Alliance Agreements, to
be executed by the Company shall have been executed by the Company on
or before the Effective Date and, once executed, shall not have been
modified without the consent of Investor, shall be in effect and shall
not have been stayed;
(l) the Company shall have performed in all material respects all
obligations on its part required to be performed on or before the
Effective Date under this Agreement, the Procedures Agreement and the
Related Agreements and all orders of the Bankruptcy Court in respect
thereof that are consistent with the provisions of such intruments;
(m) all representations and warranties of the Company under this
Agreement, the Procedures Agreement and the Related Agreements shall be
true in all material respects as of the Effective Date;
(n) the Plan and Disclosure Statement each shall have been filed by
the Company on or prior to May 15, 1994, and, once filed, shall have
been served by the Company on all appropriate parties and, once served,
shall not have been modified in any material respect without the prior
consent of Investor (which consent shall not be unreasonably withheld),
withdrawn by the Company or dismissed;
(o) the Disclosure Statement (in the form approved by the
Bankruptcy Court and as amended or supplemented, if applicable) shall
have been true and correct in all material respects as of the date
first mailed to Unsecured Parties and as of the date fixed by the
Bankruptcy Court for voting on the Plan and such Disclosure Statement
shall not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made
therein (taken as a whole), in light of the circumstances under which
they were made, not misleading; provided, however, that the foregoing
condition shall not apply to statements or other information furnished
or provided by Investor or any of its Affiliates for use in the
Disclosure Statement;
(p) the order approving the Disclosure Statement shall have been
entered by the Bankruptcy Court on or prior to June 30, 1994, and, once
entered, shall not have been modified in any material respect, shall be
in effect and shall not have been stayed;
(q) the Plan (including all securities of the Company to be issued
pursuant thereto and all contracts, instruments, agreements and other
documents to be entered into in connection therewith), the Disclosure
Statement and the Confirmation Order shall be consistent with the terms
of this Agreement and otherwise reasonably satisfactory in form and
substance to Investor;
(r) the Confirmation Order shall have been entered by the
Bankruptcy Court in form reasonably satisfactory to Investor on or
before August 15, 1994, and, once entered, shall not have been modified
in any material respect, shall be in effect and shall not have been
stayed and shall not be subject to any appeal;
(s) the Effective Date shall have occurred on or prior to the
Outside Date unless the reason therefor shall be attributable to the
breach by Investor or its Affiliates of any of their respective
representations, warranties, covenants or obligations contained herein
or in the Procedures Agreement or any Related Agreement;.
(t) either pursuant to the Confirmation Order or otherwise, the
Bankruptcy Court shall have established one or more bar dates for
administrative expense claims pursuant to an order reasonably
acceptable to Investor, which bar date or dates shall occur on or
before dates reasonably acceptable to Investor; and
(u) the Securities and Exchange Commission shall have declared
effective a shelf registration statement with respect to the Securities
issuable to Investor.
In the event any of the conditions set forth in clause (a) (n), (p) or (r)
is not satisfied by the date specified in such clause (the "Deadline"),
then, on the 15th day following the then current Deadline, the Deadline
shall be automatically extended on a day-to-day basis unless the Company and
Investor otherwise agree in writing or unless Investor gives a notice of
termination to the Company pursuant to Section 20(b) of the Procedures
Agreement within such 15-day period. If any Deadline is automatically
extended as aforesaid, Investor may thereafter establish a new Deadline by
giving notice to the Company specifying the new Deadline, provided that the
new Deadline may not be sooner than 30 days after the date of such notice.
SECTION 9. Conditions to Company's Obligations Relating to
Investment. The Company's obligations to consummate or to cause the
consummation of the issuance and sale of the Securities and the other
transactions contemplated by this Agreement shall be subject to the
satisfaction, or to the effective written waiver by the Company, of the
condition described in Section 8(b) and the following additional conditions:
(a) payment of the Purchase Price;
(b) Investor shall have delivered to the Company appropriate
closing documents, including, but not limited to, executed counterparts
of the Related Agreements and certifications of officers, and opinions
of legal counsel, all of which shall be reasonably satisfactory to the
Company;
(c) there shall be in effect no injunction, stay, restraining order
or decree issued by any court of competent jurisdiction, whether
foreign or domestic, staying the effectiveness of any of the Approvals,
the Initial Order or the Confirmation Order, and there shall not be
pending any request or motion for any such injunction, stay,
restraining order or decree; provided, however, that the foregoing
condition shall not apply to any such injunction, stay, order or decree
requested, initiated or supported by the Company or to any such request
or motion made, initiated or supported by the Company;
(d) the Related Agreements to be executed by Investor or any of
its partners shall have been executed by such parties on or before the
Effective Date and, once executed, shall not have been modified without
the consent of the Company, shall be in effect and shall not have been
stayed;
(e) Investor, Continental and Mesa shall have performed in all
material respects all obligations on their part required to be
performed on or before the Effective Date under this Agreement, the
Procedures Agreement and the Related Agreements and all orders of the
Bankruptcy Court in respect thereof that are consistent with the
provisions of such instruments;
(f) all representations and warranties of Investor, Continental and
Mesa under this Agreement, the Procedures Agreement and the Related
Agreements shall be true and correct in all material respects as of the
Effective Date;
(g) the Company shall be reasonably satisfied that the Alliance
Agreements, when fully implemented, shall result in an increase to the
Company's pretax income of not less than $40 million per year;
provided, however, that Investor shall have no liability for any
failure of the Company to achieve any such increase in net income
except to the extent such failure results from a default by Investor or
its partners pursuant to the terms of such Alliance Agreements;
(h) since the date hereof, there shall have occurred (A) no
outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions or other adverse change in the financial markets or (B) any
adverse change in the condition (financial or otherwise), business,
assets, properties or prospects of Continental or Mesa, in each case
that materially impairs the ability of either Continental or Mesa to
perform its obligations under the Alliance Agreements or the Company's
ability to realize the intended benefits and value of this Agreement,
the Alliance Agreements (as contemplated by clause (g) above) or the
other Related Agreements;
(i) since the time of their initial filing by the Company, neither
the Plan nor the Disclosure Statement shall have been modified in any
material respect without the prior consent of the Company (which
consent shall not be unreasonably withheld or delayed), withdrawn by
Investor or dismissed;
(j) the certificate of incorporation and bylaws of the Company
shall contain the terms contemplated by this Agreement and shall
otherwise be reasonably satisfactory to the Company;
(k) the Plan (including all Securities to be issued pursuant
thereto and all contracts, instruments, agreements and other documents
to be entered into in connection therewith), the Disclosure Statement
and the Confirmation Order shall be consistent with the terms of this
Agreement and otherwise reasonably satisfactory in form and substance
to the Company;
(l) the Confirmation Order shall have been entered by the
Bankruptcy Court in form reasonably acceptable to the Company and, once
entered, shall not have been modified in any material respect, shall be
in effect and shall not have been stayed and shall not be subject to
any appeal; and
(m) the Effective Date shall have occurred on or prior to the
Outside Date unless the reason therefor shall be attributable to the
breach by the Company of any of its representations, warranties,
covenants or obligations contained herein or in the Procedures
Agreement or any Related Agreement.
SECTION 10. Cooperation. (a) The Company and Investor will
cooperate in a commercially reasonable manner, and will use their respective
commercially reasonable efforts, to consummate the transactions contemplated
hereby, including all commercially reasonable efforts to satisfy the
conditions specified in this Agreement. The Company will use commercially
reasonable efforts, and Investor will cooperate in a commercially reasonable
manner in seeking, to obtain all Approvals.
(b) Notwithstanding anything in Section 8 or 9 to the contrary, if
prior to the Outside Date, the Department of Justice or any other Regulatory
Authority raises any antitrust objection to the consummation of the
Investment or the implementation of any Alliance Agreement, which objection
has not been resolved on or before the Outside Date, Investor nevertheless
shall be required to consummate the Investment and, to that end, agrees to
timely make such adjustment to the composition of its partnership and to the
Alliance Agreements as required to resolve such antitrust objection;
provided, however, that nothing in this paragraph (b) shall affect the
rights of the Company under Section 9(g) or obligate the Company to enter
into or approve any adjustment or modification of the Alliance Agreements
which, in the Company's reasonable judgment, is prejudicial to the Company
or the Unsecured Parties in any material respect and which, if entered into
or approved, would materially impair the Company's ability to realize the
reasonably anticipated benefits of such Alliance Agreements.
SECTION 11. Registration Rights Agreement. Investor and the
Company will enter into a registration rights agreement on terms acceptable
to Investor and the Company. The registration rights agreement will reflect
the understanding of the parties with respect to their registration rights
and obligations and will provide that Investor, its partners and any
assignees and transferees, shall have the right to cause the Company to (i)
include the Securities issuable to Investor pursuant to the Plan (including
any such Securities issued or issuable in respect of the Warrants or by way
of any stock dividend or stock split or in connection with any combination
of shares, merger, consolidation or similar transaction), on customary
terms, in "piggyback" underwritings and registrations and (ii) to effect, on
customary terms, one demand registration under the Securities Act for the
public offering and sale of the Securities issued to Investor under the Plan
at any time after the third anniversary of the Effective Date.
SECTION 12. Applicable Provisions of Law and Regulations. It is
understood and agreed that this Agreement shall not create any obligation
of, or restriction upon, the Company or Investor or the partners of Investor
that would violate applicable provisions of law or regulation relating to
ownership or control of a U.S. air carrier. At all times after the
Effective Date, the certificate of incorporation of the Company shall
provide that, in the event persons who are not U.S. citizens shall own
(beneficially or of record) or have voting control over shares of Common
Stock, the voting rights of such persons shall be subject to automatic
suspension as required to ensure that the Company is in compliance with
applicable provisions of law or regulation relating to ownership or control
of a U.S. air carrier.
SECTION 13. Representations and Warranties of the Company. The
Company represents and warrants to Investor as follows:
(a) The Company has complied in all material respects with the
terms of all orders of the Bankruptcy Court in respect of the
Investment, this Agreement and the Procedures Agreement.
(b) The Company has delivered to Investor copies of the audited
balance sheets of the Company as of December 31, 1992 and the
statements of income, stockholders equity and cash flows for the years
then ended, together with the notes thereto. Such financial
statements, and when delivered to Investor the financial statements of
the Company referred to in Section 8(g) will, present fairly, in
accordance with generally accepted accounting principles (applied on a
consistent basis except as disclosed in the footnotes thereto), the
financial position and results of operations of the Company as of the
dates and for the periods therein set forth.
(c) When delivered to Investor, the unaudited financial statements
of the Company referred to in Section 15(b)(ii) will (i) present
fairly, in accordance with generally accepted accounting principles
(applied on a consistent basis except as disclosed therein and subject
to normal year-end audit adjustments), the financial position and
results of operations of the Company as of the date and for the period
therein set forth, it being understood and agreed, however, that the
foregoing representation relating to conformity with generally accepted
accounting principles is being made only to the extent such principles
are applicable to interim unaudited reports and (ii) reflect a
financial position and results of operations not materially worse than
those set forth in the pro forma financial statements contained in Plan
9.
(d) The Projections and the Monthly Targets were prepared in good
faith on a reasonable basis, and when prepared represented the
Company's best judgment as to the matters set forth therein, taking
into account all relevant facts and circumstances known to the Company.
Nothing has come to the Company's attention since the dates on which
the Projections and the Monthly Targets, respectively, were prepared
which causes the Company to believe that any of the projections and
other information contained therein were misleading or inaccurate in
any material respect as of such dates. It is specifically understood
and agreed that the delivery of the Projections and the Monthly Targets
shall not be regarded as a representation, warranty or guarantee that
the particular results reflected therein will in fact be achieved or
are likely to be achieved.
(e) No written statement, memorandum, certificate, schedule or
other written information provided (or to be provided) to Investor or
any of its representatives by or on behalf of the Company in connection
with the transactions contemplated hereby, when viewed together with
all other written statements and information provided to Investor and
its representatives by or on behalf of the Company, in light of the
circumstances under which they were made, (i) contains or will contain
any materially misleading statement or (ii) omits or will omit to state
any material fact necessary to make the statements therein not
misleading.
(f) The board of directors of the Company has approved the
Investment and Investor s acquisition of Securities hereunder for
purposes of, and in accordance with the provisions and requirements of,
Section 203(a)(1) of the General Corporation Law of the State of
Delaware and, as a consequence, Investor will not be subject to the
provisions of such Section with respect to any "business combination"
between Investor and the Company (as such term is defined in said
Section 203).
SECTION 14. Representations and Warranties of Investor. Investor
represents and warrants to the Company as follows:
(a) The general and limited partners of Investor (other than one
such partner which will elect to suspend the voting rights of its
Securities as contemplated by Section 4(b)) are U.S. citizens within
the meaning of Section 101(16) of the Federal Aviation Act of 1958, as
amended.
(b) Investor has, or has commitments for, sufficient funds to pay
the Purchase Price and otherwise perform its obligations under this
Agreement.
(c) No written statement, memorandum, certificate, schedule or
other written information provided (or to be provided) to the Company
or any of its representatives by or on behalf of Investor in connection
with the transactions contemplated by the Alliance Agreements, when
viewed together with all other written statements and information
provided to the Company and its representatives by or on behalf of
Investor, in light of the circumstances under which they were made, (i)
contains or will contain any materially misleading statement or (ii)
omits or will omit to state any material fact necessary to make the
statements therein not misleading.
SECTION 15. Covenants. (a) Investor covenants (i) to support,
subject to management s recommendation, increases in employee compensation
through 1995 at least equal to those set forth in Plan R-2 and (ii) after
the Effective Date, to cause the board of directors of the Company to
consider implementation of a broad based employee incentive compensation
plan and a management stock incentive plan.
(b) The Company covenants (i) to use commercially reasonable
efforts to cause the shelf registration statement referred to in Section
8(u) to remain effective for three years following its effective date and
(ii) as soon as available, to deliver to Investor a copy of the unaudited
balance sheet of the Company as of the end of each fiscal quarter of the
Company prior to the Effective Date and the unaudited statements of income
and cash flows for the periods then ended.
SECTION 16. Certain Taxes. The Company shall bear and pay all
transfer, stamp or other similar taxes (if any are not exempted under
Section 1146 of the Bankruptcy Code) imposed in connection with the issuance
and sale of the Securities.
SECTION 17. Administrative Expense. All amounts owed to Investor
or its assignees by the Company under this Agreement, the Related
Agreements, the Procedures Agreement and all orders of the Bankruptcy Court
in respect thereof shall be treated as an allowed administrative expense
priority claim under Section 507(a)(1) of the Bankruptcy Code.
SECTION 18. Incorporation by Reference. The provisions set forth
in the Procedures Agreement, including, but not limited to, the provisions
regarding confidentiality, liability indemnity and termination, are hereby
incorporated by reference and such provisions shall have the same force and
effect herein as if they were expressly set forth herein in full.
SECTION 19. 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) or by prepaid express courier to the
parties at the following addresses or facsimile numbers:
If to the Company: America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
Attention: William A. Franke and
Martin J. Whalen
Fax Number: (602) 693-5904
with a copy to: LeBoeuf, Lamb, Greene & MacRae
633 17th Street, Suite 2800
Denver, Colorado 80202
Attention: Carl A. Eklund
Fax Number: (303) 297-0422
and a copy to: Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: David G. Elkins
Fax Number: (713) 220-4285
and a copy to: Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Patrick A. Murphy
Fax Number: (415) 421-7879
and a copy to: Lord, Bissell and Brook 115 South LaSalle
Street
Chicago, IL 60603
Attention: Benjamin Waisbren
Fax Number: (312) 443-0336
If to Investor: 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
and a copy to: Goodwin, Procter &Hoar
Exchange Place
Boston, MA 02109
Attention: Laura Hodges Taylor, P.C.
Fax Number: (617) 523-1231
and a copy to: Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, California 94111
Attention: Patrick A. Murphy
Fax Number: (415) 421-7879
and a copy to: Lord, Bissell and Brook
115 South LaSalle Street
Chicago, IL 60603
Attention: Benjamin Waisbren
Fax Number: (312) 443-0336
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section, 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, 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). Either 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 specifying such change to the other
party hereto.
SECTION 20. Governing Law. Except to the extent inconsistent with
the Bankruptcy Code, this Agreement shall in all respects be governed by and
construed in accordance with the laws of the State of Arizona, without
reference to principles of conflicts or choice of law under which the law of
any other jurisdiction would apply.
SECTION 21. Amendment. This Agreement may only be amended,
waived, supplemented or modified by a written instrument signed by
authorized representatives of Investor and the Company. Investor may extend
the time for satisfaction of the conditions set forth in Section 8 (prior to
or after the relevant date) by notifying the Company in writing. The
Company may extend the time for satisfaction of the conditions set forth in
Section 9 (prior to or after the relevant date) by notifying Investor in
writing.
SECTION 22. No Third Party Beneficiary. This Agreement and the
Procedures Agreement are made solely for the benefit of the Company and
Investor and their respective permitted assigns, and no other Person
(including, without limitation, employees, stockholders and creditors of the
Company) shall have any right, claim or cause of action under or by virtue
of this Agreement or the Procedures Agreement, except to the extent such
Person is entitled to protection as contemplated by Section 28(b) or to
expense reimbursement pursuant to the Procedures Agreement or may assert a
claim for indemnity pursuant to the Procedures Agreement.
SECTION 23. Assignment. Except as otherwise provided herein,
Investor may assign all or part of its rights under this Agreement to any of
its partners (each of whom may assign all or part to its Affiliates) or to
any fund or account managed or advised by Fidelity Management Trust Company
or any of its Affiliates and may assign any Securities (or the right to
purchase any Securities) to any lawfully qualified Person or Persons, and
the Company may assign this Agreement to any Person with which it may be
merged or consolidated or to whom substantially all of its assets may be
transferred in facilitation of the consummation of the Plan and the
effectuation of the issuance and sale of the Securities as contemplated
hereby or by the Related Agreements. None of such assignments shall relieve
the Company or Investor of any obligations hereunder, under the Procedures
Agreement or under the Related Agreements.
SECTION 24. Counterparts. 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. With respect to signatures transmitted by
telecopy, upon request by either party to the other party, an original
signature of such other party shall promptly be substituted for its
facsimile.
SECTION 25. Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present
or future laws, rules or regulations, and if the rights or obligations of
Investor and the Company under this Agreement will not be materially and
adversely affected thereby, (a) such provision will be fully severable, (b)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) 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 (d) 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. If the
rights and obligations of Investor or the Company will be materially and
adversely affected by any such provision held to be illegal, invalid or
unenforceable, then unless such provision is waived in writing by the
affected party in its sole discretion, this Agreement shall be null and
void.
SECTION 26. Tagalong Rights. On the Effective Date, Investor
shall enter into a written agreement for the benefit of all holders of Class
B Common (other than Investor and its Affiliates) whereby Investor shall
agree, for a period of three years after the Effective Date, not to sell, in
a single transaction or related series of transactions, shares of Common
Stock representing 51% or more of the combined voting power of all shares of
Common Stock then outstanding unless such holders 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 Investor; provided, however, that such obligation of Investor
shall not apply to any sale of shares of Common Stock made by Investor (i)
to any Affiliate of Investor, (ii) to any Affiliate of Investor s partners,
(iii) pursuant to a bankruptcy or insolvency proceeding, (iv) pursuant to
judicial order, legal process, execution or attachment, (v) in a widespread
distribution registered under the Securities Act of 1933, as amended
("Securities Act") or (vi) in compliance with the volume limitations of Rule
144 (or any successor to such Rule) under the Securities Act.
SECTION 27. Stock Legend. All securities issued to Investor
pursuant to the Plan shall be conspicuously endorsed with an appropriate
legend to the effect that such securities may not be sold, transferred or
otherwise disposed of except in compliance with (i) Section 26 and (ii)
applicable securities laws.
SECTION 28. Directors Liability and Indemnification. (a) Upon,
and at all times after, consummation of the Plan, the certificate of
incorporation of the Company shall contain provisions which (i) eliminate
the personal liability of the Company's former, present and future directors
for monetary damages resulting from breaches of their fiduciary duties to
the fullest extent permitted by applicable law and (ii) require the Company,
subject to appropriate procedures, to indemnify the Company's former,
present and future directors and executive officers to the fullest extent
permitted by applicable law. In addition, upon consummation of the Plan,
the Company shall enter into written agreements with each person who is a
director or executive officer of the Company on the date hereof providing
for similar indemnification of such person and providing that no recourse or
liability whatsoever with respect to this Agreement, the Procedures
Agreement, the Related Agreements, the Plan or the consummation of the
transactions contemplated hereby or thereby shall be had, directly or
indirectly, by or in the right of the Company against such person.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 28(a) shall not be applicable to any person who ceased being a
director of the Company at any time prior to March 1, 1994.
(b) Investor agrees, on behalf of itself and its partners, that no
recourse or liability whatsoever (except as provided by applicable law for
intentional fraud, bad faith or willful misconduct) shall be had, directly
or indirectly, against any person who is a director or executive officer of
the Company on the date hereof with respect to this Agreement, the
Procedures Agreement, the Related Agreements, the Plan or the consummation
of the transactions contemplated hereby or thereby, such recourse and
liability, if any, being expressly waived and released by Investor and its
partners as a condition of, and in consideration for, the execution and
delivery of this Agreement.
SECTION 29. Jurisdiction of Bankruptcy Court. The parties agree
that the Bankruptcy Court shall have and retain exclusive jurisdiction to
enforce and construe the provisions of this Agreement.
SECTION 30. Interpretation. In this Agreement, unless a contrary
intention appears, (i) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to
any particular Section or other subdivision and (ii) reference to any
Section means such Section hereof. The Section headings herein are for
convenience only and shall not affect the construction hereof. No provision
of this Agreement shall be interpreted or construed against either party
solely because such party or its legal representative drafted such
provision.
SECTION 31. Termination. This Agreement shall terminate
concurrently with the termination of the Procedures Agreement.
SECTION 32. Entire Agreement. The Agreement supersedes any and all
other agreements (oral or written) between the parties in respect to the
subject matter hereof other than the Procedures Agreement.
AMWEST PARTNERS, L.P.
By: AmWest Genpar, Inc.,
its General Partner
By:
Title:
Accepted and Agreed to
this 21th day of April, 1994.
AMERICA WEST AIRLINES, INC.
as Debtor and Debtor-in-Possession
By:
Title:
FORM OF EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into effective as of
January 1, 1994 by and between America West Airlines, Inc., a Delaware
corporation ("Company"), and A. Maurice Myers ("Myers").
WHEREAS, Myers is willing to serve as the President and Chief Operating
Officer of the Company and the Company desires to retain Myers in such
capacity on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties, and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
Definitions and Interpretations
1.1.Definitions
For purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires, the following terms shall have the
following respective meanings:
"Aloha" shall mean Aloha Airlines, Inc., a Hawaii corporation.
"Applicable Federal Rate" shall mean, in the case of either the House Note
or the Stock Note, the applicable federal rate determined with respect to
such Note in accordance with section 1274(d) of the Internal Revenue Code of
1986, as amended.
"Bankruptcy Code" shall mean Title 11 of the United States Code entitled
"Bankruptcy", as from time to time amended, and any successor statute
thereto.
"Bankruptcy Court" shall mean the United States Bankruptcy Court for the
District of Arizona.
"Base Salary shall have the meaning specified in Section 3.1.
"Board" shall mean the Board of Directors of the Company.
"CEO" shall mean the Chief Executive Officer of the Company.
"Chairman of the Board" shall mean the Company's Chairman of the Board.
"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.
"Company Affiliate" shall mean any Person (other than an
individual) 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
Person, whether through ownership of voting securities, by contract or
otherwise.
"Confidential Information" shall have the meaning specified in
Section 5.1(a).
"Confirmation Bonus" shall have the meaning specified in Section
3.3.
"Deed of Trust" shall have the meaning specified in Section 3.5(a).
"Disability" shall mean a physical or mental condition of Myers
that, in the judgment of the Board, based upon certification by a
licensed physician reasonably acceptable to Myers and the Board, (i)
prevents Myers from being able to perform the services required under
this Agreement, (ii) has continued for a period of at least six months
during any period of twelve consecutive months and (iii) is expected to
continue.
"Dispute" shall have the meaning specified in Section 6.1.
"Good Reason" shall mean, without Myers express written consent,
any of the following:
(i) a substantial alteration in the nature or status of
Myers responsibilities;
(ii) the failure of the Company to perform any of its
obligations under this Agreement, but only if such failure shall
continue unremedied for more than 15 days after written notice
thereof is given by Myers to the Company;
(iii) the relocation of the office of the Company where
Myers is employed at the date hereof (the "Employment Location") to
a location more than 50 miles away from the Employment Location or
the Company's requiring Myers to be permanently based more than 50
miles away from the Employment Location; or
(iv) the failure of Myers to be elected to the Board on or
before April 1, 1994.
"House Note" shall have the meaning specified in Section 3.5(a).
"Incentive Bonus" shall mean any bonus or other payment payable to
Myers pursuant to any incentive plan adopted by the Board for the
benefit of the Company's key employees.
"Line of Credit" shall have the meaning specified in Section
3.6(a).
"Misconduct" shall mean one or more of the following:
(i) the willful and continued failure by Myers to perform
his duties hereunder (other than any such failure resulting from
Myers incapacity due to physical or mental illness) after written
notice of such failure has been given to Myers and Myers has had a
reasonable period to correct such failure;
(ii) the willful commission by Myers of acts that are
dishonest and demonstrably or materially injurious to the Company,
monetarily or otherwise;
(iii) the conviction of Myers for a felony; or
(iv) a material breach by Myers of any of the covenants set
forth in this Agreement.
"Notice of Termination" shall mean a notice purporting to terminate
Myers employment in accordance with Section 4.2 or 4.3, which notice
shall (i) indicate the specific provision in such Section being relied
upon and (ii) set forth in reasonable detail the reason for such
termination and the facts and circumstances claimed to provide a basis
for such termination.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust and an unincorporated
organization.
"Plan of Reorganization" shall mean any plan of reorganization
which (i) is filed with the Bankruptcy Court under Chapter 11 of the
Bankruptcy Code and (ii) contemplates and, if confirmed and
consummated, would result in the emergence of the Company from its
Chapter 11 bankruptcy proceedings.
"Pledge Agreement" shall have the meaning specified in Section
3.6(a).
"Pledged Stock" shall have the meaning specified in Section 3.6(a).
"Residence" shall have the meaning specified in Section 3.5(a).
"Restricted Period" shall have the meaning specified in Section
5.2(a).
"Stock Note" shall have the meaning specified in Section 3.6(a).
"Term" shall have the meaning specified in Section 2.3.
"Termination Date" shall mean the termination date specified in a
Notice of Termination delivered in accordance with Article IV, provided
that in no event shall such termination date be less than 30 nor more
than 60 days after the date such Notice is given.
1.2. Interpretations
(a) In this Agreement, unless a clear contrary intention appears,
(i) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, (ii) reference to any Article or
Section, means such Article or Section hereof or such Schedule or Exhibit
hereto, (iii) the words "including" (and with correlative meaning "include")
means including, without limiting the generality of any description
preceding such term, and (iv) where any provision of this Agreement refers
to action to be taken by either party, or which such party is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such party.
(b) The Article and Section headings herein are for convenience
only and shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or
construed against either party solely because that party or its legal
representative drafted such provision.
ARTICLE II
Employment; Positions and Duties; Term
2.1. Employment
The Company hereby employs Myers as its President and Chief
Operating Officer and Myers hereby accepts such employment, in each case
during the Term and on the other terms and conditions set forth in this
Agreement.
2.2. Positions and Duties
(a) During the Term, Myers shall serve as the President and Chief
Operating Officer of the Company, and shall have such duties and
responsibilities as are set forth with respect to such offices in the
Company's certificate of incorporation and bylaws (as from time to time in
effect) and such additional duties and responsibilities as are commensurate
with such offices or as may from time to time be reasonably assigned to him
by the Board, the Chairman of the Board or the CEO. Myers shall at all
times observe and comply with all lawful policies, directions and
instructions of the Board.
(b) The Company agrees to use its reasonable best efforts to cause
Myers to be elected as a director of the Company as soon as practicable
after the date hereof. Myers agrees to serve as a director of the Company
at all times during the Term. If requested to do so by the Board, Myers
agrees to serve as a director and/or officer of any Company Affiliate during
the Term. Upon the termination of his employment with the Company, Myers
agrees to resign as a director of the Company.
(c) Myers agrees to devote substantially all his business time,
attention, skill and efforts to the faithful and efficient performance of
his duties hereunder and shall not enter into any business or accept
employment with or for any Person other than with the Company during the
Term; provided, however, that Myers may (i) with prior approval of the
Board, serve on corporate, civic or charitable boards or committees, (ii)
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) manage his personal investments, in each case so long
as such activities do not materially interfere with the performance Myers
duties and responsibilities hereunder. Myers shall at all times conduct
himself in such a manner as not to prejudice the reputation of the Company
in the fields of business in which it is engaged or with the public at
large.
2.3. Term of Employment
Subject to the provisions for earlier termination provided in the
Agreement, the term of this Agreement shall commence on January 1, 1994 and
shall continue through December 31, 1996; provided, however, that,
commencing on March 1, 1996 and on each March 1 thereafter, the term of this
Agreement shall automatically be extended one additional year unless, prior
to such March 1, either party shall give written notice to the other that no
further such automatic extensions shall occur, in which event Myers
employment shall terminate on the December 31 next following the March 1 in
respect of which such notice is given. As used in this Agreement, "Term"
shall mean the original term of this Agreement as automatically extended in
accordance with this Section 2.3; provided, however, that in no event shall
the Term continue beyond the termination of Myers employment hereunder.
ARTICLE III
Compensation and Benefits
3.1. Base Compensation
For services rendered by Myers under this Agreement, the Company
shall pay to Myers, during the Term, a base salary ("Base Salary") of
375,000 per year, payable biweekly as earned in accordance with the
Company's customary payroll practice for its senior executives and prorated
for employment for less than a full calendar year. The amount of the Base
Salary shall be reviewed by the Board on an annual basis and may be
increased as the Board may deem appropriate. If the Base Salary is
increased as aforesaid, it may not thereafter be decreased unless a similar
decrease is made to the base compensation of all other senior executives of
the Company; provided that in no event may the Base Salary be decreased
below 375,000 per year.
3.2. Transition Allowance
Prior to February 1, 1994, the Company shall pay Myers a lump-sum
transition allowance of 100,000.
3.3. Confirmation Bonus
If, during the Term, a Plan of Reorganization is filed with the
Bankruptcy Court, the Company shall seek Bankruptcy Court approval to pay
Myers a "reorganization success bonus" of not less than 400,000 (the
"Confirmation Bonus") in the event such Plan of Reorganization is confirmed
and consummated during the Term.
3.4. Relocation Expenses
(a) The Company shall pay the reasonable expenses incurred by
Myers and his wife during the Relocation Period for (i) interim lodging in
the Phoenix, Arizona area and (ii) traveling between Phoenix, Arizona and
Honolulu, Hawaii. As used herein, "Relocation Period" means the period from
the date of this Agreement to the earlier of (i) the date on which Myers
relocates his principal residence in the Phoenix, Arizona area and (ii) July
1, 1994; provided that in no event shall the Company's obligation under this
paragraph (a) exceed 15,000.
(b) The Company agrees to reimburse Myers promptly for all
reasonable moving expenses (including packing, storage and cartage) incurred
by Myers during the Term in relocating his principal residence to the
Phoenix, Arizona area.
3.5. House Loan
(a) Upon the purchase by Myers during the Term of his initial
principal residence in the Phoenix, Arizona area (the "Residence"), the
Company will lend to Myers up to 200,000 solely for the purpose of enabling
Myers to pay all or a portion of the purchase price of the Residence. Such
loan shall be evidenced by, and subject to the terms and conditions of, a
promissory note duly executed by Myers and his wife and payable to the order
of the Company (the "House Note"). The House Note shall be in form and
substance reasonably acceptable to the Company and shall be effectively
secured by a valid second lien deed of trust on the Residence (the "Deed of
Trust"). The Deed of Trust shall be duly executed by Myers and his wife and
shall be in form and substance reasonably acceptable to the Company.
(b) The stated maturity date of the House Note shall be December
31, 2003. On the stated maturity date of the House Note, the entire unpaid
amount (principal and accrued interest) of the House Note shall be and
become immediately due and payable.
(c) The House Note shall bear interest, compounded monthly, at the
Applicable Federal Rate. Accrued interest on the House Note shall be
payable quarterly on each January 1, April 1, July 1 and October 1.
(d) Anything herein or elsewhere to the contrary notwithstanding,
(i) in the event the Confirmation Bonus becomes payable to Myers as
contemplated by Section 3.3, the Company shall be entitled to apply the
Confirmation Bonus (to the extent thereof) to payment of the House Note, in
which event only the balance (if any) of the Confirmation Bonus shall be
payable to Myers, (ii) in the event any severance payment becomes payable to
Myers pursuant to Section 4.2 or 4.3, the Company shall be entitled to apply
such severance payment (to the extent thereof) to payment of the House Note,
in which event only the balance (if any) of such severance payment shall be
payable to Myers and (iii) in the event Myers sells or otherwise disposes of
the Residence, Myers shall immediately remit the proceeds thereof to the
Company for application (to the extent thereof) to the payment of the House
Note. All such payments on the House Note shall be applied first to accrued
and unpaid interest and then to principal.
(e) Anything herein or elsewhere to the contrary notwithstanding,
the House Note (principal and accrued interest) shall be and become
immediately due and payable 180 days after the earlier to occur of (i) the
termination of Myers employment hereunder pursuant to Article IV and (ii)
Myers death.
(f) Anything herein or elsewhere to the contrary notwithstanding,
the House Note (principal and accrued interest) shall be and become
immediately due and payable if one or more of the following events shall
occur:
(i) Myers makes an assignment for the benefit of creditors
or is adjudicated insolvent or bankrupt under Title 11 of the
Bankruptcy Code;
(ii) Myers voluntarily commences any proceeding under the
Bankruptcy Code or files any petition under the Bankruptcy Code
seeking the appointment of a receiver, trustee, custodian or
liquidator for Myers or a substantial portion of his property;
(iii) involuntary proceedings are commenced against Myers
under the Bankruptcy Code seeking reorganization or a creditors
arrangement with respect to Myers or the appointment of a receiver,
trustee, custodian or liquidator for Myers or a substantial portion
of his property and such proceedings are not dismissed within 60
days after commencement;
(iv) any order, judgment or decree is entered against Myers
appointing any receiver or trustee for Myers or for all or a
substantial portion of his property; or
(v) Myers sells or otherwise disposes of the Residence.
(g) Anything herein or elsewhere to the contrary notwithstanding,
neither Myers nor his wife shall be personally liable (whether by operation
of law or otherwise) for payments due under the House Note. The sole
recourse of the Company for satisfaction of the House Note shall be against
(i) the collateral covered by the Deed of Trust (including any proceeds from
the sale or other disposition of the Residence), (ii) the Confirmation Bonus
as contemplated by paragraph (d) above and (iii) any severance payment due
to Myers pursuant to Section 4.2 or 4.3; provided, however, that nothing in
this paragraph (g) is intended to or shall limit or otherwise adversely
affect in any way (i) any right of the Company to proceed against the
collateral covered by, or otherwise to exercise or enforce any of the
remedies set forth in, the Deed of Trust, (ii) any right of the Company to
name Myers and his wife as parties defendant in any action or suit for a
judicial foreclosure of the Deed of Trust or in the exercise of any other
right or remedy under the Deed of Trust or (iii) the right of the Company to
apply the Confirmation Bonus and any severance payment (to the extent
thereof) to the payment of the House Note as contemplated by paragraph (d)
above. Except as otherwise specifically contemplated by the foregoing
proviso, in no event will the Company (i) seek to hold Myers or his wife
personally liable for the House Note or (ii) assert any claim against Myers
or his wife for the payment of the House Note.
3.6. Stock Loan
(a) If, during the Term, Myers exercises the stock option
currently held by Myers with respect to shares of common stock of Aloha, the
Company will lend to Myers up to 500,000 solely for the purpose of enabling
Myers to pay the related exercise price and any related income taxes. Such
loan shall be evidenced by, and subject to the terms and conditions of, a
promissory note duly executed by Myers and payable to the order of the
Company (the "Stock Note"). The Stock Note shall be in form and substance
reasonably satisfactory to the Company and shall be effectively secured by a
security agreement (the "Pledge Agreement") duly executed by Myers and
creating a valid first priority security interest in the Aloha stock
acquired by Myers upon exercise of such option (the "Pledged Stock"). The
Pledge Agreement shall be in form and substance reasonably satisfactory to
the Company and shall be accompanied by appropriate stock powers.
(b) The Stock Note shall mature and automatically become
immediately due and payable 90 days after the end of the Term unless (i)
Myers employment hereunder is terminated pursuant to Section 4.3 for
Misconduct, in which event the Stock Note shall be due and payable 30 days
after the end of the Term or (ii) Myers employment hereunder is terminated
pursuant to Section 2.3 as a result of a notice given by the Company
thereunder, in which event the Stock Note shall be payable in three equal
annual installments commencing on the first anniversary of the end of the
Term.
(c) The Stock Note shall bear interest, compounded monthly, at the
Applicable Federal Rate. Prior to the maturity date of the Stock Note,
accrued interest thereon shall be payable only to the extent of (i) any
Incentive Bonus earned by Myers as contemplated by Section 3.12 and (ii) the
proceeds from any sale or other disposition of the Pledged Stock. Anything
herein or elsewhere to the contrary notwithstanding, (i) in the event any
Incentive Bonus becomes payable to Myers as contemplated by Section 3.12,
the Company shall be entitled to apply such Incentive Bonus (to the extent
thereof) to payment of all accrued and unpaid interest on the Stock Note, in
which event only the balance (if any) of such Incentive Bonus shall be
payable to Myers and (ii) in the event Myers sells or otherwise disposes of
any shares of the Pledged Stock, Myers shall immediately remit the proceeds
thereof to the Company for application (to the extent thereof) to the
payment of the principal of and accrued interest on the Stock Note.
(d) Anything herein or elsewhere to the contrary notwithstanding,
the Stock Note (principal and accrued interest) shall be and become
immediately due and payable 180 days after the first date on which the
Pledged Shares may be sold by Myers in one or more transactions on the New
York Stock Exchange, the American Stock Exchange or the NASDAQ in compliance
with the registration requirements of applicable securities laws.
(e) Anything herein or elsewhere to the contrary notwithstanding,
the Stock Note (principal and accrued interest) shall be and become
immediately due and payable if one or more of the following events shall
occur:
(i) Myers makes an assignment for the benefit of creditors
or is adjudicated insolvent or bankrupt under Title 11 of the
Bankruptcy Code;
(ii) Myers voluntarily commences any proceeding under the
Bankruptcy Code or files any petition under the Bankruptcy Code
seeking the appointment of a receiver, trustee, custodian or
liquidator for Myers or a substantial portion of his property;
(iii) involuntary proceedings are commenced against Myers
under the Bankruptcy Code seeking reorganization or a creditors
arrangement with respect to Myers or the appointment of a receiver,
trustee, custodian or liquidator for Myers or a substantial portion
of his property and such proceedings are not dismissed within 60
days after commencement; or
(iv) any order, judgment or decree is entered against Myers
appointing any receiver or trustee for Myers or for all or a
substantial portion of his property.
(f) Anything herein or elsewhere to the contrary notwithstanding,
Myers shall not be personally liable (whether by operation of law or
otherwise) for payments due under the Stock Note. The sole recourse of the
Company for satisfaction of the Stock Note shall be against (i) the Pledged
Stock and the proceeds thereof and (ii) Incentive Bonuses as contemplated by
paragraph (c) above; provided, however, that nothing in this paragraph (f)
is intended to or shall limit or otherwise adversely affect in any way (i)
any right of the Company to proceed against the collateral covered by, or
otherwise to exercise or enforce any of the remedies set forth in, the
Pledge Agreement, (ii) any right of the Company to name Myers as a party
defendant in any action or suit for a judicial foreclosure of the Pledge
Agreement or in the exercise of any other right or remedy under the Pledge
Agreement or (iii) the right of the Company to apply any Incentive Bonus (to
the extent thereof) to the payment of the Stock Note as contemplated by
paragraph (c) above. Except as otherwise specifically contemplated by the
foregoing proviso, in no event will the Company (i) seek to hold Myers
personally liable for the Stock Note or (ii) assert any claim against Myers
for the payment of the Stock Note.
(g) In no event shall the Company be required to make any loan
under this Section 3.6 if the making of such loan would violate any law or
regulation relating to the extension of credit for the purpose of purchasing
or carrying any "margin stock".
3.7. Life Insurance Premiums
During the Term, the Company agrees to pay on behalf of Myers the
monthly premiums (but not more than 2,141.50 per month) accruing on Policy
No. 939-350-991A issued by Metropolitan Life Insurance Company.
3.8. Stock Options
In the event a Plan of Reorganization is filed with the Bankruptcy
Court during the Term, the Company agrees to use its reasonable best efforts
to cause such Plan of Reorganization to provide for the grant by the
reorganized Company to Myers of options to purchase shares of common stock
of the reorganized Company, which options shall be commensurate with Myers
duties and responsibilities to the reorganized Company except that in no
event shall such options have an aggregate exercise price (at the stock s
fair market value per share at the time of grant) of less than 750,000.
3.9. Reimbursement of Legal Fees
In the event it becomes necessary for Myers to obtain legal
assistance regarding the termination of his employment with Aloha, the
Company agrees to reimburse Myers for all reasonable legal fees that Myers
may incur in that regard.
3.10. Forfeited Aloha Pension Benefits
Upon his termination of employment with the Company, Myers shall be
entitled to receive from the Company an annual retirement benefit
("Retirement Benefit"), in the form of a straight life annuity beginning at
age 65 ("Normal Retirement Annuity"), in an amount equal to X - (Y + Z),
where (i) "X" is the amount of the Vested Acc d BFT for the Term Date that
precedes the date of Myers termination of employment with the Company as
reflected in Exhibit A hereto, (ii) "Y" is 49,866 and (iii) "Z" is the
vested annual retirement benefit payable to Myers under the Company's
qualified and nonqualified employee pension benefit plans (other than under
this Section 3.10) in the form of a Normal Retirement Annuity, whether or
not such benefit is received on such date or in another form. With respect
to any such Company plan that is an individual account balance plan, the
conversion of Myers account balance under such plan into a Normal
Retirement Annuity shall be calculated by independent actuaries selected by
the Company (the "Actuaries"), disregarding any employee (including 401(k))
contributions to such plan, using the applicable factors and interest rate
established by Pension Benefit Guaranty Corporation for a plan termination
on such date. In the event that Myers elects to retire prior to age 65 and
receive the Retirement Benefit on such earlier date, the amount of the
Retirement Benefit shall be reduced in the same proportion as the Vested
Acc d BFT in Exhibit A hereto is reduced with respect to a benefit
commencement on such termination date. One-twelfth of the Retirement
Benefit (reduced as aforesaid) shall be payable to Myers each month,
following his retirement, through the month of his death. Notwithstanding
the foregoing, in lieu of receiving a straight life annuity, Myers may
elect, prior to his benefit commencement date hereunder, to receive the
Retirement Benefit in the form of a joint survivor annuity, with his spouse
(determined as of his benefit commencement date) as his contingent
annuitant. Such joint survivor annuity shall be actuarially equivalent in
value to the straight life annuity otherwise payable to Myers with such
actuarial equivalence being determined by the Actuaries.
3.11. Business Expenses
The Company shall, in accordance with the rules and policies that
it may establish from time to time for senior executives, reimburse Myers
for business expenses reasonably incurred in the performance of Myers
duties. It is understood that Myers is authorized to incur reasonable
business expenses for promoting the business of the Company, including
reasonable expenditures for travel, lodging, meals and client or business
associate entertainment. Requests for reimbursement for such expenses must
be accompanied by appropriate documentation.
3.12. Other Benefits
Myers shall be entitled to receive all fringe benefits and other
perquisites that may be offered by the Company to its senior executives as a
group, including (i) participation in any incentive plans offered to key
employees, (ii) participation in the various employee benefit plans or
programs provided to the employees of the Company in general, subject to
meeting the eligibility requirements with respect to each of such benefit
plans or programs, (iii) tax planning assistance, (iv) a car allowance and
(v) such other benefits or perquisites as may be approved by the Board
during the Term. However, nothing in this Section 3.12 shall be deemed to
prohibit the Company from making any changes in any of the plans, programs
or benefits described herein, provided the change similarly affects all
senior executives of the Company similarly situated.
ARTICLE IV
Termination of Employment
4.1. General
(a) If Myers employment is terminated due to Myers death, this
Agreement shall automatically terminate and thereafter the Company shall
have no obligations to Myers or Myers legal representatives or estate with
respect to this Agreement other than the payment of any unpaid Base Salary
earned hereunder at the date of Myers death.
(b) Myers employment with the Company shall automatically
terminate upon expiration of the Term in accordance with Section 2.3, in
which event Myers shall not be entitled to further compensation or benefits
hereunder other than (i) any unpaid Base Salary earned hereunder prior to
the end of the Term, (ii) any amounts or benefits which may be required by
applicable law and (iii) in the event such termination shall have occurred
on account of a notice given by the Company pursuant to Section 2.3, a
severance payment equal to 150% of the Base Salary in effect on the date of
such notice, such severance to be paid within 30 days after the end of the
Term.
(c) Myers employment with the Company may be terminated prior to
the end of its Term as set forth in the following provisions of this Article
IV.
4.2. Termination by Myers
(a) Myers may, at any time prior to the end of the Term, terminate
his employment hereunder for any reason by delivering a Notice of
Termination to the Company. If Myers terminates his employment pursuant to
this Section 4.2, he shall not be entitled to further compensation or
benefits hereunder other than (i) any unpaid Base Salary earned hereunder
prior to the Termination Date, (ii) any amounts or benefits which may be
required by applicable law, (iii) if such termination is for Good Reason, a
severance payment equal to 150% of the Base Salary in effect on the
Termination Date and (iv) if such termination is due to a Change in Control,
a severance payment equal to 200% of the Base Salary in effect on the
Termination Date. In no event shall Myers be entitled to both of the
severance payments described above. In the event Myers becomes entitled to
a severance payment under this Section 4.2, the Company agrees to pay the
same within 30 days after the Termination Date except as provided in
paragraph (b) below.
(b) If a Change in Control occurs on account of the consummation
of a Plan of Reorganization and if Myers is offered a position with similar
titles, duties and compensation with the reorganized Company following such
Change in Control, for purposes of this Section 4.2, a termination by Myers
will not be due to a Change in Control unless Myers has rejected such offer
within 30 days.
(c) If (i) a Change in Control occurs on account of the
consummation of a Plan of Reorganization, (ii) Myers terminates his
employment pursuant to this Section 4.2 on account of such Change in Control
and (iii) Myers thereafter accepts a new offer of employment with the
reorganized Company or a Company Affiliate within six months after the
Termination Date, Myers shall promptly refund to the Company any severance
payment paid or credited to Myers as a result of such termination.
4.3. Termination by the Company
The Company may, at any time prior to the end of the Term,
terminate Myers employment hereunder for any reason deemed sufficient by
the Board by delivering a Notice of Termination to Myers. If the Company
terminates Myers employment pursuant to this Section 4.3 for any reason
other than Misconduct or Disability, Myers shall not be entitled to further
compensation or benefits hereunder other than (i) any unpaid Base Salary
earned hereunder prior to the Termination Date, (ii) any amounts or benefits
which may be required by applicable law and (iii) a severance payment equal
to 150% of the Base Salary in effect on the Termination Date, such severance
to be paid within 30 days after the Termination Date. If the Company
terminates Myers employment pursuant to this Section 4.3 for Misconduct or
Disability, Myers shall not be entitled to further compensation or benefits
hereunder other than (i) any unpaid Base Salary earned hereunder prior to
the Termination Date and (ii) any amounts or benefits which may be required
by applicable law.
4.4. Benefits and Privileges
The following provisions shall apply if Myers terminates his
employment pursuant to Section 4.2(a) for Good Reason or due to a Change in
Control or if the Company terminates Myers employment pursuant to Section
4.3 for any reason other than Misconduct or Disability:
(i) Medical Insurance. During the 12-month period following the of
Termination Date, the Company, at its cost, shall maintain in full
force and effect for the continued benefit of Myers and Myers
dependents all benefits available to Myers and Myers dependents under
all medical plans and programs of the Company, provided that (a) Myers
continued participation is possible under the terms and provisions of
such plans and programs and (bi) Myers pays the regular employee
contribution, if any, required by such plans and programs. In the
event that participation by Myers (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 Myers (and/or his dependents)
comparable coverage under individual policies.
(ii) Life Insurance. During the 12-month period following the
of Termination Date, the Company, at its cost, shall continue to
provide Myers all life insurance coverages (and in the same amounts)
provided to him by the Company immediately prior to the Termination
Date.
(iii) Travel Privileges. The Company shall provide Myers (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.
(iv) Accrued Vacation Pay, etc. Promptly after the Termination
Date, the Company shall pay to Myers a lump sum amount for (i) all
unused vacation time accrued by Myers as of the Termination Date and
(ii) all unpaid benefits earned by Myers as of the Termination Date
under any and all incentive compensation plans or programs of the
Company.
4.5. Disputes
Either party may, within 10 days after its receipt of a Notice of
Termination given by the other party, provide notice to the other party that
a dispute exists concerning the termination, in which event such dispute
shall be resolved in accordance with Article VI. Notwithstanding the
pendency of any such dispute and notwithstanding any provision of Section
4.2 or 4.3 to the contrary, the Company will continue to pay Myers the Base
Salary in effect when the notice giving rise to the dispute was given and
continue Myers as a participant in all compensation and benefit plans in
which Myers was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved, but in no event past the end
of the Term.
ARTICLE V
Confidential Information and Non-Competition
5.1. Confidential Information
(a) Myers recognizes that the services to be performed by him
hereunder are special, unique and extraordinary and that, by reason of his
employment with the Company, he may acquire Confidential Information and
trade secrets concerning the operation of the Company or a Company
Affiliate, the use or disclosure of which would cause the Company or a
Company Affiliate substantial loss and damages which could not be readily
calculated and for which no remedy at law would be adequate. Accordingly,
Myers agrees with the Company that he will not at any time (whether during
or after the Term), except in the performance of his obligations to the
Company hereunder or with the prior written consent of the Board, directly
or indirectly, disclose any secret or Confidential Information that he may
learn or has learned by reason of his association with the Company, or any
predecessors to its business or use any such information to the detriment of
the Company. As used herein, "Confidential Information" includes
information with respect to the Company's products, facilities and methods,
research and development, trade secrets and other intellectual property,
systems, patents and patent applications, procedures, manuals, confidential
reports, product price lists, customer lists, financial information,
business plans, prospects or opportunities.
(b) Myers confirms that all Confidential Information is the
exclusive property of the Company. All business records, papers and
documents kept or made by Myers relating to the business of the Company or
any Company Affiliate shall be and remain the property of the Company or
such Company Affiliate, respectively, during the Term and all times
thereafter. Upon the termination of his employment with the Company or upon
the request of the Company at any time, Myers shall promptly deliver to the
Company, and shall retain no copies of, any written materials, records and
documents made by Myers or coming into his possession concerning the
business or affairs of the Company or a Company Affiliate other than
personal notes or correspondence of Myers not containing proprietary
information relating to such business or affairs.
(c) Myers agrees not to disclose to the Company, or to use on
behalf of the Company, any confidential information or trade secrets of any
of Myers prior employers.
5.2. Non-Competition
(a) While employed by the Company and for a period of 18 months
thereafter (the "Restricted Period"), Myers shall not, unless he receives
the prior written consent of the Board or the Chairman of the Board, own an
interest in, manage, operate, join, control, lend money or render financial
or other assistance to or participate in or be connected with, as an
officer, employee, partner, stockholder, consultant or otherwise, any Person
or other business organizations competing with the Company.
(b) Myers has carefully read and considered the provisions of this
Section 5.2 and, having done so, agrees that the restrictions set forth in
this Section 5.2 (including the Restricted Period, scope of activity to be
restrained and the geographical scope) are fair and reasonable and are
reasonably required for the protection of the interests of the Company, its
officers, directors, employees, creditors and shareholders. Myers
understands that the restrictions contained in this Section 5.2 may limit
his ability to engage in a business similar to the Company's business, but
acknowledges that he will receive sufficiently high remuneration and other
benefits from the Company hereunder to justify such restrictions.
(c) During the Restricted Period, Myers shall not, whether for his
own account or for the account of any other Person, intentionally (i)
solicit, endeavor to entice or induce any employee of the Company or any
Company Affiliate to terminate his employment with the Company or such
Company Affiliate, accept employment with anyone else, or (ii) interfere in
a similar manner with the business of the Company or any Company Affiliate.
(d) In the event that any provision of this Section 5.2 relating to
the Restricted Period and/or the areas of restriction shall be declared by a
court of competent jurisdiction to exceed the maximum time period or areas
such court deems reasonable and enforceable, the Restricted Period and/or
areas of restriction deemed reasonable and enforceable by the court shall
become and thereafter be the maximum time period and/or areas.
5.3. Stock Ownership
Nothing in this Agreement shall prohibit Myers from acquiring or
holding any issue of stock or securities of any Person that has any
securities listed on a national securities exchange or quoted on the
automated quotation system of the national Association of Securities
Dealers, Inc., provided that at any time during the Restricted Period, Myers
and members of his immediate family do not own or hold more than 5% of any
voting securities of any such Person engaged in any business similar to or
competitive with that conducted by the Company or any Company Affiliate.
5.4. Injunctive Relief
Myers acknowledges that a breach of any of the covenants contained
in this Article V may result in material irreparable injury to the Company
for which there is no adequate remedy at law, that it will not be possible
to measure damages for such injuries precisely and that, in the event of
such a breach, any payments remaining under the terms of this Agreement
shall cease and the Company shall be entitled to obtain a temporary
restraining order and/or a preliminary or permanent injunction restraining
Myers from engaging in activities prohibited by this Article V or such other
relief as may required to specifically enforce any of the covenants
contained in this Article V. Myers agrees to and hereby does submit to in
personam jurisdiction before each and every such court for that purpose.
ARTICLE VI
Dispute Resolution
(a) In the event a dispute shall arise between the parties as to
whether the provisions of this Agreement have been complied with (a
"Dispute"), the parties agree to resolve such Dispute in accordance with the
following procedure:
(i) A meeting shall be held promptly between the parties, attended
by (in the case of the Company) by one or more individuals with
decision-making authority regarding the Dispute, to attempt in good
faith to negotiate a resolution of the Dispute.
(ii) If, within 10 days after such meeting, the parties have not
succeeded in negotiating a resolution of the Dispute, the parties agree
to submit the Dispute to mediation in accordance with the Commercial
Mediation Rules of the American Arbitration Association.
(iii) The parties will jointly appoint a mutually acceptable
mediator, seeking assistance in such regard from the American
Arbitration Association if they have been unable to agree upon such
appointment within 10 days following the 10-day period referred to in
clause (ii) above.
(iv) Upon appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating
thereto for 15 days.
(v) If the parties are not successful in resolving the Dispute
through mediation within such 15-day period, the parties agree that the
Dispute shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
(vi) The fees and expenses of the mediator/arbitrators shall be
borne solely by the non-prevailing party or, in the event there is no
clear prevailing party, as the mediator/arbitrators deem appropriate.
Except as provided in the preceding sentence, each party shall pay its
own costs and expenses (including, without limitation, attorneys fees)
relating to any mediation/arbitration proceeding conducted under this
Article VI.
(vii) All mediation/arbitration conferences and hearings will be
held in Phoenix, Arizona.
(b) In the event there is any disputed question of law involved in
any arbitration proceeding, such as the proper legal interpretation of any
provision of this Agreement, the arbitrators shall make separate and
distinct findings of all facts material to the disputed question of law to
be decided and, on the basis of the facts so found, express their conclusion
of the question of law. The facts so found shall be conclusive and binding
on the parties, but any legal conclusion reached by the arbitrators from
such facts may be submitted by either party to a court of law for final
determination by initiation of a civil action in the manner provided by law.
Such action, to be valid, must be commenced within 20 days after receipt of
the arbitrators decision. If no such civil action is commenced within such
20-day period, the legal conclusion reached by the arbitrators shall be
conclusive and binding on the parties. Any such civil action shall be
submitted, heard and determined solely on the basis of the facts found by
the arbitrators. Neither of the parties shall, or shall be entitled to,
submit any additional or different facts for consideration by the court. In
the event any civil action is commenced under this paragraph (b), the party
who prevails or substantially prevails (as determined by the court) in such
civil action shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys fees incurred in connection with such
action and on appeal.
(c) Except as limited by paragraph (b) above, the parties agree
that judgment upon the award rendered by the arbitrators may be entered in
any court of competent jurisdiction. In the event legal proceedings are
commenced to enforce the rights awarded in an arbitration proceeding, the
party who prevails or substantially prevails in such legal proceeding shall
be entitled to recover from the other party all costs, expenses and
reasonable attorneys fees incurred in connection with such legal proceeding
and on appeal.
(d) Nothing in Article VI is intended or shall be construed to
prohibit either party from seeking and obtaining injunctive relief as
contemplated by Section 5.4.
(e) Except as provided above, (i) no legal action may be brought by
either party with respect to any Dispute and (ii) all Disputes shall be
determined only in accordance with the procedures set forth above.
ARTICLE VII
Miscellaneous
7.1. No Mitigation
The provisions of this Agreement are not intended to, nor shall
they be construed to, require that Myers seek or accept other employment
following a termination of employment. Except as provided in Sections 3.5
and 3.6, the Company's obligations to make the payments to Myers required
under this 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 the Myers.
7.2. Assignability
The obligations of Myers hereunder are personal and may not be
assigned or delegated by Myers or transferred in any manner whatsoever, nor
are such obligations subject to involuntary alienation, assignment or
transfer. 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 Company Affiliate, provided that no such assignment or
delegation shall relieve the Company of its obligations under this
Agreement.
7.3. Notices
All notices and all other communications provided for in the
Agreement 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 Myers for purposes hereof, directed to the attention of
the Board with a copy to the Secretary of the Company and (ii) if to Myers,
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.
7.4. 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.
7.5. Successors; Binding Agreement
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement. As used herein, the term "Company" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
Agreement provided for in this Section 7.5 or which otherwise becomes bound
by all terms and provisions of this Agreement by operation of law.
(b) This Agreement and all rights of Myers hereunder shall inure to
the benefit of and be enforceable by Myers personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Myers should die while any amounts would be
payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to Myers devisee, legatee, or other designee or, if there
be no such designee, to Myers estate.
7.6. Tax Withholdings
The Company shall withhold from all payments hereunder all
applicable taxes (federal, state or other) which it is required to withhold
therefrom.
7.7. 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 Myers and such officer as may be specifically
authorized by the Board. 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.
7.8. Entire Agreement
This Agreement is an integration of the parties agreement; no
agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement.
7.9. Governing Law
The validity, interpretation, construction and performance of this
Agreement, the House Note, the Deed of Trust, the Stock Note and the Pledge
Agreement shall be governed by the laws of the State of Arizona.
7.10. 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 parties have executed this Agreement as of
the date first above written.
AMERICA WEST AIRLINES, INC.
By:
Chairman
A. Maurice Myers
