<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1995
REGISTRATION NO. 33-61099
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO THE
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICA WEST AIRLINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4512 86-0418245
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
4000 EAST SKY HARBOR BOULEVARD
PHOENIX, ARIZONA 85034
(602) 693-0800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARTIN J. WHALEN
SENIOR VICE PRESIDENT
AMERICA WEST AIRLINES, INC.
4000 EAST SKY HARBOR BOULEVARD
PHOENIX, ARIZONA 85034
(602) 693-0800
------------------------
With Copies to:
DAVID J. GRAHAM
ANDREWS & KURTH L.L.P.
4200 TEXAS COMMERCE TOWER
HOUSTON, TEXAS 77002
(713) 220-4200
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
AMERICA WEST AIRLINES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Facing Page of Registration Statement;
Cross-Reference Sheet; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Prospectus Summary; Business; The Offer
4. Terms of the Transaction.................. Prospectus Summary; The Offer; Description
of the New Notes
5. Pro Forma Financial Information........... *
6. Material Contracts with the Company Being
Acquired................................ *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters...................... *
8. Interests of Named Experts and Counsel.... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. *
10. Information with Respect to S-3
Registrants............................. *
11. Incorporation of Certain Information by
Reference............................... *
12. Information with Respect to S-2 or S-3
Registrants............................. *
13. Incorporation of Certain Information by
Reference............................... *
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants....... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Capitalization;
Selected Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operation;
Business; Management; Certain
Transactions; Principal Stockholders
15. Information with Respect to S-3
Companies............................... *
16. Information with Respect to S-2 or S-3
Companies............................... *
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies......... *
18. Information if Proxies, Consents or
Authorizations are to be Solicited...... *
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer................. Certain Transactions; Management
</TABLE>
---------------
* Not Applicable
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 7, 1995
PROSPECTUS
AMERICA WEST AIRLINES, INC.
OFFER TO PURCHASE
$48,000,000 PRINCIPAL AMOUNT OF
11 1/4% SENIOR UNSECURED NOTES DUE 2001
AND
OFFER TO EXCHANGE
$75,000,000 PRINCIPAL AMOUNT OF
10 3/4% SENIOR UNSECURED NOTES DUE 2005
FOR
$75,000,000 PRINCIPAL AMOUNT OF
11 1/4% SENIOR UNSECURED NOTES DUE 2001
------------------------
THE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON AUGUST 11, 1995, UNLESS EXTENDED
------------------------
America West Airlines, Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal, (i) to purchase an
aggregate of $48,000,000 principal amount of the Company's outstanding 11 1/4%
Senior Unsecured Notes due 2001 (the "Existing Notes") for cash equal to the
face amount thereof plus accrued and unpaid interest to the date of purchase
(the "Purchase Offer") and (ii) to exchange an aggregate of $75,000,000
principal amount of its 10 3/4% Senior Unsecured Notes due 2005 (the "New
Notes") for $75,000,000 principal amount of Existing Notes (the "Exchange
Offer"). The Purchase Offer and the Exchange Offer are sometimes referred to
herein collectively as the "Offer."
As of the date hereof, $123,000,000 in aggregate principal amount of
Existing Notes are outstanding. In order for either the Purchase Offer or the
Exchange Offer to be consummated, all of the Existing Notes must be validly
tendered as provided herein and not withdrawn prior to 5:00 p.m., New York City
time, on the date the Offer expires, which will be August 11, 1995, unless
extended (the "Expiration Date"). The Offer is subject to certain conditions
that may be waived by the Company. To accept the Offer a holder must tender all
of the Existing Notes held by such holder and must tender such notes with
respect to both the Purchase Offer and the Exchange Offer. See "The Offer."
As of the date hereof, there are two registered holders of the Existing
Notes. The Company has been advised by Fidelity Management Trust Company
("Fidelity") that three funds managed or advised by Fidelity or its affiliates
beneficially own all of the outstanding Existing Notes. Certain of the Existing
Notes originally purchased by Fidelity Copernicus Fund, L.P. ("Copernicus") are
subject to a repurchase agreement between Copernicus and Lehman Government
Securities Inc. ("LGSI") pursuant to which such notes were sold to LGSI shortly
after their issuance to Copernicus. The repurchase agreement is terminable upon
demand by either party, at which time Copernicus will be required to repurchase,
and LGSI will be required to sell, such notes at a price equal to the price paid
by LGSI to purchase such notes from Copernicus, plus an amount that provides to
LGSI a rate of return on the purchase price based on a spread over LIBOR.
The New Notes to be issued upon consummation of the Exchange Offer will be
obligations of the Company entitled to the benefits of the New Note Indenture
(as defined herein). The New Notes differ from the Existing Notes in interest
rate, maturity, redemption features and covenants regarding the Company's
ability to make certain restricted payments and certain investments. In other
material respects, the terms of the New Notes are substantially identical to the
terms of the Existing Notes.
SEE "RISK FACTORS" ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE OFFER AND AN INVESTMENT IN THE NEW
NOTES OFFERED HEREBY.
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is August , 1995
<PAGE> 4
Interest on the Existing Notes accepted for purchase pursuant to the
Purchase Offer will accrue through the day such notes are accepted for purchase.
Interest on the Existing Notes accepted for exchange pursuant to the Exchange
Offer will accrue through the day preceding the date of the issuance of the New
Notes. The New Notes will bear interest from their date of issuance.
The New Notes will mature on September 1, 2005. The New Notes will not be
redeemable prior to September 1, 2000. Thereafter, the New Notes will be
redeemable, in whole or in part, at the option of the Company, at the redemption
prices set forth herein, plus accrued and unpaid interest to the date of
redemption. In the event of a Change in Control (as defined in the New Note
Indenture), each registered holder (a "Holder") shall have the right to require
the Company to repurchase all or any part of such Holder's New Notes at a
repurchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. See "Description of the New Notes."
The Existing Notes are, and the New Notes will be, senior unsecured
obligations of the Company ranking senior in right of payment to all existing
and future subordinated indebtedness of the Company and ranking pari passu in
right of payment with all other indebtedness of the Company. Certain
indebtedness, however, including secured debt, is, and will be, effectively
senior in right of payment to the Existing Notes and the New Notes with respect
to assets that constitute collateral securing such other indebtedness. See
"Description of the New Notes." Assuming consummation of the Offer, at March 31,
1995 the Company would have had $355.8 million of secured obligations that would
have effectively ranked senior to the New Notes and $41.6 million of debt that
would have ranked pari passu with the New Notes. The indentures governing the
Existing Notes and the New Notes contain restrictions providing for, among other
things, limitations on restricted payments, limitations on transactions with
affiliates, limitations on asset sales, limitations on investments, limitations
on issuances and dispositions of capital stock of subsidiaries, limitations on
payment restrictions affecting subsidiaries and restrictions relating to mergers
or consolidations.
The Exchange Offer and the issuance of New Notes pursuant to such offer
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part. Based on an interpretation of the
Securities and Exchange Commission (the "Commission"), New Notes issued pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) a broker-dealer who purchased
the Existing Notes directly from the Company for resale pursuant to an exemption
from registration under the Securities Act or (ii) a person that is an
"affiliate" of the Company (within the meaning of Rule 405 of the Securities
Act)), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is acquiring the New
Notes in its ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes. A holder of Existing Notes wishing to accept the Exchange
Offer must represent to the Company that such conditions have been met.
There has been no public market for the Existing Notes. The Company does
not intend to list the New Notes on any securities exchange or to seek approval
for quotation through any automated quotation system. An active market for the
New Notes is not expected to develop. To the extent that a market for the New
Notes does develop, however, future trading prices of the New Notes will depend
on many factors, including, among other things, prevailing interest rates, the
Company's results of operations and financial condition and the market for
similar securities and other factors. The New Notes may trade at a discount from
their principal amount. See "Risk Factors -- Absence of Public Market for the
New Notes."
The Company will not receive any proceeds from the Offer. No dealer manager
is being used in connection with the Offer.
THE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS
FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN WHICH THE OFFER OR THE
ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY
LAWS OF SUCH JURISDICTION.
2
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") under the Securities Act, with respect to the
New Notes. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Company is subject to
the periodic reporting and informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, the
Company files reports and other information as required thereby with the
Commission. Items of information omitted from this Prospectus but contained in
the Registration Statement and other reports of the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the following
regional offices of the Commission: Northwest Atrium Center 500 West Madison
Street, Suite 1400, Chicago, Illinois 60611; and 7 World Trade Center, Suite
1300 New York, New York 10048. Copies of such material can also be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. In addition,
the Company's Class B Common Stock, par value $.01 per share, is listed on the
New York Stock Exchange and the Company's reports and other information
concerning the Company may also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company's mailing address is 4000 East Sky Harbor Boulevard, Phoenix,
Arizona and the telephone number is (602) 693-0800.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements (including the notes thereto)
appearing elsewhere in this Prospectus, which should be read in its entirety.
Prospective investors should carefully consider matters discussed under the
caption "Risk Factors."
THE COMPANY
America West Airlines, Inc. ("America West" or the "Company") is a major
United States air carrier providing passenger, cargo and mail service with
principal hubs in Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub in
Columbus, Ohio. America West served 47 destinations with a fleet of 88 jet
aircraft as of March 31, 1995. At such date, the Company had connecting service
to an additional 20 destinations through alliances with Mesa Air Group, Inc.
("Mesa") and to an additional 23 destinations through an alliance with
Continental Airlines, Inc. ("Continental").
America West operates with one of the lowest cost structures among the
major U.S. airlines, based on reported 1994 results. The Company's operating
cost per available seat mile ("ASM") for 1994 was 6.99 cents, which was
approximately 22% less than the average operating cost per ASM of the nine
largest other domestic airlines, and was comparable on a non-stage length
adjusted basis to the cost structure of Southwest Airlines, Inc. ("Southwest
Airlines") which operates in the Company's principal market areas. Management
believes that the Company can continue to offer fares that are competitive with
those offered by low cost carriers in the Company's markets, while providing a
differentiated level of service. Passenger services provided by America West
include assigned seating, participation in computerized reservation systems,
interline ticketing, first class cabins on certain flights, baggage transfer and
various other services. The Company believes that these features distinguish
America West from certain low cost carriers in the Company's markets, including
Southwest Airlines, and enable the Company to attract passengers without
competing solely on the basis of fares.
RECENT OPERATING RESULTS
For the three months ended June 30, 1995, the Company reported net income
of $20.9 million, or 46 cents per share, on revenues of $399.9 million.
Operating income for the second quarter 1995 was $53.0 million. During the
comparable three months of 1994, the Company reported net income of $20.1
million and operating income of $44.1 million on revenues of $363.4 million.
SUMMARY OF TERMS OF THE OFFER
The Offer relates to (i) the purchase of $48,000,000 principal amount of
Existing Notes for cash plus accrued and unpaid interest to the date of purchase
and (ii) the exchange of $75,000,000 principal amount of New Notes for
$75,000,000 principal amount of Existing Notes. As of the date hereof,
$123,000,000 in aggregate principal amount of Existing Notes are outstanding. In
order for either the Purchase Offer or the Exchange Offer to be consummated, all
of the outstanding Existing Notes must be validly tendered and not withdrawn
prior to 5:00 p.m., New York City time, on the Expiration Date.
THE NEW NOTES.................... The New Notes will be obligations of the
Company entitled to the benefits of an
indenture (the "New Note Indenture"). The
New Notes differ from the Existing Notes in
interest rate, maturity, redemption
features and covenants regarding the
Company's ability to make certain
restricted payments and certain
investments. In other material respects,
the terms of the New Notes are
substantially identical to the terms of the
Existing Notes.
THE PURCHASE OFFER............... The Company will pay $1,000 plus accrued
and unpaid interest to the date of purchase
for each $1,000 principal amount of
Existing Notes validly tendered and
accepted pursuant to the Purchase Offer.
For any Existing Notes to be
4
<PAGE> 7
purchased, all of the Existing Notes must
be tendered pursuant to the Offer.
THE EXCHANGE OFFER............... $1,000 principal amount of New Notes will
be issued in exchange for each $1,000
principal amount of Existing Notes validly
tendered and accepted pursuant to the
Exchange Offer. For any Existing Notes to
be exchanged for New Notes, all of the
Existing Notes must be validly tendered
pursuant to the Offer. To accept the Offer,
a holder must tender all of the Existing
Notes held by such holder and must tender
such notes with respect to both the
Purchase Offer and the Exchange Offer.
EXPIRATION DATE.................. 5:00 p.m., New York City time, on August
11, 1995, unless the Offer is extended, in
which case the term "Expiration Date" means
the latest date and time to which the Offer
is extended. See "The Offer -- Expiration
Date; Extensions; Amendments."
ACCRUED INTEREST ON THE NEW
NOTES AND THE EXISTING NOTES... Interest on the New Notes to be issued on
consummation of the Exchange Offer will
accrue from their date of issuance, which
date will be within 30 days after the
Expiration Date, as determined by the
Company. The Company will pay to holders of
Existing Notes tendering such notes
pursuant to the Exchange Offer, promptly
following the acceptance thereof, accrued
and unpaid interest through the date prior
to the day on which the New Notes are
issued. The Company will pay to holders of
Existing Notes tendering such notes
pursuant to the Purchase Offer, promptly
following the acceptance thereof, accrued
and unpaid interest to the date on which
such Existing Notes are purchased.
TERMINATION OF THE OFFER......... The Company may terminate the Offer at any
time prior to the purchase or exchange of
Existing Notes if it determines that its
ability to proceed with the Offer could be
materially impaired due to any legal or
governmental action, any new law, statute,
rule or regulation, any interpretation of
the staff of the Commission of any existing
law, statute, rule or regulation, or the
failure to obtain any necessary approvals
of governmental agencies or holders of the
Existing Notes. The Company does not expect
any of the foregoing conditions to occur,
although there can be no assurance that
such conditions will not occur.
PROCEDURES FOR TENDERING EXISTING
NOTES............................ A holder of Existing Notes wishing to
accept the Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter
of Transmittal, or such facsimile, together
with the Existing Notes and any other
required documentation to American Bank
National Association, as Exchange Agent, at
the address set forth herein and therein.
5
<PAGE> 8
ACCEPTANCE OF EXISTING NOTES
PURSUANT TO THE PURCHASE OFFER... Subject to certain conditions (as
summarized above in "Termination of the
Offer" and described more fully in "The
Offer -- Termination"), including the
condition that all of the outstanding
Existing Notes be properly tendered and not
withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date, the Company
will accept for purchase pursuant to the
Purchase Offer $48,000,000 principal amount
of Existing Notes. Payment pursuant to the
Purchase Offer will be made promptly
following the Expiration Date. Tenders of
Existing Notes may not be withdrawn after
the Expiration Date.
ACCEPTANCE OF EXISTING NOTES
PURSUANT TO THE EXCHANGE OFFER... Subject to the conditions described herein,
following the consummation of the Purchase
Offer, the Company will pay a fee ("New
Note Payment") equal to 3 5/8% of the
principal amount of New Notes ($2,718,750)
in respect of the agreement by holders of
Existing Notes to accept the New Notes.
Upon payment of the New Note Payment, the
Company will be entitled to elect at any
time during a period expiring at 5:00 p.m.,
New York City time, on the 30th day
following the Expiration Date to consummate
the Exchange Offer by (i) accepting for
exchange pursuant to the Exchange Offer the
$75,000,000 in aggregate principal amount
of the Existing Notes remaining outstanding
after completion of the Purchase Offer and
(ii) issuing the New Notes in the aggregate
principal amount of $75,000,000 in exchange
for such Existing Notes. The New Note
Payment will be non-refundable whether or
not the New Notes are issued pursuant to
the Exchange Offer.
RESALE OF NEW NOTES.............. Based on an interpretation by the Staff of
the Commission set forth in no-action
letters issued to third parties, the
Company believes that the New Notes issued
pursuant to the Exchange Offer generally
will be freely transferable by the holders
thereof without registration or any
prospectus delivery requirement under the
Securities Act, except that a "dealer" or
any "affiliate" of the Company, as such
terms are defined under the Securities Act,
that exchanges Existing Notes held for its
own account will be required to deliver a
prospectus in connection with any resale of
the New Notes. By executing the Letter of
Transmittal, each holder will represent to
the Company that, among other things, the
New Notes acquired pursuant to the Exchange
Offer are being obtained in the ordinary
course of business of the person receiving
such New Notes, whether or not such person
is the holder, that neither the holder nor
any such other person has any arrangement
or understanding with any person to
participate in the distribution of such New
Notes and that neither the holder nor any
such other person is an "affiliate," as
defined in Rule 405 under the Securities
Act, of the Company.
6
<PAGE> 9
EXCHANGE AGENT................... American Bank National Association, the
Trustee under the Indenture, is serving as
exchange agent (the "Exchange Agent") in
connection with the Offer. The mailing
address, the address for hand deliveries
and for deliveries by overnight courier of
the Exchange Agent is 101 East Fifth
Street, St. Paul, Minnesota 55101. For
assistance and requests for additional
copies of this Prospectus or the Letter of
Transmittal the telephone number for the
Exchange Agent is and the facsimile number
for the Exchange Agent is (612) 298-6280.
See "The Offer" for more detailed information concerning the terms of the Offer.
SUMMARY OF TERMS OF NEW NOTES
SECURITIES OFFERED............... $75,000,000 principal amount of 10 3/4%
Senior Unsecured Notes.
MATURITY DATE.................... September 1, 2005.
INTEREST PAYMENT DATES........... March 1 and September 1.
OPTIONAL REDEMPTION.............. Redeemable, in whole or in part, at the
option of the Company at any time after
September 1, 2000 at the redemption prices
set forth herein plus accrued and unpaid
interest to the date of redemption.
RANKING.......................... The New Notes will be senior in right of
payment to all existing and future
subordinated indebtedness and will be
senior unsecured obligations of the Company
ranking pari passu in right of payment with
all other Indebtedness (as defined in the
New Note Indenture) of the Company. Certain
Indebtedness, however, including secured
debt, is, and will be, effectively senior
in right of payment to the New Notes with
respect to assets that constitute
collateral securing such other
Indebtedness.
CHANGE OF CONTROL................ Upon a Change of Control (as defined in the
New Note Indenture), each Holder shall have
the right to require the Company to
repurchase all or any part of such Holder's
New Notes at a repurchase price equal to
101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
date of purchase.
CERTAIN COVENANTS................ The New Note Indenture will contain
restrictions providing for, among other
things, limitations on restricted payments,
limitations on transactions with
affiliates, limitations on asset sales,
limitations on investments, limitations on
issuances and dispositions of capital stock
of subsidiaries, limitations on payment
restrictions affecting subsidiaries and
restrictions relating to mergers or
consolidations. These limitations are
subject to a number of important
qualifications and exceptions. See
"Description of the New Notes -- Certain
Covenants."
7
<PAGE> 10
SUMMARY FINANCIAL DATA
The summary financial data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" for, and as of (i) the period August
26, 1994 to December 31, 1994, the period January 1, 1994 to August 25, 1994,
and each of the years in the four-year period ended December 31, 1993, are
derived from the financial statements of the Company, which financial statements
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants and (ii) the periods ended March 31, 1995 and 1994 are derived from
the unaudited condensed financial statements of the Company. The summary data
should be read in conjunction with the financial statements, the related notes
and the independent auditors' report included elsewhere herein.
<TABLE>
<CAPTION>
| PREDECESSOR COMPANY
REORGANIZED COMPANY(A) | --------------------------------------------------------------------------
------------------------ | PERIOD
THREE | THREE FROM
MONTHS PERIOD FROM | MONTHS JANUARY 1
ENDED AUGUST 26 TO | ENDED TO YEARS ENDED DECEMBER 31,
MARCH 31, DECEMBER 31, | MARCH 31, AUGUST 25, -------------------------------------------------
1995 1994 | 1994 1994 1993 1992 1991 1990
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
| (IN THOUSANDS EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> | <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS |
DATA: |
Operating revenues......... $ 345,790 $ 469,766 | $ 345,264 $ 939,028 $1,325,364 $1,294,140 $1,413,925 $1,315,804
Operating expenses......... 320,895 430,895 | 307,514 831,522 1,204,310 1,368,952 1,518,582 1,347,435
Operating income (loss).... 24,895 38,871 | 37,750 107,506 121,054 (74,812) (104,657) (31,631)
Income (loss) before income |
taxes and extraordinary |
items.................... 10,968 19,736 | 15,807 (201,209 ) 37,924 (131,761) (222,016) (76,695)
Income taxes............... 5,758 11,890 | 632 2,059 759 -- -- --
Income (loss) before |
extraordinary items...... -- 7,846 | -- (203,268 ) 37,165 (131,761) (222,016) (76,695)
Extraordinary items(b)..... -- -- | -- 257,660 -- -- -- 2,024
Net income (loss).......... 5,210 7,846 | 15,175 54,392 37,165 (131,761) (222,016) (74,671)
Earnings (loss) per |
share:(c) |
Primary: |
Before extraordinary |
items................ .12 .17 | .56 (7.03 ) 1.50 (5.58) (10.39) (4.26)
Extraordinary |
items(b)............. -- -- | -- 9.02 -- -- -- 0.11
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... .12 .17 | .56 1.99 1.50 (5.58) (10.39) (4.15)
Fully diluted: |
Before extraordinary |
items................ .12 .17 | .40 (4.96 ) 1.04 (5.58) (10.39) (4.26)
Extraordinary |
items(b)............. -- -- | -- 6.37 -- -- -- 0.11
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... .12 .17 | .40 1.41 1.04 (5.58) (10.39) (4.15)
Shares used for computation |
Primary.................. 45,166 45,127 | 29,153 28,550 27,525 23,914 21,534 18,396
Fully diluted............ 45,166 45,127 | 41,055 40,452 41,509 23,914 21,534 18,396
Ratio of earnings to fixed |
charges(d)............... 1.28 1.38 | 1.48 -- 1.28 -- -- --
BALANCE SHEET DATA: |
Working capital |
deficiency............... $ (67,827) $ (47,927) | $ (102,345) $ (124,375) $ (201,567) $ (51,158) $ (94,671)
Total assets............... 1,624,032 1,545,092 | 1,083,161 1,016,743 1,036,441 1,111,144 1,165,256
Long-term debt, less |
current maturities(e).... 453,452 465,598 | 613,967 620,992 647,015 726,514 620,701
Total stockholders equity |
(deficiency)............. 600,892 595,446 | (238,835) (254,262) (294,613) (166,510) 21,141
</TABLE>
---------------
(a) The Company filed a voluntary petition to reorganize under Chapter 11 of the
Bankruptcy Code on June 27, 1991 and operated as a debtor-in-possession
until August 25, 1994 (the "Effective Date"). The financial statements of
the Reorganized Company are presented on a different basis of accounting
than those of the Predecessor Company and, therefore, are not comparable in
all respects. The financial statements of the Reorganized Company reflect
the impact of adjustments to reflect the fair value of assets and
liabilities under fresh start reporting.
8
<PAGE> 11
(b) Includes extraordinary items of $257.7 million in 1994 resulting from the
discharge of indebtedness pursuant to the consummation of the Plan of
Reorganization and $2.0 million in 1990 resulting from the purchase and
retirement of convertible subordinated debentures.
(c) Historical per share data for the Predecessor Company is not meaningful
since the Company has been recapitalized and has adopted fresh start
reporting as of August 25, 1994.
(d) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income (loss) before taxes plus fixed charges less capitalized
interest. "Fixed charges" consist of interest expense including amortization
of debt issuance costs, capitalized interest and a portion of rent expense
which is deemed to be representative of an interest factor. For the years
ended December 31, 1992 and 1991 and 1990, earnings were insufficient to
cover fixed charges by $131.8 million, $228.7 million and $83.1 million,
respectively. For the period ended August 25, 1994, earnings were
insufficient to cover fixed charges by $201.2 million.
(e) Includes certain balances reported as "Estimated Liabilities Subject to
Chapter 11 Proceedings" for the Predecessor Company.
9
<PAGE> 12
RISK FACTORS
RECENT REORGANIZATION
The Company experienced significant operating losses in each year of the
three-year period ended December 31, 1992. During this period, notwithstanding a
series of actions taken by the Company to improve its cash position and reduce
costs, the Company faced a severe liquidity crisis and filed for protection
under Chapter 11 of the United States Bankruptcy Code in June 1991. In
connection with its reorganization in bankruptcy and related operational
restructuring (the "Reorganization"), the Company took significant steps to
improve its operations leading to profitability during 1993 and subsequent
periods. The Company's long-term viability, however, will depend upon its
ability to sustain profitable results of operations. There can be no assurance
that such results can be sustained.
LEVERAGE
Although the Reorganization improved the Company's financial position, the
Company remains highly leveraged. This high degree of leverage will pose
substantial risks to holders of the New Notes and could have a material adverse
effect on the marketability, price and future value of such New Notes. This high
degree of leverage will increase the Company's vulnerability to adverse general
economic and airline industry conditions and to increased competitive pressures.
In addition, as described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources," at
March 31, 1995, the Company had on order a total of 24 Airbus A320-200 aircraft,
with an aggregate net cost estimated at $1.1 billion. The Company has arranged
for financing for up to one-half of the commitment relating to such aircraft and
will require substantial capital from external sources to meet its remaining
financial commitment. The acquisition and financing of these aircraft will
likely result in a substantially greater degree of leverage than currently
exists.
ADVERSE INDUSTRY CONDITIONS AND COMPETITION
The airline industry is highly competitive. Overall industry profit margins
are low and industry earnings are volatile. Airlines compete in the areas of
pricing, scheduling (frequency and flight times), on-time performance, frequent
flyer programs and other services. Many of America West's competitors are
carriers with substantially greater financial resources. The airline industry is
susceptible to price discounting, which involves the offering of discount or
promotional fares to passengers. Any such fares offered by one airline are
normally matched by competing airlines, resulting in lower industry yields with
little or no increase in traffic levels.
Most of the Company's markets are served by larger carriers and are highly
competitive. Also, in recent years several new carriers have entered the
industry, typically with low cost structures. In some cases, new entrants have
initiated or triggered further price discounting. The entry of additional new
carriers on many of the Company's routes, as well as increased competition from
or the introduction of new services by established carriers, could negatively
impact America West's results of operations.
INCREASES IN FUEL PRICES
Fuel costs constituted approximately 13% of America West's total operating
expenses during 1994. A one cent per gallon change in fuel price would affect
the Company's annual operating results by approximately $3 million at present
consumption levels. Accordingly, either a substantial increase in fuel prices or
the lack of adequate fuel supplies in the future would likely have a material
adverse effect on the operations of the Company. Moreover, fuel price increases
or supply shortages can occur at any time as a result of, among other things,
geopolitical developments.
The Company purchases fuel on standard trade terms under master agreements
and has been able to obtain fuel sufficient to meet its requirements at
competitive prices. The Company does not currently hedge its fuel costs. In
August 1993, the United States government increased taxes on fuel, including
aircraft fuel, by 4.3 cents per gallon. Airlines are exempt from this tax
increase until October 1, 1995. When implemented, this
10
<PAGE> 13
new tax will increase the Company's annual operating expenses by approximately
$13 million based upon its 1994 fuel consumption levels. There can be no
assurance that additional taxes on fuel will not be imposed in the future or
that such taxes will not materially affect the Company's results of operations.
LABOR NEGOTIATIONS
The Company historically has operated without collective bargaining
agreements covering any of its employees. In October 1993, however, the Air
Lines Pilots Association ("ALPA") was certified by the National Mediation Board
as the bargaining representative of the Company's flight deck crew members.
Formal negotiations commenced in April 1994 and in April 1995, the Company and
its pilots, represented by ALPA, reached a five year agreement which was
ratified by the pilots. See "Business -- Employees."
In June 1994, the National Mediation Board accepted the Association of
Flight Attendants' ("AFA") petition to represent the Company's flight
attendants, and in September 1994 the Company's flight attendants voted in favor
of AFA representation and contract negotiations are ongoing. In April 1994, the
Transportation Workers Union ("TWU") filed a petition to represent the Company's
fleet service personnel which petition was rejected in December 1994. The
International Brotherhood of Teamsters ("IBT") filed applications to represent
the Company's mechanics including related personnel and the Company's flight
simulator technicians in August and September 1994, respectively. Both of these
applications were rejected in December 1994, and the IBT thereafter withdrew
another pending application previously filed with respect to stock clerks. The
TWU filed an application to represent the Company's dispatcher and assistant
dispatcher personnel in April 1995. This application was rejected in June 1995.
The Company cannot predict the effect, if any, that a future collective
bargaining agreement with the AFA or any other collective bargaining
representative would have on the Company's operations or financial performance.
GOVERNMENT REGULATION
The Company is subject to the Federal Aviation Act of 1958, as amended (the
"Aviation Act"), under which the Department of Transportation (the "DOT") and
the Federal Aviation Administration (the "FAA") exercise regulatory authority.
This regulatory authority includes (i) the determination and periodic review of
the fitness (including financial fitness) of air carriers; (ii) the
certification and regulation of the flight equipment; (iii) the approval of
personnel who may engage in flight, maintenance and operations activities; and
(iv) the approval of flight training activities and the enforcement of minimum
air safety standards set forth in FAA regulations. In accordance with the
Airline Deregulation Act of 1978, domestic airline fares and routes are no
longer subject to significant regulation. The DOT maintains authority over
international aviation, subject to review by the President of the United States,
and has jurisdiction over consumer protection policies, computer reservation
system issues and unfair trade practices.
In the last several years, the FAA has issued a number of maintenance
directives and other regulations relating to, among other things, retirement of
older aircraft, collision avoidance system, airborne windshear avoidance
systems, noise abatement and increased inspections and maintenance procedures to
be conducted on older aircraft. Additional laws and regulations have been
proposed from time to time which could significantly increase the cost of
airline operations by imposing additional requirements or restrictions on
operations. Laws and regulations have been considered from time to time that
would prohibit or restrict the ownership and transfer of airline routes or
slots. There is no assurance that laws and regulations currently enacted or
enacted in the future will not adversely affect the Company's ability to
maintain its current level of operating results. See "Business -- Government
Regulations."
FUTURE CAPITAL REQUIREMENTS
At March 31, 1995, America West had $518.4 million ($469.7 million giving
effect to the Offer) of long-term indebtedness, including current maturities,
and $600.9 million of stockholders' equity. At such date, the Company had $213.4
million of unrestricted cash and cash equivalents. America West does not have
available lines of credit or significant unencumbered assets. America West is
more leveraged and has significantly less liquidity than certain of its
competitors, several of whom have available lines of credit or
11
<PAGE> 14
significant unencumbered assets. Accordingly, the Company may be less able than
certain of its competitors to withstand adverse industry conditions or a
prolonged economic recession.
As of March 31, 1995, the Company had significant capital commitments,
including commitments for a substantial number of new aircraft with a net cost
aggregating approximately $1.1 billion. Although the Company has arranged for
financing for up to one-half of its aircraft purchase commitments, the Company
will require substantial capital from external sources to meet the remaining
financial commitments. There can be no assurance that sufficient financing will
be obtained for all aircraft and other capital requirements. A default by the
Company under any such commitment could have a material adverse effect on the
Company. See "Business -- Aircraft."
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
As of the date hereof, there were two registered holders of the Existing
Notes. The Company does not intend to list the New Notes on any national
securities exchange or to seek approval for quotation through any automated
quotation system. No assurance can be given that an active public or other
market will develop for the New Notes or as to the liquidity of or the trading
market for the New Notes. If a trading market does not develop, holders of the
New Notes may experience difficulty in reselling the New Notes or may be unable
to sell them at all. If a market for the New Notes develops, any such market may
cease to continue at any time and future trading prices of the New Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's results of operations and financial condition and the
market for similar securities and other factors. In addition, the New Notes may
trade at a discount from their principal amount.
12
<PAGE> 15
THE OFFER
PURPOSES OF THE OFFER
The Offer relates to (i) the purchase of $48,000,000 principal amount of
Existing Notes for cash plus accrued and unpaid interest to the date of purchase
and (ii) the exchange of $75,000,000 principal amount of New Notes for
$75,000,000 principal amount of Existing Notes. The purposes of the Offer are
(i) to reduce the Company's long-term indebtedness and annual interest expense,
(ii) to lengthen the average maturity of a portion of the Company's long-term
indebtedness and (iii) to modify the limitations on restricted payments covenant
contained in the Indenture governing the Existing Notes (the "Existing Note
Indenture").
TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, including the tender of all Existing Notes
pursuant to the Offer, the Company will accept for purchase pursuant to the
Purchase Offer $48,000,000 principal amount of Existing Notes. Subject to the
conditions described herein, following the consummation of the Purchase Offer,
the Company will pay the New Note Payment equal to 3 5/8% of the principal
amount of New Notes in respect of the agreement by holders of Existing Notes to
accept the New Notes. Upon payment of the New Note Payment, the Company will be
entitled to elect at any time during a period expiring at 5:00 p.m., New York
City time, on the 30th day following the Expiration Date to consummate the
Exchange Offer by (i) accepting for exchange pursuant to the Exchange Offer the
$75,000,000 in aggregate principal amount of Existing Notes remaining
outstanding after completion of the Purchase Offer and (ii) issuing the New
Notes in the aggregate principal amount of $75,000,000 in exchange for such
Existing Notes. The New Note Payment will be non-refundable whether or not the
New Notes are issued pursuant to the Exchange Offer. All Existing Notes must be
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date in order for either the Purchase Offer or the Exchange Offer
to be consummated. In the event there is more than one Holder who tenders
Existing Notes pursuant to the Offer, the amount of Existing Notes purchased
pursuant to the Purchase Offer and the amount of Existing Notes subject to the
Exchange Offer will be determined on a pro rata basis. To accept the Offer, a
Holder must tender all of the Existing Notes held by such Holder with respect to
both the Purchase Offer and the Exchange Offer.
The form and terms of the New Notes will differ from the Existing Notes in
interest rate, maturity, redemption features and covenants regarding the
Company's ability to make certain restricted payments and certain investments.
In other material respects, the terms of the New Notes are substantially
identical to the terms of the Existing Notes.
As of the date of this Prospectus, $123,000,000 aggregate principal amount
of the Existing Notes is outstanding. This Prospectus, together with the
accompanying Letter of Transmittal, is initially being sent to all registered
Holders as of the close of business on August 8, 1995.
The Company shall be deemed to have accepted for purchase pursuant to the
Purchase Offer or for exchange pursuant to the Exchange Offer, as the case may
be, validly tendered Existing Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent. See "-- Exchange Agent." The
Exchange Agent will act as agent for the tendering Holders for the purpose of
(i) receiving cash from the Company for purposes of consummating the Purchase
Offer, (ii) receiving the New Note Payment, (iii) receiving the New Notes to be
issued in connection with the Exchange Offer, and (iv) delivering the foregoing
to the Holders.
Holders who tender Existing Notes in the Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange or purchase of Existing
Notes pursuant to the Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Offer. See
"-- Solicitation of Tenders; Fees and Expenses."
Based on an interpretation of the Commission, the New Notes issued pursuant
to the Exchange Offer in exchange for Existing Notes may be offered for resale,
resold and otherwise transferred by a Holder thereof
13
<PAGE> 16
(other than (i) a broker-dealer who purchased such Existing Notes directly from
the Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) a person that is an "affiliate" of the Company
(within the meaning of Rule 405 of the Securities Act)), without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that the Holder is acquiring the New Notes in its ordinary course of
business and is not participating, and has no arrangement or understanding with
any person to participate, in the distribution of the New Notes. Holders wishing
to accept the Exchange Offer must represent to the Company that such conditions
have been met.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean August 11, 1995, unless the Company,
in its sole discretion, extends the Offer, in which case the term "Expiration
Date" shall mean the latest date to which the Offer is extended.
The Company expressly reserves the right, in its sole discretion (i) to
delay acceptance of any Existing Notes, to extend the Offer or to terminate the
Offer and to refuse to accept Existing Notes not previously accepted, if any of
the conditions set forth herein under "-- Termination" shall have occurred and
shall not have been waived by the Company (if permitted to be waived by the
Company), by giving oral or written notice of such delay, extension or
termination to the Exchange Agent, and (ii) to amend the terms of the Offer in
any manner. Any such delay in acceptance, extension, termination or amendment
will be followed as promptly as practicable by oral or written notice thereof by
the Company to the registered holders of the Existing Notes. If the Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the Holders of such amendment.
PAYMENT OF ACCRUED INTEREST
Interest on the New Notes to be issued on consummation of the Exchange
Offer will accrue from their date of issuance, which date will be within 30 days
after the Expiration Date, as determined by the Company. The Company will pay to
holders of Existing Notes tendering such notes pursuant to the Exchange Offer,
promptly following the acceptance thereof, accrued and unpaid interest through
the date prior to the day the New Notes are issued. The Company will pay to
holders of Existing Notes tendering such notes pursuant to the Purchase Offer,
promptly following the acceptance thereof, accrued and unpaid interest to the
date on which such Existing Notes are purchased.
PROCEDURES FOR TENDERING
Only a Holder may tender its Existing Notes in the Offer. To tender in the
Offer, a Holder must complete, sign and date the Letter of Transmittal or a
facsimile thereof, have the signatures thereof guaranteed if required by the
Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal
or such facsimile, together with the Existing Notes and any other required
documents, to the Exchange Agent, prior to 5:00 p.m., New York City time, on the
Expiration Date. The tender by a Holder will constitute an agreement among such
Holder, the Company and the Exchange Agent in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
THE LETTER OF TRANSMITTAL WILL INCLUDE REPRESENTATIONS TO THE COMPANY THAT,
AMONG OTHER THINGS, (I) ANY NEW NOTES RECEIVED PURSUANT TO THE EXCHANGE OFFER
ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON RECEIVING
SUCH NEW NOTES (WHETHER OR NOT SUCH PERSON IS THE HOLDER), (II) NEITHER THE
HOLDER NOR ANY SUCH OTHER PERSON HAS AN ARRANGEMENT OR UNDERSTANDING WITH ANY
PERSON TO PARTICIPATE IN THE
14
<PAGE> 17
DISTRIBUTION OF SUCH NEW NOTES, (III) NEITHER THE HOLDER NOR ANY SUCH OTHER
PERSON IS AN "AFFILIATE," AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT, OF
THE COMPANY, AND (IV) THE HOLDER IS NOT ENGAGED IN, AND DOES NOT INTEND TO
ENGAGE IN, A DISTRIBUTION OF THE NEW NOTES.
The method of delivery of Existing Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holders. Instead of delivery by mail, it is recommended that Holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent prior to the Expiration Date.
No Letter of Transmittal or Existing Notes should be sent to the Company.
Any beneficial owner whose Existing Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered Holder promptly and instruct such
registered Holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Existing Notes, either
make appropriate arrangements to register ownership of the Existing Notes in
such owner's name or obtain a properly completed bond power from the registered
Holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States (an "Eligible Institution") unless the Existing Notes tendered
pursuant thereto are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" of the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered Holder listed therein, such Existing Notes must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender the
Existing Notes on behalf of the registered Holder, in either case signed as the
name of the registered Holder or Holders appears on the Existing Notes.
If the Letter of Transmittal or any Existing Notes or bond powers are
signed or endorsed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with this Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Existing Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Existing Notes not properly tendered or any Existing Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Existing Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify Holders of
defects or irregularities with respect to tenders of Existing Notes, neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Existing
Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Existing Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Existing Notes received
by the Exchange Agent that the Company determines are not properly tendered or
the tender of which is otherwise rejected by the Company and as to which the
defects or irregularities have not been cured or waived by the Company will be
returned by the Exchange Agent to the tendering Holder unless otherwise provided
in the Letter of Transmittal, as soon as practicable.
15
<PAGE> 18
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. To withdraw a tender of Existing Notes in the Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Existing Notes to be withdrawn (the
"Depositor"), (ii) identify the Existing Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Existing Notes),
(iii) be signed by the Depositor in the same manner as the original signature on
the Letter of Transmittal by which such Existing Notes were tendered (including
any required signature guarantee) or be accompanied by documents of transfer
sufficient to permit the trustee with respect to the Existing Notes to register
the transfer of such Existing Notes into the name of the Depositor withdrawing
the tender and (iv) specify the name in which any such Existing Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Existing Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Offer. Any Existing Notes that
have been tendered but are not accepted for exchange or purchase will be
returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal, rejection of tender or termination of the Offer.
Properly withdrawn Existing Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date. Tenders of Existing Notes may not be withdrawn after the
Expiration Date.
TERMINATION
Notwithstanding any other term of the Offer, the Company will not be
required to accept for exchange or purchase the Existing Notes, and may
terminate or amend the Offer as provided herein at any time prior to the
purchase or exhange of the Existing Notes if: (i) any action or proceeding is
instituted or threatened in any court or by or before any governmental agency
with respect to the Offer, which, in the Company's judgment, might materially
impair the Company's ability to proceed with the Offer, or (ii) any law,
statute, rule or regulation is proposed, adopted or enacted, or any existing
law, statute, rule or regulation is interpreted by the staff of the Commission
in a manner, which, in the Company's sole judgment, might materially impair the
Company's ability to proceed with the Offer, or (iii) any governmental approval
or approval by Holders has not been obtained, which approval the Company shall,
in its sole discretion, deem necessary for the consummation of the Offer as
contemplated hereby.
If the Company determines that it may terminate the Offer for any of the
reasons set forth above, the Company may (i) return the Existing Notes that have
been tendered to the Holders thereof, (ii) extend the Offer and retain all
Existing Notes tendered prior to the Expiration Date of the Offer, subject to
the rights of such Holders of tendered Existing Notes to withdraw their tendered
Existing Notes, or (iii) waive such termination event with respect to the Offer
and accept all properly tendered Existing Notes that have not been withdrawn. If
such waiver constitutes a material change in the Offer, the Company will
disclose such change by means of a supplement to this Prospectus that will be
distributed to each registered Holder, and the Company will extend the Offer for
a period of five to ten business days, depending upon the significance of the
waiver and the manner of disclosure to the registered Holders, if the Offer
would otherwise expire during such period.
EXCHANGE AGENT
American Bank National Association has been appointed as Exchange Agent for
the Offer. In such capacity, the Exchange Agent has no fiduciary duties and will
be acting solely on the basis of directions of the
16
<PAGE> 19
Company. Requests for assistance and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent addressed as follows:
By Mail or Courier:
101 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Mr. Frank P. Leslie
SOLICITATION OF TENDERS; FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Offer will be borne by
the Company. The solicitation pursuant to the Offer is being made by mail, and
officers and regular employees of the Company and its affiliates in person, by
telegraph, telephone or telecopier.
The Company has not retained any dealer manager in connection with the
Offer and will not make any payments to brokers, dealers or other persons for
soliciting acceptances of the Offer. The Company, however, will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse the
Exchange Agent for its reasonable out-of-pocket costs and expenses in connection
therewith and will indemnify the Exchange Agent for all losses and claims
incurred by it as a result of the Offer. The Company may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the
Existing Notes and in handling or forwarding tenders for exchange or purchase.
The expenses to be incurred in connection with the Offer, in addition to
the fees and expenses of the Exchange Agent and Trustee, will include
accounting, financial advisory and legal fees and printing costs of the Company,
and will be paid by the Company. The Company has agreed to indemnify its
financial advisor for any losses and claims incurred by it as a result of the
Offer. The Company will pay all transfers taxes, if any, applicable to the
exchange or purchase of Existing Notes pursuant to the Offer.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
This section sets forth certain federal income tax matters that a Holder of
an Existing Note may wish to consider in deciding whether to participate in the
Offer. No opinion is expressed, however, as to the tax treatment of any Holder
that participates in the Offer.
This summary is based on the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), administrative pronouncements, judicial decisions
and existing and proposed Treasury Regulations, including regulations concerning
the treatment of debt instruments issued with original issue discount (the "OID
Regulations"), changes to any of which subsequent to the date of this Prospectus
may affect the tax consequences described herein. This summary discusses only
Existing Notes and New Notes held as capital assets within the meaning of
section 1221 of the Code. It does not discuss all of the tax consequences that
may be relevant to a Holder in light of his particular circumstances or to
Holders subject to special rules, such as foreign taxpayers, certain financial
institutions, insurance companies and dealers in securities. Persons considering
participation in the Offer should consult their tax advisors with regard to the
application of the United States income tax laws to their particular situations
as well as any tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction.
Tax Consequences of Purchase Offer
The receipt of cash by a Holder of Existing Notes pursuant to the Purchase
Offer will be a taxable transaction to such Holder for federal income tax
purposes. A Holder will recognize taxable gain or loss on the purchase of an
Existing Note pursuant to the Purchase Offer (the "Purchase") equal to the
difference between the (i) cash received and (ii) such Holder's adjusted tax
basis in the Existing Note. To the extent that accrued interest (including any
accrued OID) on an Existing Note has not been taxed previously, cash received
pursuant to the Purchase Offer will not be taken into account in determining a
Holder's gain or loss
17
<PAGE> 20
on the purchase, but will be taxed to a Holder as ordinary interest income. A
Holder's adjusted tax basis for an Existing Note will generally equal the cost
of the Existing Note to the Holder, increased by the amount of any OID and
accrued market discount included in income by the Holder with respect to such
note and decreased by the amount of any amortized premium and any principal
payments with respect to such note.
In general, any gain or loss realized on the Purchase of an Existing Note
pursuant to the Purchase Offer will be capital gain (subject to the market
discount rules discussed below) or loss and will be long-term capital gain or
loss if at the time of sale, exchange or retirement the Existing Note has been
held for more than one year.
If a Holder purchased an Existing Note for an amount that is less than its
stated redemption price at maturity or, in the case of an Existing Note that
bears OID, its "revised issue price," the amount of the difference is treated as
"market discount" for federal income tax purposes, unless such difference is
less than a specified de minimis amount. The revised issue price of an Existing
Note bearing OID is defined as the sum of the issue price of the Existing Note
and the aggregate amount of OID includable in gross income for all prior periods
without regard to acquisition premium. Generally, Existing Notes acquired by the
selling Holder at their original issue would not have market discount. Under the
market discount rules of the Code, a Holder will be required to treat any gain
on the Purchase of an Existing Note as ordinary income to the extent of any
accrued market discount which has not previously been included in the Holder's
income pursuant to an election by the Holder to include market discount as it
accrues.
Tax Consequences of Exchange Offer
Treatment as a Recapitalization. The tax treatment of a Holder's exchange
of Existing Notes for New Notes pursuant to the Exchange Offer may vary
depending on whether that exchange is treated as part of a recapitalization,
which is generally nontaxable except to the extent of the lesser of any gain
realized or "boot" (i.e., non-qualifying consideration) received. Under the
Code, the exchange of Existing Notes for New Notes pursuant to the Exchange
Offer (the "Exchange") will be treated as a recapitalization only if both the
Existing Notes and the New Notes constitute "securities" within the meaning of
the provisions of the Code governing reorganizations. This, in turn, depends
upon the facts and circumstances surrounding the origin and nature of these debt
instruments, and upon the interpretation of numerous judicial decisions.
Generally, a debt claim evidenced by a written instrument with an original
maturity of 10 years or more constitutes a "security," while a claim with an
original maturity of five years or less or arising out of the extension of trade
credit does not.
In the event that the Exchange were treated as a recapitalization under the
reorganization provisions, a Holder of an Existing Note should not recognize any
gain on receipt of the New Note as long as the issue price of the New Note does
not exceed the adjusted issue price of the Existing Note, although the New Note
Payment would likely be taxable as "boot". In the case of any Existing Note that
has OID, the issue price of the New Note could exceed the adjusted issue price
of the Existing Note. In such a case, the Internal Revenue Service (the
"Service") could claim that the Holder's receipt of the New Note represents
"boot" to the extent that the issue price of the New Note exceeds the adjusted
issue price of the Existing Note, thereby requiring the Holder to recognize that
boot as taxable gain to the extent that the fair market value of the Existing
Note exceeds its adjusted tax basis. See "-- Character of Gain or Loss" and
"-- Issue Price, Adjusted Issue Price, and Adjusted Tax Basis" below. In
addition, the Service might argue that both the Purchase Offer and the Exchange
Offer should be treated as part of a single recapitalization and therefore that
the cash received by a Holder pursuant to the Purchase Offer should be treated
as taxable boot which triggers gain on all of the Existing Notes disposed of by
a Holder pursuant to the Offer.
Also, in addition to taxable boot, any accrued interest on an Existing Note
that has not been taxed previously will be taxed to the Holder as ordinary
interest income on the exchange.
Treatment as a Taxable Exchange. In the event that the Exchange was not
treated as a recapitalization, the receipt of New Notes by a Holder of Existing
Notes will be a fully taxable transaction to such Holder for federal income tax
purposes. In general, a Holder would be likely to recognize taxable gain or loss
on the
18
<PAGE> 21
exchange equal to the difference between the (i) the sum of the issue price of
the New Note and the New Note Payment and (ii) such Holder's adjusted tax basis
in the Existing Note. To the extent that accrued interest on the Existing Note
has not been taxed previously, the fair market value of the New Note for
purposes of determining a Holder's gain or loss on the exchange will not include
any amount attributable to such accrued interest and such amount will be taxed
to a Holder as ordinary interest income. See "-- Character of Gain or Loss" and
"-- Issue Price, Adjusted Issue Price, and Adjusted Tax Basis" below.
Character of Gain or Loss. In general, any gain or loss realized on the
Exchange will be capital gain (subject to the market discount rules discussed
below) or loss and will be long-term capital gain or loss if at the time of
sale, exchange or retirement the Existing Note has been held for more than one
year.
If a Holder purchased an Existing Note for an amount that is less than its
stated redemption price at maturity or, in the case of an Existing Note that
bears OID, its "revised issue price", the amount of the difference is treated as
"market discount" for federal income tax purposes, unless such difference is
less than a specified de minimis amount. The revised issue price of an Existing
Note bearing OID is defined as the sum of the issue price of the Existing Note
and the aggregate amount of OID includable in gross income for all prior periods
without regard to acquisition premium. Generally, Existing Notes acquired by the
selling Holder at their original issue would not have market discount. Under the
market discount rules of the Code, a Holder will be required to treat any gain
on the exchange of an Existing Note for a New Note as ordinary income to the
extent of any accrued market discount which has not previously been included in
the Holder's income pursuant to an election by the Holder to include market
discount as it accrues.
Issue Price, Adjusted Issue Price, and Adjusted Tax Basis. In general, the
"issue price" of the New Notes will equal (i) the fair market value of the
Existing Notes or the New Notes if either is traded on an established market at
the time the New Notes are issued, or (ii) the stated principal amount of the
New Notes if neither the Existing Notes nor the New Notes are traded on an
established market. The "adjusted issue price" of a debt instrument generally
equals the amount of its issue price, increased by the portion of any OID
previously includable in the gross income of any Holder of that debt instrument.
A Holder's adjusted tax basis for an Existing Note will generally equal the cost
of the Existing Note to the Holder, increased by the amount of any OID and
accrued market discount included in income by the Holder with respect to such
Note and decreased by the amount of any amortized premium and any principal
payments with respect to such Note.
ACCOUNTING TREATMENT OF THE OFFER
Upon the completion of the Purchase Offer and the Exchange Offer, the
unamortized costs associated with the Existing Notes will be written off as an
expense. The issuance of New Notes, net of costs, will be recorded in exchange
for Existing Notes. The costs associated with the New Notes will be deferred and
amortized over the term of the New Notes.
19
<PAGE> 22
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1995 and as adjusted to reflect the consummation of the Offer. The table
should be read in conjunction with the Company's financial statements and the
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
Total debt................................................ $ 518,429 $ 469,186(1)
Stockholders' equity:
Class A Common Stock.................................... 12 12
Class B Common Stock.................................... 440 440
Additional paid in capital.............................. 587,384 587,384
Retained earnings....................................... 13,056 11,773(2)
---------- --------
Total stockholders' equity........................... 600,892 599,609
---------- --------
Total capitalization...................................... $1,119,321 $1,068,795
========== ========
</TABLE>
---------------
(1) Reflects the following:
(a) Write off of unamortized costs associated with the Existing Notes of
$2,076,000.
(b) Principal payments on Existing Notes of $48,000,000.
(c) Issuance of $75,000,000 of New Notes net of the New Note Payment and
estimated issuance costs totalling $3,318,750 in exchange for
$75,000,000 of Existing Notes.
(2) Reflects the extraordinary loss associated with the write off of unamortized
costs relating to Existing Notes.
20
<PAGE> 23
SELECTED FINANCIAL DATA
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" for, and as of, (i) the period August
26, 1994 to December 31, 1994, the period January 1, 1994 to August 25, 1994,
and each of the years in the four-year period ended December 31, 1993, are
derived from the financial statements of the Company, which financial statements
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants and (ii) the periods ended March 31, 1995 and 1994 which are derived
from the unaudited condensed financial statements of the Company. The selected
data should be read in conjunction with the financial statements as of December
31, 1994 and 1993 and for each of the years in the three-year period ended
December 31, 1994, and the report thereon, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
REORGANIZED COMPANY(A) PREDECESSOR COMPANY
------------------------ | --------------------------------------------------------------------------
THREE | THREE PERIOD FROM
MONTHS PERIOD FROM | MONTHS JANUARY 1
ENDED AUGUST 26 TO | ENDED TO YEARS ENDED DECEMBER 31,
MARCH 31, DECEMBER 31, | MARCH 31, AUGUST 25, -------------------------------------------------
1995 1994 | 1994 1994 1993 1992 1991 1990
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
| (IN THOUSANDS EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> | <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS |
DATA: |
Operating revenues......... $ 345,790 $ 469,766 | $ 345,264 $ 939,028 $1,325,364 $1,294,140 $1,413,925 $1,315,804
Operating expenses......... 320,895 430,895 | 307,514 831,522 1,204,310 1,368,952 1,518,582 1,347,435
Operating income (loss).... 24,895 38,871 | 37,750 107,506 121,054 (74,812) (104,657) (31,631)
Income (loss) before income |
taxes and extraordinary |
items.................... 10,968 19,736 | 15,807 (201,209 ) 37,924 (131,761) (222,016) (76,695)
Income taxes............... 5,758 11,890 | 632 2,059 759 -- -- --
Income (loss) before |
extraordinary items...... -- 7,846 | -- (203,268 ) 37,165 (131,761) (222,016) (76,695)
Extraordinary items(b)..... -- -- | -- 257,660 -- -- -- 2,024
Net income (loss).......... 5,210 7,846 | 15,175 54,392 37,165 (131,761) (222,016) (74,671)
Earnings (loss) per |
share:(c) |
Primary: |
Before extraordinary |
items................ .12 .17 | .56 (7.03 ) 1.50 (5.58) (10.39) (4.26)
Extraordinary |
items(b)............. -- -- | -- 9.02 -- -- -- 0.11
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... .12 .17 | .56 1.99 1.50 (5.58) (10.39) (4.15)
Fully diluted: |
Before extraordinary |
items.................. .12 .17 | .40 (4.96 ) 1.04 (5.58) (10.39) (4.26)
Extraordinary |
items(b)............. -- -- | -- 6.37 -- -- -- 0.11
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... .12 .17 | .40 1.41 1.04 (5.58) (10.39) (4.15)
Shares used for computation |
Primary.................. 45,166 45,127 | 29,153 28,550 27,525 23,914 21,534 18,396
Fully diluted............ 45,166 45,127 | 41,055 40,452 41,509 23,914 21,534 18,396
Ratio of earnings to fixed |
charges(d)............... 1.28 1.38 | 1.48 -- 1.28 -- -- --
BALANCE SHEET DATA: |
Working capital |
deficiency............... (67,827) (47,927) | (102,345) (124,375) (201,567) (51,158) (94,671)
Total assets............... 1,624,032 1,545,092 | 1,083,161 1,016,743 1,036,441 1,111,144 1,165,256
Long-term debt, less |
current |
maturities(e)............ 453,452 465,598 | 613,967 620,992 647,015 726,514 620,701
Total stockholders' equity |
(deficiency)............. 600,892 595,446 | (238,835) (254,262) (294,613) (166,510) 21,141
</TABLE>
---------------
(a) The Company filed a voluntary petition to reorganize under Chapter 11 of
the Bankruptcy Code on June 27, 1991 and operated as a debtor-in-possession
until the Effective Date. The financial statements of the Reorganized
Company are presented on a different basis of accounting than those of the
Predecessor Company and, therefore, are not comparable in all respects. The
financial statements of the Reorganized Company reflect the impact of
adjustments to reflect the fair value of assets and liabilities under fresh
start reporting.
(b) Includes extraordinary items of $257.7 million in 1994 resulting from the
discharge of indebtedness pursuant to the consummation of the Plan of
Reorganization and, $2.0 million in 1990, resulting from the purchase and
retirement of convertible subordinated debentures.
(c) Historical per share data for the Predecessor Company is not meaningful
since the Company has been recapitalized and has adopted fresh start
reporting as of August 25, 1994.
(d) For purposes of computing the ratio of earnings to fixed charges,"earnings"
consist of income (loss) before taxes plus fixed charges less capitalized
interest. "Fixed charges" consist of interest expense including
amortization of
21
<PAGE> 24
debt issuance costs, capitalized interest and a portion of rent expense
which is deemed to be representative of an interest factor. For the years
ended December 31, 1992, 1991 and 1990, earnings were insufficient to cover
fixed charges by $131.8 million, $228.7 million and $83.1 million,
respectively. For the period ended August 25, 1994, earnings were
insufficient to cover fixed charges by $201.2 million.
(e) Includes certain balances reported as "Estimated Liabilities Subject to
Chapter 11 Proceedings" for the Predecessor Company.
22
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
America West Airlines, Inc. (the "Predecessor Company") filed a voluntary
petition to reorganize under Chapter 11 of the Bankruptcy Code on June 27, 1991.
On August 10, 1994, the Plan filed by the Predecessor Company was confirmed by
the Bankruptcy Court and became effective August 25, 1994. On August 26, 1994,
America West Airlines, Inc. (the "Reorganized Company" or the "Company") emerged
from bankruptcy and adopted fresh start reporting. For further information
regarding the Plan, see Note 1 of Notes to Financial Statements.
IMPACT OF FRESH START REPORTING ON RESULTS OF OPERATIONS
In connection with its emergence from bankruptcy, the Company adopted fresh
start reporting in accordance with Statement of Position 90-7, Financial
Reporting by Entities in Reorganization under the Bankruptcy Code ("Statement
90-7") of the American Institute of Certified Public Accountants. Under fresh
start reporting, the reorganization value of the Company has been allocated to
its assets and liabilities on a basis substantially consistent with purchase
accounting. The portion of reorganization value not attributable to specific
tangible assets has been recorded as "Reorganization Value in Excess of Amounts
Allocable to Identifiable Assets." Certain fresh start reporting adjustments,
primarily related to the adjustment of the Company's assets and liabilities to
fair market values, will have a significant effect on the Company's future
statements of operations. The more significant adjustments relate to reduced
depreciation expense on property and equipment, increased amortization expense
relating to reorganization value in excess of amounts allocable to identifiable
assets, increased interest expense and reduced aircraft rent expense.
INDUSTRY CONDITIONS AND COMPETITION
The competitive landscape is changing for America West in 1995 as its major
competitors have announced operational changes which are consistent with steps
that the Company has taken over the past two years. Recent announcements by
virtually all of the major carriers have focused on two central themes:
- Route rationalization and capacity restraint; and
- Significant efforts to reduce operating costs.
Both of these matters reflect an increasing emphasis within the industry to
return to profitability.
With respect to capacity issues, the airlines are focusing on their areas
of relative strength, which tend to be their hub operations, and have eliminated
service to many under-performing markets. To this end, Continental has announced
that it will cease its "Calite" operations by July 1995, Delta is reallocating
capacity to certain longer haul routes emanating from certain of its hubs and
USAir has announced a significant reduction in capacity throughout its system.
These steps are consistent with the route rationalization which the Company
undertook during its bankruptcy when it reduced or eliminated service to a
number of cities and reduced the fleet size to 85 from 123 aircraft. The Company
continually evaluates the performance of the markets which it serves and has
undertaken a study of the strategic deployment of its aircraft to optimize
operating performance.
The introduction and expansion of electronic ticketing services combined
with the move to cap domestic commissions at certain levels are two examples of
initiatives taken by competitors to endeavor to reduce operating costs.
Initiatives have been announced by competitors with respect to labor cost
concessions being sought from unionized employees, aircraft lease rates, future
equipment delivery commitments, fuel costs and other matters.
To the extent that other carriers are successful in reducing their
operating costs, the advantage which the Company enjoys as a result of its low
cost structure is diminished. For this reason, maintaining a low cost
23
<PAGE> 26
structure is one of the strategic imperatives which the Company has set for
itself as it moves forward in the 1990s.
The Company continues to evaluate all elements of its operating costs to
sustain the momentum which commenced in bankruptcy to reduce costs where
practicable. On April 27, 1995, the Company announced that a five-year agreement
had been approved by the Board of Directors and ratified by a majority of the
Company's pilots represented by the Air Line Pilots Association. See
"Business -- Employees."
In the fourth quarter of 1994, certain competitive pricing initiatives were
commenced by other carriers which exerted pressure on both the Company's yield
and load factor. Such initiatives carried over to the first quarter of 1995. To
address these conditions, the Company announced certain fare initiatives of its
own and selectively matched fare increases initiated by other carriers, where
appropriate.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1995 and 1994
The Company's results of operations for the quarter ended March 31, 1995
have not been prepared on a basis of accounting consistent with its results of
operations for the quarter ended March 31, 1994 due to the implementation of
fresh start reporting upon the Company's emergence from bankruptcy.
The Company realized net income of $5.2 million for the first quarter of
1995 compared to $15.2 million for the first quarter of 1994. Operating income
for the quarters ended March 31, 1995 and 1994 was $24.9 million and $37.8
million, respectively. The 1994 net income included reorganization expense of
$8.4 million.
Total operating revenues were $345.8 million for the first quarter of 1995
compared to $345.3 million for the 1994 first quarter. Passenger revenue
decreased slightly for the 1995 first quarter to $323.5 million compared to
$324.4 million for the 1994 period. Cargo and other revenues increased to $22.3
million in 1995 compared to $20.8 million for the 1994 first quarter. Summarized
below are certain capacity and traffic statistics for the three months ended
March 31, 1995 and 1994.
<TABLE>
<CAPTION>
FIRST QUARTER
---------------------------
PERCENT
1995 1994 CHANGE
----- ----- -------
<S> <C> <C> <C>
Number of aircraft (end of period).......................... 88 85 3.5
Available seat miles (millions)............................. 4,635 4,302 7.7
Revenue passenger miles (millions).......................... 2,960 2,917 1.5
Load factor (percent)....................................... 63.9 67.8 (5.8)
Passenger enplanements (thousands).......................... 3,820 3,742 2.1
Average passenger journey miles............................. 957 979 (2.3)
Average stage length........................................ 687 659 4.2
Yield per revenue passenger mile (cents).................... 10.93 11.12 (1.7)
Revenue per available seat mile:
Passenger (cents)......................................... 6.98 7.54 (7.4)
Total (cents)............................................. 7.46 8.03 (7.1)
Average daily aircraft utilization (hours).................. 11.20 10.94 2.4
</TABLE>
Capacity offered, as measured by available seat miles, increased 7.7% for
the first quarter of 1995 compared to the first quarter of 1994. This increase
was the result of the addition of three aircraft to the fleet, a 2.4% increase
in the average daily utilization of the fleet and a 4.2% increase in the average
stage length flown. Although traffic, as measured by revenue passenger miles,
increased 1.5% for the three months ended March 31, 1995 compared to the 1994
first quarter, this increase was less than the additional capacity offered and,
as a result, load factor decreased to 63.9% for the 1995 quarter compared to
67.8% for the 1994 quarter.
24
<PAGE> 27
The additional capacity offered in 1995 was deployed to commence service to
Mazatlan and Los Cabos, Mexico in December 1994 and to increase frequency over
certain existing routes.
Passenger revenues for the first quarter of 1995 decreased because the 1.7%
decline in average passenger yield was greater than the 1.5% increase in revenue
passenger miles flown. As a result of the decrease in passenger revenues and the
7.7% increase in available seat miles, passenger revenue per available seat mile
decreased 7.4% for the 1995 first quarter compared to the first quarter of 1994.
Looking ahead to the second quarter of 1995, certain competitors have announced
changes to their route schedules which have sharply limited or entirely
eliminated service which had competed with that provided by the Company. Most
significantly affected were certain Midwestern cities connecting to Phoenix and
Las Vegas and the Los Angeles area airports connecting to Phoenix.
Operating expense per available seat mile decreased 3.2% to 6.92 cents for
the first quarter of 1995 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 1995 and 1994.
<TABLE>
<CAPTION>
FIRST QUARTER
-------------------------------
PERCENT
1995 1994 CHANGE
---- ---------- -------
(IN CENTS)
<S> <C> <C> <C>
Salaries and related costs................................ 1.92 1.85 3.8
Rentals and landing fees.................................. 1.47 1.54 (4.5)
Aircraft fuel............................................. .86 .88 (2.3)
Agency commissions........................................ .62 .68 (8.8)
Aircraft maintenance material & repairs................... .28 .18 55.6
Depreciation and amortization............................. .43 .49 (12.2)
Other..................................................... 1.34 1.53 (12.4)
---- ----- -------
6.92 7.15 (3.2)
==== ==== ====
</TABLE>
The changes in the components of operating expense per available seat mile
are explained as follows:
- The increase in salaries and related costs is the result of salary
increases ranging from two to eight percent of base pay which were
awarded effective April 1, 1994 under the Moving Forward Program. In
addition, the Company implemented the Total Pay Program effective January
1, 1995 which provides employees with a pay and benefits package which is
competitive with other low cost airlines and local employers. The Total
Pay Program is anticipated to increase non-executive pay by approximately
$25 million annually. In addition, an accrual of $1.4 million was made
during the 1995 first quarter to begin to provide for performance awards
under the AWArd Pay element of the Total Pay Program. Partially
offsetting these increases were reductions in force arising from a
strategic restructuring program. In January 1995, the Company closed its
reservations center in Colorado Springs, Colorado which reduced the
employee census by approximately 100 positions and in March 1995, further
reductions in force of approximately 700 positions were realized. When
fully implemented, the strategic restructuring programs are anticipated
to result in the elimination of approximately 1,300 positions with
associated annual cost savings of approximately $40 million.
- The decrease in rentals and landing fees is the result of a 3% increase
in the nominal expense level, which is largely due to the rental expense
associated with three aircraft added to the fleet, which was more than
offset by the 7.7% increase in available seat miles flown.
- Aircraft fuel decreased due to the decline in the average cost per gallon
to 53.96 cents for the first quarter of 1995 compared to 54.71 cents for
the 1994 first quarter.
- Agency commissions decreased as a result of the decrease in passenger
revenues, as discussed above.
25
<PAGE> 28
- Aircraft maintenance materials and repairs increased largely as the
result of a change in the classification of the amortization expense
associated with capitalized heavy engine and airframe overhauls. In 1994,
for the Predecessor Company, such amortization totaling $8.4 million is
included in depreciation and amortization. In 1995, as part of fresh
start reporting, such amortization totaling $900,000 is included in
aircraft maintenance materials and repairs. In addition, aircraft
maintenance materials and repairs expense increased as a result of the
increase in block hours flown and a flight hour agreement involving
certain auxiliary power units.
- Depreciation and amortization expense decreased due to the implementation
of fresh start reporting upon bankruptcy emergence and as a result of the
change in classification discussed above with respect to aircraft
maintenance materials and repairs. Amortization of the excess
reorganization value amounted to $8.2 million for the quarter ended March
31, 1995.
- Other operating expenses decreased due to reductions in advertising
expense, telecommunications charges, booking fees and interrupted trip
expense.
Nonoperating expenses (net of nonoperating income) amounted to $13.9
million for the three months ended March 31, 1995 compared to $21.9 million for
the first quarter of 1994. Net interest expense for the first quarter of 1995
was $15.9 million compared to $13.2 million for the 1994 period. In conformity
with Statement 90-7, the Company ceased accruing and paying interest on
unsecured prepetition long-term debt. Interest expense for the first quarter of
1994 would have been $16.4 million, if the Company had accrued interest expense
on such debt. The 1994 first quarter includes reorganization expense of $8.4
million.
Period August 26, 1994 to December 31, 1994, January 1, 1994 to August 25,
1994 and the years ended December 31, 1993 and 1992
The following discussion provides an analysis of the Company's results of
operations and reasons for material changes therein for the periods August 26,
1994 to December 31, 1994, January 1, 1994 to August 25, 1994 and the two-years
ended December 31, 1993. The Company's results of operations for the periods
subsequent to August 25, 1994 have not been prepared on a basis of accounting
consistent with its results of operations for periods prior to August 26, 1994
due to the implementation of fresh start reporting upon the Company's emergence
from bankruptcy.
The Company realized net income of $62.2 million on a combined basis for
1994 compared to net income of $37.2 million for 1993 and a net loss of $131.8
million for 1992. The 1994 results include an extraordinary gain of $257.7
million from the discharge of certain prepetition indebtedness and $273.7
million of reorganization expenses. The results for 1993 include reorganization
expenses of $25 million and losses aggregating $4.6 million primarily resulting
from the disposition of surplus spare aircraft parts and equipment. During 1992,
the Company recorded restructuring charges of $31.3 million, reorganization
expenses of $16.2 million and a gain of $15 million from the sale of its
Honolulu to Nagoya, Japan route.
Total operating revenues were $1.409 billion on a combined basis for 1994,
an increase of 6.3 percent compared to the prior year and 8.9 percent greater
than 1992. Passenger revenues for 1994, 1993 and 1992
26
<PAGE> 29
were $1.320 billion on a combined basis, $1.247 billion and $1.215 billion,
respectively. Summarized below are certain capacity and traffic statistics for
the years ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
1994
PERCENT
CHANGE TO
-------------
1994 1993 1992 1993 1992
------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Aircraft (end of period).......................... 87 85 87 2.4 --
Available seat miles (in millions)................ 18,060 17,190 19,271 5.1 (6.3)
Revenue passenger miles (in millions)............. 12,233 11,221 11,781 9.0 3.8
Load factor (percent)............................. 67.7 65.3 61.1 3.7 10.8
Passenger enplanements (in thousands)............. 15,669 14,740 15,173 6.3 3.3
Average passenger journey miles................... 979 970 990 .9 (1.1)
Average stage length.............................. 676 645 631 4.8 7.1
Yield per revenue passenger mile (cents).......... 10.79 11.11 10.31 (2.9) 4.7
Revenue per available seat mile:
Passenger (cents)............................... 7.31 7.25 6.30 .8 16.0
Total (cents)................................... 7.80 7.71 6.72 1.2 16.1
Average daily aircraft utilization (hours)........ 11.19 10.69 10.47 4.7 6.9
</TABLE>
Passenger revenue per available seat mile increased slightly in 1994
compared to 1993 as the increase in load factor period over period was largely
offset by a decline in average passenger yields. The increase in passenger
revenue per available seat mile in 1994 compared to 1992, was due to
improvements in both load factor and yield. The passenger revenue increases
realized in 1994 reflect a continuation of trends which commenced in 1993
relative to:
- An improved economic climate;
- Elimination of "fare simplification" and a non-recurrence of
industry-wide 50 percent-off sales which occurred in the second and third
quarters of 1992; and
- A stable fleet size for virtually all of 1994. The Company added two
aircraft in mid-December 1994 which increased the fleet size to 87
aircraft.
With the exception of the two aircraft deliveries late in 1994, the Company
operated an 85 aircraft fleet and realized increases in capacity over 1993 as
measured by available seat miles by increasing the average stage length flown by
4.8 percent and by increasing the average daily utilization of the aircraft by
4.7 percent.
In the fourth quarter of 1994, certain competitive pricing initiatives were
commenced by other carriers which exerted pressure on both the Company's yield
and the load factor. The result of these initiatives, which have carried over to
the first quarter of 1995, has been softer traffic than was experienced in the
prior year and generally lower yield levels. To address these conditions, the
Company has announced certain fare initiatives of its own, and has selectively
matched fare increases initiated by other carriers, where appropriate.
Revenues from sources other than passenger fares increased to $88.9 million
on a combined basis for 1994 compared to $78.8 million and $79.3 million for
1993 and 1992, respectively. Cargo revenues comprised 49.8 percent, or $44.3
million of other revenues on a combined basis for 1994. For the years 1994, 1993
and 1992, the Company carried 129.6 million, 110.7 million and 116.4 million
pounds of freight and mail, respectively. The balance of other revenues includes
revenues generated from: pilot training; contract services provided to other
airlines for maintenance and ground handling; reduced rate fares; alcoholic
beverage sales and headset rentals and service charges assessed for refunds,
reissues and prepaid ticket advices.
27
<PAGE> 30
In spite of significant reductions in capacity which have occurred since
1991, operating expense per available seat mile declined to 6.99 cents for 1994
from 7.01 cents for 1993 and 7.10 cents for 1992. The table below sets forth the
major categories of operating expense per available seat mile for 1994, 1993 and
1992.
<TABLE>
<CAPTION>
1994 PERCENT
(IN CENTS) CHANGE TO
----------------------- --------------
1994 1993 1992 1993 1992
----- ----- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Salaries and related costs........................... 1.83 1.78 1.68 2.8 8.9
Rentals and landing fees............................. 1.47 1.60 1.76 (8.1) (16.5)
Aircraft fuel........................................ .88 .97 .97 (9.3) (9.3)
Agency commissions................................... .64 .62 .55 3.2 16.4
Aircraft maintenance materials and repairs........... .25 .18 .20 38.9 25.0
Depreciation and amortization........................ .47 .48 .45 (2.1) 4.4
Restructuring charges................................ -- -- .16 -- --
Other................................................ 1.45 1.38 1.33 5.1 9.0
----- ----- ----- ---- -----
6.99 7.01 7.10 (.3) (1.5)
==== ==== ==== ==== =====
</TABLE>
The changes in the components of operating expense per available seat mile
are explained as follows:
- The increase in 1994 salaries and related costs compared to 1993 is a
result of an increase in capacity as well as the implementation of the
Moving Forward Pay Program in the second quarter of 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.
Each employee whose anniversary date occurred between April and December
also received an additional increase of four percent on such anniversary
date, with certain exceptions. Also effective April 1, 1994, the Company
increased its matching contribution to 50 percent of the first six
percent contributed by employees under the Company's 401(k) plan. The
effect of these changes was to increase Salaries and Related Costs in
1994 by approximately $18 million. The Moving Forward Pay Program
replaced the Transition Pay Program which commenced in the second quarter
of 1993 and terminated at the end of the first quarter of 1994. Under the
Transition Pay Program, performance award distributions totaling $6.5
million, including applicable payroll taxes, were made in 1993 upon the
Company meeting or exceeding certain operating income targets. In
addition, commencing in the third quarter of 1993, employee award
distributions based on the greater of .5 percent of an employee's annual
base wage or $125 were made on a quarterly basis. Such payments totaled
$2.6 million, including applicable payroll taxes. In the first quarter of
1994, approximately $3.3 million in distributions were made prior to the
termination of the Transition Pay Program.
- Rentals and landing fees decreased in 1994 compared to 1993 and 1992 for
the following reasons:
-- The Company generated more ASMs in 1994 with essentially the same
sized aircraft fleet as in 1993 which, in turn, caused the rate per
ASM to decrease;
-- Rent reductions were obtained at New York's JFK and Phoenix's Sky
Harbor International Airports;
-- Rent expense for aircraft leases were reduced to reflect fair
market rates in August 1994 under fresh start reporting; and
-- Certain administrative office space was vacated as part of the
Company's facilities consolidation program.
- Aircraft fuel expense decreased year over year due to the decline in the
average price per gallon to 54.89 cents from 61.05 cents for 1993 and
62.70 cents for 1992.
28
<PAGE> 31
- Agency commission expense increased in 1994 in comparison to 1993 and
1992 as a result of the increase in passenger revenue per available seat
mile. In addition, the 1994 commission expense increased because a higher
percentage of passenger revenues was generated by America West Vacations
which pays a higher average commission rate on its sales.
- Aircraft maintenance materials and repair expense increased in 1994 as
the result of an increase in average daily utilization of the fleet to
11.19 hours per day in 1994 from 10.69 hours and 10.47 hours for 1993 and
1992, respectively. This higher level of utilization resulted in
increases in line maintenance materials usage, engine repairs and
component repairs.
- Depreciation and amortization expense decreased slightly in 1994 compared
to 1993 as the result of a decrease in depreciation expense arising from
the re-valuation of property and equipment under fresh start reporting
which was partially offset by an increase in amortization expense arising
from the amortization of the reorganization value in excess of amounts
allocable to identifiable assets under fresh start reporting.
Depreciation and amortization expense was higher in 1993 than in 1992
largely as the result of increased heavy engine overhauls.
- Restructuring charges incurred in 1992 consisted of the following:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Write-off for certain assets related to station closures or route
restructuring.................................................. $ 9.5
Provision for spare parts for aircraft types no longer in
service........................................................ 12.7
Provision for employee severance................................. 2.3
Loss on return of aircraft....................................... 6.8
------
$31.3
=====
</TABLE>
The restructuring charges were necessitated by aircraft fleet
reductions and other operational changes. The Company reduced its fleet to
87 aircraft at the end of 1992 as well as eliminated two of five aircraft
types it operated. Additionally, the number of employees was reduced by
approximately 1,500 employees and service was terminated to ten cities
through the end of 1992.
- The increase in other operating expense for 1994 compared to 1993 and
1992 is due to increased advertising costs and other expenses related to
increased passenger traffic such as credit card discount fees, booking
fees, catering expenses and supplies.
Nonoperating expenses (net of nonoperating income) were $327.9 million on a
combined basis for 1994, $83.1 million for 1993 and $56.9 million for 1992.
Interest expense increased to $56.6 million in 1994 compared to $54.2 million in
1993 and $55.8 million in 1992. The increase in interest expense is primarily
the result of the issuance of $123 million of the Existing Notes in connection
with the Company's emergence from bankruptcy protection. In conformity with
Statement 90-7, the Company ceased accruing and paying interest on certain
prepetition long-term debt so long as the Company remained a
debtor-in-possession. Had the Company continued to accrue interest on such debt,
interest expense for 1994, 1993 and 1992 would have been $67.3 million, $73.0
million and $73.9 million, respectively. The Company incurred expenses of $273.7
million in 1994, $25 million in 1993 and $16.2 million in connection with its
efforts to reorganize under Chapter 11. See Note 1 of Notes to Financial
Statements for further discussion with respect to reorganization.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a working capital deficiency which increased to $67.8
million at March 31, 1995 from $47.9 million at December 31, 1994. This increase
reflects an increase in accounts payable arising from the higher level of heavy
engine maintenance and an increase in the air traffic liability arising from
higher levels of advance ticket bookings. The effect of these two liability
increases more than offset the increase in cash and cash equivalents discussed
above. Despite the working capital deficiency, the Company expects to meet all
of its obligations as they become due. Cash and cash equivalents increased to
$213.4 million at March 31, 1995 from $182.6 million at December 31, 1994. Cash
generated from operating activities for the three months
29
<PAGE> 32
ended March 31, 1995 and 1994 amounted to $73.4 million and $79.6 million,
respectively. During the first quarter of 1995, the Company incurred capital
expenditures of $29.0 million compared to $13.7 million in 1994. The capital
expenditures incurred for both the first quarters of 1995 and 1994 consisted
largely of aircraft spare parts and heavy engine overhauls.
On January 1, 1995, the Total Pay Program became effective. The program is
designed to provide employees with a pay and benefits package which is
competitive with other low-cost airlines and local employers. The Total Pay
Program is anticipated to increase non-executive pay by approximately $25
million annually. In addition, an accrual of $1.4 million was made during the
1995 first quarter to begin to provide for performance awards under the Award
Pay element of the Total Pay Program. Partially offsetting these increases were
reductions in force arising from a strategic restructuring program. In January
1995, the Company closed its reservations center in Colorado Springs, Colorado
which reduced the employee census by approximately 100 positions and in March
1995, further reductions in force of approximately 700 positions were realized.
When fully implemented, the strategic restructuring programs are anticipated to
result in the elimination of approximately 1,300 positions with associated
annual cost savings of approximately $40 million.
At March 31, 1995, the Company had net operating loss ("NOL") and general
business tax credit carryforwards of approximately $557.4 million and $12.7
million, respectively. Under Section 382 of the Internal Revenue Code of 1986,
as amended, if a loss corporation has an "ownership change" within a designated
testing period, its ability to use its NOL and credit carryforwards is subject
to certain limitations. The Company is a loss corporation within the meaning of
Section 382. The issuance of certain common stock by the Company pursuant to the
Plan of Reorganization resulted in an ownership change within the meaning of
Section 382. This ownership change entails an annual limitation (the "Section
382 Limitation") upon the Company's ability to offset any post-change taxable
income with pre-change NOL. Should the Company generate insufficient taxable
income in any post-change taxable year to fully utilize the Section 382
Limitation of that year, any excess limitation will be carried forward to use in
subsequent tax years, provided the pre-change NOL has not been exhausted nor has
the carryforward period expired.
The Company's reorganization and the associated implementation of fresh
start reporting gave rise to significant items of expense for financial
reporting purposes that are not deductible for income tax purposes. In large
measure, it is these nondeductible expenses that result in an effective tax rate
(for financial reporting purposes) significantly greater than the current U.S.
corporate statutory rate of 35 percent. Nevertheless, the Company's actual
income tax liability (i.e., income taxes payable) is considerably lower than
income tax expense shown for financial reporting purposes. This difference in
financial expense compared to actual income tax liability is in part
attributable to tax attributes (including NOL carryforwards, subject to certain
limitations) of the Predecessor Company that serve to reduce the Company's
actual income tax liability. To the extent the tax attributes of the Predecessor
Company reduce the Company's actual income tax liability below the amount of
expense reflected in the financial statements, that difference is applied to
reduce the carrying balance of the Company's Reorganization Value in Excess of
Amounts Allocable to Identifiable Assets.
At March 31, 1995, the Company had on order a total of 24 Airbus A320-200
aircraft, with an aggregate net cost estimated at $1.1 billion. Delivery dates
of the aircraft will fall in the years 1998 through 2000 with an option to defer
the 1998 deliveries. If new A320 aircraft are delivered as a result of a
renegotiated put agreement (described below), the Company will have the right to
cancel on a one-for-one basis, up to a maximum of eight non-consecutive aircraft
deliveries hereunder, subject to certain conditions. Additionally, the Company
has the option to cancel, without cause, up to an additional four aircraft with
thirty months prior notice, and the Company has the right, with Continental's
concurrence, to assign all or some of these delivery positions to Continental.
In December 1994, the Company entered into a support contract with
International Aero Engines ("IAE") which provides for the purchase by the
Company of six new V2500-A5 spare engines scheduled for delivery beginning in
1998 through 2000 for use on the A320 fleet. Such engines have an estimated
aggregate cost of $42.3 million for which the Company has provided a $1.5
million security deposit in the form of a letter of credit. Pursuant to a side
letter to an earlier contract with IAE, the Company agreed to purchase from IAE
30
<PAGE> 33
prior to December 31, 1995, a new or used V2500-A1 engine. During the first
quarter of 1995, such agreement was modified to include the following terms:
- Acquisition of a new V2500-A5 engine instead of a V2500-A1 at a cost of
approximately $7.1 million.
- Reduction of the letter of credit requirement under the agreement to
acquire six spare V2500-A5 engine to $600,000 from $1.5 million.
- Release of previously restricted cash of $900,000 which collateralized
the letter of credit requirement and payment of such amount to IAE as a
down payment on the A5 engine discussed above, with IAE carrying the
balance at no interest until January 1996 at which time the Company will
be required to secure alternative financing.
The following table reflects estimated cash payments under the aircraft and
engine purchase contracts as of March 31, 1995. Actual payments may vary due to
inflation factor adjustments and changes in the delivery schedule of the
equipment. The estimated cash payments include the progress payments that will
be made in cash, as opposed to being financed under an existing progress payment
financing facility.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995............................................... $ 3,223
1996............................................... 32,608
1997............................................... 58,230
1998............................................... 379,309
1999............................................... 355,540
2000............................................... 350,863
----------
$1,179,773
==========
</TABLE>
At March 31, 1995, the Company has significant capital commitments for a
number of new aircraft, as discussed above. Although the Company has arranged
for financing for up to one-half of the commitment to AVSA S.A.R.L., an
affiliate of Airbus Industrie ("AVSA"), the Company will require substantial
capital from external sources to meet its remaining financial commitments. The
Company intends to seek additional financing (which may include public debt
financing or private financing) in the future when and as appropriate. There can
be no assurance that sufficient financing will be obtained for all aircraft and
other capital requirements. A default by the Company under any such commitment
could have a material adverse effect on the Company.
At March 31, 1995, the Company had a put agreement for seven aircraft with
deliveries to start no earlier than June 30, 1995 and end on June 30, 1999.
Under the agreement, new or used B737-300, B757-200, or new or "like new"
A320-200 aircraft may be put to the Company at a rate of no more than two
aircraft in 1995, and with respect to each ensuing year during the put period,
of no more than three aircraft. In addition, no more than five used aircraft may
be put to the Company, and for every new A320 aircraft put to the Company, the
Company has the right to reduce deliveries under the AVSA A320 purchase contract
on a one-for-one basis. The put agreement provides that during each January of
the put period, the Company will negotiate the type and delivery dates for terms
ranging from three to eighteen years, depending on the type and condition of the
aircraft.
Within the period of January 1, 1995 to December 31, 2000, the Company has
23 aircraft whose lease arrangements are due to expire, 11 of which may be
extended at the option of the lessor. Given this situation and the other
aircraft commitments discussed above, the Company has the flexibility to expand
or contract its fleet as business conditions warrant.
In February 1995, the Company entered into an agreement under the 1994 Put
Agreement to lease one Boeing 737-300 aircraft for five years at a rental rate
subject to reset every six months based on LIBOR. Payments for the aircraft are
due monthly.
In April 1995, the Company entered into an agreement to lease one Boeing
757 aircraft and two A320 aircraft. Under the arrangements, the Boeing 757
aircraft has a term of two years with payments due monthly
31
<PAGE> 34
and the two A320 aircraft have terms of eight years with payments due monthly.
The two A320 aircraft were received under the 1994 Put Agreement, reducing the
number of put aircraft from seven at March 31, 1995 to five.
Under the AVSA A320 purchase contract, the Company has the right to reduce
deliveries on a one for one basis for the two A320 put aircraft received in
April but such election has not been made. The Company has a letter agreement
that preserves such cancellation right but the cancellation right must be
exercised no earlier than April 15, 1996 and no later than April 17, 1997 and
the cancellation right is limited to any future A320 delivery with a scheduled
delivery date at least thirty months from the date such cancellation right is
exercised.
Certain of the Company's long-term debt agreements contain minimum cash
balance requirements, leverage ratios, coverage ratios and other financial
covenants with which the Company was in compliance at March 31, 1995.
SEASONALITY
The Company's operations are seasonal and the Company generally experiences
its highest traffic levels in spring, summer and the holiday season.
32
<PAGE> 35
BUSINESS
America West is a major United States air carrier providing passenger,
cargo and mail service with principal hubs in Phoenix, Arizona and Las Vegas,
Nevada, and a mini-hub in Columbus, Ohio. America West served 47 destinations
with a fleet of 88 jet aircraft as of March 31, 1995. At such date, the Company
had connecting service to an additional 20 destinations through alliances with
Mesa and to an additional 23 destinations through an alliance with Continental.
The Company emerged from bankruptcy under Chapter 11 of the Bankruptcy Code
on August 25, 1994. In connection with the Reorganization, the Company took
significant steps to improve its operations, including (i) reducing its fleet
size from 123 aircraft in July 1991 to 85 as of April 1993, facilitating a
better matching of capacity to demand through elimination of nonproductive
routes; (ii) reducing the aircraft types operated from five to three to reduce
operating costs; (iii) implementing certain enhancements to its revenue
management system to optimize the level of passenger revenues generated on each
flight; (iv) eliminating Company operated commuter service and introducing
code-sharing agreements to expand the scope of service and attract a broader
passenger base; and (v) implementing numerous cost reduction programs, including
the reduction of aircraft lease rentals to fair market rates in the fall of
1992. America West was one of only two major United States airlines to report a
profit in each quarter of 1993 and 1994.
BUSINESS STRATEGY
The Company's business strategy is to offer competitive fares while
providing an incrementally higher level of service relative to low cost
carriers. The principal features of the Company's business strategy are as
follows.
Maintain Competitive Pricing While Providing Differentiated
Service. America West operates with one of the lowest cost structures among the
major U.S. airlines, based on reported 1994 results. The Company's operating
cost per ASM for 1994 was 6.99 cents, which was approximately 22% less than the
average operating cost per ASM of the nine largest other domestic airlines, and
was comparable on a non-stage length adjusted basis to the cost structure of
Southwest Airlines which operates in the Company's principal market areas.
Management believes that the Company can continue to offer fares that are
competitive with those offered by low cost carriers in the Company's markets,
while providing a differentiated level of service. Passenger services provided
by America West include assigned seating, participation in computerized
reservation systems, interline ticketing, first class cabins on certain flights,
baggage transfer and various other services. The Company believes that these
features distinguish America West from certain low cost carriers in the
Company's markets, including Southwest Airlines, and enable the Company to
attract passengers without competing solely on the basis of fares.
Achieve Growth in Revenue Passenger Miles. Management believes the
Company's pricing and service strategies, together with a gradual improvement of
general economic activity, will enable the Company to achieve growth in revenue
passenger miles in its existing markets and to expand into certain other North
American markets. Management believes that growth in existing markets will be
achieved in part due to the location of the Company's principal hubs. Both
Phoenix and Las Vegas are experiencing population growth in excess of national
averages, and these hubs are well situated to benefit from an expanding market
for leisure travel.
Expand Service through Alliances. The Company entered into certain
agreements (the "Alliance Agreements") with Continental and Mesa. Such
agreements provide for code-sharing arrangements and coordination of flight
schedules and include sharing ticket counter space, linking in part their
frequent flyer programs, and coordinating ground handling operations. Management
believes the Alliance Agreements will contribute significantly to the Company's
growth in revenue passenger miles and operating results.
Maintain a Cost Effective Fleet. In connection with its Reorganization,
the Company substantially reduced its aircraft fleet, reduced the aircraft types
from five to three and renegotiated lease rates for certain aircraft to fair
market rates. As of March 31, 1995, the Company's fleet consisted of 58 Boeing
737s, 17 Airbus 320s and 13 Boeing 757s, with an average age of approximately
9.3 years. The fleet enables the
33
<PAGE> 36
Company to achieve low fuel costs compared to industry averages and to enjoy
operational efficiencies due to the limited number of aircraft types. Current
plans provide for increasing the Company's fleet through the acquisition of
additional aircraft of the types currently operated by the Company.
OPERATIONS
Hub Operations. The Company operates primarily through hub airports in
Phoenix and Las Vegas and, to a lesser extent, through its mini-hub in Columbus,
Ohio. The Company schedules banks of flights timed to arrive at the hub from one
direction at approximately the same time and to depart toward the opposite
direction a short time later. The hub system allows the Company to transport
passengers between a large number of destinations with substantially more
frequent service than if each route were served directly.
The Company is the leading airline serving Phoenix Sky Harbor International
Airport with approximately 38% of all enplanements during 1994. In Las Vegas,
the Company is the second largest carrier with approximately 26% of all
enplanements during 1994. In both markets the Company's principal competitor is
Southwest Airlines, which handled approximately 31% and 30% of enplanements in
Phoenix and Las Vegas, respectively, in 1994. America West offers fares
comparable to or below those of its competitors on most routes. America West is
able to use pricing as a part of its strategy because of its ability to provide
service generally comparable to the full service airlines while maintaining a
lower cost structure than these competitors. In selected markets, America West
has chosen not to match Southwest Airlines' fares, but differentiates itself
from Southwest Airlines in these and other markets by providing assigned
seating, interline ticketing, baggage transfer and various other services not
offered by Southwest Airlines.
The Company established a mini-hub at Columbus, Ohio in December 1991. As
of March 31, 1995, the Company provided non-stop jet service to 11 destinations
from Columbus. During 1994, the Company enplaned approximately 24% of the
Columbus traffic compared to approximately 23% for USAir, the Company's
principal competitor at Columbus.
The success of the Company's hub system depends on its ability to attract
passengers traveling to and from its hubs, as well as passengers traveling
through the hubs to the Company's other destinations. The Company believes that
several factors have contributed to the success of its operations in Phoenix and
Las Vegas. First, the rate of population growth in these two cities has exceeded
the national average in recent periods. Second, Phoenix and Las Vegas are
popular vacation destinations and, therefore, benefit from the fact that a
growing percentage of airline travelers are leisure or non-business travelers.
Third, the Company believes that certain costs of operating in Phoenix and Las
Vegas are less than in certain other geographic regions. Finally, these hub
operations allow the Company to serve a number of relatively high density routes
that involve short- and medium-haul service without competing directly in the
more intensely competitive long-haul markets against larger carriers.
The Company continually evaluates its operating strategy in light of
changing market conditions. The Company's current strategy is to increase
utilization of its existing hub facilities by increasing frequency of service on
existing routes served by its hub operations and identifying selected markets
into which the Company can expand utilizing its existing hub operations. An
important part of the Company's strategy involves codesharing arrangements with
regional carriers that serve its hub airports and alliances with major or
foreign carriers that complement the Company's operations.
Regional/Commuter Service. A number of passengers served by the Company
arrive at or depart from its hub airports via regional or commuter service
airlines that serve the surrounding areas. These airlines typically utilize
turboprop rather than jet aircraft and focus on flights less than 200 miles in
length and 90 minutes in duration. In order to maximize the number of
enplanements of passengers from these commuter airlines, America West has
entered into a codesharing agreement with Mesa designed to establish Mesa as a
feeder carrier for the Company at its Phoenix hub.
Alliance Agreements. The Company entered into certain Alliance Agreements
with Continental and Mesa. The Company and Continental agreed to implement
certain code-sharing arrangements, coordinate certain flight schedules, share
ticket counter space, link in part their frequent flyer programs, and coordinate
34
<PAGE> 37
ground handling operations for mutual benefit. These arrangements are being
implemented in phases, which commenced in the fourth quarter of 1994. The
Company believes that it will realize substantial benefits from such agreements,
which are intended to increase the number of America West enplanements of
Continental passengers and vice versa. In addition, the Company will be able to
offer its existing customers connections to a greater number of destinations
served by Continental, which may permit the Company to further increase its
market share in its hub markets. With Mesa, America West has entered into a
codesharing agreement that establish Mesa as a feeder carrier for the Company at
its Phoenix hub. The codesharing agreement provides for coordinated flight
schedules, passenger handling and computer reservations under the America West
flight designator code, thereby allowing passengers to purchase one air fare for
their entire trip. Mesa connects 12 cities to the Company's Phoenix hub,
operates under the name "America West Express" and has begun to incorporate the
color scheme and commercial logo of America West on certain aircraft utilized on
these routes. In August 1994, the Company and Mesa agreed to extend the terms of
the codesharing agreement until 2004. Recently, Mesa began to offer jet service
under its codesharing agreement with the Company, employing Fokker F70 aircraft.
Mexico and Canada. The Company serves Mexico City, Mazatlan and Los Cabos,
Mexico and Vancouver, British Columbia.
COMPETITION AND MARKETING
The airline industry is highly competitive and susceptible to price
discounting, and America West must compete on certain routes with carriers that
may be larger and may have substantially greater resources. The entry of
additional carriers on many of the Company's routes (as well as increased
competition from or the introduction of new services by established carriers)
could negatively impact America West's results of operations. Generally, the
passenger carrier industry is segmented into markets based on the length of trip
and level of service, including long-haul domestic and international routes,
medium-haul (two to three hours) and short-haul (less than two hours) routes
serviced by jet aircraft, and commuter routes served by turboprop aircraft.
America West services primarily short-haul and medium-haul routes connected to
its hub operations, engages only to a limited extent in long-haul flights, which
are dominated by larger carriers, and does not engage in regional commuter
flights, which are primarily served by smaller non-jet carriers. America West
competes primarily with Southwest Airlines at its Phoenix and Las Vegas hub
operations and with USAir and Delta Airlines at its Columbus mini-hub.
As is the case with other carriers, most tickets for travel on America West
are sold by travel agents through computer reservation systems that have been
developed and are controlled by other airlines. Travel agents generally receive
commissions based on the price of tickets sold. Accordingly, airlines compete
not only with respect to the price of tickets sold but also with respect to the
amount of commissions paid. In early 1995, certain of the major domestic
airlines initiated a program to cap the amount of commissions paid to travel
agents at $50 for domestic round-trip tickets with fares of $500 or more. The
Company is in the process of evaluating this commission structure but has not
yet adopted such a program. Airlines often pay additional commissions in
connection with special revenue programs. Federal regulations have been
promulgated that are intended to diminish preferential schedule displays and
other practices with respect to the reservation systems that place the Company
and other similarly situated users at a competitive disadvantage to the airlines
controlling the systems.
The Company began testing electronic or paperless ticketing on May 15,
1995, which the Company believes would reduce distribution costs.
The Company has implemented certain measures to increase leisure travel
utilizing America West flights. In 1987, the Company developed America West
Vacations, which is a tour packaging division that arranges vacation packages
that include hotel accommodations, air fare and ground transportation in certain
markets. During 1994, this division sold approximately 749,000 room nights, had
approximately 53,250 rental car days, handled approximately 501,400 passengers
and generated approximately $161 million in gross package sales. In 1993, the
Company became the preferred commercial air carrier of the MGM Grand Hotel
Casino and Theme Park ("MGM") in Las Vegas. Pursuant to an agreement with MGM,
America West will
35
<PAGE> 38
develop joint marketing programs that target travel agents and consumers, which
management believes will enhance America West's presence in the Las Vegas
market. America West also is an official airline of Knott's Berry Farm in Buena
Park, California, one of the country's best-known and best-attended family
entertainment parks. The Company sponsors the theme park's America West Airlines
Mystery Lodge, a popular attraction with guests who visit the park.
The Company also has an exclusive arrangement with the Phoenix Suns
professional basketball team pursuant to which the arena in which the team plays
is named "America West Arena," and the Company's name and logo appear throughout
the facility, including on the basketball court. As a result of this
association, the Company receives media exposure during national and local
telecasts of Phoenix Suns basketball games, as well as during other events at
the arena. An advertising and media arrangement with the Arizona Diamondbacks,
which is the major league baseball franchise that will begin play in Phoenix in
1998, is also planned. In addition, America West provides exclusive carrier
service to a number of professional and college sports teams.
FLIGHTFUND
All major airlines have established frequent flyer programs to encourage
travel on that particular carrier. America West offers the FlightFund program
that allows members to earn mileage credits by flying America West and by using
the services of other program participants such as hotels, car rental firms and
other specialty services. FlightFund members are also allowed to earn mileage
credit by flying partner carriers. For example, in 1994, the Company entered
into an Alliance Agreement with Continental that allows FlightFund members to
earn mileage credit on code-share flights. In addition, the Company periodically
offers special short-term promotions that allow members to earn additional free
travel awards or mileage credits. When a FlightFund member accumulates mileage
credits of 20,000 miles, the Company issues mileage award certificates that can
be redeemed for various travel awards, including first class upgrades and
tickets on America West or other airlines participating in America West's
frequent flyer program. Most travel awards are subject to blackout dates and
capacity controlled seating. Mileage award certificates automatically expire
after two years if issued prior to April 1, 1993 and after three years for
certificates issued after that date. Travel is valid up to one year from the
date of ticketing. FlightFund awards may also be redeemed for flights to certain
international destinations and Hawaii. America West is required to purchase
space on other airlines to accommodate such award redemption.
The Company accounts for the FlightFund program under the incremental cost
method whereby travel awards are valued at the incremental cost of carrying one
additional passenger. Costs including passenger food, beverages, supplies, fuel,
liability insurance, purchased space on other airlines and denied boarding
compensation are accrued as frequent flyer program participants accumulate
mileage to their accounts. Such unit costs are based upon expenses expected to
be incurred on a per passenger basis. No profit or overhead margin is included
in the accrual for these incremental costs.
FlightFund's current membership is approximately 2.0 million participants.
At December 31, 1994, 1993 and 1992, the Company estimated that approximately
369,000, 238,000 and 238,000 travel awards were expected to be redeemed.
Correspondingly, the Company had an accrued liability of $9.8 million, $7.4
million and $7.3 million for 1994, 1993 and 1992, respectively. The accrual is
based upon the Company's estimates of mileage earned that will eventually be
redeemed for a travel award.
The number of FlightFund travel awards redeemed for round-trip travel for
the years ended December 31, 1994, 1993 and 1992, was approximately 109,000,
99,000 and 106,000, respectively, representing 2.6%, 2.8% and 3.0% of total
revenue passenger miles for each respective period. The Company does not believe
that the usage of free travel awards results in any significant displacement of
revenue passengers due to the Company's ability to manage frequent flyer travel
by use of blackout dates and limited seat availability.
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AIRCRAFT
At March 31, 1995, the Company operated a fleet of 58 Boeing 737s, 17
Airbus A320s and 13 Boeing 757s as follows:
<TABLE>
<CAPTION>
AVERAGE
REMAINING
NUMBER AVERAGE LEASE
AIRCRAFT TYPE STATUS (1) AIRCRAFT AGE (YRS.) TERM (YRS.)
---------------------------------------- ---------- ------ ---------- -----------
<S> <C> <C> <C> <C>
B737-100................................ Owned 1 25.5 --
B737-200................................ Owned 5 16.1 --
B737-200................................ Leased 17 15.2 5.4
B737-300................................ Leased 24 7.8 5.3
B737-300................................ Owned 11 6.4 --
B757-200................................ Leased 11 9.0 10.7
B757-200................................ Owned 2 5.5 --
A320 Leased.. 17 5.2 16.4
--
88 9.3 8.9
======
</TABLE>
---------------
(1) Each of the aircraft that is designated as owned serves as collateral for a
loan pursuant to which the aircraft was acquired by the Company or serves as
collateral for a non-purchase money loan.
Beginning in April 1995 through September 1998, leases for 20 of the
Company's aircraft are scheduled to terminate (such aircraft are 12 Boeing
B737-300s, six Boeing B737-200s, one Boeing B757-200 and one Airbus A320-200).
At the option of the lessor, the lease for one of the B737-300 aircraft may be
extended for up to 48 months, and the leases for 10 of the B737-300 aircraft may
each be extended for up to 60 months. There are no contractual options to extend
any other of such leases.
In February 1995, the Company leased a B737-300 aircraft for a term of five
years. Additionally, the Company entered into lease agreements for two A320-200
aircraft. All of these aircraft were leased by the Company under the 1994 Put
Agreement discussed below.
Certain of the Company's aircraft lessors have the option to call their
respective aircraft upon adequate notice to the Company (such notice periods
range from 60 to 180 days). Usually, if such call options are exercised, the
Company has the right of first refusal to retain the aircraft by matching the
terms of bona fide third party offers received by the lessors to lease or
purchase such aircraft. None of these options have been exercised. The last of
these call options expires in July 1997. In addition, certain other of the
Company's aircraft lessors have an option to reset their respective rentals to
the greater of the existing rentals being paid under the leases or the then
current fair marketrates. The first round of these resets, involving 11
aircraft, occurred in August 1994. The rentals for seven of these aircraft may
be reset two more times over the remaining lease terms, with the next possible
reset not occurring before August 1996. The call and reset options were granted
to these lessors in exchange for rental reductions and payment deferrals in 1992
and 1991, respectively. The Company does not believe that the possible exercise
of any or all of these options will have a material effect on its operations.
As a part of the Reorganization, the Company amended a purchase agreement
with AVSA for the acquisition of 24 Airbus A320-200 aircraft with an aggregate
net cost estimated at $1.1 billion. These amendments provide to the Company
reduced prices for and certain options regarding the number and delivery dates
of the aircraft to be acquired under the agreement. The aircraft are scheduled
to be delivered to the Company at the rate of eight per year in 1998, 1999 and
2000. Upon adequate notice to AVSA, the Company may: defer all or some of the
1998 deliveries to either 2001 or 2002; for every new A320 aircraft leased to
the Company under the 1994 Put Agreement (described below), cancel up to the
number of such leased aircraft (subject to certain conditions); cancel without
cause up to an additional four aircraft; and, with Continental's consent, assign
all or some of its delivery positions to Continental. Additionally, AVSA and the
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<PAGE> 40
manufacturer of the engines that will power the subject aircraft have agreed to,
if requested by the Company and on its behalf, finance jointly up to one-half of
the aircraft delivered under this agreement, subject to certain conditions.
In June 1994, the Company entered into a put agreement with a certain
lessor providing the lessor with a right to lease up to eight aircraft to the
Company (the "1994 Put Agreement"). This agreement replaced a similar agreement
with this lessor involving 10 aircraft (none of which were ever leased to the
Company). These aircraft may be new or used B737-300 and B757-200 aircraft (of
which no more than five may be used aircraft) and new or "like new" A320
aircraft. Unless otherwise consented to by the Company, beginning in June 1995
and ending by June 1999, the lessor may, with adequate notice to the Company,
put to the Company up to two aircraft in 1995 and no more than three aircraft
per year thereafter. The rentals for such aircraft will be at the then current
market rates with lease terms ranging from three to 18 years depending on the
type and condition of the aircraft, which will be predetermined by the Company
and the lessor. In connection with the 1994 Put Agreement and for other
consideration, this lessor was paid approximately $30.5 million and issued
certain equity securities by the Company on the Effective Date.
In June 1994, the Company and another lessor cancelled a similar agreement
involving four aircraft. In consideration for such cancellation, the Company
paid the lessor $2.5 million in June 1994 and $2.0 million in August 1994.
In connection with the Plan, the Company rejected certain aircraft purchase
agreements with The Boeing Company ("Boeing"). As part of this settlement,
Boeing retained certain of the Company's cash purchase deposits that it held
under these agreements.
In December 1994, the Company entered into a support contract with IAE
which provides for the purchase by the Company of six new V2500-A5 spare engines
scheduled for delivery beginning in 1998 through 2000 for use on the A320 fleet.
Such engines have an estimated aggregate cost of $42.3 million.
FACILITIES
America West's principal facilities are associated with its hub operations
in Phoenix, Las Vegas and Columbus. The Company operates from Terminal 4 of
Phoenix Sky Harbor International Airport pursuant to a lease agreement that
includes 28 gates and approximately 258,200 square feet at December 31, 1994.
The Company also leases approximately 25,000 square feet of additional space at
the airport for administrative offices and pilot training. Since 1988, the
Company has owned a 660,000 square foot maintenance and technical support
facility that includes four hangar bays, hangar shops, two flight simulator
bays, and warehouse and commissary facilities.
In Las Vegas, the Company leases approximately 80,000 square feet of space
at McCarran International Airport, which includes seven gates and adjoining
holding room areas. At the Company's Columbus, Ohio mini-hub, the Company leases
30,000 square feet and two gates and has the ability to sublease additional
gates from other airlines as the need arises. Pursuant to the Company's Alliance
Agreement with Continental, certain of the station operations for both carriers
have been consolidated in an effort to reduce operating expenses.
Space for ticket counters, gates and back offices has also been obtained at
each of the other airports served by the Company, either by lease from the
airport operator or by sublease from another airline. Some of the Company's
airport sublease agreements include requirements that the Company purchase
various ground services at the airport from the lessor airline at rates in
excess of what it would cost the Company to provide those services itself.
The Company owns the 68,000 square foot America West Corporate Center at
222 South Mill Avenue in Tempe, Arizona. The Company currently leases
approximately 500,000 square feet of general office and other space in Phoenix
and Tempe, Arizona.
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<PAGE> 41
EMPLOYEES
At March 31, 1995, the Company employed 7,937 full-time and 2,739 part-time
employees, the equivalent of 10,280 fulltime employees. During 1994, the Company
had 1,685,500 available seat miles per full-time equivalent employee and
1,141,700 revenue passenger miles per full-time equivalent employee, based on
the number of full-time equivalent employees at year end.
In January 1995, the Company announced its new compensation program, the
Total Pay Program. This program is designed to provide employees with a pay and
benefits package which is competitive with other low-cost airlines and local
employers. In addition, performance awards of up to 25% of base pay will be made
to employees provided certain annually established operating income targets are
attained. The Total Pay Program is expected to increase non-executive pay by
approximately $25 million annually. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." Concurrent with this new compensation program, the Company announced
that it is in the process of strategically overhauling its work processes which
is anticipated to reduce its workforce by approximately 1,300 employees. The
Company anticipates that the cost savings, including the reduction in workforce,
will be about $40 million in 1995. In addition, in December 1994, the Board of
Directors approved the America West 1994 Incentive Equity Plan which authorizes
the grant of various stock, stock-related and cash awards to employees and
non-employee directors of the Company. Such plan was approved by the Company
stockholders at the 1995 Annual Meeting of Stockholders in May 1995.
In October 1993, ALPA was certified by the National Mediation Board as the
bargaining representative of the Company's flight deck crew members. Formal
negotiations commenced in April 1994 and in April 1995, the Company and its
pilots, represented by ALPA, reached a five year agreement, which was later
ratified by the pilots. Among the material provisions of the agreement are the
following:
- Pilot productivity improvements of up to 10%;
- A single pay scale for all aircraft types;
- Pay increases averaging 6.9% annually or approximately $35.0 million over
the term;
- Flexible work rules;
- Management's right to staff the airline and to enter into strategic
alliances is preserved; and
- Sympathy work stoppages or job actions by the pilots are precluded.
The contract took effect beginning May 1, 1995.
In June 1994, the National Mediation Board accepted the AFA petition to
represent the Company's flight attendants and in September 1994, the Company's
flight attendants voted in favor of AFA representation and contract negotiations
are ongoing. In April 1994, the TWU filed a petition to represent the Company's
fleet service personnel which petition was rejected in December 1994. The IBT
filed applications to represent the Company's mechanics including related
personnel and the Company's flight simulator technicians in August and September
1994, respectively. Both of these applications were rejected in December 1994,
and the IBT thereafter withdrew another pending application previously filed
with respect to stock clerks. The TWU filed an application to represent the
Company's dispatcher and assistant dispatcher personnel in April 1995. This
application was rejected in June 1995. The Company cannot predict the effect, if
any, that a future collective bargaining agreement with the AFA or any other
collective bargaining representative would have on the Company's operations or
financial performance.
GOVERNMENT REGULATIONS
Noise Abatement and Other Restrictions. The Airport Noise and Capacity Act
of 1990 provides, with certain exceptions, that after December 31, 1999, no
person may operate certain large civilian turbo-jet aircraft in the United
States that do not comply with Stage 3 noise levels, which is the FAA
designation for the quietest commercial jets. These regulations will require
carriers to gradually phase out their noisier jets, either replacing them with
quieter Stage 3 jets or equipping them with hush kits to comply with noise
39
<PAGE> 42
abatement regulations, over a five-year period commencing December 31, 1994. As
of December 31, 1994, approximately 74 percent of America West's fleet was in
compliance with the FAA noise abatement regulations, and the Company expects
that it will meet the thresholds imposed by such regulations through scheduled
retirement of its older aircraft.
Numerous airports, including those serving Boston, Denver, Los Angeles,
Minneapolis-St. Paul, New York City, San Diego, San Francisco, San Jose, Orange
County, Washington, D.C., Burbank and Long Beach have imposed restrictions such
as curfews, limits on aircraft noise levels, mandatory flight paths, runway
restrictions and limits on number of average daily departures, which limit the
ability of air carriers to provide service to or increase service at such
airports. In February 1995, the Company obtained approval to increase service at
Orange County's John Wayne Airport, which is a capacity controlled airport, by
five daily flights. The Port Authority of New York and New Jersey is considering
a phaseout of Stage 2 aircraft on a more accelerated basis than that of the FAA
requirement. The Company's Boeing 757-200s, 737-300s and Airbus A320s all comply
with the noise abatement requirements of the airports listed above.
The Company operates in airports with take-off and landing time slot
restrictions and other restrictions on the use of facilities. Such restrictions
may result in curtailment of services by and increased operating costs for
individual airlines, including America West. In general, the FAA rules relating
to allocated slots at high density airports contain provisions requiring the
relinquishment of slots for nonuse and permit carriers, under certain
circumstances, to sell, lease or trade their slots to other carriers. All slots
must be used on 80% of the dates during each reporting period. Failure to
satisfy the 80% use rate will result in loss of the slot. The slot would revert
to the FAA and be reassigned through a lottery arrangement.
Fuel Tax Increases. In August 1993, the federal government increased taxes
on fuel, including aircraft fuel, by 4.3 cents per gallon. Airlines are exempt
from this tax until October 1, 1995. When implemented, this tax will increase
the Company's annual operating expenses by approximately $13 million based upon
its 1994 fuel consumption levels.
PFC Charges. During 1990, Congress enacted legislation to permit airport
authorities, with prior approval from the DOT, to impose passenger facility
charges ("PFCs") as a means of funding local airport projects. These charges,
which are intended to be collected by the airlines from their passengers, are
limited to $3.00 per enplanement, and to no more than $12.00 per round trip. As
a result of competitive pressure, the Company and other airlines have been
limited in their abilities to pass on the cost of the PFCs to passengers through
fare increases.
Environmental Matters. The Company is subject to regulation under major
environmental laws administered by state and federal agencies, including the
Clean Air Act, Clean Water Act and Comprehensive Environmental Response
Compensation and Liability Act of 1980. In some locations there are also county
and sanitary sewer district agencies which regulate the Company. The Company
believes that it is in substantial compliance with applicable environmental
regulations.
Aging Aircraft Maintenance. The FAA issued several Airworthiness
Directives ("AD") in 1990 mandating changes to the older aircraft maintenance
programs. These ADs were issued to ensure that the oldest portion of the
nation's fleet remains airworthy. The FAA is requiring that these aircraft
undergo extensive structural modifications. These modifications are required
upon the accumulation of 20 years time in service, prior to the accumulation of
a designated number of flight cycles or prior to 1994 deadlines established by
the various ADs, whichever occurs later. Six of the Company's 88 aircraft are
currently affected by these aging aircraft ADs and are in compliance with such
ADs. The Company constantly monitors its fleet of aircraft to ensure safety
levels which meet or exceed those mandated by the FAA or the DOT.
Safety. America West is subject to the jurisdiction of the FAA with
respect to aircraft maintenance and operations, including equipment, dispatch,
communications, training, flight personnel and other matters affecting air
safety. The FAA has the authority to issue new or additional regulations. To
ensure compliance with its regulations, the FAA requires the Company to obtain
operating, airworthiness and other certificates which are subject to suspension
or revocation for cause. In addition, a combination of FAA and Occupational
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Safety and Health Administration regulations on both federal and state levels
apply to all of America West's ground-based operations.
CRAF Program. In time of war or during a national emergency, United States
air carriers may be required to provide airlift services to the Military Airlift
Command under the Civil Reserve Air Fleet Program.
INSURANCE
The Company has arranged a program of insurance of the types and in the
amounts it believes customary in the airline industry, including coverage for
public liability, passenger liability, property damage, aircraft loss or damage,
cargo liability and workers' compensation. The Company believes such insurance
is adequate as to both risks covered and coverage amounts.
LEGAL PROCEEDINGS
The Company emerged from bankruptcy on the Effective Date after operating
as a debtor-in-possession since June 27, 1991, when the Company filed a
voluntary petition to reorganize under Chapter 11 of the Bankruptcy Code.
As contemplated by the Plan, certain administrative and priority tax claims
remain pending against the Company, which, if ultimately allowed by the
Bankruptcy Court, would represent general obligations of the Company. Such
claims include claims of various state and local tax authorities, most of which
represent ordinary course pre-bankruptcy tax obligations not paid during the
pendency of the bankruptcy proceedings, certain indemnification obligations
under contractual obligations assumed by the Company pursuant to the Plan, and
various other matters. In connection with the state and local tax claims, the
Company has reserved certain amounts believed by management to be adequate. With
respect to ongoing indemnity obligations, the Company has been informed by one
of its aircraft sublessors that it may assert an administrative claim, in an
unspecified amount, as a result of the Internal Revenue Service potentially
disallowing certain tax benefits claimed by the head lessor of certain aircraft
which are subleased to the Company. The Company is unable to predict whether the
Internal Revenue Service will prevail in matters asserted against the head
lessor and whether the Company will incur any liability in connection with such
claims, or the amount of any such liability, if incurred. The Company also
assumed, pursuant to the Plan, indemnification agreements with its former
directors, certain of whom are named as defendants in an Arizona state court
action brought by Stephen D. Clark, on behalf of himself and others similarly
situated (the "Clark Action"). The Plan provided that the Clark Action be
permanently enjoined and dismissed in consideration of the forgiveness by the
Company of debt owed by employees arising under the Company's stock purchase
plan, and on March 8, 1995, the Bankruptcy Court denied a motion filed by Clark
to dissolve a preliminary injunction entered by the Bankruptcy Court in May
1992. The Company is unable to predict whether the Bankruptcy Court's ruling
will be appealed or challenged, whether such ruling will be upheld, or whether
the Company may incur any liability under its indemnification obligations as a
result of the Clark Action. Management cannot predict whether or to what extent
any of the pending administrative and priority tax claims will result in
liabilities to the Company. Should such liabilities be incurred, future
operating results could be adversely affected. Based on information currently
available, however, management believes that the disposition of these matters
will not have a material adverse effect on the Company's financial condition.
In August 1991, the Commission informally requested that the Company
provide the Commission with certain information and documentation underlying
disclosures made by the Company in annual and quarterly reports filed with the
Commission by the Company in 1991. The Company has cooperated with the
Commission's informal inquiry. On March 29, 1994, the Company's Board of
Directors approved the submission of an offer of settlement for the purpose of
resolving the inquiry through the entry of a consent decree pursuant to which
the Company would, while neither admitting nor denying any violation of the
securities laws, agree to comply with its future reporting obligations under
Section 13 of the Exchange Act. The Company was advised on May 6, 1994 that the
Commission agreed to accept the Company's offer of settlement. In order to
implement the settlement, on May 12, 1994 the Commission issued an "Order
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Instituting Proceedings Pursuant to Section 21C of the Exchange Act and Opinion
and Order of the Commission" (the "Order") finding the Company's Form 10-K for
the year ending December 31, 1990, violated Section 13(a) of the Exchange Act
and Rule 13a-1 thereunder, and that the Company's Form 10-Q for the first
quarter of 1991 violated Section 13(a) of the Exchange Act and Rule 13a-13
thereunder, and ordered that the Company cease and desist from violating Section
13(a) of the Exchange Act and Rules 13a-1 and 13a-13 promulgated under the
Exchange Act. The Order provides that the Company neither admits nor denies any
violation of the securities laws.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to the executive officers and directors of the
Company as of December 31, 1994, is set forth below.
DIRECTORS OF THE COMPANY
WILLIAM A. FRANKE -- AGE 58. Chairman of the Board and Chief Executive
Officer -- (Executive Committee). Mr. Franke was named Chairman of the Board of
Directors in September 1992. On January 1, 1994, Mr. Franke was also elected to
serve as the Company's Chief Executive Officer. In addition to his
responsibilities at America West, Mr. Franke serves as president of Franke &
Company, Inc., a financial services company he has owned since May 1987. From
November 1989 until June 1990, Mr. Franke served as the Chairman of Circle K
Corporation's executive committee with the responsibility for Circle K
Corporation's restructuring. In May 1990, the Circle K Corporation filed a
voluntary petition to reorganize under Chapter 11 of the United States
Bankruptcy Code. From June 1990 until August 1993, Mr. Franke served as the
chairman of a special committee of directors overseeing the reorganization of
the Circle K Corporation. From 1990 until 1993, Mr. Franke also served in
various other capacities at Circle K Corporation. Mr. Franke was also involved
in the restructuring of the Valley National Bank of Arizona (now Bank One of
Arizona). Mr. Franke serves as a director of Phelps Dodge Corp., Central
Newspapers Inc. and the Air Transport Association of America.
A. MAURICE MYERS -- AGE 55. President and Chief Operating Officer. Mr.
Myers was named President and Chief Operating Officer on January 1, 1994 and was
named to the Board of Directors in 1994. Prior to joining America West, Mr.
Myers was the president and chief executive officer of Aloha Airgroup, an
aviation services corporation which owns and operates Aloha Airlines and Aloha
Island Air. Mr. Myers joined Aloha in 1983 as vice president of marketing and
became its president and chief executive officer in June 1985. Mr. Myers is a
member of the board of directors of Hawaiian Electric Industries.
JULIA CHANG BLOCH -- AGE 53. Ms. Bloch has been a member of America West's
Board of Directors since August 26, 1994. She is the group executive vice
president, corporate relations of Bank of America Corporation and has held that
position since June 1993. Ms. Bloch served as the U.S. Ambassador to Nepal from
September 1989 through May 1993. Ms. Bloch is a board member of the American
Refugee Committee and the Himalaya Foundation and serves as a trustee of the
Asian Art Museum and the Asia Society.
STEPHEN F. BOLLENBACH -- AGE 53. (Compensation Committee.) Mr. Bollenbach
has been a member of America West's Board of Directors since August 26, 1994. He
became chief financial officer of The Walt Disney Company in May 1995. Prior to
May 1995, he was president and chief executive officer of Host Marriott Corp.
Mr. Bollenbach served as chief financial officer of the Promus Companies from
1986 to 1990 and served as chief financial officer for the Trump Organization
from 1990 to 1992. He served as executive vice president and chief financial
officer of The Marriott Corporation from 1992 until 1993. He serves as a
director of Host Marriott Corporation, Carr Realty Corporation and Mid-America
Apartment Communities, Inc.
FREDERICK W. BRADLEY, JR. -- AGE 68. (Compensation Committee, Executive
Committee.) Mr. Bradley has been a member of America West's Board of Directors
since September 1992. Immediately prior to joining the Board of Directors, Mr.
Bradley was a senior advisor with Simat, Helliesen & Eichner, Inc. Mr. Bradley
formerly was a senior vice president of Citibank/Citicorp's Global Airline and
Aerospace business. Mr. Bradley joined Citibank/Citicorp in 1958. In addition,
Mr. Bradley is a member of the board of directors of Shuttle, Inc. (USAir
Shuttle) and the Institute of Air Transport, Paris, France. Mr. Bradley also is
chairman of the board of directors of Aircraft Lease Portfolio Securitization
94-1 Ltd.
JAMES G. COULTER -- AGE 35. (Executive Committee). Mr. Coulter has been a
member of America West's Board of Directors since August 26, 1994. Since 1992,
Mr. Coulter has been a managing director of Texas Pacific Group, an investment
firm. From 1986 to August 1992, Mr. Coulter was vice
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president of Keystone, Inc. (formerly Robert M. Bass Group, Inc.), a private
investment firm based in FortWorth, Texas. From April 1993 until he became a
member of the Company's Board, Mr. Coulter was a member of the board of
directors of Continental. Mr. Coulter also serves as a director of American
Savings Bank and Allied Waste Industries, Inc.
JOHN F. FRASER -- AGE 64. Mr. Fraser has been a member of America West's
Board of Directors since August 26, 1994. He is vice chairman of Russel Metals,
Inc., a metals distribution and processing company that was formed when Federal
Industries, Ltd. and FedMet, Inc. was joined together in May 1995. Mr. Fraser
was chairman and chief executive officer of Federal Industries Ltd. from March
1991 to May 1995, and president and chief executive officer from May 1978 to
March 1991. Mr. Fraser was a member of the Board of Directors of Continental
from August 1993 through August 3, 1994. Mr. Fraser is a director of Air Canada,
Bank of Montreal, Coca-Cola Beverages Limited, Ford Motor Company of Canada,
Limited, Inter-City Products Corporation, Investors Group Inc., Shell Canada
Limited and The Thomson Corporation.
JOHN L. GOOLSBY -- AGE 53. (Audit Committee.) Mr. Goolsby has been a
member of America West's Board of Directors since August 26, 1994. He has been
the president of The Hughes Corporation and The Howard Hughes Corporation
(formerly named the Summa Corporation), the principal operating companies of the
Howard Hughes Estate, since 1988, and has been the chief executive officer of
those companies since 1990. In addition, Mr. Goolsby serves as a director of
Nevada Power Company and Bank of America Nevada. He also serves as a trustee of
The Donald W. Reynolds Foundation and the UNLV Foundation.
RICHARD C. KRAEMER -- AGE 52. (Compensation Committee.) Mr. Kraemer has
been a member of America West's Board of Directors since September 1992. He is a
director and serves as president, chief executive officer and chief operating
officer of UDC Homes, Inc., a Phoenix-based homebuilding company which he joined
in 1975.
JOHN R. POWER, JR. -- AGE 39. (Executive Committee.) Mr. Power has been a
member of America West's Board of Directors since August 26, 1994. He is
president of The Patrician Corporation, an investment company. Prior to joining
The Patrician Corporation, Mr. Power served as vice president at Continental
Bank.
LARRY L. RISLEY -- AGE 50. (Audit Committee.) Mr. Risley has been a member
of America West's Board of Directors since August 26, 1994. He has been the
chief executive officer and chairman of the board of directors of Mesa since the
founding of the company in 1983. From 1979 to 1982, Mr. Risley was president of
Mesa Aviation Services, Inc.
FRANK B. RYAN -- AGE 59. (Audit Committee.) Dr. Ryan has been a member of
America West's Board of Directors since March 17, 1995. Since August 1990, Dr.
Ryan has been a professor of mathematics and of computational and applied
mathematics and formerly the vice president of external affairs of Rice
University. From 1988 to 1990, Dr. Ryan served as president and chief executive
officer of Contex Electronics, Inc., an electronic component manufacturing
company. Dr. Ryan serves on the board of directors of Danielson Holding Company,
Inc. and as a governor advisor to Rice University.
RICHARD P. SCHIFTER -- AGE 42. (Compensation Committee.) Mr. Schifter has
been a member of America West's Board of Directors since August 26, 1994. He has
been a managing director of Texas Pacific Group, an investment firm, since July
1994. Mr. Schifter serves of counsel to the Washington D.C. based law firm of
Arnold & Porter, where he was an associate from 1979 to 1986 and a partner from
1986 to July 1994.
JOHN F. TIERNEY -- AGE 50. Mr. Tierney has served as a member of the Board
of Directors since December 1993. Mr. Tierney is the assistant chief executive
and finance director of GPA Group plc, an Irish aircraft leasing concern, and
has served GPA in such capacity since 1993. From 1981 to 1993, he served as
chief financial officer of GPA.
RAYMOND S. TROUBH -- AGE 69. (Audit Committee.) Mr. Troubh has been a
member of America West's Board of Directors since August 26, 1994. He is a
financial consultant and currently serves on
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the board of directors of ADT Limited, American Maize Products Co., Applied
Power Inc., ARIAD Pharmaceuticals, Inc., Becton, Dickinson and Company, Benson
Eyecare Corporation, Foundation Health Corporation, General American Investors
Company, Manville Corporation, Olsten Corporation, Riverwood International
Corporation, Time Warner Inc., Petrie Stores Corporation, Triarc Companies, Inc.
and WHX Corporation.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is information respecting the names, ages, positions and
offices with the Company of the executive officers of the Company other than
Messrs. Franke and Myers who are described above.
THOMAS F. DERIEG -- AGE 55. Senior Vice President -- Operations. Mr.
Derieg joined the Company in July 1994. For the preceding seven years, Mr.
Derieg served as Senior Vice President -- Operations at Aloha Airgroup, Inc. in
Honolulu. Mr. Derieg served in the U.S. Air Force from 1963 to 1969, and from
1970 to 1987 held a variety of positions in areas of operations and maintenance
in the air transportation industry.
JOHN R. GAREL -- AGE 36. Senior Vice President -- Marketing and Sales. Mr.
Garel joined the Company in April 1995. From 1993 until early 1995, Mr. Garel
was the Chief Executive Officer of Cadmus Journal Services, a division of Cadmus
Communications located in Baltimore. Prior to that, Mr. Garel was with Northwest
Airlines, serving from 1990 to 1992 as Vice President, Financial Planning and
Analysis and, thereafter, as Vice President, Market Development and Area
Marketing. From 1982 to 1990, Mr. Garel worked for American Airlines in several
management and senior capacities.
ROBERT S. NICHOLS, JR. -- AGE 49. Senior Vice President -- Customer
Service. Mr. Nichols joined the Company in April 1995. Before joining the
Company, Mr. Nichols spent 27 years with Marriott Hotels, Resorts & Suites. From
1991 until 1994 Mr. Nichols held the position of Senior Vice President, Total
Quality Management. From 1984 to 1991 Mr. Nichols served as Regional Vice
President from 1982 to 1984 as Vice President, Human Resources Development and
before that in a number of other positions with Marriott.
W. DOUGLAS PARKER -- AGE 33. Senior Vice President and Chief Financial
Officer. Mr. Parker joined the Company in June 1995. Previously, he served for
four years at Northwest Airlines, most recently as Vice President and Assistant
Treasurer and previously as Vice President of Financial Planning and Analysis.
Prior to his position at Northwest, Mr. Parker served in various positions at
American Airlines.
MICHAEL A. VESCUSO -- AGE 50. Senior Vice President -- Human Resources.
Mr. Vescuso joined the Company in September 1994. Prior to such time, Mr.
Vescuso worked as an organizational and management development consultant. From
1990 to 1992 he was the Director, Organization and Development of Frito-Lay,
Inc. From 1978 to 1990, he held several senior management positions at HBJ,
Inc., including the position of human resources officer.
MARTIN J. WHALEN -- AGE 55. Senior Vice President -- Corporate Affairs.
Mr. Whalen joined the Company in July 1986 and served as Senior Vice
President -- Administration and General Counsel until February 1995. From 1980
until July 1986, Mr. Whalen was employed by McDonnell Douglas Helicopter Company
and its predecessors, most recently as Vice President of Administration. He also
held positions in labor relations, personnel and legal affairs at Hughes Airwest
and Eastern Airlines.
C.A. HOWLETT -- AGE 51. Vice President -- Public Affairs. Mr. Howlett
joined the Company in January 1995. Prior to such time, Mr. Howlett maintained a
government relations practice as a principal at the law firm of Lewis and Roca
in Phoenix. Mr. Howlett's prior work experience has included senior positions
with Salt River Project, the City of Phoenix and The White House where he served
as special assistant to President Ronald Reagan for intergovernmental affairs.
STEPHEN L. JOHNSON -- AGE 39. Vice President -- Legal Affairs. Mr. Johnson
joined the Company in February 1995. From 1993 to 1994, Mr. Johnson served as
Senior Vice President and General Counsel to GE Capital Aviation Services
Limited, in Shannon, Ireland. From 1989 to 1993 Mr. Johnson was employed by GPA
Group plc, also in Shannon, from 1989 to 1991 as Vice President and Senior
Counsel and from 1991
45
<PAGE> 48
to 1993 as Senior Vice President and General Counsel to GPA's Leasing Division.
From 1982 until 1989, Mr. Johnson was engaged in the private practice of law.
RAYMOND T. NAKANO -- AGE 50. Vice President and Controller. Mr. Nakano
joined the Company in June 1983 and has served as Vice President and Controller
since April 1985. Prior to such time, Mr. Nakano was employed by Continental for
eight years in various accounting positions, most recently as Senior Director,
General Accounting.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information for the years ended December 31,
1994, 1993 and 1992 with respect to compensation for services to America West
paid to (i) the chief executive officer, (ii) the four most highly compensated
executive officers of the Company during 1994, other than the chief executive
officer, and (iii) one former executive officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) COMPENSATION($)(1) COMPENSATION($)(2)
--------------------------- ---- --------- ------------------ ------------------
<S> <C> <C> <C> <C>
William A. Franke(3)................. 1994 450,000 5,625 1,224,375
Chairman of the Board and 1993 450,000 -- --
Chief Executive Officer 1992 131,250 -- --
A. Maurice Myers..................... 1994 376,442 104,688(4) 421,415
President and Chief
Operating Officer
Martin J. Whalen..................... 1994 142,464 2,406 190,883
Senior Vice President -- Corporate 1993 134,400 4,368 3,873
Affairs and Secretary 1992 134,400 -- 3,808
Raymond T. Nakano.................... 1994 132,447 2,237 190,103
Vice President and Controller 1993 124,950 4,061 1,973
1992 124,950 -- 975
Thomas P. Burns(5)................... 1994 130,592 2,205 105,058
Vice President -- Sales............ 1993 123,200 4,004 3,385
1992 123,200 -- 3,659
Alphonse E. Frei(6).................. 1994 129,249 2,807 98,479
Senior Vice President -- Finance 1993 156,800 5,096 4,798
and Chief Financial Officer 1992 156,800 -- 4,731
</TABLE>
---------------
(1) For officers other than Mr. Myers, reflects amounts paid under the Company's
Transition Pay Program.
(2) Includes a Reorganization success bonus paid to Mr. Franke in the form of
125,000 shares of Class B Common Stock, valued at $9.795 per share. Includes
Reorganization success bonuses paid in cash to Messrs. Myers, Whalen, Nakano
and Burns of $400,000, $185,000, $185,000 and $100,000, respectively.
Includes matching contributions made by the Company under the Company's
401(k) plan for Messrs. Whalen, Nakano, Burns and Frei (i) in 1994 of
$4,091, $4,128, $4,135 and $1,913, respectively, (ii) in 1993 of $2,081,
$998, $1,908 and $2,249, respectively, and (iii) in 1992 of $2,016, $0,
$2,182 and $2,182, respectively. Also includes premiums paid by the Company
for life insurance for Messrs. Whalen, Nakano, Burns and Frei (i) in 1994 of
$1,792, $975, $923 and $2,443, respectively, (ii) in 1993 of $1,792, $975,
$1,477 and $2,549, respectively, and (iii) in 1992 of $1,792, $975, $1,477
and $2,549, respectively. Includes a severance payment to Mr. Frei of
$94,123 in 1994. For Mr. Myers, includes $21,415 in life insurance premiums
paid by the Company in 1994.
(3) Mr. Franke's employment with the Company commenced on September 17, 1992.
(4) Reflects payment of a $100,000 transition allowance in connection with
commencement of employment with the Company and $4,688 paid to Mr. Myers
under the Company's Transition Pay Program.
46
<PAGE> 49
(5) Mr. Burns' employment with the Company ended in May 1995.
(6) Mr. Frei's employment with the Company ended on July 1, 1994.
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
POTENTIAL
MARKETABLE
VALUE AT ANNUAL
INDIVIDUAL GRANTS RATE OF
----------------------------------------------------- STOCK PRICE
NUMBER OF APPRECIATION
SECURITIES PERCENT OF EXERCISE FOR OPTION TERM
UNDERLYING TOTAL OPTIONS PRICE EXPIRATION -----------------------
NAME OPTIONS GRANTED IN 1994 ($/SHARE) DATE 5% 10%
----- ----------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William A. Franke.......... 355,000 100% $8.75 12/1/2005 $1,953,565 $4,950,475
</TABLE>
EMPLOYMENT AGREEMENTS
Effective as of December 1, 1994, the Company entered into an employment
agreement with William A. Franke for service as the Chairman of the Board and
Chief Executive Officer of the Company for a term of one year with a possible
one-year extension at Mr. Franke's election with the approval of the Company's
Board of Directors. Under the agreement, Mr. Franke is to receive an annual cash
base salary of at least $300,000, which amount may be increased at the Board's
discretion. The agreement provides for restricted stock grants of 11,000, 30,334
and 25,000 shares of Class B Common Stock as soon as practicable after December
1, 1994, January 1, 1995 and January 1, 1996, respectively, subject to partial
or complete forfeiture upon termination of employment under certain
circumstances. In addition, upon execution of the agreement, Mr. Franke received
(i) a fully vested option to purchase 255,000 shares of Class B Common Stock at
an exercise price of $8.75 per share, the fair market value on the date of
grant, and (ii) options to purchase an additional 100,000 shares of Class B
Common Stock at an exercise price of $8.75 per share, vesting over a two-year
period beginning January 1, 1996. The agreement further provides for the
granting to Mr. Franke (a) on August 25, 1995 of options to purchase an
additional 150,000 shares of Class B Common Stock, vesting over a three-year
period and (b) on August 25, 1996 of options to purchase an additional 150,000
shares of Class B Common Stock, vesting over a three-year period. All of such
options become fully vested and exercisable upon a "change in control" (as
defined in the agreement) or in the event Mr. Franke's employment is terminated
by reason of death or disability. All of such restricted stock grants and stock
options are covered by the Incentive Plan which was approved by the stockholders
at the annual meeting in May 1995. The agreement also provides that the Company
will maintain a term life insurance policy on the life of Mr. Franke in the
amount of $2 million, proceeds of which are to be paid to beneficiaries
designated by Mr. Franke. Mr. Franke is to receive an allowance for
administrative expenses of $50,000 per year. A majority of the Board of
Directors may authorize termination of Mr. Franke's employment for any reason
which the Board deems sufficient. If Mr. Franke terminates his employment for
good reason or is terminated by the Board of Directors for any reason other than
misconduct or disability, he will receive, among other things, a severance
payment in the amount of $1.5 million if the termination is prior to August 25,
1996 and $1 million if the termination is after such date. Pursuant to the
agreement, Mr. Franke has certain registration rights with respect to shares of
Class B Common Stock granted to him or received pursuant to the exercise of
stock options. On June 27, 1994, the Company entered into a key employee
protection agreement with Mr. Franke providing for the payment to him of a
severance payment of approximately 200% of his base salary in the event of a
termination of his employment following a "change in control." That key employee
protection agreement was superseded in its entirety by Mr. Franke's employment
agreement described above. In September 1994, the Company issued to Mr. Franke
125,000 fully-vested shares of Class B Common Stock as a Reorganization success
bonus. The Company also loaned $470,282 to Mr. Franke for the purpose of
enabling him to pay the income taxes attributable to such bonus. The loan (i) is
payable in two equal installments on September 26, 2000 and September 26, 2001,
(ii) bears interest (payable semi-annually) at the rate of 8% per annum (11% per
annum after maturity) and (iii) is secured by a pledge of 62,500 of the bonus
shares, but is otherwise non-recourse to Mr. Franke.
47
<PAGE> 50
Effective as of January 1, 1994, the Company entered into an employment
agreement with A. Maurice Myers for service as President and Chief Operating
Officer of the Company for a two-year term with automatic one-year extensions
unless prior written notice is given by either party. Pursuant to the agreement
(as amended), Mr. Myers is to receive an annual base salary of $375,000 for the
period ended December 31, 1994 and $400,000 for the period beginning January 1,
1995, which amount may be increased in the Board's discretion. Pursuant to the
agreement, the Company paid to Mr. Myers in 1994 a lump sum transition allowance
of $100,000 and a Reorganization success bonus of $400,000. In addition, the
Company made a non-recourse loan to Mr. Myers in 1994 in the amount of $200,000
to be used in connection with the purchase of a home, which loan is secured by a
lien on such property and has a stated maturity of December 31, 2003. In 1994,
the Company also loaned approximately $320,000 to Mr. Myers in connection with
the exercise of options to purchase Aloha Airgroup, Inc. ("Aloha") common stock
and related taxes. Such loan is secured by a pledge of the Aloha stock acquired
with the proceeds thereof, is non-recourse to Mr. Myers and is due 90 days after
the term of the agreement or earlier upon certain events. Both the house loan
and the stock loan bear interest at the applicable federal rate in accordance
with the Internal Revenue Code of 1986, as amended. The Company is entitled to
apply any incentive bonuses payable to Mr. Myers to the repayment of the house
loan and the stock loan. The agreement also provides for certain pension
benefits. The Company is required by the agreement to pay Mr. Myers a severance
payment in the amount of (i) 100% of his base salary if Mr. Myers terminates the
agreement due to the election of any person other than Mr. Myers or Mr. Franke
as Chief Executive Officer of the Company or (ii) 150% of his base salary if the
Company elects to discontinue automatic extensions of the agreement, if Mr.
Myers terminates the agreement for good reason or due to a change in control or
if the Company terminates the agreement for any reason other than misconduct or
disability. In 1995, the Company granted to Mr. Myers an option to purchase
200,000 shares of Class B Common Stock at an exercise price of $8.75 per share,
the fair market value on the date of grant. Such option was granted pursuant to
the Incentive Plan which was approved by the stockholders at the annual meeting
in May 1995.
DIRECTOR COMPENSATION
Each director who is not an officer or employee of the Company currently
receives an annual retainer of $15,000 and $1,000 for each Board or committee
meeting attended. Pre-Reorganization directors each received an annual retainer
of $25,000 and $1,000 for each Board or committee meeting attended. Directors
are also entitled to certain air travel benefits. Pursuant to the America West
Airlines, Inc. 1994 Incentive Equity Plan as approved by the stockholders at the
annual meeting in May 1995, (i) each non-employee director who served on the
Board of Directors on December 31, 1994 was awarded an option to purchase 3,000
shares of Class B Common Stock and (ii) each new non-employee director elected
after December 1, 1994 will automatically receive on the date of election an
option to purchase 3,000 shares of Class B Common Stock. In addition, each
non-employee director will be automatically granted an option to purchase 3,000
shares of Class B Common Stock on the day after each annual stockholders'
meeting (commencing with the 1995 Annual Meeting).
MANAGEMENT RIGHTS AGREEMENT
On the Effective Date, the Company and TPG Partners, L.P. and certain of
its affiliates ("TPG") entered into a Management Rights Agreement ("Management
Rights Agreement") pursuant to which TPG is entitled, subject to certain
restrictions, (i) to make proposals, recommendations and suggestions to the
Company relating to the business and affairs of the Company, (ii) discuss the
affairs of the Company with officers, directors and accountants, and (iii)
examine the Company's books and records. Proposals and recommendations made
pursuant to the Management Rights Agreement will not be binding on the Company
and information provided to TPG will be subject to confidentiality and various
other restrictions.
COMPENSATION COMMITTEE INTERLOCKS
Two members of the pre-Reorganization Board and the pre-Reorganization
Compensation Committee, John F. Tierney and Declan Treacy, were elected to the
Board of Directors pursuant to a certain management
48
<PAGE> 51
letter agreement, as amended and restated, between the Company and its
debtor-in-possession lenders, including GPA. Both Mr. Tierney and Mr. Treacy are
executives of GPA. The management letter agreement terminated in connection with
the Reorganization and Mr. Treacy's term expired on August 25, 1994. GPA's
representation on the Company's Board is now determined pursuant to the
Stockholders' Agreement and a voting agreement entered into between GPA and
AmWest. Mr. Tierney continues to be a member of the Board, but is no longer a
member of the Compensation Committee.
GPA is a major supplier of leased aircraft and engines to the Company and
provided financing to the Company prior to and during the bankruptcy
proceedings. In June 1994, in connection with the Reorganization, the Company
entered into the 1994 Put Agreement with GPA providing GPA with a right to lease
up to eight aircraft to the Company. This agreement replaced a similar agreement
with GPA involving 10 aircraft (none of which were ever leased to the Company).
These aircraft may be new or used B737-300 and B757-200 aircraft (of which no
more than five may be used aircraft) and new or "like new" A320 aircraft. Unless
otherwise consented to by the Company, beginning in June 1995 and ending by June
1999, GPA may, with adequate notice to the Company, put to the Company up to two
aircraft in 1995 and no more than three aircraft per year thereafter. The
rentals for such aircraft will be at the then current market rates with lease
terms ranging from three to 18 years depending on the type and condition of the
aircraft, which will be predetermined by the Company and GPA. In connection with
the 1994 Put Agreement and for other consideration, GPA was paid approximately
$30.5 million and issued certain equity securities by the Company as part of the
Reorganization.
In February 1995, the Company leased a B737-300 aircraft from GPA for a
term of five years. Additionally, the Company and GPA have agreed, subject to
final documentation, to enter into lease agreements for two A320-200 aircraft
beginning in the spring of 1995. All of these aircraft will be leased to the
Company under the 1994 Put Agreement.
Lease payments from America West to GPA under an agreement initially
entered into in September 1990 (the "Aircraft Finance Agreement") and under the
1991 Put Agreement totaled approximately $63 million in 1994. As of December 31,
1994, the Company was obligated to pay approximately $1.1 billion over the life
of the 16 aircraft leases under the Aircraft Finance Agreement. Payments by the
Company to GPA under a debtor-in-possession financing facility established in
September 1991 were approximately $61 million in 1994.
Richard P. Schifter, a member of the Company's Board of Directors, and of
the Compensation Committee is a vice president of TPG Advisors, which is the
general partner of TPG GenPar, the general partner of TPG. TPG received Class A
Common Stock and Class B Common Stock and warrants to purchase Class B Common
Stock in exchange for its investment in America West pursuant to the
Reorganization. Mr. Schifter serves of counsel to the law firm of Arnold &
Porter, where he was a partner until July 1994. America West from time to time
engages Arnold & Porter for certain legal services, not any of which are
performed by Mr. Schifter.
Each of the Company transactions described above was the result of
arms'-length negotiation among the parties thereto and was concluded on what the
Company believes to be terms no less favorable than would have been obtained had
the transactions been entered into with non-affiliated third parties.
CERTAIN TRANSACTIONS
The Company has certain alliance agreements with Continental and Mesa. With
Continental, the Company agreed to implement certain code sharing arrangements,
coordinate certain flight schedules to maximize connections between the two
airlines, share ticket counter space, link in part their frequent flyer programs
and coordinate ground handling operations. With Mesa, America West has entered
into two code sharing agreements that establish Mesa as a feeder carrier for the
Company at its hubs in Phoenix and Columbus. The Alliance Agreements are
designed to enhance significantly the Company's growth in revenue passenger
miles and operating results. Continental and Mesa are principal stockholders of
the Company. See "Principal Stockholders."
49
<PAGE> 52
Pursuant to a code sharing agreement with Mesa entered into in December
1992 (which was prior to Mesa becoming a significant stockholder), the Company
assesses a per passenger charge for facilities, reservations and other services
from Mesa for enplanements on the Mesa system. Such payments by Mesa to the
Company totalled approximately $2.5 million for 1994.
As part of the Reorganization and pursuant to an investment agreement (the
"Investment Agreement"), the Company received approximately $205.3 million in
cash upon the issuance to the partners of AmWest Partners, L.P. ("AmWest"), and
to certain assignees of AmWest (as described below), of rights to acquire shares
of the Company's Class A and Class B Common Stock, warrants to purchase Class B
Common Stock and $100 million principal amount of Existing Notes. Certain funds
managed or advised by Fidelity Management Trust Company and its affiliates
(collectively, "Fidelity") and Lehman Brothers Inc. ("Lehman") purchased a
portion of the securities that otherwise would have been issued to AmWest
pursuant to assignments by AmWest to those parties. Pursuant to these
assignments, Lehman acquired shares of Class B Common Stock and Fidelity
acquired shares of Class B Common Stock, warrants and $100 million principal
amount of Existing Notes. On October 14, 1994 in exchange for pre-existing
claims of approximately $25 million and a prepayment of a $1.3 million lease
obligation, Fidelity received an additional $13 million of principal amount of
Existing Notes and Lehman received $10 million of principal amount of Existing
Notes. Additionally, cash aggregated $2.1 million and $1.2 million was paid to
Fidelity and Lehman, respectively. AmWest, which dissolved on the Effective
Date, assigned its rights to acquire securities pursuant to the Investment
Agreement to its partners and certain of their respective affiliates. Pursuant
to the Reorganization, Lehman, Fidelity and an affiliate of AmWest received
additional shares of Class B Common Stock for their existing claims and
interests. Fidelity and Lehman are principal stockholders of the Company. See
"Principal Stockholders."
In 1994, the Company made certain loans to William A. Franke and A. Maurice
Myers, both executive officers of the Company. For a description of such loans,
see "Management -- Employment Agreements."
50
<PAGE> 53
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the outstanding
Common Stock of the Company by (i) each person who is known to the Company to
own beneficially more than 5% of either class of the Company's outstanding
Common Stock, (ii) each director of the Company, (iii) each of the executive
officers of the Company named in the Summary Compensation Table and (iv) all
executive officers and directors of the Company as a group, in each case as of
March 31, 1995. The beneficial ownership information set forth below does not
include any shares that may be issued to the holders shown below upon the final
adjudication of certain claims pending in connection with proceedings relating
to the Company's Reorganization.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS A AND B
BENEFICIALLY OWNED BENEFICIALLY OWNED COMBINED
-------------------- ----------------------------- VOTING POWER
BENEFICIAL OWNER(1) NUMBER PERCENTAGE NUMBER PERCENTAGE PERCENTAGE
------------------------------- ------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
TPG Partners, L.P.(2).......... 774,495 64.5% 6,924,818(3) 15.1% 43.1%
201 Main Street
Suite 2420
Fort Worth, Texas 76102
Continental Airlines,
Inc.(4)...................... 325,505 27.1% 2,311,094(5) 5.2% 17.7%
2929 Allen Parkway
Houston, Texas 77019
Mesa Air Group, Inc.(6)........ 100,000 8.3% 2,985,239(7) 6.7% 7.6%
2525 30th Street
Farmington, New Mexico 87401
Lehman Brothers Inc............ -- -- 4,575,601(8) 10.3% 4.4%
200 Vesey Street
American Express Tower
World Financial Center
New York, NY 10285-1800
FMR Corp....................... -- -- 4,808,922(9) 10.8% 4.6%
82 Devonshire Street
Boston, MA 02109
William A. Franke.............. -- -- 421,334(10) 1.0% *
A. Maurice Myers............... -- -- -- -- --
Martin J. Whalen............... -- -- 36(11) * *
Raymond T. Nakano.............. -- -- 4(12) -- --
Thomas P. Burns................ -- -- 101(13) * *
Alphonse E. Frei............... -- -- 187(14) * *
Julia Chang Bloch.............. -- -- -- -- --
Stephen F. Bollenbach.......... -- -- -- -- --
Frederick W. Bradley, Jr....... -- -- -- -- --
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
James G. Coulter(15)........... 774,495 64.5% 6,924,818(3) 15.1% 43.1%
John F. Fraser................. -- -- -- -- --
John L. Goolsby................ -- -- 1,500 * *
Richard C. Kraemer............. -- -- -- -- --
John R. Power, Jr.............. -- -- -- -- --
Larry L. Risley(16)............ 100,000 8.3% 2,985,239(7) 6.7% 7.6%
Frank B. Ryan.................. -- -- -- -- --
Richard P. Schifter(17)........ 774,495 64.5% 6,924,818(3) 15.1% 43.1%
John F. Tierney................ -- -- -- -- --
</TABLE>
51
<PAGE> 54
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS A AND B
BENEFICIALLY OWNED BENEFICIALLY OWNED COMBINED
-------------------- ----------------------------- VOTING POWER
BENEFICIAL OWNER(1) NUMBER PERCENTAGE NUMBER PERCENTAGE PERCENTAGE
------------------------------- ------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Raymond S. Troubh.............. -- -- 2,500 * *
All executive officers and
directors as a group (21
persons)..................... 874,495 72.8% 10,335,719(18) 22.1% 50.7%
</TABLE>
---------------
* Less than 1%.
(1) Information with respect to each beneficial owner of 5% of the Company's
Common Stock is based solely on Schedules 13G filed by such beneficial
owners with the Securities and Exchange Commission.
(2) TPG is a Delaware limited partnership whose general partner is TPG GenPar,
L.P., a Delaware limited partnership ("TPG GenPar"). The general partner of
TPG GenPar is TPG Advisors, Inc., a Delaware corporation ("TPG Advisors").
The executive officers and directors of TPG Advisors are: David Bonderman
(director and president), James G. Coulter (director and vice president),
William Price (director and vice president), James O'Brien (vice president,
treasurer and secretary), Richard P. Schifter (vice president) and Richard
A. Ekleberry (vice president). Includes shares owned by TPG Parallel I,
L.P., a Delaware limited partnership ("TPG Parallel"), and Air Partners II,
L.P., a Texas limited partnership ("Air Partners II"). The general partner
of each of TPG Parallel and Air Partners II is TPG GenPar. No other persons
control TPG, TPG GenPar, TPG Advisors, TPG Parallel or Air Partners II.
(3) Includes 1,911,523 shares of Class B Common Stock that may be acquired upon
the exercise of warrants.
(4) Mr. Bonderman is also director and chairman of the board of Continental and
Mr. Price is a director of Continental. Mr. Bonderman, Mr. Coulter and Mr.
Price, through their control positions in Air Partners, L.P., a special
purpose partnership formed in 1992 to participate in the funding of the
reorganization of Continental and a significant shareholder in Continental,
may be deemed to own beneficially a significant percentage of Continental's
common stock.
(5) Includes 802,860 shares of Class B Common Stock that may be acquired upon
the exercise of warrants.
(6) Larry L. Risley, a director of the Company, is the chairman and chief
executive officer of Mesa.
(7) Includes 799,767 shares of Class B Common Stock that may be acquired upon
the exercise of warrants.
(8) Includes 293,242 shares of Class B Common Stock that may be acquired upon
the exercise of warrants. Does not include any shares which Lehman or its
affiliates may own in its or their capacity as a market maker on a
when-issued basis for the warrants and the Class B Common Stock.
(9) Includes 658,009 shares of Class B Common Stock that may be acquired upon
the exercise of warrants. All shares are owned directly by Fidelity
Copernicus Fund, L.P. ("Copernicus"), Belmont Capital Partners II, L.P.
("Belmont II") or Belmont Fund, L.P. ("Belmont I"), each of which is a
private investment limited partnership. Fidelity Management Trust Company
("FMTC") serves as investment adviser to Belmont I and Belmont II, and
Fidelity Management & Research Company ("FMRC") serves as investment
adviser to Copernicus. Each of FMTC and FMRC is a wholly owned subsidiary
of FMR Corp. ("FMR"). Through shared voting and dispositive power over the
shares held by Belmont I and Belmont II, FMTC may be deemed to own
beneficially the shares held by such entities. Through shared voting and
dispositive power over the shares held by Copernicus, FMRC may be deemed to
own beneficially the shares held by such entity. In addition, FMR, as
controlling person of FMTC, FMRC and certain general partners of Belmont I,
Belmont II and Copernicus, may be deemed to own beneficially the shares
held by each of Belmont I, Belmont II and Copernicus. FMR disclaims
beneficial ownership of such shares. Edward C. Johnson III, through his
interest in FMR, may be deemed to own beneficially the shares held by each
of Belmont I, Belmont II and Copernicus. Mr. Johnson disclaims beneficial
ownership of such shares.
(10) Includes 255,000 shares of Class B Common Stock that may be acquired upon
exercise of stock options.
(11) Includes 16 shares of Class B Common Stock that may be acquired upon
exercise of warrants.
(12) Includes 3 shares of Class B Common Stock that may be acquired upon
exercise of warrants.
(13) Includes 74 shares of Class B Common Stock that may be acquired upon
exercise of warrants.
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<PAGE> 55
(14) Includes 137 shares of Class B Common Stock that may be acquired upon
exercise of warrants.
(15) Represents shares of Class A Common Stock and Class B Common Stock held by
TPG. In connection with Mr. Coulter's positions described in footnote (2)
above, Mr. Coulter may be deemed to own beneficially such shares. Mr.
Coulter disclaims beneficial ownership of such shares.
(16) Represents shares held by Mesa. Through his position as chairman and chief
executive officer of Mesa, Mr. Risley may be deemed to own beneficially
such shares. Mr. Risley disclaims beneficial ownership of such shares.
(17) Represents shares of Class A Common Stock and Class B Common Stock held by
TPG. In connection with Mr. Schifter's position described in footnote (2)
above, Mr. Schifter may be deemed to own beneficially such shares. Mr.
Schifter disclaims beneficial ownership of such shares.
(18) Includes 2,711,520 shares of Class B Common Stock that may be acquired upon
exercise of warrants.
STOCKHOLDERS' AGREEMENTS
On the Effective Date, the Company, AmWest, GPA, and certain designated
stockholder representatives entered into an agreement (the "Stockholders'
Agreement") with respect to certain matters involving the Company. Upon the
dissolution of AmWest, which occurred immediately following the Effective Date,
the provisions of the Stockholders' Agreement with respect to AmWest became
binding upon TPG, Continental and Mesa. As used below, "AmWest" means TPG,
Continental and Mesa in their capacities as successors-in-interest to AmWest
under the Stockholders' Agreement.
The Stockholders' Agreement provides that, for a period lasting until the
first annual meeting after the third anniversary of the Effective Date (the
"Voting Period"), America West's Board of Directors will consist of 15 members
including (i) nine members designated by AmWest; (ii) one member designated by
GPA for as long as GPA retains at least 2% of the voting equity securities of
the Company; and (iii) five independent directors (the "Independent Directors")
initially including (a) three directors designated by the official committee of
the unsecured creditors, (b) one member designated by the official committee of
the equity security holders and (c) one director designated by the
pre-Reorganization Board of Directors from among the executive officers of the
Company. The Stockholders' Agreement provides that during the Voting Period,
AmWest and GPA will vote all shares of Common Stock owned by them in favor of
the reelection of the initially designated Independent Directors for as long as
such Independent Directors continue to serve.
In addition, AmWest and GPA agreed that (i) AmWest will vote in favor of
GPA's nominee to the Company's Board of Directors, and (ii) GPA will vote in
favor of AmWest's nine nominees to the Company's Board of Directors for so long
as (a) AmWest owns at least 5% of the voting equity securities of the Company
and (b) GPA owns at least 2% of the voting equity securities of the Company.
The Stockholders' Agreement also provides that no director nominated by
AmWest will be an employee or officer of Continental. All directors who are
selected by or who are directors of Continental or Mesa and all directors who
are employees or officers of Mesa are required by the Stockholders' Agreement to
recuse themselves from voting on or receiving information on any matters
involving negotiations or direct competition between their respective companies
and America West.
In addition, the Stockholder's Agreement provides that until the annual
meeting after the third anniversary of the Effective Date, approval of
transactions in which AmWest or its affiliates may participate will require the
affirmative vote of the holders of a majority of the voting power of the
outstanding shares of each class of common stock of the Company entitled to
vote, voting as a single class and excluding any shares owned by AmWest or any
of its affiliates. Transactions to which such restriction applies include any
merger or consolidation of the Company with or into AmWest or its affiliates,
any sale or other disposition of all or a substantial part of the assets of the
Company to AmWest or its affiliates and certain other transactions in which
AmWest or its affiliates would acquire an increased ownership of equity
securities in the Company. The Company does not believe these restrictions will
have any adverse effects on the stockholders of the Company.
Under the terms of the Stockholders' Agreement, neither AmWest nor any
affiliate of AmWest may sell or otherwise transfer any Common Stock (other than
to an affiliate of the transferor) if, after giving effect
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<PAGE> 56
thereto or to any related transaction, the total number of shares of Class B
Common Stock beneficially owned by the transferor is less than twice the number
of shares of Class A Common Stock beneficially owned by the transferor, except
in certain circumstances.
In addition, the Stockholders' Agreement provides that, for a period of
three years after the Effective Date, AmWest shall not sell, in a single
transaction or related series of transactions, shares of Common Stock
representing 51% or more of the combined voting power of shares of Common Stock
then outstanding other than (i) pursuant to or in connection with a tender or
exchange offer for all shares of Common Stock and for the benefit of all others
of Class B Common Stock on a pro rata basis at the same price per share and on
the same economic terms, (ii) to any affiliate of AmWest, (iii) to any affiliate
of AmWest's partners, (iv) pursuant to a bankruptcy or insolvency proceeding,
(v) pursuant to judicial order, legal process, execution or attachment or (vi)
in a public offering.
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<PAGE> 57
COMPARISON OF EXISTING NOTES AND NEW NOTES
The following is a summary comparison of the material terms of the Existing
Notes and the New Notes. Such summary comparison does not purport to be complete
and is qualified in its entirety by reference to the Existing Note Indenture and
the New Note Indenture. Capitalized terms used herein but not defined herein
shall have the meanings assigned to them in the Existing Note Indenture or the
New Note Indenture, as the case may be. For further information, see
"Description of the New Notes."
<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Aggregate
Principal
Amount
Outstanding: $123,000,000 (as of May 31, 1995) $75,000,000
Maturity Date: September 1, 2001 September 1, 2005
Interest Rate: 11 1/4% 10 3/4%
Interest Payment
Dates: March 1 and September 1 March 1 and September 1
Ranking: The Existing Notes are senior in right of No change.
payment to all existing and future
subordinated indebtedness and will be
senior unsecured obligations of the
Company ranking pari passu in right of
payment with all other Indebtedness of
the Company. Certain Indebtedness,
however, including secured debt, is, and
will be, effectively senior in right of
payment to the Existing Notes with
respect to assets that constitute
collateral securing such Indebtedness.
Optional
Redemption: The Existing Notes may be redeemed at the The New Notes may not be redeemed prior
option of the Company (a) prior to to September 1, 2000. The New Notes may
September 1, 1997, (A) at any time, in be redeemed at the option of the Company
whole but not in part, at a redemption on or after September 1, 2000 at any time
price of 105% of the principal amount of in whole or from time to time in part, at
the Existing Notes plus accrued and a redemption price equal to the following
unpaid interest, if any, to the percentage of the principal amount
redemption date or (B) from time to time redeemed, plus accrued and unpaid in-
in part from the net proceeds of a public terest to the date of redemption, if
offering of its capital stock at a redeemed during the 12-month period
redemption price equal to 105% of the beginning:
principal amount, plus accrued and unpaid SEPTEMBER 1, PERCENTAGE
interest, if any, to the redemption date 2000 105.375%
except for amounts mandatorily redeemed; 2001 103.583%
and (ii) on or after September 1, 1997 at 2002 101.792%
any time in whole or from time to time in 2003 and thereafter 100.000%
part, at a redemption price equal to the
following percentage of the principal
amount redeemed, plus accrued and unpaid
interest to the date of redemption, if
redeemed during the 12-month period
beginning:
SEPTEMBER 1, PERCENTAGE
1997 105.0%
1998 103.3%
1999 101.7%
2000 100.0%
</TABLE>
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<PAGE> 58
<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Mandatory
Redemption: In the event that prior to September 1, The New Note Indenture does not contain a
1997 the Company consummates a Public mandatory redemption provision.
Offering Sale, and immediately prior to
such consummation the Company has cash
and cash equivalents, not subject to any
restriction on disposition of at least
$100,000,000, then the Company shall
redeem the Existing Notes at a redemption
price equal to 104% of the aggregate
principal amount of the Existing Notes so
redeemed, plus accrued and unpaid
interest to the redemption date. The ag-
gregate redemption price and accrued and
unpaid interest of the Existing Notes to
be so redeemed shall equal the lesser of
(a) 50% of the net offering proceeds of
such Public Offering Sale and (b) the
excess, if any, of (i) $20,000,000 over
(ii) the amount of any net offering
proceeds of any prior Public Offering
Sale received prior to September 1, 1997
and applied to so redeem Existing Notes.
Limitation on Re-
stricted Payments: Under the terms of the Existing Note (Revisions to this covenant are
Indenture, neither the Company nor any underlined) Under the terms of the New
subsidiary shall: (i) declare or pay any Note Indenture, neither the Company nor
dividends on or make any distributions in any subsidiary shall: (i) declare or pay
respect of Capital Stock of the Company any dividends on or make any
(other than dividends or distributions distributions in respect of Capital Stock
payable solely in shares of Capital Stock of the Company (other than dividends or
(other than Redeemable Stock) or in distributions payable solely in shares of
options, warrants or other rights to Capital Stock (other than Redeemable
purchase Capital Stock (other than Stock) or in options, warrants or other
Redeemable Stock)) to holders of Capital rights to purchase Capital Stock (other
Stock of the Company, (ii) purchase, than Redeemable Stock)) to holders of
redeem or otherwise acquire or retire for Capital Stock of the Company, (ii)
value (other than through the issuance purchase, redeem or otherwise acquire or
solely of Capital Stock (other than retire for value (other than through the
Redeemable Stock)) any Capital Stock or issuance solely of Capital Stock (other
warrants, rights or options to acquire than Redeemable Stock)) any Capital Stock
Capital Stock other than Redeemable or warrants, rights or options to acquire
Stock; (iii) redeem, repurchase, defease Capital Stock other than Redeemable
(including, but not limited to, in Stock; (iii) redeem, repurchase, defease
substance or legal defeasance), or (including, but not limited to, in
otherwise acquire or retire for value substance or legal defeasance), or
(other than through the issuance solely otherwise acquire or retire for value
of Capital Stock (other than Redeemable (other than through the issuance solely
Stock) or warrants, rights or options to of Capital Stock (other than Redeemable
acquire Capital Stock (other than Stock) or warrants, rights or options to
Redeemable Stock)) (collectively, a "pre- acquire Capital Stock (other than
payment"), directly or indirectly Redeemable Stock)) (collectively, a "pre-
(including by way of amendment of the payment"), directly or indirectly
terms of any Indebtedness in connection (including by way of amendment of the
with any retirement or acquisition of terms of any Indebtedness in connection
such Indebtedness) other than at with any retirement or acquisition of
scheduled maturity thereof or by any such Indebtedness) other than at
scheduled repayment or scheduled sinking scheduled maturity thereof or by any
fund payment, any indebtedness of the scheduled repayment or scheduled sinking
Company which is subordinated in right of fund payment, any indebtedness of the
payment to the Existing Notes or which Company which is subordinated in right of
matures after the maturity date of the payment to the New Notes or which matures
Existing Notes (except out of the after the maturity date of the New Notes
proceeds of Refinancing Indebtedness); (except out of the proceeds of Refi-
if, at the time of such transaction nancing Indebtedness); if, at the time of
described in clause (i), (ii) or (iii) such transaction described in clause (i),
(such transactions being hereinafter (ii) or (iii) (such transactions being
collectively referred to as "Restricted hereinafter collectively referred to as
Payments") and after giving effect "Restricted Payments") and after giving
thereto, either the aggregate amount effect thereto, either the aggregate
expended by the Company and its Sub- amount expended by the Company and its
sidiaries for all Restricted Payments Subsidiaries for all Restricted Payments
(the amount of any Restricted Payment if (the amount
other than cash to
</TABLE>
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<PAGE> 59
<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
be the fair market value of the property of any Restricted Payment if other than
included in such payment as determined in cash to be the fair market value of the
good faith by the Board of Directors as property included in such payment as
evidenced by a Board Resolution) from and determined in good faith by the Board of
after the Closing Date shall exceed the Directors as evidenced by a Board
sum of (A) 50% (or if the Existing Notes Resolution) from and after the Closing
at the time of the proposed Restricted Date shall exceed the sum of (A) 50% (or
Payment are rated Investment Grade by at if the New Notes at the time of the
least one rating agency of recognized proposed Restricted Payment are rated
standing selected by the Company, 75%) of Investment Grade by at least one rating
the aggregate Adjusted Consolidated Net agency of recognized standing selected by
Income (or if such Adjusted Consolidated the Company, 75%) of the aggregate Ad-
Net Income is a loss, minus 100% of such justed Consolidated Net Income (or if
loss) of the Company and its Subsidiaries such Adjusted Consolidated Net Income is
for the period from the first day of the a loss, minus 100% of such loss) of the
first quarter ended subsequent to the Company and its Subsidiaries for the
Closing Date and through the last day of period from the first day of the first
the most recently completed quarter quarter ended subsequent to the Closing
immediately preceding the quarter in Date and through the last day of the most
which the Restricted Payment occurs, recently completed quarter immediately
calculated on a cumulative basis as if preceding the quarter in which the
such period were a single accounting Restricted Payment occurs, calculated on
period; (B) the aggregate net proceeds a cumulative basis as if such period were
received by the Company after the Closing a single accounting period; (B) the
Date (including the fair market value of aggregate net proceeds received by the
non-cash proceeds as determined in good Company after the Closing Date (includ-
faith by the Board of Directors as ing the fair market value of non-cash
evidenced by a Board Resolution) from any proceeds as determined in good faith by
Person other than a Subsidiary, as a the Board of Directors as evidenced by a
result of the issuance of (or Board Resolution) from any Person other
contribution to capital on) Capital Stock than a Subsidiary, as a result of the
(other than any Redeemable Stock) or issuance of (or contribution to capital
warrants, rights or options to acquire on) Capital Stock (other than any
Capital Stock (other than any Redeemable Redeemable Stock) or warrants, rights or
Stock); (C) the aggregate net proceeds options to acquire Capital Stock (other
received by the Company after the Closing than any Redeemable Stock); (C) the
Date from any Person other than a aggregate net proceeds received by the
Subsidiary as a result of the issuance of Company after the Closing Date from any
Capital Stock (other than Redeemable Person other than a Subsidiary as a
Stock) upon conversion or exchange of result of the issuance of Capital Stock
Indebtedness or upon exercise of options, (other than Redeemable Stock) upon
warrants or other rights to acquire such conversion or exchange of Indebtedness or
Capital Stock and (D) $25,000,000. For upon exercise of options, warrants or
purposes of any calculation that is other rights to acquire such Capital
required to be made in respect of, or Stock and (D) $125,000,000; provided that
after the declaration of a dividend by the sum of the foregoing clauses (A), (B)
the Company, such dividend shall be (C) and (D) shall be reduced, dollar for
deemed to be paid at the date of dollar, by the amount of any Investments
declaration and shall be included in made solely in reliance upon clause (xi)
determining the aggregate amount of of the covenant relating to limitations
Restricted Payments, and the subsequent on investments (less the amount of
payment of such dividend shall not be Returned Investments (as defined in the
treated as an additional payment. New Note Indenture)). For purposes of any
calculation that is required to be made
in respect of, or after the declaration
of a dividend by the Company, such
dividend shall be deemed to be paid at
the date of declaration and shall be
included in determining the aggregate
amount of Restricted Payments, and the
subsequent payment of such dividend shall
not be treated as an additional payment.
</TABLE>
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<PAGE> 60
<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Limitation on
Transactions with
Affiliates: Neither the Company nor any Subsidiary of No change.
the Company shall, directly or indirectly
(i) sell, lease, transfer or otherwise
dispose of any of its properties or
assets, or issue securities to, (ii)
purchase any property, assets or
securities from, (iii) make any
Investment in, or (iv) enter into or
suffer to exist any contract or agreement
with or for the benefit of, an Affiliate
or Holder of 5% or more of any class of
Capital Stock (and any Affiliate of such
Holder) of the Company (an "Affiliate
Transaction"), other than (x) certain
permitted Affiliate Transactions and (y)
Affiliate Transactions (including lease
transactions) which are on fair and
reasonable terms no less favorable to the
Company or such Subsidiary, as the case
may be, as those as might reasonably have
been obtainable at such time from an
unaffiliated party; provided that if an
Affiliate Transaction or series of
related Affiliate Transactions involves
or has a value in excess of $10 million,
the Company or such Subsidiary, as the
case may be, shall not enter into such
Affiliate Transaction or series of
related Affiliate Transactions unless a
majority of the disinterested members of
the Board of Directors of the Company or
such Subsidiary shall reasonably and in
good faith determine that such Affiliate
Transaction is fair to the Company or
such Subsidiary, as the case may be, or
is on terms no less favorable to the
Company or such Subsidiary, as the case
may be, than those as might reasonably
have been obtainable at such time from an
unaffiliated party.
The preceding paragraph shall not apply
to (i) any agreement as in effect as of
the Closing Date, or any amendment
thereto (including pursuant to any
amendment thereto) so long as any such
amendment is not disadvantageous to the
Holders in any material respect or any
transaction contemplated thereby
(including pursuant to any amendment
thereto); (ii) any transaction between
the Company and any Wholly Owned
Subsidiary or between Wholly Owned
Subsidiaries, provided such transactions
are not otherwise prohibited by the
Existing Note Indenture; (iii) reasonable
and customary fees and compensation paid
to, and indemnity provided on behalf of,
officers, directors, employees or
consultants of the Company or any
Subsidiary, as determined by the Board of
Directors of the Company or any
Subsidiary or the senior management
thereof in good faith; (iv) any
Restricted Payments not prohibited in
Section 4.13; (v) any payments or other
transactions pursuant to any tax sharing
agreement between the Company and any
other Person with which the Company is
required or permitted to file a
consolidated tax return or with which the
Company is or could be part of a
consolidated group for tax purposes; and
(vi) transactions with Continental, Mesa
and their respective Affiliates as
contemplated by Alliance Agreements.
</TABLE>
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<PAGE> 61
<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Limitation on
Asset Sales: Subject to certain provisions of the No change.
Existing Note Indenture, in the event and
to the extent that on any date after the
Closing Date the Company and its
Subsidiaries shall receive Net Cash Pro-
ceeds from one or more Asset Sales (other
than Asset Sales by the Company or any
Subsidiary to the Company or another
Subsidiary), then the Company shall, or
shall cause such Subsidiary to, within 12
months after such date apply an amount
equal to such Net Cash Proceeds (A) to
repay Indebtedness of the Company or
Indebtedness of any Subsidiary, and/or
(B) as an Investment (or enter into a
definitive agreement committing to so
invest within 12 months after the date of
such agreement), in property or assets of
a nature or type or that are used in a
business (or in a Person having property
and assets of a nature or type, or
engaged in a business) similar or related
to the nature or type of the property and
assets of, or the business of, the
Company and its Subsidiaries existing on
the date thereof (as determined in good
faith by the Board of Directors of the
Company or such Subsidiary, as the case
may be, whose determination shall be
conclusive and evidenced by a Board
Resolution). The amount of such Net Cash
Proceeds required to be applied (or to be
committed to be applied) during such
12-month period as set forth in clause
(A) or (B) of the preceding sentence
shall constitute "Excess Proceeds."
If on the first Business Day following
any 12-month period referred to in the
preceding paragraph, the aggregate amount
of Excess Proceeds from all Asset Sales
subject to application but not previously
applied during such 12-month period as
provided in clause (A) or (B) of the
preceding paragraph, exceeds $15,000,000,
the Company, within 10 Business Days
thereafter, shall make an offer to
purchase on a pro rata basis from all
Holders (an "Excess Proceeds Offer"), and
shall purchase from Holders accepting
such Excess Proceeds Offer, the maximum
principal amount (expressed as an
integral multiple of $1,000) of Existing
Notes that may be purchased from funds in
an amount equal to all such outstanding
Excess Proceeds at a purchase price equal
to 100% of the principal amount of the
Existing Notes so purchased plus accrued
and unpaid interest thereon to the date
of purchase ("Excess Proceeds Payment").
Upon completion of an Excess Proceeds
Offer (or up on termination of such offer
if no repurchases are required), the
amount of such Excess Proceeds relating
thereto shall be equal to zero.
</TABLE>
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<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Change of
Control: Upon a Change of Control, each Holder No change.
shall have the right to require the
Company to repurchase all or any part of
such Holder's Existing Notes at a
repurchase price equal to 101% of the
principal amount thereof plus accrued and
unpaid interest, if any, to the date of
purchase. Within 30 days following any
Change of Control, the Company shall mail
a notice to each Holder stating: (i) that
a Change of Control has occurred and that
such Holder has the right to require the
Company to purchase all or any part of
such Holder's Existing Notes at a
purchase price in cash equal to 101% of
the principal amount thereof plus accrued
and unpaid interest, if any, to the date
of purchase; (ii) the circumstances and
relevant facts regarding such Change of
Control; (iii) the purchase date (which
shall be no earlier than 30 days nor
later than 60 days from the date such
notice is mailed); and (iv) the
instructions that the Company determines
that a Holder must follow to have its
Existing Notes repurchased. Holders
electing to have a Existing Note
purchased will be required to surrender
the Existing Note, with an appropriate
form duly completed, to the Company at
the address specified in the notice at
least 10 business days prior to the
purchase date. Holders will be entitled
to withdraw their election as specified
in the notice.
</TABLE>
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<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Limitation on
Investments: The Company shall not, and shall not (Revisions to this covenant are
permit any Subsidiary to make any underlined) The Company shall not, and
Investment other than (i) Investments shall not permit any Subsidiary to make
consisting of non-cash proceeds from any Investment other than (i) Investments
Asset Sales as contemplated by the Ex- consisting of non-cash proceeds from
isting Note Indenture; (ii) Investments Asset Sales as contemplated by the New
consisting of Cash Equivalents; (iii) Note Indenture; (ii) Investments
accounts receivable if credited or consisting of Cash Equivalents; (iii)
acquired in the ordinary course of accounts receivable if credited or
business; (iv) payroll advances and acquired in the ordinary course of
advances for business and travel expenses business; (iv) payroll advances and
in the ordinary course of business; (v) advances for business and travel expenses
Investments by the Company in its in the ordinary course of business; (v)
Subsidiaries in the ordinary course of Investments by the Company in its
its business; (vi) Investments by any Subsidiaries in the ordinary course of
Subsidiary of the Company in the Company its business; (vi) Investments by any
or in any Subsidiary; (vii) Investments Subsidiary of the Company in the Company
by the Company for the purpose of or in any Subsidiary; (vii) Investments
acquiring businesses reasonably related by the Company for the purpose of
to the business of the Company, in an acquiring businesses reasonably related
aggregate amount not exceeding $5,000,000 to the business of the Company, in an
in any fiscal year; (viii) Investments aggregate amount not exceeding $5,000,000
made by way of endorsement of negotiable in any fiscal year; (viii) Investments
instruments received by the Company or made by way of endorsement of negotiable
any Subsidiary in the ordinary course of instruments received by the Company or
business; (ix) stock, obligations or any Subsidiary in the ordinary course of
securities received in settlement of business; (ix) stock, obligations or
debts created in the ordinary course of securities received in settlement of
business owing to the Company or any debts created in the ordinary course of
Subsidiary; (x) Investments by the business owing to the Company or any
Company for the purpose of receivables Subsidiary; (x) Investments by the
financing; and (xi) in addition to any Company for the purpose of receivables
other permitted investments, any other financing; (xi) an Investment not in
Investments by the Company in an aggre- excess of the amount of Restricted
gate amount not exceeding $1,000,000 at Payments that the Company is permitted to
any time. make (immediately prior to making such
Investment) under the covenant relating
to limitations on restricted payments and
(xii) in addition to any other permitted
investments, any other Investments by the
Company in an aggregate amount not ex-
ceeding $1,000,000 at any time.
</TABLE>
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<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Limitations on
Mergers and
Consolidation: The Existing Note Indenture provides that No change.
the Company will not consolidate with or
merge into any other corporation, or
transfer, lease or convey its properties
and assets substantially as an entirety
(the "Properties") to any Person, unless:
(i) the corporation formed by such
consolidation or merger or the Person
that acquires by transfer, lease or
conveyance the Properties (collectively,
the "Successor"), is a corporation
organized and existing under the laws of
the United States of America or any State
thereof or the District of Columbia and
the Success or assumes by supplemental
indenture in a form satisfactory to the
Trustee the Company's obligation for the
due and punctual payment of the principal
of and interest on all the Existing Notes
according to their tenor and the
performance of every covenant of the
Existing Note Indenture on the part of
the Company to be performed or observed;
and (ii) immediately before and after
giving effect to such transaction, no
Default or Event of Default shall have
occurred and be continuing; and (iii) the
Company has delivered to the Trustee an
Officers' Certificate and an Opinion of
Counsel, each stating that such
consolidation, merger, conveyance, lease
or transfer and such Supplemental
Indenture comply with Article Six of the
Existing Note Indenture and that all
conditions precedent set forth in the
Existing Note Indenture relating to such
transaction have been complied with.
</TABLE>
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<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Limitation on
Issuances and
Dispositions of
Capital Stock of
Subsidiaries: Each Subsidiary of the Company shall at (Revisions to this covenant are
all times be a Wholly Owned Subsidiary of underlined) Each Subsidiary of the
the Company. The Company (i) shall not, Company shall at all times be a Wholly
and shall not permit any Subsidiary to, Owned Subsidiary of the Company. The
transfer, convey, sell, or otherwise Company (i) shall not, and shall not
dispose of any Capital Stock of a permit any Subsidiary to, transfer,
Subsidiary, or securities convertible or convey, sell, or otherwise dispose of any
exchangeable into, or options, warrants, Capital Stock of a Subsidiary, or
rights or any other interest with respect securities convertible or exchangeable
to, Capital Stock of a Subsidiary to any into, or options, warrants, rights or any
Person (other than the Company or a other interest with respect to, Capital
Wholly Owned Subsidiary) and (ii) shall Stock of a Subsidiary to any Person
not permit any Subsidiary to issue shares (other than the Company or a Wholly Owned
of its Capital Stock (other than Subsidiary) and (ii) shall not permit any
directors' qualifying shares), or Subsidiary to issue shares of its Capi-
securities convertible or exchangeable tal Stock (other than directors'
into, or options, warrants, rights or any qualifying shares), or securities
other interest with respect to, its convertible or exchangeable into, or
Capital Stock to any Person other than to options, warrants, rights or any other
the Company or a Wholly Owned Subsidiary. interest with respect to, its Capital
Stock to any Person other than to the
Company or a Wholly Owned Subsidiary;
provided, that the limitations of this
covenant shall not apply to any
transaction between or among the Company
and one or more direct or indirect Wholly
Owned Subsidiaries of the Company
pursuant to which all existing holders of
Capital Stock of the Company receive,
upon conversion or otherwise in exchange
for securities owned by such holders,
Capital Stock of a corporation which
immediately prior to such exchange is a
Wholly Owned Subsidiary, and which
securities have rights and preferences
identical to those of the securities
replaced, so long as (i) immediately
before and after giving effect to such
transaction no Default or Event of
Default shall have occurred and be
continuing, and (ii) such transaction is
not otherwise prohibited by the New Note
Indenture.
</TABLE>
63
<PAGE> 66
<TABLE>
<CAPTION>
EXISTING NOTES NEW NOTES
----------------------------------------- -----------------------------------------
<S> <C> <C>
Limitation on
Payment Restric-
tions Affecting
Subsidiaries: The Company shall not, and shall not No change.
permit any Subsidiary to, create or
otherwise cause or suffer to exist or
become effective any Payment Restriction
or consensual encumbrance with respect to
any Subsidiary thereof to (a) pay
dividends or make any other distributions
on such Subsidiary's Capital Stock; (b)
make any loans or advances to the Company
or any other Subsidiary; or (c) transfer
any of its property or assets to the
Company or any other Subsidiary except
(i) restrictions imposed by applicable
law; (ii) any restrictions existing under
the Existing Note Indenture; and (iii)
encumbrances or restrictions contained in
any agreement or instrument (A) relating
to any property acquired or leased by the
Company or any of its Subsidiaries after
the Closing Date, provided that such en-
cumbrance or restriction relates only to
the property which is acquired or leased;
(B) relating to any Indebtedness of any
Subsidiary at the date of acquisition of
such Subsidiary by the Company or any
Subsidiary of the Company, provided that
such Indebtedness was not incurred in
connection with, or in contemplation of,
such acquisition (the Company being
entitled to rely upon a certificate of
such Subsidiary as to whether such
Indebtedness was incurred in
contemplation thereof); (C) arising
pursuant to an agreement effecting a
refinancing of Indebtedness issued
pursuant to an agreement referred to in
the foregoing clauses (A) and (B), so
long as the encumbrances and restrictions
contained in any such refinancing
agreement are no more restrictive than
the encumbrances and restrictions con-
tained in such agreements; (D) which
constitute customary provisions
restricting subletting or assignment of
any lease of the Company or any
Subsidiary or provisions in agreements
that restrict the assignment of such
agreement of any rights thereunder; and
(E) which constitute restrictions on the
sale or other disposition of any property
securing Indebtedness as a result of a
lien on such property.
</TABLE>
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<PAGE> 67
DESCRIPTION OF THE NEW NOTES
The New Notes will be issued under an indenture dated August , 1995 (the
"New Note Indenture") between the Company and American Bank National
Association, as trustee (the "Trustee"). The material provisions of the New
Notes and the New Note Indenture are summarized below. The statements under this
caption relating to the New Notes and the New Note Indenture are summaries only,
however, and do not purport to be complete. Such summaries make use of terms
defined in the New Note Indenture and are qualified in their entirety by express
reference to the New Note Indenture, which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. All section
references under this heading are references to sections of the New Note
Indenture.
GENERAL
Each New Note will mature on September 1, 2005, and will bear interest at
the rate per annum stated on the cover page hereof from the date of issuance,
payable semiannually in arrears on March 1 and September 1 of each year,
commencing March 1, 1996, to the person in whose name the New Note is registered
at the close of business on the record date next preceding such interest payment
date. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company will pay the principal on the New Notes to each Holder who
surrenders such New Notes to a Paying Agent on or after September 1, 2005 or, in
the event of an early redemption of the New Notes, on or after the Redemption
Date, as described below. The Company will pay principal and interest in U.S.
legal tender by Federal funds bank wire transfer or (in the case of payment of
interest) by check to the persons who are registered Holders at the close of
business on the Record Date next preceding the applicable interest payment date.
The aggregate principal amount of the New Notes that may be issued will be
limited to $75,000,000.
The New Notes will be transferable and exchangeable at the office of the
Registrar and any co-registrar and will be issued in fully registered form,
without coupons, in denominations of $1,000 and any whole multiple thereof;
provided, however, that any Global Security representing all or a portion of the
New Notes may not be transferred except as a whole by the Depository in certain
circumstances unless and until it is exchanged in whole or in part for New Notes
in a non-global form. The Company may require payment of a sum sufficient to
cover any transfer tax or other similar governmental charge payable in
connection with certain transfers and exchanges.
RANKING
The New Notes will be senior to all existing and future subordinated
indebtedness and will be senior unsecured obligations of the Company, ranking
pari passu in right of payment with all other Indebtedness of the Company.
Certain Indebtedness, however, including secured debt, is, and will be,
effectively senior in right of payment to the New Notes with respect to assets
that constitute collateral securing such other Indebtedness.
OPTIONAL REDEMPTION
The Company may not redeem the New Notes prior to September 1, 2000. The
Company, at its option on notice to the Holders, may redeem the New Notes on and
after September 1, 2000 at any time in whole or from time to time in part, at a
Redemption Price equal to the applicable percentage of the aggregate principal
amount of the New Notes so to be redeemed, set forth below, plus accrued and
unpaid interest thereon to the Redemption Date if redeemed during the 12
calendar months beginning on September 1 of the years indicated below:
<TABLE>
<S> <C>
2000............................... 105.375%
2001............................... 103.583%
2002............................... 101.792%
2003 and thereafter................ 100.000%
</TABLE>
65
<PAGE> 68
SINKING FUND; MANDATORY REDEMPTION
The New Notes will not be entitled to the benefit of any sinking fund or
mandatory redemption provisions.
CERTAIN COVENANTS
Limitations on Restricted Payments. Under the terms of the New Note
Indenture, neither the Company nor any subsidiary shall: (i) declare or pay any
dividends on or make any distributions in respect of Capital Stock of the
Company (other than dividends or distributions payable solely in shares of
Capital Stock (other than Redeemable Stock) or in options, warrants or other
rights to purchase Capital Stock (other than Redeemable Stock)) to holders of
Capital Stock of the Company, (ii) purchase, redeem or otherwise acquire or
retire for value (other than through the issuance solely of Capital Stock (other
than Redeemable Stock)) any Capital Stock or warrants, rights or options to
acquire Capital Stock other than Redeemable Stock; (iii) redeem, repurchase,
defease (including, but not limited to, in substance or legal defeasance), or
otherwise acquire or retire for value (other than through the issuance solely of
Capital Stock (other than Redeemable Stock) or warrants, rights or options to
acquire Capital Stock (other than Redeemable Stock)) (collectively, a
"prepayment"), directly or indirectly (including by way of amendment of the
terms of any Indebtedness in connection with any retirement or acquisition of
such Indebtedness) other than at scheduled maturity thereof or by any scheduled
repayment or scheduled sinking fund payment, any indebtedness of the Company
which is subordinated in right of payment to the New Notes or which matures
after the maturity date of the New Notes (except out of the proceeds of
Refinancing Indebtedness); if, at the time of such transaction described in
clause (i), (ii) or (iii) (such transactions being hereinafter collectively
referred to as "Restricted Payments") and after giving effect thereto, either
the aggregate amount expended by the Company and its Subsidiaries for all
Restricted Payments (the amount of any Restricted Payment if other than cash to
be the fair market value of the property included in such payment as determined
in good faith by the Board of Directors as evidenced by a Board Resolution) from
and after the Closing Date shall exceed the sum of (A) 50% (or if the New Notes
at the time of the proposed Restricted Payment are rated Investment Grade by at
least one rating agency of recognized standing selected by the Company, 75%) of
the aggregate Adjusted Consolidated Net Income (or if such Adjusted Consolidated
Net Income is a loss, minus 100% of such loss) of the Company and its
Subsidiaries for the period from the first day of the quarter ended subsequent
to the Closing Date and through the last day of the most recently completed
quarter immediately preceding the quarter in which the Restricted Payment
occurs, calculated on a cumulative basis as if such period were a single
accounting period; (B) the aggregate net proceeds received by the Company after
the Closing Date (including the fair market value of non-cash proceeds as
determined in good faith by the Board of Directors as evidenced by a Board
Resolution) from any Person other than a Subsidiary, as a result of the issuance
of (or contribution to capital on) Capital Stock (other than any Redeemable
Stock) or warrants, rights or options to acquire Capital Stock (other than any
Redeemable Stock); (C) the aggregate net proceeds received by the Company after
the Closing Date from any Person other than a Subsidiary as a result of the
issuance of Capital Stock (other than Redeemable Stock) upon conversion or
exchange of Indebtedness or upon exercise of options, warrants or other rights
to acquire such Capital Stock and (D) $125,000,000; provided that the sum of the
foregoing clauses (A), (B), (C) and (D) shall be reduced, dollar for dollar, by
the amount of any investments made solely in reliance upon clause (xi) of the
covenant relating to limitations on investments (less the amount of Returned
Investments). For purposes of any calculation that is required to be made in
respect of, or after the declaration of a dividend by the Company, such dividend
shall be deemed to be paid at the date of declaration and shall be included in
determining the aggregate amount of Restricted Payments, and the subsequent
payment of such dividend shall not be treated as an additional payment.
For the purposes of the preceding covenant, the net proceeds from the
issuance of shares of Capital Stock of the Company upon conversion of debt
securities shall be deemed to be an amount equal to the net book value of such
debt securities (plus the additional amount required to be paid upon such
conversion, if any), less any cash payment on account of fractional shares; the
"net book value" of a security shall be the net amount received by the Company
on the issuance of such security, as adjusted on the books of the Company to the
date of conversion.
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<PAGE> 69
Notwithstanding the foregoing, if no Default or Event of Default shall have
occurred or be continuing at the time, the New Note Indenture shall not prohibit
(i) the purchase, redemption or other acquisition or retirement for value of any
shares of the Company's Capital Stock or the prepayment of any indebtedness of
the Company which is subordinated in right of payment to the New Notes or which
matures after the maturity date of the New Notes by any exchange for, or out of
and to the extent the Company has received cash proceeds from the substantially
concurrent sale or issuance (other than to a Subsidiary) of, shares of Capital
Stock (other than any Redeemable Stock of the Company) or warrants, rights or
options to acquire Capital Stock (other than any Redeemable Stock); or (ii) the
purchase or redemption of shares of Capital Stock of the Company (including
options on any such shares or related stock appreciation rights or similar
securities) held by officers or employees of the Company or its Subsidiaries (or
their estates or beneficiaries under their estates) upon death, disability,
retirement, termination of employment or pursuant to the terms of any Plan or
any other agreement under which such shares of stock or related rights were
issued, provided that the aggregate amount of such purchases or redemptions of
such Capital Stock shall not exceed $3,000,000 in any one fiscal year of the
Company.
Limitation on Transactions with Affiliates. Neither the Company nor any
Subsidiary of the Company shall, directly or indirectly (i) sell, lease,
transfer or otherwise dispose of any of its properties or assets, or issue
securities to, (ii) purchase any property, assets or securities from, (iii) make
any Investment in, or (iv) enter into or suffer to exist any contract or
agreement with or for the benefit of, an Affiliate or Holder of 5% or more of
any class of Capital Stock (and any Affiliate of such Holder) of the Company (an
"Affiliate Transaction"), other than (x) certain permitted Affiliate
Transactions and (y) Affiliate Transactions (including lease transactions) which
are on fair and reasonable terms no less favorable to the Company or such
Subsidiary, as the case may be, as those as might reasonably have been
obtainable at such time from an unaffiliated party; provided that if an
Affiliate Transaction or series of related Affiliate Transactions involves or
has a value in excess of $10 million, the Company or such Subsidiary, as the
case may be, shall not enter into such Affiliate Transaction or series of
related Affiliate Transactions unless a majority of the disinterested members of
the Board of Directors of the Company or such Subsidiary shall reasonably and in
good faith determine that such Affiliate Transaction is fair to the Company or
such Subsidiary, as the case may be, or is on terms no less favorable to the
Company or such Subsidiary, as the case may be, than those as might reasonably
have been obtainable at such time from an unaffiliated party.
The preceding paragraph shall not apply to (i) any agreement as in effect
as of the Closing Date, or any amendment thereto (including pursuant to any
amendment thereto) so long as any such amendment is not disadvantageous to the
Holders in any material respect or any transaction contemplated thereby
(including pursuant to any amendment thereto); (ii) any transaction between the
Company and any Wholly Owned Subsidiary or between Wholly Owned Subsidiaries,
provided such transactions are not otherwise prohibited by this New Note
Indenture; (iii) reasonable and customary fees and compensation paid to, and
indemnity provided on behalf of, officers, directors, employees or consultants
of the Company or any Subsidiary, as determined by the Board of Directors of the
Company or any Subsidiary or the senior management thereof in good faith; (iv)
any Restricted Payments not prohibited in Section 4.13; (v) any payments or
other transactions pursuant to any tax sharing agreement between the Company and
any other Person with which the Company is required or permitted to file a
consolidated tax return or with which the Company is or could be part of a
consolidated group for tax purposes; and (vi) transactions with Continental,
Mesa and their respective Affiliates as contemplated by Alliance Agreements.
Limitation on Asset Sales. Subject to certain provisions of the New Note
Indenture, in the event and to the extent that on any date the Company or any of
its Subsidiaries shall receive Net Cash Proceeds from one or more Asset Sales
(other than Asset Sales by the Company or any Subsidiary to the Company or
another Subsidiary) then the Company shall, or shall cause such Subsidiary to,
within 12 months after such date apply an amount equal to such Net Cash Proceeds
(A) and to repay Indebtedness of the Company or Indebtedness of any Subsidiary,
in each case owing to a Person other than the Company or any of its
Subsidiaries, and/or (B) as an investment (or enter into a definitive agreement
committing to so invest within 12 months after the date of such agreement), in
property or assets of a nature or type or that are used in a business (or in a
Person having property and assets of a nature or type, or engaged in a business)
similar or related to the nature or type
67
<PAGE> 70
of the property and assets of, or the business of, the Company and its
Subsidiaries existing on the date thereof (as determined in good faith by the
Board of Directors of the Company or such Subsidiary, as the case may be, whose
determination shall be conclusive and evidenced by a Board Resolution). The
amount of such Net Cash Proceeds required to be applied (or to be committed to
be applied) during such 12-month period as set forth in clause (A) or (B) of the
preceding sentence shall constitute "Excess Proceeds."
If on the first Business Day following any 12-month period referred to in
the preceding paragraph, the aggregate amount of Excess Proceeds from all Asset
Sales subject to application but not previously applied during such 12-month
period as provided in clause (A) or (B) of the preceding paragraph, exceeds
$15,000,000, the Company, within 10 Business Days thereafter, shall make an
offer to purchase on a pro rata basis from all Holders (an "Excess Proceeds
Offer"), and shall purchase from Holders accepting such Excess Proceeds Offer,
the maximum principal amount (expressed as an integral multiple of $1,000) of
New Notes that may be purchased from funds in an amount equal to all such
outstanding Excess Proceeds at a purchase price equal to 100% of the principal
amount of the New Notes so purchased plus accrued and unpaid interest thereon to
the date of purchase ("Excess Proceeds Payment"). Upon completion of an Excess
Proceeds Offer (or upon termination of such offer if no repurchases are
required), the amount of such Excess Proceeds relating thereto shall be equal to
zero.
Change of Control. Upon a Change of Control, each Holder shall have the
right to require the Company to repurchase all or any part of such Holder's New
Notes at a repurchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase. Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
stating: (i) that a Change of Control has occurred and that such Holder has the
right to require the Company to purchase all or any part of such Holder's New
Notes at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase; (ii) the
circumstances and relevant facts regarding such Change of Control; (iii) the
purchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (iv) the instructions that the Company
determines that a Holder must follow to have its New Notes repurchased. Holders
electing to have a New Note purchased will be required to surrender the New
Note, with an appropriate form duly completed, to the Company at the address
specified in the notice at least 10 business days prior to the purchase date.
Holders will be entitled to withdraw their election as specified in the notice.
Limitation on Investments. The Company shall not, and shall not permit any
Subsidiary to make any Investment other than (i) Investments consisting of
non-cash proceeds from Asset Sales as contemplated by the New Note Indenture;
(ii) Investments consisting of Cash Equivalents; (iii) accounts receivable if
credited or acquired in the ordinary course of business; (iv) payroll advances
and advances for business and travel expenses in the ordinary course of
business; (v) Investments by the Company in its Subsidiaries in the ordinary
course of its business; (vi) Investments by any Subsidiary of the Company in the
Company or in any Subsidiary; (vii) Investments by the Company for the purpose
of acquiring businesses reasonably related to the business of the Company, in an
aggregate amount not exceeding $5,000,000 in any fiscal year; (viii) Investments
made by way of endorsement of negotiable instruments received by the Company or
any Subsidiary in the ordinary course of business; (ix) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business owing to the Company or any Subsidiary; (x) Investments by the Company
for the purpose of receivables financing; and (xi) an Investment not in excess
of the amount of Restricted Payments that the Company is permitted to make
(immediately prior to making such Investment) under the covenant relating to
limitations on restricted payments and (xii) in addition to any other permitted
investments, any other Investments by the Company in an aggregate amount not
exceeding $1,000,000 at any time.
Limitation on Issuances and Dispositions of Capital Stock of
Subsidiaries. Each Subsidiary of the Company shall at all times be a Wholly
Owned Subsidiary of the Company. The Company (i) shall not, and shall not permit
any Subsidiary to, transfer, convey, sell, or otherwise dispose of any Capital
Stock of a Subsidiary, or securities convertible or exchangeable into, or
options, warrants, rights or any other interest with respect to, Capital Stock
of a Subsidiary to any Person (other than the Company or a Wholly Owned
Subsidiary) and (ii) shall not permit any Subsidiary to issue shares of its
Capital Stock (other than directors' qualifying shares), or securities
convertible or exchangeable into, or options, warrants, rights or any other
68
<PAGE> 71
interest with respect to, its Capital Stock to any Person other than to the
Company or a Wholly Owned Subsidiary provided, that the limitations of this
covenant shall not apply to any transaction between or among the Company and one
or more direct or indirect Wholly Owned Subsidiaries of the Company pursuant to
which all existing holders of Capital Stock of the Company receive, upon
conversion or otherwise in exchange for securities owned by such holders,
Capital Stock of a corporation which immediately prior to such exchange is a
Wholly Owned Subsidiary, and which securities have rights and preferences
identical to those of the securities replaced, so long as (i) immediately before
and after giving effect to such transaction no Default or Event of Default shall
have occurred and be continuing, and (ii) such transaction is not otherwise
prohibited by the New Note Indenture.
Limitation on Payment Restrictions Affecting Subsidiaries. The Company
shall not, and shall not permit any Subsidiary to, create or otherwise cause or
suffer to exist or become effective any Payment Restriction or consensual
encumbrance with respect to any Subsidiary thereof to (a) pay dividends or make
any other distributions on such Subsidiary's Capital Stock; (b) make any loans
or advances to the Company or any other Subsidiary; or (c) transfer any of its
property or assets to the Company or any other Subsidiary except (i)
restrictions imposed by applicable law; (ii) any restrictions existing under the
New Note Indenture; and (iii) encumbrances or restrictions contained in any
agreement or instrument (A) relating to any property acquired or leased by the
Company or any of its Subsidiaries after the Closing Date, provided, that such
encumbrance or restriction relates only to the property which is acquired or
leased; (B) relating to any Indebtedness of any Subsidiary at the date of
acquisition of such Subsidiary by the Company or any Subsidiary of the Company,
provided, that such Indebtedness was not incurred in connection with, or in
contemplation of, such acquisition (the Company being entitled to rely upon a
certificate of such Subsidiary as to whether such Indebtedness was incurred in
contemplation thereof); (C) arising pursuant to an agreement effecting a
refinancing of Indebtedness issued pursuant to an agreement referred to in the
foregoing clauses (A) and (B), so long as the encumbrances and restrictions
contained in any such refinancing agreement are no more restrictive than the
encumbrances and restrictions contained in such agreements; (D) which constitute
customary provisions restricting subletting or assignment of any lease of the
Company or any Subsidiary or provisions in agreements that restrict the
assignment of such agreement or any rights thereunder; and (E) which constitute
restrictions on the sale or other disposition of any property securing
Indebtedness as a result of a lien on such property.
LIMITATIONS ON MERGERS AND CONSOLIDATION
The New Note Indenture provides that the Company will not consolidate with
or merge into any other corporation, or transfer, lease or convey its properties
and assets substantially as an entirety (the "Properties") to any Person,
unless: (i) the corporation formed by such consolidation or merger or the Person
that acquires by transfer, lease or conveyance the Properties (collectively, the
"Successor"), is a corporation organized and existing under the laws of the
United States of America or any State thereof or the District of Columbia and
the Successor assumes by supplemental New Note Indenture in a form satisfactory
to the Trustee the Company's obligation for the due and punctual payment of the
principal of and interest on all the New Notes according to their tenor and the
performance of every covenant of the New Note Indenture on the part of the
Company to be performed or observed; and (ii) immediately before and after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; and (iii) the Company has delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, lease or transfer and such Supplemental New
Note Indenture comply with Article Six of the New Note Indenture and that all
conditions precedent set forth in the New Note Indenture relating to such
transaction have been complied with.
CERTAIN DEFINITIONS
The following is a summary of certain defined terms to be used in the New
Note Indenture. Reference is made to the New Note Indenture for the full
definition of all such terms and for the definitions of other capitalized terms
used herein and not defined below.
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<PAGE> 72
"Adjusted Consolidated Net Income" means, for any Person for any period,
the aggregate net income (or loss) of such Person and its consolidated
Subsidiaries for such period determined in occurrence with GAAP; provided that
the following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication): (i) the net income (or loss) of any Person (other
than a Subsidiary of such first Person) in which any other Person (other than
such first Person or any of its Subsidiaries) has a joint or shared interest,
except to the extent of the amount of dividends or other distributions actually
paid to and received by such first Person or any of its Subsidiaries during such
period out of funds legally available therefor, (ii) the net income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of such first
Person or any of its Subsidiaries or all or substantially all of the property
and assets of such Person are acquired by such first Person or any of its
Subsidiaries, (iii) the net income (or loss) of any Subsidiary of such Person
that is subject to a Payment Restriction, except to the extent of the amount of
cash dividends or other distributions actually paid to, and received by, such
person or any of its Subsidiaries during such period from such Subsidiary out of
funds legally available therefor, (iv) any gains or losses (on an after-tax
basis) attributable to Asset Sales, and (v) all extraordinary gains and
extraordinary losses.
"Affiliates" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transactions) in one transaction
or a series of related transactions by the Company or any of its Subsidiaries to
any Person other than the Company or any of its Subsidiaries of (i) all or any
of the Capital Stock of any Subsidiary of the Company, (ii) all or substantially
all of the property and assets of an operating unit or business of the Company
or any of its Subsidiaries or (iii) any other property and assets of the Company
or any of its Subsidiaries outside the ordinary course of business of the
Company or such Subsidiary and, in each case, that is not governed by the
provisions of Article Six of the New Note Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the property and
assets of the Company; provided that none of (A) sales or other dispositions of
inventory, receivables and other current assets, (B) sale or other dispositions
of surplus equipment, spare parts, expandable inventories, furniture or fixtures
in an aggregate amount not to exceed $10,000,000 in any fiscal year of the
Company, (C) sale leasebacks of aircraft and engines passenger loading bridges
or other flight or ground equipment, flight simulators, or the Company's
reservation facility located at 222 South Mill Avenue, Tempe, Arizona; or (D)
$20,000,000 of other sales in any fiscal year of the Company shall be included
within the meaning of "Asset Sale."
"Change of Control" means (i) the acquisition at any time by any Person
(other than one or more Permitted Holders), of "beneficial ownership" (within
the meaning of Section 13(d) under the Exchange Act and the rules and
regulations promulgated thereunder) in excess of 50% of the total voting power
of the voting stock of the Company; (ii) the sale, lease, transfer or other
disposition, of all or substantially all of the assets of the Company to any
Person (other than one or more Permitted Holders) as an entirety or
substantially as an entirety in one transaction or a series of related
transactions; (iii) the merger or consolidation of the Company, with or into
another corporation, or the merger of another corporation into the Company, or
any other transaction, with the effect that a Person (other than one or more
Permitted Holders), has "beneficial ownership" (within the meaning of Section
13(d) under the Exchange Act and the rules and regulations promulgated
thereunder) in excess of 50% of the voting stock of the Company, or such other
corporation, as the case may be (including indirect ownership through another
Person other than one or more Permitted Holders); or (iv) the liquidation or
dissolution of the Company. For purposes of this definition, the term Person
includes a "person" within the meaning of Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder.
"Closing Date" means the date on which the New Notes are originally issued
under the New Note Indenture.
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<PAGE> 73
"Commodity Agreement" means any agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in the
prices of commodities used by the Company or any of its Subsidiaries in the
ordinary course of its business.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to or
under which the Company or any of its Subsidiaries is a party or a beneficiary
on the date of the New Note Indenture or becomes a party or a beneficiary
thereafter.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, New Notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all obligations
of such Person to pay the deferred and unpaid purchase price of property or
services, except trade payables, (v) all obligations of such Person to the
extent capitalized on the balance sheet of such Person as lessee under
Capitalized Leases, (vi) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B) the
stated principal amount of such Indebtedness, (vii) all Indebtedness of other
Persons guaranteed by such Person to the extent such Indebtedness is guaranteed
by such Person, (viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements, Interest Risk Agreement and Commodity
Agreements. The amount of Indebtedness of any Person of any date shall be the
outstanding balance on such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the full amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness of such
time as determined in conformity with GAAP.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business consistent with past practices that are recorded as accounts receivable
on the balance sheet of such Person or its Subsidiaries) or other extension of
credit or capital contribution by such Person to any other Person (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others; provided, that any transfer of
aircraft to a limited partnership or other entity in connection with the
transaction in which the aircraft are leased to the Company shall not be an
Investment), or any purchase or acquisition by such person of Capital Stock,
bonds, notes, debentures or other similar instruments issued by any other
Person.
"Interest Rate Agreement" means any interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement designed to protect the Company or any of
its Subsidiaries against fluctuations in interest rates to or under which the
Company or any of its Subsidiaries is a party or a beneficiary on the date of
the New Note Indenture or becomes a party or a beneficiary thereafter.
"Investment Grade" means a rating of BBB- or higher by S&P or BaaB or
higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the
event that the Company shall select any other rating agency, the equivalent of
such ratings by such rating agency shall be used.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest); provided that in no event shall a true operating
lease be deemed to constitute a Lien hereunder.
"Material Subsidiary" means each Subsidiary that is either (a) a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the
Securities Act and the Exchange Act (as such regulation is in
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<PAGE> 74
effect on the date hereof) or (b) material to the financial condition or results
of operations of the Company and its Subsidiaries taken as a whole.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds of
such Asset Sale in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company) and proceeds
from the conversion of other property received when converted to cash or Cash
Equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale
without regard to the consolidated results of operations of the Company and its
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such Asset Sale other than pursuant to this Agreement, and (iv)
appropriate amounts to be provided by the Company or any Subsidiary of the
Company as a reserve against any liabilities associated with such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP.
"Payment Restriction" means, with respect to a Subsidiary of any Person,
any encumbrance, restriction or limitation, whether by operation of the terms of
its charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such Subsidiary
to (a) pay dividends or make other distributions on its Capital Stock or make
payments on any obligation, liability or Indebtedness owed to such Person or any
other Subsidiary of such Person, (b) make loans or Advances to such Person or
any other Subsidiary of such Person, or (c) transfer any of its property or
assets to such Person or any other Subsidiary of such Person, or (ii) such
Person or other Subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or (c) property or
assets.
"Permitted Holders" means AmWest, TPG, Continental, Mesa, Fidelity and
their respective successors and affiliates.
"Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise (i) is required to be redeemed prior to the
Stated Maturity of the Securities, (ii) may be required to be redeemed at the
option of the holder of such class or series of Capital Stock at any time prior
to the Stated Maturity of the Securities or (iii) is convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
indebtedness having a scheduled maturity prior to the Stated Maturity of the
Securities; provided that any Capital Stock that would not constitute Redeemable
Stock but for provisions thereof offering holders thereof the right to require
the Company to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" occurring prior to the Stated Maturity of the Securities shall not
constitute Redeemable Stock if the asset sale provisions contained in such
Capital Stock specifically provide that in respect of any particular asset sale
proceeds, the Company will not repurchase or redeem any such Capital Stock
pursuant to such provisions prior to the Company's repurchase of such Securities
as are required to be repurchased from Holders accepting an Excess Proceeds
Offer pursuant to the provisions of Section 4.15.
"Refinancing Indebtedness" means any Indebtedness of the Company or any
Subsidiary issued in exchange for, or the net proceeds of which are applied
entirely to substantially concurrently repay, refinance, refund or replace,
outstanding Indebtedness of the Company or any of its Subsidiaries (the
"Refinanced Indebtedness"), to the extent such Indebtedness
(a) is issued in a principal amount (or if such Indebtedness is issued
at an original issue discount, is issued at an original issue price) not
exceeding the outstanding principal amount (or, if such Refinanced
Indebtedness was issued at an original issue discount, not exceeding the
outstanding accreted principal amount) of such Refinanced Indebtedness, and
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<PAGE> 75
(b) if the Refinanced Indebtedness is Indebtedness of the Company and
ranks by its terms junior in right of payment to the Securities, (i) does
not have a final scheduled maturity and is not subject to any principal
payments, including but not limited to payments upon mandatory or optional
redemption, prior to the dates of analogous payments under the Refinanced
Indebtedness, and (ii) has subordination provisions effective to
subordinate such Indebtedness to the Securities at least to the extent that
such Refinanced Indebtedness is subordinated to the Securities, and
(c) if the Refinanced Indebtedness is Indebtedness of the Company and
ranks by its terms pari passu in right of payment with the Securities, (i)
is pari passu or subordinated in right of payment to the Securities, (ii)
does not have a final scheduled maturity and is not subject to any
principal payments, including but not limited to payments upon mandatory or
optional redemption, prior to the dates of analogous payments under the
Refinanced Indebtedness, and (iii) is not secured by any Lien on any
property of the Company or any Subsidiary in addition to Liens securing the
Refinanced Indebtedness.
"Returned Investments" mean, with respect to all Investments made pursuant
to clause (xi) of the covenant relating to limitations on investments, the
aggregate amount of all payments made in respect of such Investments, other than
interest, dividends or other distributions not in the nature of a return or
repurchase of capital or a repayment of principal, that have been paid or
returned, without restriction, in cash to the Company and its subsidiaries.
EVENTS OF DEFAULT
An Event of Default, with respect to the New Notes, means any one of the
following events shall have occurred and be continuing: (i) default by the
Company for 30 days in payment of any interest on the New Notes; (ii) default by
the Company in any payment of principal of or premium, if any, on the New Notes
when such payment becomes due and payable; (iii) default by the Company in
performance of any other covenant or agreement in the New Note Indenture or
under the New Notes, which shall not have been remedied within 30 days after
receipt of written notice from the Trustee or from the holders of at least 25%
in principal amount of the New Notes then outstanding; (iv) upon an event of
default resulting in the acceleration of the maturity of any issue or issues of
Indebtedness of the Company and/or one or more Subsidiaries of any principal
amount of $10 million or more in the aggregate, and such default shall be
continuing for a period of 30 days without the Company or such Subsidiary, as
the case may be, discharging the Indebtedness or effecting a cure of such
default; (v) a judgment or order not covered by insurance for the payment of
money in excess of $10 million having been rendered against the Company or any
Subsidiary and such judgment or order shall continue unsatisfied and unstayed
for a period of 60 days; or (vi) certain events involving bankruptcy, insolvency
or reorganization of the Company or any Material Subsidiary; (vii) failure by
the Company to make at the final (but not any interim) fixed maturity of one or
more issues of Indebtedness a principal payment or principal payments
aggregating $10 million or more, which failure shall not have been remedied
within 30 days of the payment default that causes the aggregate amount of such
indebtedness to exceed $10 million, or (viii) the cessation of the full force
and effect of the New Note Indenture, except as permitted therein. The Trustee
may withhold notice to the holders of the New Notes of any default or Event of
Default (except in payment of principal of, or premium, if any, or interest on
the Notes) if the Trustee considers it in the interest of the holders of the New
Notes to do so.
If an Event of Default occurs and is continuing with respect to the New
Note Indenture, the Trustee or the Holders of not less than 25% in principal
amount of the New Notes outstanding may, and at the request of the Holders, the
Trustee shall declare the principal of and premium, if any, and accrued but
unpaid interest on all the New Notes to be due and payable. Upon such a
declaration, such principal, premium, if any, and interest will be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company or any Material
Subsidiary occurs and is continuing, the principal of and premium, if any, and
interest on all the New Notes will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders
of the New Notes. If an Event of Default relating to item (iv) in the preceding
paragraph occurs, such acceleration will be automatically rescinded if the Event
of Default is cured by the Company or waived by the holders of the relevant
Indebtedness within 30 days after the occurrence of the Event of Default. Under
certain circum-
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<PAGE> 76
stances, the holders of a majority in principal amount of the outstanding New
Notes may rescind any such acceleration with respect to the New Notes and its
consequences.
The New Note Indenture provides that no Holder may pursue any remedy under
the New Note Indenture unless (i) the Trustee shall have received written notice
from the Holder of a continuing Event of Default, (ii) the Trustee shall have
received a request from holders of at least 25% in principal amount of the New
Notes to pursue such remedy, (iii) the Trustee shall have been offered indemnity
reasonably satisfactory to it, (iv) the Trustee shall have failed to act for a
period of 60 days after receipt of such notice and offer of indemnity, and (v)
during such 60-day period, a majority of the Holders do not give the Trustee
directions inconsistent with the initial request; however, such provision does
not affect the right of a holder of a Note to sue for enforcement of any overdue
payment thereon.
The holders of a majority in principal amount of the New Notes then
outstanding have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee under the New
Note Indenture, subject to certain limitations specified in the New Note
Indenture. The New Note Indenture will require the annual filing by the Company
with the Trustee of a written statement as to compliance with the covenants
contained in the New Note Indenture.
MODIFICATION AND WAIVER
The New Note Indenture provides that supplements and amendments to the New
Note Indenture or the New Notes may be made by the Company, and the Trustee with
the written consent of the Holders of at least a majority in aggregate principal
amount of the New Notes then outstanding; provided that no such amendment or
waiver may, without the consent of each Holder affected, (i) reduce the
principal amount of New Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any New Note, or alter the provisions with respect to the redemption of the
New Notes in a manner adverse to the Holders, (iii) reduce the rate of or change
the time for payment of interest on any New Note, (iv) make any New Note payable
in money other than U.S. Legal Tender, (v) make any change in the provisions of
the New Note Indenture relating to waivers of past Defaults or the rights of
Holders to receive payments of principal of, or premium, if any, or interest on,
the New Notes, (vi) waive a redemption payment with respect to any New Notes, or
(vii) make any change in certain sections of the New Note Indenture.
The New Note Indenture provides that supplements and amendments to the New
Note Indenture may be made by the Company and the Trustee without the consent of
any Holder to: (i) cure any ambiguity, correct or supplement any provision
therein which may be inconsistent with any other provision therein, or to make
any other provisions with respect to matters or questions arising under the New
Note Indenture which shall not be inconsistent with the provisions of the New
Note Indenture, provided that such amendment does not adversely affect the
rights of the Holders, (ii) evidence the succession of another corporation to
the Company, and provide for the assumption by such successor of the Company's
obligations to the Holders under the New Note Indenture and the New Notes, (iii)
to provide for uncertificated New Notes in addition to or in place of
certificated New Notes, (iv) make any change that would provide additional
rights or benefits to holders, or not adversely affect the legal rights of the
Holder under the New Note Indenture or (v) comply with the requirements of the
Commission in order to effect or maintain the qualification of the New Note
Indenture under the Trust Indenture Act of 1939.
The New Note Indenture provides that the holders of a majority in aggregate
principal amount of the New Notes then outstanding may waive any existing
Default or Event of Default under the New Note Indenture or the New Notes,
except a default or Event of Default in the payment of principal, or premium, if
any, or interest.
DISCHARGE AND TERMINATION
The New Note Indenture provides that the New Note Indenture shall cease to
be of further effect (subject to certain exceptions) when (i) all outstanding
New Notes theretofore authenticated and delivered (other than destroyed, lost or
stolen New Notes that have been replaced or paid) have been delivered to the
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<PAGE> 77
Trustee for cancellation or (ii) (A) the New Notes mature within one year or all
of them are to be called for redemption within one year under arrangements
satisfactory to the Trustee, (B) the Company irrevocably deposits in trust with
the Trustee during such one-year period, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust funds
solely for the benefit of the Holders, money or U.S. Government Obligations
sufficient to pay principal and interest on the New Notes to maturity or
redemption, as the case may be, and to pay all other sums payable by it under
the New Note Indenture or the New Notes, (C) no Event of Default with respect to
the New Notes shall have occurred and be continuing on the date of such deposit,
(D) such deposit will not result in a breach or violation of, or constitute a
default under, the New Note Indenture or any other agreement or instrument to
which the Company is a party or by which either is bound and (E) the Company has
delivered to the Trustee any required Officers' Certificate and Opinion of
Counsel.
The New Note Indenture provides that the Company may terminate all of its
obligations under the New Note Indenture (subject to certain exceptions) if (i)
the Company irrevocably deposits in trust with the Trustee money or U.S.
Government Obligations sufficient to pay principal of, premium, if any, and
interest on the New Notes on the Stated Maturity or on the applicable redemption
date; provided that the Trustee shall have been irrevocably instructed to apply
such money or the proceeds of such U.S. Government Obligations to the payment of
such principal, premium, if any, and interest with respect to the New Notes,
(ii) such deposit will not result in a Default or an Event of Default under the
New Note Indenture or any other agreement or instrument to which the Company is
a party or is bound, (iii) the Company shall have delivered to the Trustee (1)
either (x) a tax ruling to the effect that the Holders of New Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
the Company's exercise of its option under such section or (y) an Opinion of
Counsel to the same effect as such ruling and (2) an Opinion of Counsel to the
effect that (w) the creation of the defeasance trust does not violate the
Investment Company Act of 1940, (x) the Holders have a valid first-priority
security interest in the trust funds and (y) after the passage of 123 days
following the deposit (except, with respect to any trust funds for the account
of any Holder who may be deemed to be an "insider" for purposes of the United
States Bankruptcy Code, after one year following the deposit), the trust funds
will not be subject to the effect of Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law in a case commenced
by or against the Company under either such statute, and either (I) the trust
funds will no longer remain the property of the Company (and therefore will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or (II) if
a court were to rule under any such law in any case or proceeding that the trust
funds remained property of the Company, (a) assuming such trust funds remained
in the possession of the Trustee prior to such court ruling to the extent not
paid to the Holders, the Trustee will hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not avoidable
in bankruptcy or otherwise except for the effect of Section 552(b) of the United
States Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute and (b) the Holders will be entitled
to receive adequate protection of their interests in such trust funds if such
trust funds are used in such case or proceeding; (iv) if the New Notes are then
listed on a national securities exchange, the Company shall have delivered to
the Trustee an Opinion of Counsel to the effect that such deposit, defeasance
and discharge will not cause the New Notes to be delisted; and (v) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
in each case stating that all conditions precedent provided for in the section
of the New Note Indenture relating to the defeasance contemplated by such
section have been complied with.
GOVERNING LAW
The New Note Indenture and each New Note are governed by, and construed in
accordance with, the laws of the State of New York, except as may otherwise be
required by mandatory provisions at law, but without giving effect to principles
of conflicts of law.
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THE TRUSTEE
American Bank National Association will be the Trustee under the New Note
Indenture. Its address is 101 East Fifth Street, St. Paul, Minnesota 55101.
The New Note Indenture contains certain limitations on the right of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest (as defined
in the Trust Indenture Act of 1939), it must eliminate such conflict or resign.
The New Note Indenture provides that in case an Event of Default shall
occur (and be continuing), the Trustee will be required to use the degree of
care and skill of a prudent man in the conduct of his own affairs. The Trustee
will be under no obligation to exercise any of its powers under the New Note
Indenture at the request of any of the holders of the New Notes, unless such
holders shall have offered the Trustee indemnity reasonably satisfactory to it.
AUTHENTICATION
Two officers of the Company will sign each New Note on behalf of the
Company, in each case by manual or facsimile signature. The Company's seal will
be reproduced on each New Note and may be in facsimile form. A New Note will not
be valid until the Trustee or an Authenticating Agent manually signs the
certificate of authentication on the New Note. Each New Note will be dated the
date of its authentication.
LEGAL MATTERS
Certain legal matters relating to the New Notes offered hereby have been
passed upon for the Company by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The financial statements and financial statement schedule of America West
Airlines, Inc., as of December 31, 1994 and 1993, and for the period August 26,
1994 to December 31, 1994, the period January 1, 1994 to August 25, 1994 and for
each of the years in the two-year period ended December 31, 1993, have been
included herein and in the registration statements in reliance upon the reports
of KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
The reports of KPMG Peat Marwick LLP for the period August 26, 1994 to
December 31, 1994, the period January 1, 1994 to August 25, 1994, and as of
December 31, 1994 contain an explanatory paragraph that states the financial
statements of the Reorganized Company reflect the impact of adjustments to
reflect the fair value of assets and liabilities under fresh start reporting. As
a result, the financial statements of the Reorganized Company are presented on a
different basis than those of the Predecessor Company and therefore, are not
comparable in all respects.
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<PAGE> 79
AMERICA WEST AIRLINES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1994
Independent Auditors' Report........................................................ F-2
Balance Sheets as of December 31, 1994 and 1993..................................... F-3
Statements of Operations for the periods August 26, 1994 to December 31, 1994,
January 1, 1994 to August 25, 1994 and the Years ended December 31, 1993 and
1992............................................................................. F-4
Statements of Cash Flows for the periods August 26, 1994 to December 31, 1994,
January 1, 1994 to August 25, 1994 and the Years ended December 31, 1993 and
1992............................................................................. F-5
Statements of Stockholders' Equity (Deficiency) for the periods August 26, 1994 to
December 31, 1994, January 1, 1994 to August 25, 1994 and the Years ended
December 31, 1993 and 1992....................................................... F-6
Notes to Financial Statements....................................................... F-7
CONDENSED FINANCIAL STATEMENTS AS OF MARCH 31, 1995
Condensed Balance Sheets as of March 31, 1995 (Unaudited) and December 31, 1994..... F-24
Condensed Statements of Operations for the three month periods ended March 31, 1995
and 1994 (Unaudited)............................................................. F-25
Condensed Statements of Cash Flows for the three month periods ended March 31, 1995
and 1994 (Unaudited)............................................................. F-26
Notes to Condensed Financial Statements............................................. F-27
</TABLE>
F-1
<PAGE> 80
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
America West Airlines, Inc.
We have audited the accompanying balance sheets of America West Airlines,
Inc. as of December 31, 1994 and 1993, and the related statements of operations,
cash flows and stockholders' equity (deficiency) for the period August 26, 1994
to December 31, 1994, the period January 1, 1994 to August 25, 1994, and for
each of the years in the two-year period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurances about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of America West Airlines, Inc.
as of December 31, 1994 and 1993, and the results of its operations and its cash
flows for the period August 26, 1994 to December 31, 1994, the period January 1,
1994 to August 25, 1994, and for each of the years in the two-year period ended
December 31, 1993 in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 2 to the financial statements, on August 25,
1994, America West Airlines, Inc. emerged from bankruptcy. The financial
statements of the Reorganized Company reflect the impact of adjustments to
reflect the fair value of assets and liabilities under fresh start reporting. As
a result, the financial statements of the Reorganized Company are presented on a
different basis than those of the Predecessor Company and, therefore, are not
comparable in all respects.
KPMG Peat Marwick LLP
Phoenix, Arizona
February 24, 1995
F-2
<PAGE> 81
AMERICA WEST AIRLINES, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR
COMPANY | COMPANY
----------- | -----------
1994 | 1993
----------- | -----------
<S> <C> | <C>
ASSETS |
Current assets: |
Cash and cash equivalents......................................................................... $ 182,581 | $ 99,631
Accounts receivable, less allowance for doubtful accounts of $3,531 in 1994 and $3,030 in 1993.... 57,474 | 65,744
Expendable spare parts and supplies, less allowance for obsolescence of $483 in 1994 and $7,231 |
in 1993......................................................................................... 24,179 | 28,111
Prepaid expenses.................................................................................. 29,284 | 34,939
----------- | -----------
Total current assets........................................................................ 293,518 | 228,425
----------- | -----------
Property and equipment: |
Flight equipment.................................................................................. 452,177 | 872,104
Other property and equipment...................................................................... 92,169 | 180,607
----------- | -----------
544,346 | 1,052,711
Less accumulated depreciation and amortization.................................................... 15,882 | 385,776
----------- | -----------
528,464 | 666,935
Equipment purchase deposits....................................................................... 26,074 | 51,836
----------- | -----------
554,538 | 718,771
----------- | -----------
Restricted cash..................................................................................... 28,578 | 46,296
Reorganization value in excess of amounts allocable to identifiable assets, net..................... 645,703 | --
Other assets, net................................................................................... 22,755 | 23,251
----------- | -----------
$1,545,092 | $1,016,743
=========== | ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) |
Current liabilities: |
Current maturities of long-term debt.............................................................. $ 65,198 | $ 125,271
Accounts payable.................................................................................. 77,569 | 62,957
Air traffic liability............................................................................. 127,356 | 118,479
Accrued compensation and vacation benefits........................................................ 15,776 | 11,704
Accrued interest.................................................................................. 13,109 | 8,295
Accrued taxes..................................................................................... 27,061 | 14,114
Other accrued liabilities......................................................................... 15,376 | 11,980
----------- | -----------
Total current liabilities................................................................... 341,445 | 352,800
----------- | -----------
Estimated liabilities subject to Chapter 11 proceedings............................................. -- | 381,114
Long-term debt, less current maturities............................................................. 465,598 | 396,350
Manufacturers' and deferred credits................................................................. 116,882 | 73,592
Other liabilities................................................................................... 25,721 | 67,149
Commitments and contingencies |
Stockholders' equity (deficiency): |
Preferred stock, $.01 par value. Authorized 48,800,000 shares; no shares issued at December 31, |
1994............................................................................................ -- | --
Class A common stock, $.01 par value. Authorized 1,200,000 shares; issued and outstanding |
1,200,000 shares at December 31, 1994........................................................... 12 | --
Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding |
43,936,272 shares at December 31, 1994.......................................................... 439 | --
Preferred stock, $.25 par value. Authorized 50,000,000 shares; Series C 9.75% convertible |
preferred stock, issued and outstanding 73,099 shares at December 31, 1993; $1.33 per share |
cumulative dividend............................................................................. -- | 18
Common stock, $.25 par value. Authorized 90,000,000 shares; issued and outstanding 25,291,102 at |
December 31, 1993............................................................................... -- | 6,323
Additional paid-in capital........................................................................ 587,149 | 197,010
Retained earnings (deficit)....................................................................... 7,846 | (438,626)
----------- | -----------
595,446 | (235,275)
Less deferred compensation and notes receivable -- employee stock purchase plans.................. -- | 18,987
----------- | -----------
Total stockholders' equity (deficiency)..................................................... 595,446 | (254,262)
----------- | -----------
$1,545,092 | $1,016,743
=========== | ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 82
AMERICA WEST AIRLINES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR COMPANY
COMPANY | -----------------------------------------
------------- | PERIOD FROM
PERIOD FROM | JANUARY 1 YEARS ENDED DECEMBER 31,
AUGUST 26 TO | TO
DECEMBER 31, | AUGUST 25, -------------------------
1994 | 1994 1993 1992
------------- | ----------- ---------- ----------
<S> <C> | <C> <C> <C>
Operating revenues: |
Passenger................................................ $ 437,775 | $ 882,140 $1,246,564 $1,214,816
Cargo.................................................... 16,648 | 27,645 40,161 42,077
Other.................................................... 15,343 | 29,243 38,639 37,247
------------- | ----------- ---------- ----------
Total operating revenues............................. 469,766 | 939,028 1,325,364 1,294,140
------------- | ----------- ---------- ----------
Operating expenses: |
Salaries and related costs............................... 117,562 | 213,722 305,429 324,255
Rentals and landing fees................................. 90,822 | 173,710 274,708 338,391
Aircraft fuel............................................ 58,165 | 100,646 166,313 186,042
Agency commissions....................................... 37,265 | 78,988 106,368 106,661
Aircraft maintenance materials and repairs............... 17,590 | 28,109 31,000 38,366
Depreciation and amortization............................ 26,684 | 56,694 81,894 86,981
Restructuring charges.................................... -- | -- -- 31,316
Other.................................................... 82,807 | 179,653 238,598 256,940
------------- | ----------- ---------- ----------
Total operating expenses............................. 430,895 | 831,522 1,204,310 1,368,952
------------- | ----------- ---------- ----------
Operating income (loss).............................. 38,871 | 107,506 121,054 (74,812)
------------- | ----------- ---------- ----------
Nonoperating income (expenses): |
Interest income.......................................... 3,834 | 470 728 1,418
Interest expense (contractual interest of $44,747, |
$72,961 and $73,931 for the periods ended August 25, |
1994, and December 31, 1993 and 1992, respectively).... (22,636) | (33,998) (54,192) (55,826)
Loss on disposition of property and equipment............ (398) | (1,659) (4,562) (1,283)
Reorganization expense, net.............................. -- | (273,659) (25,015) (16,216)
Other, net............................................... 65 | 131 (89) 14,958
------------- | ----------- ---------- ----------
Total nonoperating expenses, net..................... (19,135) | (308,715) (83,130) (56,949)
------------- | ----------- ---------- ----------
Income (loss) before income taxes and extraordinary |
item............................................... 19,736 | (201,209) 37,924 (131,761)
------------- | ----------- ---------- ----------
Income taxes............................................... 11,890 | 2,059 759 --
------------- | ----------- ---------- ----------
Income (loss) before extraordinary item.............. 7,846 | (203,268) 37,165 (131,761)
------------- | ----------- ---------- ----------
Extraordinary gain on elimination of debt.................. -- | 257,660 -- --
------------- | ----------- ---------- ----------
Net income (loss).................................... $ 7,846 | $ 54,392 $ 37,165 $ (131,761)
============= | =========== ========= =========
Earnings (loss) per share: |
Primary: |
Income (loss) before extraordinary item................ $ .17 | $ (7.03) $ 1.50 $ (5.58)
Extraordinary item..................................... -- | 9.02 -- --
------------- | ----------- ---------- ----------
Net income (loss).................................... $ .17 | $ 1.99 $ 1.50 $ (5.58)
============= | =========== ========= =========
Fully Diluted: |
Income (loss) before extraordinary item................ $ .17 | $ (4.96) $ 1.04 $ (5.58)
Extraordinary item..................................... -- | 6.37 -- --
------------- | ----------- ---------- ----------
Net income (loss).................................... $ .17 | $ 1.41 $ 1.04 $ (5.58)
============= | =========== ========= =========
Shares used for computation: |
Primary.................................................. 45,127 | 28,550 27,525 23,914
============= | =========== ========= =========
Fully diluted............................................ 45,127 | 40,452 41,509 23,914
============= | =========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 83
AMERICA WEST AIRLINES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR COMPANY
COMPANY | --------------------------------------
------------- | PERIOD FROM
PERIOD FROM | JANUARY 1 YEARS ENDED DECEMBER
AUGUST 26 TO | TO 31,
DECEMBER 31, | AUGUST 25, ----------------------
1994 | 1994 1993 1992
------------- | ----------- -------- ---------
<S> <C> | <C> <C> <C>
Cash flows from operating activities: |
Net income (loss)........................................... $ 7,846 | $ 54,392 $ 37,165 $(131,761)
Adjustments to reconcile net income (loss) to cash provided |
by operating activities: |
Depreciation and amortization............................. 15,538 | 56,694 81,894 86,981
Amortization of deferred overhauls........................ 356 | -- -- --
Amortization of reorganization value in excess of amounts |
allocable to identifiable assets........................ 11,145 | -- -- --
Amortization of manufacturers' and deferred credits....... (3,961) | (2,966) (5,186) (5,869)
Loss on disposition of property and equipment............. 398 | 1,659 4,562 1,283
Restructuring charges..................................... -- | -- -- 31,316
Reorganization items...................................... -- | 185,226 18,167 3,188
Extraordinary gain on extinguishment of debt.............. -- | (257,660) -- --
Other..................................................... 1,178 | (383) (554) 866
|
Changes in operating assets and liabilities: |
Decrease (increase) in accounts receivable, net........... 27,439 | (18,769) (927) 19,418
Decrease (increase) in spare parts and supplies, net...... 1,165 | 397 6,320 (2,384)
Decrease in prepaid expenses.............................. 4,371 | 1,284 2,627 812
Decrease (increase) in other assets and restricted cash... 1,219 | 12,971 (5,295) (1,141)
Increase (decrease) in accounts payable................... (17,289) | (15,557) 9,014 (8,473)
Increase (decrease) in air traffic liability.............. (26,452) | 30,510 8,749 30,723
Increase (decrease) in accrued compensation |
and vacation benefits................................... (11,667) | 15,739 (1,300) (1,491)
Increase in accrued interest.............................. 7,517 | 4,694 10,368 25,640
Increase (decrease) in accrued taxes...................... (2,104) | 25,999 (1,764) 2,968
Increase (decrease) in other accrued liabilities.......... (13,785) | 67,429 644 18,204
Increase (decrease) in other liabilities.................. (4,996) | (19,443) (11,126) 6,465
------------- | ----------- -------- ---------
Net cash provided by (used in) operating activities..... (2,082) | 142,216 153,358 76,745
|
Cash flows from investing activities: |
Purchases of property and equipment......................... (14,658) | (61,271) (54,324) (69,208)
Decrease in equipment purchase deposits..................... -- | -- -- 14,425
Proceeds from disposition of property....................... 600 | 334 3,715 383
------------- | ----------- -------- ---------
Net cash used in investing activities................... (14,058) | (60,937) (50,609) (54,400)
|
Cash flows from financing activities: |
Proceeds from issuance of DIP financing..................... -- | -- -- 53,000
Proceeds from issuance of debt.............................. -- | 100,000 -- 22,804
Repayment of debt including DIP financing................... (23,355) | (173,699) (77,501) (75,871)
Issuance of common stock.................................... 3 | 114,862 -- --
------------- | ----------- -------- ---------
Net cash provided by (used in) financing activities..... (23,352) | 41,163 (77,501) (67)
------------- | ----------- -------- ---------
Net increase (decrease) in cash and cash equivalents.... (39,492) | 122,442 25,248 22,278
------------- | ----------- -------- ---------
Cash and cash equivalents at beginning of period.............. 222,073 | 99,631 74,383 52,105
------------- | ----------- -------- ---------
Cash and cash equivalents at end of period.................... $ 182,581 | $ 222,073 $ 99,631 $ 74,383
============ | =========== ======== =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 84
AMERICA WEST AIRLINES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIODS AUGUST 26 TO DECEMBER 31, 1994, JANUARY 1 TO AUGUST 25, 1994
AND THE YEARS ENDED DECEMBER 31, 1993, AND 1992
(IN THOUSANDS EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
DEFERRED
COMPENSATION
AND NOTES
CONVERTIBLE CLASS A CLASS B ADDITIONAL RETAINED RECEIVABLE --
PREFERRED COMMON COMMON COMMON PAID-IN EARNINGS/ EMPLOYEE STOCK
STOCK STOCK STOCK STOCK CAPITAL (DEFICIT) PURCHASE PLANS TOTAL
----------- ------- ------- ------- ---------- ----------- ----------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1992...................... $ 91 $-- $ -- $5,904 $ 191,825 $(342,358) $ (21,972) $(166,510)
----- ------- ------- ------- ---------- ----------- ----------------- ---------
Issuance of 346,661 shares
of common stock pursuant
to convertible
subordinated
debentures............... -- -- -- 86 3,599 -- -- 3,685
Employee restricted stock
deferred compensation.... -- -- -- -- -- -- 101 101
Employee stock purchase
plan:
Issuance of 7,305 shares
of common stock at:
$.19-$2.63 per share..... -- -- -- 2 (13) -- 81 70
Deferred compensation.... -- -- -- -- (4) -- 1,478 1,474
Preferred stock dividends
Series B: $5.41 per
share.................. -- -- -- -- -- (1,575) -- (1,575)
Series C: $1.33 per
share.................. -- -- -- -- -- (97) -- (97)
Net loss................... -- -- -- -- -- (131,761) -- (131,761)
----- ------- ------- ------- ---------- ----------- ----------------- ---------
Balance at December 31,
1992..................... 91 -- -- 5,992 195,407 (475,791) (20,312) (294,613)
----- ------- ------- ------- ---------- ----------- ----------------- ---------
Issuance of 170,173 shares
of common stock pursuant
to Series B convertible
subordinated
debentures............... -- -- -- 43 1,896 -- -- 1,939
Issuance of 1,164,596
shares of common stock
pursuant to convertible
preferred stock.......... (73) -- -- 291 (218) -- -- --
Employee restricted stock
deferred compensation.... -- -- -- -- -- -- 21 21
Employee stock purchase
plan:
Cancellation of 11,330
shares of common stock
at: $.22-$1.59 per
share.................... -- -- -- (3 ) (38) -- 49 8
Deferred compensation.... -- -- -- -- (37) -- 1,255 1,218
Net income................. -- -- -- -- -- 37,165 -- 37,165
----- ------- ------- ------- ---------- ----------- ----------------- ---------
Balance at December 31,
1993..................... 18 -- -- 6,323 197,010 (438,626) (18,987) (254,262)
----- ------- ------- ------- ---------- ----------- ----------------- ---------
Issuance of 336,277 shares
of common stock pursuant
to convertible preferred
stock dividends.......... -- -- -- 84 2,932 -- -- 3,016
Employee stock purchase
plan:
Cancellation of 7,678
shares of common stock
at:
$1.19-$4.03 per share.... -- -- -- (2 ) (49) -- 43 (8)
Deferred compensation.... -- -- -- -- (1) -- 606 605
Issuance of 108,825 shares
of common stock pursuant
to exercise of stock
options.................. -- -- -- 27 166 -- -- 193
Net income................. -- -- -- -- -- 54,392 -- 54,392
Eliminate predecessor
equity accounts in
connection with fresh
start.................... (18) -- -- (6,432) (200,058) 206,508 -- --
Eliminate employee stock
receivable............... -- -- -- -- -- (18,338) 18,338 --
Record excess of
reorganization value over
identifiable assets...... -- -- -- -- -- 668,702 -- 668,702
Sale of 1,200,000 shares of
Class A common
stock and 14,000,000
shares of Class B common
stock.................... -- 12 140 -- 114,710 -- -- 114,862
Issuance of 29,925,000
shares of new Class B
common stock............. -- -- 299 -- 472,339 (472,638) -- --
----- ------- ------- ------- ---------- ----------- ----------------- ---------
Balance at August 25,
1994..................... -- 12 439 -- 587,049 -- -- 587,500
----- ------- ------- ------- ---------- ----------- ----------------- ---------
Issuance of 272 shares of
common stock pursuant to
exercise of stock
warrants................. -- -- -- -- 3 -- -- 3
Issuance of 11,000 shares
of restricted stock...... -- -- -- -- 97 -- -- 97
Net income................. -- -- -- -- -- 7,846 -- 7,846
----- ------- ------- ------- ---------- ----------- ----------------- ---------
Balance at December 31,
1994..................... $..... $12 $ 439 $ -- $ 587,149 $ 7,846 $ -- $ 595,446
========= ====== ====== ======= ========= ========== =============== =========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 85
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
America West Airlines, Inc., (the "Predecessor Company") filed a voluntary
petition on June 27, 1991, to reorganize under Chapter 11 of the U.S. Bankruptcy
Code. On August 10, 1994, the Plan of Reorganization ("Plan"), filed by the
Predecessor Company, was confirmed and became effective on August 25, 1994 (the
"Effective Date"). On August 25, 1994, America West Airlines, Inc., (the
"Reorganized Company" or the "Company") adopted fresh start reporting in
accordance with Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code" ("SOP 90-7") of the American Institute
of Certified Public Accountants. Accordingly, the Company's post-reorganization
balance sheet and statement of operations have not been prepared on a consistent
basis with such pre-reorganization financial statements and are not comparable
in all respects to financial statements prior to reorganization. For accounting
purposes, the inception date of the Reorganized Company is deemed to be August
26, 1994. A vertical black line is shown in the financial statements to separate
the Reorganized Company from the Predecessor Company since they have not been
prepared on a consistent basis of accounting.
1. CHAPTER 11 REORGANIZATION
The following occurred upon the Effective Date:
- The partners of AmWest Partners, L.P. ("AmWest"), a limited partnership
which includes TPG Partners, L.P. ("TPG"); Continental Airlines, Inc.
("Continental"); and Mesa Airlines, Inc. ("Mesa"); together with Lehman
Brothers, Inc. ("Lehman") and Fidelity Investments ("Fidelity"), as
assignees of AmWest, invested $205.3 million in consideration for the
issuance of securities by the Reorganized Company, consisting of (i)
1,200,000 shares of Class A Common Stock at a price of $7.467 per share;
(ii) 12,981,636 shares of Class B Common Stock, consisting of 12,259,821
shares at a price of $7.467 per share and 721,815 shares at $8.889 per
share (representing shares acquired as a result of cash elections made by
unsecured creditors); (iii) 2,769,231 Warrants to purchase shares of
Class B Common Stock at an exercise price of $12.74 per share and (iv)
$100 million principal amount of 11 1/4% Senior Unsecured Notes, due
September 1, 2001. AmWest was dissolved immediately after the Effective
Date with all rights being delegated to the partners and assignees of
AmWest.
- Pre-existing equity interests of the Company were cancelled, the
Company's obligations to certain prepetition creditors were restructured
and general unsecured nonpriority prepetition creditors received, in full
satisfaction of their claims, their pro rata share of approximately
26,053,185 shares of Class B Common Stock and $6,416,214 in cash. Holders
of the Company's pre-existing common equity interests received, on a pro
rata basis, 2,250,000 shares of Class B Common Stock and Warrants to
purchase 6,230,769 shares of Class B Common Stock. In addition, pursuant
to the exercise of subscription rights, holders of pre-existing equity
interests received 1,615,179 shares of Class B Common Stock for an
aggregate purchase price of $14,357,326 ($8.889 per share), including
holders of pre-existing preferred equity interests. TPG and Fidelity, the
holders of preferred equity interests of the Predecessor Company received
their pro rata share of (i) $500,000 in cash and (ii) 125,000 shares of
Class B Common Stock for an aggregate purchase price of $1,111,125.
- In exchange for certain concessions principally arising from cancellation
of the right of GPA Group plc and/or its affiliates ("GPA") to lease to
America West 10 Airbus A320 aircraft, GPA received Class B Common Stock,
a cash payment and certain rights (note 13).
- The Company entered into certain Alliance Agreements with Continental and
Mesa relating to code-sharing, schedule coordination and certain other
relationships and agreements. With respect to Mesa, a pre-existing code
share agreement was extended to August 2004.
F-7
<PAGE> 86
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- The Company executed letter agreements with Fidelity and Lehman
relating to the settlement of certain prepetition claims. On October
14, 1994, the Company issued an additional $23 million of 11 1/4%
Senior Unsecured Notes, due September 2001, and made a prepayment of a
$1.3 million lease obligation. Additionally, cash payments of $2.1
million and $1.2 million were made to Fidelity and Lehman,
respectively.
- The Plan also provided for many other matters, including the
satisfaction of certain other prepetition claims in accordance with
negotiated settlement agreements, the disposition of the various
types of claims asserted against the Company, the adherence to the
Company's aircraft lease agreements, the amendment of the Company's
aircraft purchase agreements and the release of the Company's
employees from all obligations arising under the Company's stock
purchase plan in consideration for the cancellation of the shares of
Predecessor Company stock securing such obligations.
As of December 31, 1994, distributions on $295 million of allowed general
unsecured claims had been made. Approximately 21.6 million shares of the
Company's Class B Common Stock and cash proceeds equivalent to an additional
524,000 shares have been distributed in settlement. The remaining shares will be
distributed as the remaining general unsecured claims are allowed. To the extent
that the total allowed amount of claims is less than the $345 million reserve
set by the Bankruptcy Court, the holders of such claims will receive a
supplemental distribution.
Reorganization expense recorded by the Predecessor Company consisted of the
following:
<TABLE>
<CAPTION>
YEARS ENDED
PERIOD FROM DECEMBER 31,
JANUARY 1 TO -------------------
AUGUST 25, 1994 1993 1992
--------------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Professional fees and other expenses related to
the Chapter 11 proceedings...................... $ 31,959 $ 9,419 $16,498
Adjustments of assets and liabilities to fair
value........................................... 166,829 -- --
Provisions for settlement of claims............... 66,626 18,231 1,748
Reorganization success bonuses.................... 11,956 -- --
Interest income................................... (3,711) (2,635) (2,030)
--------------- ------- -------
$ 273,659 $25,015 $16,216
=========== ======= =======
</TABLE>
2. FRESH START REPORTING
In connection with its emergence from bankruptcy, the Company adopted fresh
start reporting in accordance with SOP 90-7. The fresh start reporting common
equity value of $587.5 million was determined by the Company with the assistance
of its financial advisors. The significant factors used in the determination of
this value were analyses of industry, economic and overall market conditions and
the historical and estimated performance of the Company as well as of the
airline industry, discussions with various potential investors and certain other
financial analyses.
Under fresh start reporting, the reorganization value of the entity has
been allocated to the Company's assets and liabilities on a basis substantially
consistent with purchase accounting. The portion of reorganization value not
attributable to specific tangible assets has been recorded as "Reorganization
Value in Excess of Amounts Allocable to Identifiable Assets" in the accompanying
balance sheet as of December 31, 1994. The fresh start reporting adjustments,
primarily related to the adjustment of the Company's assets and liabilities to
fair market values, will have a significant effect on the Company's future
statements of operations. The more significant of these adjustments relate to
reduced depreciation expense on property and equipment, increased
F-8
<PAGE> 87
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
amortization expense relating to reorganization value in excess of amounts
allocable to identifiable assets, and increased interest expense and reduced
aircraft rent expense for leases adjusted to fair market rental rates.
The effects of the Plan and fresh start reporting on the balance sheet at
the Effective Date are as follows (in thousands):
<TABLE>
<CAPTION>
(A) (B) (C)
PREDECESSOR ISSUE OF REORGANIZED
COMPANY DEBT DEBT & FRESH START COMPANY
AUG. 25, 1994 DISCHARGE STOCK ADJUSTMENTS AUG. 25, 1994
------------- --------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 156,401 $(140,284) $205,956 $ -- $ 222,073
Accounts receivable, net..................... 77,682 -- 6,831 -- 84,513
Expendable spare parts and supplies.......... 27,715 -- -- (2,371) 25,344
Prepaid expenses............................. 34,540 -- -- (885) 33,655
------------- --------- -------- ----------- -------------
Total current assets........................... 296,338 (140,284 ) 212,787 (3,256) 365,585
Property and equipment, net.................... 702,442 -- -- (138,830) 563,612
Restricted cash................................ 30,503 -- -- -- 30,503
Reorganization value in excess of amounts
allocable
to identifiable assets....................... -- -- -- 668,702 668,702
Other assets, net.............................. 24,497 -- 1,575 (2,449) 23,623
------------- --------- -------- ----------- -------------
Total assets................................... $ 1,053,780 $(140,284) $214,362 $ 524,167 $ 1,652,025
============ ========= ======== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current liabilities:
Current maturities of long-term debt......... $ 119,185 $(65,014 ) $ -- $ -- $ 54,171
Accounts payable............................. 98,080 6,500 -- 969 105,549
Air traffic liability........................ 153,808 -- -- -- 153,808
Accrued compensation and vacation benefits... 27,443 -- -- -- 27,443
Accrued interest............................. 5,620 -- -- -- 5,620
Accrued taxes................................ 26,613 14,405 -- -- 41,018
Other accrued liabilities.................... 29,161 -- -- -- 29,161
------------- --------- -------- ----------- -------------
Total current liabilities...................... 459,910 (44,109 ) -- 969 416,770
Estimated liabilities subject to Chapter 11
proceedings.................................. 382,769 (382,769 ) -- -- --
Long-term debt, less current maturities........ 368,939 28,934 100,000 -- 497,873
Manufacturers' and deferred credits............ 70,625 -- -- 51,530 122,155
Other liabilities.............................. 57,932 -- -- (30,205) 27,727
Stockholders' equity (deficiency):
Preferred stock.............................. 18 -- -- (18) --
Common stock, Predecessor Company............ 6,432 -- -- (6,432) --
Common stock, Reorganized Company............ -- -- 152 299 451
Additional paid in capital................... 200,058 -- 114,710 272,281 587,049
Accumulated deficit.......................... (474,565) 257,660 (500) 217,405 --
------------- --------- -------- ----------- -------------
(268,057) 257,660 114,362 483,535 587,500
Deferred compensation and notes receivable --
employee stock purchase plans.............. 18,338 -- -- (18,338) --
------------- --------- -------- ----------- -------------
Total stockholders' equity (deficiency)........ (286,395) 257,660 114,362 501,873 587,500
------------- --------- -------- ----------- -------------
Total liabilities & stockholders' equity
(deficiency)................................. $ 1,053,780 $(140,284) $214,362 $ 524,167 $ 1,652,025
============ ========= ======== ========== ============
</TABLE>
---------------
(a) To record the discharge or reclassification of prepetition obligations as
well as the repayment in cash of $77.6 million of D.I.P. financing and a
$62.7 million priority term loan.
(b) To record proceeds received from the issuance of new debt and equity
securities and to record the preferred stock settlement payment of $500,000
and the receipt of approximately $1.1 million for the purchase of Class B
Common Stock.
(c) To record adjustments to reflect assets and liabilities at fair market
values and to record reorganization value in excess of amounts allocable to
identifiable assets.
F-9
<PAGE> 88
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Financial Reporting for Bankruptcy Proceedings
The Company implemented the guidance as to financial reporting by entities
that have filed petitions with the Bankruptcy Court, provided by SOP 90-7 in the
accompanying financial statements.
Pursuant to SOP 90-7, prepetition liabilities are reported on the basis of
the expected amounts of such allowed claims, as opposed to the amounts for which
those allowed claims may be settled and are classified as "Liabilities Subject
to Chapter 11 Proceedings". The accrual for interest on such unsecured or
undersecured liabilities was discontinued from the period June 27, 1991 to
August 25, 1994, the Effective Date of the Plan.
(b) Cash Equivalents
Cash equivalents consist of all highly liquid debt instruments purchased
with original maturities of three months or less and are carried at cost which
approximates market.
(c) Restricted Cash
Restricted cash includes cash deposits securing certain letters of credit
and cash held in Company accounts, but pledged to an institution which processes
credit card sales transactions.
(d) Expendable Spare Parts and Supplies
Flight equipment expendable spare parts and supplies are valued at average
cost. Allowances for obsolescence are provided, over the estimated useful life
of the related aircraft and engines, for spare parts expected to be on hand at
the date the aircraft are retired from service.
(e) Property and Equipment
Property and equipment were recorded at cost as of December 31, 1993 and at
fair market value as of August 25, 1994; subsequent acquisitions are recorded at
cost. Interest capitalized on advance payments for aircraft acquisitions and on
expenditures for aircraft improvements are part of these costs. Interest
capitalized was $621,000 for the period August 26, 1994 through December 31,
1994. No interest was capitalized while the Company was in bankruptcy. Property
and equipment is depreciated and amortized to residual values over the estimated
useful lives or the lease term, whichever is less, using the straight-line
method.
The estimated useful lives for the Company's property and equipment range
from three to twelve years for owned property and equipment and to thirty years
for the reservation and training center and technical support facilities. The
estimated useful lives of the Company's owned aircraft, jet engines, flight
equipment and rotable parts range from eleven to twenty-two years. Leasehold
improvements relating to flight equipment and other property on operating leases
are amortized over the life of the lease or the life of the asset, whichever is
shorter.
Routine maintenance and repairs are charged to expense as incurred. The
cost of major scheduled airframe, engine and certain component overhauls are
capitalized and amortized over the periods benefited and included in aircraft
maintenance materials and repairs for the Reorganized Company, as part of fresh
start reporting, and in depreciation and amortization expense for the
Predecessor Company. Additionally, a provision for the estimated cost of
scheduled airframe and engine overhauls required to be performed on leased
aircraft prior to their return to the lessors has been provided.
(f) Reorganization Value in Excess of Amounts Allocable to Identifiable Assets
Reorganization value in excess of amounts allocable to identifiable assets
is amortized on a straight line basis over 20 years. Accumulated amortization at
December 31, 1994 is approximately $11.1 million. As more
F-10
<PAGE> 89
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
fully discussed at Note 9, with respect to the period ended December 31, 1994, a
reduction in reorganization value in excess of amounts allocable to identifiable
assets of $11.9 million was recorded as a result of the utilization of
Predecessor Company tax attributes. The Company assesses the recoverability of
this asset based upon expected future undiscounted cash flows and other relevant
information.
(g) Frequent Flyer Awards
The Company maintains a frequent travel award program known as "FlightFund"
that provides a variety of awards to program members based on accumulated
mileage. The estimated cost of providing the free travel, using the incremental
cost method as adjusted for estimated redemption rates, is recognized as a
liability and charged to operations as program members accumulate mileage.
(h) Manufacturers' and Deferred Credits
In connection with the acquisition of certain aircraft and engines, the
Company receives various credits. Such manufacturers' credits are deferred until
the aircraft and engines are delivered, at which time they are either applied as
a reduction of the cost of acquiring owned aircraft and engines, resulting in a
reduction of future depreciation expense, or amortized as a reduction of rent
expense for leased aircraft and engines. Unamortized amounts were written off at
the Effective Date.
(i) Deferred Credit -- Operating Leases
Operating leases were adjusted to fair market value at the Effective Date.
The net present value of the difference between the contractual lease rates and
the fair market rates has been recorded as a deferred credit in the accompanying
balance sheets. The deferred credit will be increased through charges to
interest expense and decreased on a straight-line basis as a reduction in rent
expense over the applicable lease periods. At December 31, 1994, the unamortized
balance of the deferred credit was $116.9 million.
(j) Revenue Recognition
Passenger revenue is recognized when the transportation is provided. Ticket
sales for transportation which has not yet been provided are reflected in the
financial statements as air traffic liability.
(k) Passenger Traffic Commissions and Related Fees
Passenger traffic commissions and related fees are expensed when the
transportation is provided and the related revenue is recognized. Passenger
traffic commissions and related fees not yet recognized are included as a
prepaid expense.
(l) Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. As more fully
discussed at Note 9, adoption of the new standard changed the Company's method
of accounting for income taxes from the deferred approach to an asset and
liability approach.
As with the prior standard, the Company continues to account for its
general business credits by use of the flow-through method.
(m) 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
F-11
<PAGE> 90
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reflect net income adjusted for interest on borrowings effectively reduced by
the proceeds from the assumed exercise of common stock equivalents but only if
the effect of such adjustments are dilutive.
Fully diluted earnings per share is based on the weighted average number of
shares of common stock outstanding, dilutive common stock equivalents (stock
options and warrants), and the conversion of outstanding convertible preferred
stock as well as for the Predecessor Company the conversion of convertible
subordinate debentures. Fully diluted earnings per share reflect net income
adjusted for interest on borrowings effectively reduced by the proceeds from the
assumed exercise of common stock equivalents but only if the effect of such
adjustments are dilutive.
(n) Reclassification
Certain prior period reclassifications have been made in the Predecessor
Company's financial statements to conform to the Reorganized Company's
presentation.
4. LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
REORGANIZED |
COMPANY | PREDECESSOR
-------------- | COMPANY
1994 | 1993
-------------- | --------------
(IN THOUSANDS) | (IN THOUSANDS)
<S> <C> | <C>
SECURED |
Notes payable, fixed interest rates of 6.00% to 10.79% and |
floating |
interest rates of various LIBOR + 1.5% to 3.5%, |
installments due |
through 2008.............................................. $307,077 | $402,448
Borrowings under lines of credit, floating interest rates of |
Prime + 1% to three month LIBOR + 4%, installments due |
through 1999. No available borrowings remain. ............ 24,225 | 18,589
Notes payable, floating interest rate of Prime + 1%, |
installments |
due through 1999. (a)..................................... 34,097 | --
DIP financing............................................... -- | 83,577
-------------- | --------------
365,399 | 504,614
UNSECURED |
11 1/4% senior notes, face amount of $123 million, interest |
only payments until due in 2001. (b)...................... 120,843 | --
Notes payable, fixed interest rates of 6% to 8% and floating |
interest rates of three month LIBOR + 3%, installments due |
through 2000. ............................................ 41,752 | 10,734
Other....................................................... 2,802 | 6,273
-------------- | --------------
165,397 | 17,007
Total long-term debt.............................. 530,796 | 521,621
Less: current maturities.......................... (65,198) | (125,271)
-------------- | --------------
$465,598 | $396,350
============= | =============
</TABLE>
---------------
(a) Approximately $29.5 million was drawn on a letter of credit facility that
secured certain industrial development bonds (the "Bonds") used by the
Company to build its aircraft maintenance facility in Phoenix, Arizona (the
"Hangar"). The issuer of the letter of credit facility was in turn
reimbursed for such draws under a reimbursement agreement among the Company,
that issuer and a certain bank group (the "Banks"). The reimbursement
agreement was secured by the Hangar. At the Effective Date, the Company and
the Banks agreed to facilitate repayment of the obligation created under the
reimbursement agreement with two loans, the principal loan for $29.5 million
and the interest loan for $6.5 million.
F-12
<PAGE> 91
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
These two loans are secured by the Hangar. The interest loan is repaid with
monthly level principal payments and interest at the prime rate plus 1% and
matures in August 1996. Amortization of the principal loan is calculated
over 12 years with a five year maturity in August 1999; and payments are
made monthly of level principal and interest at the prime rate plus 1%,
with the balance of the loan, or $12.5 million, being due at its maturity.
Additionally, if the Company does not re-market the Bonds prior to August
25, 1995 (the proceeds from which will be used to retire the then
outstanding balance of the principal loan), the Company is required to make
an additional $5.0 million principal repayment under the principal loan in
October 1995.
(b) On the Effective Date, the Company issued $100 million of 11 1/4% Senior
Unsecured Notes (the "Senior Notes") at a discount of 1.575% as part of the
investment by AmWest, and on October 14, 1994, the Company issued an
additional $23 million of the Senior Notes. The notes mature in September,
2001 and interest is payable in arrears semi-annually commencing on March 1,
1995. The Senior Notes may be redeemed at the option of the Company; (i)
prior to September 1, 1997; (a) at any time, in whole but not in part, at a
redemption price of 105% of the principal amount of the Senior Notes plus
accrued and unpaid interest, if any, to the redemption date or; (b) from
time to time in part from the net proceeds of a public offering of its
capital stock at a redemption price equal to 105% of the principal amount,
plus accrued and unpaid interest, if any, to the redemption date except for
amounts mandatorily redeemed; (ii) on or after September 1, 1997 at any time
in whole or from time to time in part, at a redemption price equal to the
following percentage of principal redeemed, plus accrued and unpaid interest
to the date of redemption, if redeemed during the 12-month period beginning:
<TABLE>
<CAPTION>
SEPTEMBER 1, PERCENTAGE
------------ ----------
<S> <C>
1997 105.0%
1998 103.3%
1999 101.7%
2000 100.0%
</TABLE>
The Senior Notes are also subject to mandatory redemption if the Company
consummates a Public Offering Sale, as defined in the Indenture, prior to
September 1, 1997, and immediately prior to such consummation, the Company
has cash and cash equivalents, not subject to any restriction on
disposition of at least $100 million. Then the Company shall redeem the
Senior Notes at a redemption price equal to 104% of the aggregate principal
amount of the Senior Notes so redeemed plus accrued and unpaid interest to
the redemption date. The aggregate redemption price and accrued unpaid
interest of the Senior Notes to be redeemed shall equal the lesser of: (a)
50% of the net proceeds of such Public Offering Sale and; (b) the excess if
any of; (i) $20 million and; (ii) the amount of any net offering proceeds
of any Public Offering Sale received prior to September 1, 1997. The
Indenture contains a limitation on investment covenant with which the
Company was in compliance at December 31, 1994.
At December 31, 1994, the estimated maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995............................................... $ 65,198
1996............................................... 55,566
1997............................................... 48,316
1998............................................... 44,653
1999............................................... 57,203
Thereafter......................................... 259,860
--------------
$530,796
===========
</TABLE>
F-13
<PAGE> 92
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Secured financings totaling $365 million are collateralized by assets,
primarily aircraft and engines, with a net book value of $422.6 million at
December 31, 1994.
Prepetition long-term debt totaling approximately $224 million was included
in Estimated Liabilities Subject to Chapter 11 Proceedings at December 31, 1993.
As part of the reorganization, approximately $85.6 million of long-term debt was
restructured and included as long-term debt secured at December 31, 1994.
Certain of the Company's long-term debt agreements contain minimum cash balance
requirements, leverage ratios, coverage ratios and other financial covenants for
which the Company was in compliance at December 31, 1994.
5. CAPITAL STOCK
Preferred Stock
The Company's Board of Directors by resolution may authorize the issuance
of the Preferred Stock as a class, in one or more series, having the number of
shares, designations, relative voting rights, dividend rights, liquidation and
other preferences, and limitation that the Board of Directors fixes without any
stockholder approval. No shares of Preferred Stock have been issued.
Common Stock
The holders of Class A Common Stock are entitled to fifty votes per share,
and the holders of Class B Common Stock are entitled to one vote per share, on
all matters submitted to a vote of common stockholders except that voting rights
of non-U.S. citizens are limited. The Class A Common Stock is convertible into
an equal number of Class B shares at any time at the election of the holders of
the Class A Common Stock.
Holders of Common Stock of all classes participate equally as to any
dividends or distributions on the Common Stock, except that dividends payable in
shares of Common Stock, or securities to acquire Common Stock, will be made in
the same class of common stock as that held by the recipient of the dividend.
Holders of Common Stock have no right to cumulate their votes in the election of
directors. The Common Stock votes together as a single class, subject to the
right to a separate class vote in certain instances required by law.
Pursuant to the Stockholders' Agreement, the partners and assignees of
AmWest and GPA will vote all shares of Common Stock owned by them in favor of
the reelection of the initially designated independent directors for as long as
such independent directors continue to serve until the third annual meeting.
In addition to the voting and other provisions of the Stockholders'
Agreement, AmWest and GPA agreed that (i) the partners and assignees of AmWest
will vote in favor of GPA's nominee to the Company's Board of Directors, and
(ii) GPA will vote in favor of the partners and assignees of AmWest's nine
nominees to the Company's Board of Directors for so long as (a) the partners and
assignees of AmWest own at least 5% of the voting equity securities of the
Company, and (b) GPA owns at least 2% of the voting equity securities of the
Company.
Warrants
The Company issued approximately 10.4 million Warrants to purchase Class B
Common Stock with an exercise price of $12.74 per share as part of the
reorganization. The Warrants are exercisable by the holders anytime before
August 25, 1999 and 10.4 million shares of Class B Common Stock have been
reserved for the exercise of these warrants.
F-14
<PAGE> 93
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. RESTRICTED STOCK AND STOCK OPTIONS
In December 1994, the Company's Board of Directors approved the America
West Airlines, Inc. 1994 Incentive Equity Plan (the "Incentive Plan") subject to
approval of the stockholders. Under the Incentive Plan, up to 3.5 million shares
of Class B Common Stock may be issued to cover all outstanding awards under this
plan, of which, no more than 1.5 million will be issued as Restricted Stock or
Bonus Stock. The Company's Board of Directors granted 11,000 shares of
restricted stock under the Incentive Plan and recorded compensation expense of
$96,250 based on the fair value of $8.75 at the date of grant. Additionally,
1,267,000 options to purchase common stock at $8.75 per share, the fair value at
date of grant were granted under the Incentive Plan. Also, 39,000 options to
purchase common stock were granted at $8.75 per share, the fair value at date of
grant, to members of the Board of Directors who are not employees of the
Company. As of December 31, 1994, 11,000 shares of restricted stock were vested
and 255,000 options to purchase common stock were exercisable, both contingent
upon stockholder approval of the Incentive Plan.
7. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) defined contribution plan, covering essentially
all employees of the Company. Participants may contribute from 1 to 15% of their
pre-tax earnings to a maximum of $9,240 in 1995. In April 1994, the Company
increased the Company matched portion from 25% to 50% of a participant's
contributions up to 6% of the participant's annual pre-tax earnings. The
Company's contribution expense to the plan totaled $3.8 million, $2.1 million
and $2 million in 1994, 1993 and 1992, respectively.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity
of those instruments.
Accounts Receivable and Accounts Payable
The carrying amount of accounts receivable and accounts payable
approximates fair value as they are expected to be collected or paid within 90
days of year-end.
Long-term Debt, Including Current Maturities (at December 31, 1994)
The fair value of long-term debt, including current maturities, was
approximately $515 million based on quoted market prices for the same or similar
debt including debt of comparable remaining maturities.
Long-term Debt Including Current Maturities and Estimated Liabilities
Subject to Chapter 11 Proceedings (December 31, 1993)
The fair value of long-term debt and estimated liabilities subject to
Chapter 11 proceedings cannot readily be estimated as quoted market prices are
not available. Additionally, future cash flows cannot be estimated as the
repayment of these instruments is subject to disposition within the bankruptcy
proceedings.
9. INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109). The Predecessor Company had adopted SFAS
109 as of January 1, 1993. Under SFAS 109, deferred tax assets (subject to a
possible valuation allowance) and liabilities are recognized for the expected
future tax consequences of events that are reflected in the Company's financial
statements or tax returns.
F-15
<PAGE> 94
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense:
For the periods shown below, the Company recorded income tax expense as follows:
<TABLE>
<CAPTION>
| PREDECESSOR COMPANY
| --------------------------------------
REORGANIZED | YEARS ENDED
COMPANY | PERIOD FROM DECEMBER 31,
------------------ | JANUARY 1 TO -------------
PERIOD FROM | AUGUST 25, 1994 1993 1992
AUGUST 26 TO | ------------------ ---- ------
DECEMBER 31, 1994 |
------------------ |
(IN THOUSANDS) | (IN THOUSANDS)
<S> <C> | <C> <C> <C>
Current taxes: |
Federal............................... $ -- | $1,869 $675 $ --
State................................. 36 | 190 84 --
---------- | ------- ---- ------
36 | 2,059 759 --
Deferred taxes:......................... -- | -- -- --
Income tax expense attributable to |
reorganization items.................. 11,854 | -- -- --
---------- | ------- ---- ------
Income tax expense...................... $ 11,890 | $2,059 $759 $
============== | ============= ==== ======
</TABLE>
With respect to the period August 26, 1994 to December 31, 1994, income tax
expense pertains both to income before extraordinary item as well as certain
adjustments necessitated by the effectiveness of the Plan and the resultant
fresh start adjustments to the Company's financial statements. The Company's
reorganization and the associated implementation of fresh start reporting gave
rise to significant items of expense for financial reporting purposes that are
not deductible for income tax purposes. In large measure, it is these
nondeductible (for income tax purposes) expenses that result in an effective tax
rate (for financial reporting purposes) significantly greater than the current
U.S. corporate statutory rate of 35 percent. Nevertheless, the Company's actual
income tax liability (i.e., income taxes payable) is considerably lower than
income tax expense shown for financial reporting purposes. This difference in
financial expense compared to actual income tax liability is in part
attributable to the utilization of certain tax attributes of the Predecessor
Company that serve to reduce the Company's actual income tax liability. The
excess of financial expense over the Company's actual income tax liability
(approximately $11.8 million) is applied to reduce the carrying balance of the
Company's reorganization value in excess of amounts allocable to identifiable
assets.
For the periods January 1, 1994 to August 25, 1994, and years ended
December 31, 1993 and 1992, income tax expense pertains solely to income before
extraordinary item. No income tax expense was recognized with respect to the
extraordinary gain resulting from the cancellation of indebtedness that occurred
in connection with the effectiveness of the Plan as such gain is not subject to
income taxation.
A reconciliation of taxes at the federal statutory rate ("expected taxes")
of 35% to those reflected in the financial statements (the "effective rate") is
as follows:
F-16
<PAGE> 95
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
| PREDECESSOR COMPANY
REORGANIZED | ---------------------------------
COMPANY | PERIOD FROM YEAR ENDED
------------------| JANUARY 1 TO DECEMBER 31,
PERIOD FROM | AUGUST 25, 1994 1993
AUGUST 26 TO | ------------------ ------------
DECEMBER 31, 1994 |
------------------|
(IN THOUSANDS) | (IN THOUSANDS)
<S> <C> | <C> <C>
Taxes at U.S. statutory rate...................... $ 6,908 | $ 19,758 $ 13,273
Benefit of loss carryforwards..................... -- | (17,889) (12,598)
State taxes....................................... 1,663 | 190 84
Amortization of reorganization value in excess |
of amounts allocable to identifiable assets..... 3,901 | -- --
Other............................................. (582) | -- --
---------- | ------------ ---------
Total................................... $ 11,890 | $ 2,059 $ 759
============== | ============= ==========
</TABLE>
As of December 31, 1994, the Company has available net operating loss,
business tax credit and alternative minimum tax credit carryforwards for Federal
income tax purposes of approximately $557.9 million, $12.7 million and $.57
million, respectively. The net operating loss carryforwards expire during the
years 1999 through 2009 while the business credit carryforwards expire during
the years 1997 through 2006. However, such carryforwards are not fully available
to offset federal (and in certain circumstances, state) alternative minimum
taxable income. Further, as a result of a statutory "ownership change" (as
defined for purposes of sec.382 of the Internal Revenue Code) that occurred as a
result of the effectiveness of the Company's Plan of Reorganization, the
Company's ability to utilize its net operating loss and business tax credit
carryforwards may be restricted. The alternative minimum tax credit may be
carried forward without expiration and is available to offset future income tax
payable.
Composition of Deferred Tax Items:
The Company has not recognized any net deferred tax items as of December
31, 1994. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities are a result of
the temporary differences related to the items described as follows:
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR COMPANY
COMPANY | ----------------------------------------
----------------- | AUGUST 25, 1994 DECEMBER 31, 1993
DECEMBER 31, 1994 | ------------------ -----------------
----------------- |
(IN THOUSANDS) | (IN THOUSANDS)
<S> <C> | <C> <C>
Deferred income tax liabilities: |
Property and equipment, principally |
depreciation and fresh start |
differences.......................... $ (71,425) | $ (70,367) $(105,242)
----------------- | ------------------ -----------------
Deferred tax assets: |
Aircraft leases........................... 63,354 | 65,787 20,594
Reorganization expenses................... 32,654 | 32,654 16,527
Net operating loss carryforwards.......... 215,119 | 210,939 212,124
Tax credit carryforwards.................. 13,272 | 13,272 12,706
Other..................................... 10,892 | 13,809 9,707
----------------- | ------------------ -----------------
Total deferred tax assets....... 335,291 | 336,461 271,658
----------------- | ------------------ -----------------
Valuation allowance....................... (263,866) | (266,094) (166,416)
----------------- | ------------------ -----------------
Net deferred items.............. $ -- | $ -- $ --
============= | ============== =============
</TABLE>
F-17
<PAGE> 96
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 109 requires a "more likely than not" criterion be applied when
evaluating the realizability of a deferred tax asset. Given the Company's
history of losses for income tax purposes, the volatility of the industry within
which the Company operates and certain other factors, the Company has
established a valuation allowance principally for the portion of its deductible
temporary differences, including net operating loss and other carryforwards that
may not be available due to expirations or other limitations after consideration
of net reversals of future taxable and deductible amounts. In this context, the
Company has taken into account prudent and feasible tax planning strategies.
After application of the valuation allowance, the Company's net deferred tax
assets and liabilities are zero. If the Company, in future tax periods, were to
recognize tax benefits attributable to tax attributes of the Predecessor Company
(such as net operating loss and other carryforwards), any such benefit would be
applied to reduce the balance of reorganization value in excess of amounts
allocable to identifiable assets.
10. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Cash paid for interest, net of amounts capitalized, during the period
August 26, 1994 through December 31, 1994, January 1, 1994 through August 25,
1994 and the years ended December 31, 1993 and 1992 was approximately $11
million, $29 million, $44 million and $46 million, respectively.
Cash paid for income taxes during the period August 26, 1994 through
December 31, 1994, January 1, 1994 through August 25, 1994 and the year ended
December 31, 1993 was $425,000, $1,253,000 and $537,000, respectively.
Cash flows from reorganization items in connection with the Chapter 11
proceedings were as follows:
<TABLE>
<CAPTION>
JANUARY 1 TO YEARS ENDED DECEMBER 31,
AUGUST 25, ----------------------------
1994 1993 1992
------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest received on cash accumulations................ $ 3,711 $ 2,635 $ 2,030
Professional fees paid for services rendered........... (23,563) (7,372) (11,346)
D.I.P. financing issuance costs paid................... -- (1,378) (1,760)
</TABLE>
In addition, during the period August 26 through December 31, 1994, January
1, 1994 through August 25, 1994 and the years ended December 31, 1993 and 1992,
the Company had the following non-cash financing and investing activities:
<TABLE>
<CAPTION>
| PREDECESSOR COMPANY
REORGANIZED | -----------------------------------------
COMPANY | PERIOD FROM
-------------- | JANUARY 1 TO YEARS ENDED DECEMBER 31,
PERIOD FROM | AUGUST 25, -------------------------
AUGUST 26 TO | 1994 1993 1992
DECEMBER 31, | ------------- ------- -------
1994 |
-------------- |
(IN THOUSANDS) | (IN THOUSANDS)
<S> <C> | <C> <C> <C>
Equipment acquired through capital |
leases.................................. $ -- | $ 138 $ 709 $ 437
Conversion of long-term debt to common |
stock................................... -- | -- 1,938 3,685
Notes payable issued to seller............ -- | -- 818 22,804
Notes payable issued for administrative |
claims.................................. -- | -- 11,597 --
Accrued interest reclassified to long-term |
debt.................................... -- | 5,563 15,137 16,443
Draws taken by third parties letter of |
credit.................................. -- | -- -- 11,201
Preferred dividend declared but unpaid.... -- | -- -- 1,672
Issuance of stock as success bonus........ -- | 1,224 -- --
</TABLE>
F-18
<PAGE> 97
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. EXTRAORDINARY ITEM
The extraordinary gain recorded in the period January 1 through August 25,
1994 includes $257.7 million from the discharge of indebtedness pursuant to the
consummation of the Plan of Reorganization.
12. COMMITMENTS AND CONTINGENCIES
(a) Leases
As of December 31, 1994, the Company had 68 aircraft under operating leases
with remaining terms ranging from five months to approximately 23 years. The
Company has options to purchase certain of the aircraft at fair market values at
the end of the lease terms. Certain of the agreements require security deposits
and maintenance reserve payments. The Company also leases certain terminal
space, ground facilities and computer and other equipment under noncancelable
operating leases.
At December 31, 1994, the scheduled future minimum cash rental payments
under noncancelable operating leases with initial terms of more than one year
including those leases entered into through February 1995 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995................................................... $ 212,340
1996................................................... 205,236
1997................................................... 185,753
1998................................................... 163,520
1999................................................... 159,989
Thereafter............................................. 1,172,241
--------------
$2,099,079
===========
</TABLE>
Rent expense (excluding landing fees) was approximately $245 million, $245
million and $307 million for the combined twelve months ended December 31, 1994
and the years ended December 31, 1993 and 1992, respectively.
Collectively, the operating lease agreements require security deposits with
lessors of $11.5 million and bank letters of credit of $17.6 million. The
letters of credit are collateralized by $17.6 million of restricted cash as of
December 31, 1994.
(b) Revenue Bonds
Special facility revenue bonds issued by a municipality have been used to
fund the acquisition of leasehold improvements at the Phoenix Sky Harbor
International 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.
On August 25, 1994, the Company entered into a Restated and Amended Trust
Indenture in which the Series 1989 and Series 1990 Bonds were retired
contemporaneously with the issuance of the Series 1994A and Series 1994B Bonds.
Pursuant to the agreement, payment of principal and interest at 8.3% on the
Series 1994A Bonds commenced on the Effective Date and ends on January 1, 2006
while payment of principal and interest at 8.2% on the Series 1994B Bonds
commenced on the Effective Date and ends on January 1, 1999. At December 31,
1994, the outstanding balance was $21.2 million.
(c) Aircraft and Related Equipment Acquisitions
At December 31, 1994, the Company had on order a total of 24 Airbus
A320-200 aircraft with an aggregate net cost estimated at $1.1 billion. Delivery
dates of the aircraft will fall in the years 1998 through
F-19
<PAGE> 98
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2000 with an option to defer the 1998 deliveries. If new A320 aircraft are
delivered as a result of the renegotiated put agreement (described below), the
Company will have the right to cancel on a one-for-one basis, up to a maximum of
eight non-consecutive aircraft deliveries hereunder, subject to certain
conditions. The Company also has the option to cancel without cause up to an
additional four aircraft, and the Company has the right to assign all or some of
these delivery positions to Continental.
At December 31, 1994, the Company had a put agreement for eight aircraft
with deliveries to start not earlier than June 30, 1995 and end on June 30,
1999. Under the agreement, new or "like new" A320-200, or new or used B737-300
or B757-200 aircraft may be put to the Company at a rate of no more than two
aircraft in 1995, and, with respect to each ensuing year during the put period,
of no more than three aircraft. In addition, no more than five used aircraft may
be put to the Company, and for every new A320 aircraft put to the Company, the
Company has the right to reduce the deliveries under the AVSA A320 purchase
contract on a one-for-one basis. During each January of the put period, the
Company will negotiate the type and delivery dates of the put aircraft for that
year. The puts will require 150-day notice and will be leased at fair market
rates for terms ranging from three to eighteen years, depending on the type and
condition of the aircraft. In 1995, three aircraft (one used B737-300 in
February and two new A320-200s in April) will be delivered to the Company under
this agreement. As part of the agreement, certain cash payments and securities
were issued to the put holder pursuant to the Plan (see Note 13).
The Company had certain aircraft purchase contracts with Boeing. In
connection with the Plan, the Company reached a settlement in which the purchase
contracts were rejected and equipment purchase deposits were kept by Boeing in
full settlement of the rejection damages.
In December 1994, the Company entered into a support contract with
International Aero Engines ("IAE") which provides for the purchase by the
Company of six new V2500-A5 spare engines scheduled for delivery beginning in
1998 through 2000 for use on the A320 fleet. Such engines have an estimated
aggregate cost of $42.3 million for which the Company has provided a $1.5
million security deposit in the form of a letter of credit. Pursuant to a side
letter to an earlier contract with IAE, the Company agreed to purchase from IAE
prior to December 31, 1995, a new or used V2500-A1 engine. However, the Company
expects to, with IAE's consent, acquire an additional "A5" engine in lieu of
this "A1" engine.
The following table reflects estimated cash payments under the aircraft and
engine purchase contracts. Actual payments may vary due to inflation factor
adjustments and changes in the delivery schedule of the equipment. The estimated
cash payments include the progress payments that will be made in cash, as
opposed to being financed under an existing progress payment financing facility.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995........................................................... $ 3,223
1996........................................................... 32,608
1997........................................................... 58,230
1998........................................................... 379,309
1999........................................................... 355,540
2000........................................................... 350,863
--------------
$1,179,773
===========
</TABLE>
At December 31, 1994, the Company has significant capital commitments for a
number of new aircraft, as discussed above. Although the Company has arranged
for financing for up to one-half of such commitment, the Company will require
substantial capital from external sources to meet the remaining financial
commitments. The Company intends to seek additional financing (which may include
public debt financing or private financing) in the future when and as
appropriate. There can be no assurance that sufficient financing will be
obtained for all aircraft and other capital requirements. A default by the
Company under any such commitment could have a material adverse effect on the
Company.
F-20
<PAGE> 99
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(d) Concentration of Credit Risk
The Company does not believe it is subject to any significant concentration
of credit risk. At December 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 the 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.
(e) Contingent Legal Obligations
Certain administrative and priority tax claims are pending against the
Company, which, if ultimately allowed by the Bankruptcy Court, would represent
general obligations of the Company. Such claims include claims of various state
and local tax authorities and certain contractual indemnification obligations.
Management cannot predict whether or to what extent any of the pending
administrative and priority tax claims will result in liabilities to the
Company. Should such liabilities be incurred, future operating results could be
adversely affected. However, based on information currently available,
management believes that the disposition will not have a material adverse effect
on the Company's financial condition.
13. RELATED PARTY TRANSACTIONS
In exchange for certain concessions principally arising from cancellation
of the right of GPA to lease to America West 10 Airbus A320 aircraft at
specified rates, GPA received (i) 900,000 shares of Class B Common Stock; (ii)
1,384,615 Warrants to purchase shares of Class B Common Stock at an exercise
price of $12.74 per share; (iii) a cash payment of approximately $30.5 million;
(iv) the rights to require the Company to lease up to eight aircraft of types
operated by the Company, which rights must be exercised by June 30, 1999.
The Company has entered into various aircraft and leasing arrangements with
GPA at terms comparable to those obtained from third parties for similar
transactions. The Company leases 16 aircraft from GPA and the rental payments
for such leases amount to $63.1 million, $63.1 million, and $63.8 million for
the combined twelve months ended December 31, 1994, 1993 and 1992, respectively.
As of December 31, 1994, the Company was obligated to pay approximately $1.1
billion under these leases which expire at various times through the year 2013.
The Company has entered into Alliance Agreements with Continental and Mesa,
both of whom invested in the Company. Pursuant to a code-sharing agreement with
Mesa entered into in December 1992, the Company collects a per-passenger charge
for facilities, reservations and other services from Mesa for enplanements on
the Mesa system. Such payments by Mesa to the Company totaled $2.5 million and
$1.9 million for the twelve months ended December 31, 1994 and 1993,
respectively.
In October 1994, the Company issued an additional $23.0 million of 11 1/4%
Senior Unsecured Notes to Fidelity and Lehman in exchange for full settlement of
certain prepetition unsecured claims. Additionally, cash payments of $2.1
million and $1.3 million were made to Fidelity and Lehman, respectively.
14. 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 continued business operations as debtor-in-possession. These prepetition
liabilities were settled as part of the Plan and were classified as "Estimated
liabilities subject to Chapter 11 proceedings" prior to the Effective Date.
F-21
<PAGE> 100
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Estimated liabilities subject to Chapter 11 proceedings as of December 31,
1993 consisted of the following:
<TABLE>
<S> <C>
Long-term debt (including convertible subordinated debentures of
$138.9 million)................................................. $224,642
Accounts payable and accrued liabilities.......................... 113,945
Accrued interest.................................................. 16,808
Accrued taxes..................................................... 25,719
--------
$381,114
========
</TABLE>
15. RESTRUCTURING CHARGES
Restructuring charges consist of the following:
<TABLE>
<CAPTION>
1992
--------------
(IN THOUSANDS)
<S> <C>
Write-off for certain assets related to station closures or
route restructuring.......................................... $ 9,529
Provision for spare parts for aircraft types no longer in
service...................................................... 12,651
Provision for employee severance............................... 2,284
Loss on return of aircraft..................................... 6,852
--------------
$ 31,316
===========
</TABLE>
The restructuring charges were necessitated primarily by aircraft fleet
reductions and other operational changes. The Company has reduced its fleet to
87 aircraft and has reduced the number of aircraft types in the fleet from five
to three.
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
1994 -- REORGANIZED COMPANY QUARTER QUARTER QUARTER QUARTER
----------------------------------------------- -------- -------- --------- --------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Total operating revenues....................... $ 127,315 $342,451
Operating income............................... 8,336 30,535
Nonoperating expense, net...................... (5,293) (13,842)
Income tax expense............................. (1,825) (10,065)
Net income..................................... 1,218 6,628
Earnings per share:
Primary...................................... .03 .15
Fully diluted................................ .03 .15
</TABLE>
F-22
<PAGE> 101
AMERICA WEST AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1994 -- PREDECESSOR COMPANY
-----------------------------------------------
<S> <C> <C> <C> <C>
Total operating revenues....................... $345,264 $363,351 230,413
Operating income............................... 37,750 44,146 25,610
Nonoperating expense, net (a).................. (21,943) (23,171) (263,601)
Income tax expense............................. (632) (839) (588)
Net income (a)................................. 15,175 20,136 19,081
Earnings per share:
Primary...................................... .56 .74 .69
Fully diluted................................ .40 .52 .49
</TABLE>
<TABLE>
<CAPTION>
1993 -- PREDECESSOR COMPANY
-----------------------------------------------
<S> <C> <C> <C> <C>
Total operating revenues....................... 316,605 324,910 335,113 348,736
Operating income............................... 17,168 25,179 32,981 45,726
Nonoperating expense, net...................... (14,990) (14,710) (18,285) (35,145)
Income tax expense............................. (44) (209) (293) (213)
Net income..................................... 2,134 10,260 14,403 10,368
Earnings per share:
Primary...................................... .09 .41 .56 .40
Fully diluted................................ .09 .28 .38 .28
</TABLE>
---------------
(a) During the third quarter of 1994, the Company recorded reorganization
expenses of $255.4 million as well as an extraordinary gain of $257.7
million from the discharge of debt pursuant to the Plan of Reorganization.
F-23
<PAGE> 102
AMERICA WEST AIRLINES, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 213,406 $ 182,581
Accounts receivable, less allowance for doubtful accounts of
$3,505 in 1995 and $3,531 in 1994............................. 86,746 57,474
Expendable spare parts and supplies, less allowance for
obsolescence of $859 in 1995 and $483 in 1994................. 26,264 24,179
Prepaid expenses................................................. 35,616 29,284
----------- ------------
Total current assets.......................................... 362,032 293,518
----------- ------------
Property and equipment:
Flight equipment................................................. 477,995 452,177
Other property and equipment..................................... 93,573 92,169
----------- ------------
571,568 544,346
Less accumulated depreciation and amortization................... 28,413 15,882
----------- ------------
543,155 528,464
Equipment purchase deposits...................................... 27,489 26,074
----------- ------------
570,644 554,538
----------- ------------
Restricted cash.................................................... 30,078 28,578
Reorganization value in excess of amounts allocable to identifiable
assets, net...................................................... 637,495 645,703
Other assets, net.................................................. 23,783 22,755
----------- ------------
$ 1,624,032 $1,545,092
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................. $ 64,977 $ 65,198
Accounts payable................................................. 92,311 77,569
Air traffic liability............................................ 187,310 127,356
Accrued compensation and vacation benefits....................... 16,533 15,776
Accrued interest................................................. 7,759 13,109
Accrued taxes.................................................... 45,349 27,061
Other accrued liabilities........................................ 15,620 15,376
----------- ------------
Total current liabilities..................................... 429,859 341,445
----------- ------------
Long-term debt, less current maturities............................ 453,452 465,598
Manufacturers' and deferred credits................................ 115,520 116,882
Other liabilities.................................................. 24,309 25,721
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 48,800,000 shares; no
shares issued at March 31, 1995 or December 31, 1994.......... -- --
Class A common stock, $.01 par value. Authorized 1,200,000
shares; issued and outstanding 1,200,000 shares at March 31,
1995 and December 31, 1994.................................... 12 12
Class B common stock, $.01 par value. Authorized 100,000,000
shares; issued and outstanding 43,966,645 shares at March 31,
1995 and 43,936,272 at December 31, 1994...................... 440 439
Additional paid-in capital....................................... 587,384 587,149
Retained earnings................................................ 13,056 7,846
----------- ------------
Total stockholders' equity.................................... 600,892 595,446
----------- ------------
$ 1,624,032 $1,545,092
========= ==========
</TABLE>
See accompanying notes to condensed financial statements.
F-24
<PAGE> 103
AMERICA WEST AIRLINES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR
COMPANY | COMPANY
------------- | -------------
THREE MONTHS | THREE MONTHS
ENDED | ENDED
MARCH 31, | MARCH 31,
------------- | -------------
1995 | 1994
------------- | -------------
<S> <C> | <C>
Operating revenues: |
Passenger....................................................... $ 323,459 | $ 324,427
Cargo........................................................... 11,376 | 10,491
Other........................................................... 10,955 | 10,346
------------- | -------------
Total operating revenues..................................... 345,790 | 345,264
------------- | -------------
Operating expenses: |
Salaries and related costs...................................... 89,180 | 79,471
Rentals and landing fees........................................ 68,254 | 66,259
Aircraft fuel................................................... 39,694 | 37,932
Agency commissions.............................................. 28,965 | 29,111
Aircraft maintenance materials and repairs...................... 12,764 | 7,929
Depreciation and amortization................................... 20,128 | 21,153
Other........................................................... 61,910 | 65,659
------------- | -------------
Total operating expenses..................................... 320,895 | 307,514
------------- | -------------
Operating income............................................. 24,895 | 37,750
------------- | -------------
Nonoperating income (expense): |
Interest income................................................. 2,874 | 161
Interest expense (contract interest of $16,437 for 1994)........ (15,879) | (13,175)
Loss on disposition of property and equipment................... (923) | (542)
Reorganization expense, net..................................... -- | (8,396)
Other, net...................................................... 1 | 9
------------- | -------------
Total nonoperating expenses, net............................. (13,927) | (21,943)
------------- | -------------
Income before income taxes and extraordinary item................. 10,968 | 15,807
------------- | -------------
Income taxes...................................................... 5,758 | 632
------------- | -------------
Net income........................................................ 5,210 | 15,175
Retained earnings (deficit) at beginning of period................ 7,846 | (438,626)
------------- | -------------
Retained earnings (deficit) at end of period...................... $ 13,056 | $(423,451)
=========== | ===========
Earnings per share: |
Primary: |
Net income................................................... $ .12 | $ .56
=========== | ===========
Fully Diluted: |
Net income................................................... $ .12 | $ .40
=========== | ===========
Shares used for computation: |
Primary...................................................... 45,165,959 | 29,152,729
Fully diluted................................................ 45,165,959 | 41,055,183
</TABLE>
See accompanying notes to condensed financial statements.
F-25
<PAGE> 104
AMERICA WEST AIRLINES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR
COMPANY | COMPANY
------------- | -------------
THREE MONTHS | THREE MONTHS
ENDED | ENDED
MARCH 31, | MARCH 31,
------------- | -------------
1995 | 1994
------------- | -------------
<S> <C> | <C>
Cash flows from operating activities: |
Net income.................................................... $ 5,210 | $ 15,175
Adjustments to reconcile net income to cash provided by |
operating activities: |
Depreciation and amortization.............................. 11,920 | 21,153
Amortization of manufacturers' and deferred credits........ (2,642) | (1,114)
Amortization of deferred overhauls......................... 859 | --
Amortization of reorganization value in excess of amounts |
allocable to identifiable assets......................... 8,208 | --
Loss on disposition of property and equipment.............. 923 | 542
Reorganization items....................................... -- | 3,703
Other...................................................... 851 | (187)
Changes in operating assets and liabilities: |
Increase in accounts receivable, net.......................... (29,031) | (22,798)
Increase in spare parts and supplies, net..................... (2,081) | (1,192)
Increase in prepaid expenses.................................. (6,332) | (5,179)
Decrease (increase) in other assets and restricted cash....... (2,528) | 6,481
Increase in accounts payable.................................. 13,462 | 4,823
Increase in air traffic liability............................. 59,954 | 45,325
Increase in accrued compensation and vacation benefits........ 757 | 686
Increase (decrease) in accrued interest....................... (5,318) | 1,530
Increase in accrued taxes..................................... 18,288 | 10,756
Increase in other accrued liabilities......................... 479 | 3,139
Increase (decrease) in other liabilities...................... 441 | (3,209)
------------- | -------------
Net cash provided by operating activities............. 73,420 | 79,634
Cash flows from investing activities: |
Purchases of property and equipment........................... (28,950) | (13,665)
Proceeds from disposition of property......................... 312 | 172
------------- | -------------
Net cash used in investing activities................. (28,638) | (13,493)
Cash flows from financing activities: |
Repayment of debt............................................. (13,958) | (14,320)
Exercise of warrants.......................................... 1 | --
------------- | -------------
Net cash used in financing activities................. (13,957) | (14,320)
Net increase in cash and cash equivalents............. 30,825 | 51,821
------------- | -------------
Cash and cash equivalents at beginning of period.............. 182,581 | 99,631
------------- | -------------
Cash and cash equivalents at end of period.................... $ 213,406 | $ 151,452
=========== | ===========
</TABLE>
See accompanying notes to condensed financial statements.
F-26
<PAGE> 105
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995
America West Airlines, Inc., (the "Predecessor Company") filed a voluntary
petition on June 27, 1991, to reorganize (the "Reorganization") under Chapter 11
of the U.S. Bankruptcy Code. On August 10, 1994, the Plan of Reorganization
("Plan"), filed by the Predecessor Company, was confirmed and became effective
on August 25, 1994 (the "Effective Date"). For a detailed discussion of the
Company's Plan, refer to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994. On August 25, 1994, America West Airlines, Inc., (the
"Reorganized Company" or the "Company") adopted fresh start reporting in
accordance with Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code" ("SOP 90-7") of the American Institute
of Certified Public Accountants. Accordingly, the Company's post-reorganization
balance sheet and statement of operations have not been prepared on a basis
consistent with such pre-reorganization financial statements and are not
comparable in all respects to financial statements prior to reorganization. For
accounting purposes, the inception date of the Reorganized Company is deemed to
be August 26, 1994. A vertical black line is shown in the financial statements
to separate the Reorganized Company from the Predecessor Company since they have
not been prepared on a consistent basis of accounting.
1. BASIS OF PRESENTATION
The unaudited condensed financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission but do not include all information and footnotes
required by generally accepted accounting principles. In the opinion of
management, the condensed financial statements reflect all adjustments, which
are of a normal recurring nature, necessary for a fair presentation. Certain
prior year amounts have been reclassified to conform with current year
presentation. The accompanying condensed financial statements should be read in
conjunction with the financial statements and related notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
2. PER SHARE DATA
Primary earnings per share is based upon the weighted average number of
shares of common stock outstanding and dilutive common stock equivalents (stock
options and warrants). Primary earnings per share reflect net income adjusted
for interest on borrowings effectively reduced by the proceeds from the assumed
exercise of common stock equivalents, but only if the effects of such
adjustments are dilutive.
Fully diluted earnings per share is based on the weighted average number of
shares of common stock outstanding, dilutive common stock equivalents (stock
options and warrants), the conversion of outstanding convertible preferred stock
and for the Predecessor Company the conversion of convertible subordinated
debentures. Fully diluted earnings per share reflect net income adjusted for
interest on borrowings effectively reduced by the proceeds from the assumed
exercise of common stock equivalents, but only if the effects of such
adjustments are dilutive.
3. CAPITAL STOCK
PREFERRED STOCK
The Company's Board of Directors by resolution may authorize the issuance
of the Preferred Stock as a class, in one or more series, having the number of
shares, designations, relative voting rights, dividend rights, liquidation and
other preferences, and limitations that the Board of Directors fixes without any
stockholder approval. No shares of Preferred Stock have been issued.
F-27
<PAGE> 106
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
COMMON STOCK
The holders of Class A Common Stock are entitled to fifty votes per share,
and the holders of Class B Common Stock are entitled to one vote per share, on
all matters submitted to a vote of common stockholders, except that voting
rights of non-U.S. citizens are limited. The Class A Common Stock is convertible
into an equal number of Class B shares at any time at the election of the
holders of the Class A Common Stock.
Holders of Common Stock of all classes participate equally as to any
dividends or distributions on the Common Stock, except that dividends payable in
shares of Common Stock, or securities to acquire Common Stock, will be made in
the same class of common stock as that held by the recipient of the dividend.
Holders of Common Stock have no right to cumulate their votes in the election of
directors. The Common Stock votes together as a single class, subject to the
right to a separate class vote in certain instances required by law.
Pursuant to an agreement, the partners and assignees of AmWest Partners,
L.P. ("AmWest") and GPA Group plc, ("GPA") will vote all shares of Common Stock
owned by them in favor of the reelection of the initially designated independent
directors for as long as such independent directors continue to serve until the
third annual meeting after the Reorganization.
In addition to the voting and other provisions of the agreement, AmWest and
GPA agreed that (i) the partners and assignees of AmWest will vote in favor of
GPA's nominee to the Company's Board of Directors, and (ii) GPA will vote in
favor of the partners and assignees of AmWest's nine nominees to the Company's
Board of Directors for so long as (a) the partners and assignees of AmWest own
at least 5% of the voting equity securities of the Company, and (b) GPA owns at
least 2% of the voting equity securities of the Company.
WARRANTS
The Company issued approximately 10.4 million warrants to purchase Class B
Common Stock with an exercise price of $12.74 per share as part of the
Reorganization. The warrants are exercisable by the holders anytime before
August 25, 1999, and 10.4 million shares of Class B Common Stock have been
reserved for the exercise of these warrants.
4. RESTRICTED STOCK AND STOCK OPTIONS
In December 1994, the Company's Board of Directors approved the America
West Airlines, Inc. 1994 Incentive Equity Plan (the "Incentive Plan"). The
stockholders of the Company approved the Incentive Plan at the Annual Meeting in
May 1995. Under the Incentive Plan, up to 3.5 million shares of Class B Common
Stock may be issued to cover awards under this plan, of which, no more than 1.5
million will be issued as restricted stock or bonus stock. As of March 31, 1995,
the Company's Board of Directors granted 41,334 shares of restricted stock and
1,437,000 options to purchase Class B Common Stock at $8.75 per share, the fair
market value at the date of grant, under the Incentive Plan. Also, 39,000
options to purchase common stock were granted at $8.75 per share, the fair
market value at date of grant, to members of the Board of Directors who are not
employees of the Company. As of March 31, 1995, 18,583 shares of restricted
stock were vested and 255,000 options to purchase common stock were exercisable.
F-28
<PAGE> 107
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109) upon its emergence from bankruptcy. The
Predecessor Company had adopted SFAS 109 as of January 1, 1993.
Income tax expense:
For the periods shown below, the Company recorded income tax expense as
follows:
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR
COMPANY | COMPANY
-------------- | --------------
THREE MONTHS | THREE MONTHS
ENDED | ENDED
MARCH 31, 1995 | MARCH 31, 1994
-------------- | --------------
(IN THOUSANDS) | (IN THOUSANDS)
<S> <C> | <C>
Current taxes: |
Federal.............................................. $ 10 | $450
State................................................ 18 | 182
------- | ------
28 | 632
Deferred taxes:........................................ -- | --
Income tax expense |
Attributable to reorganization items................. 5,730 | N/A
------- | ------
Income tax expense..................................... $5,758 | $632
=========== | ===========
</TABLE>
For the period ended March 31, 1995, income tax expense pertains both to
income from continuing operations as well as certain adjustments necessitated by
the effectiveness of the Plan and the resultant fresh start adjustments to the
Company's financial statements. The Company's Reorganization and the associated
implementation of fresh start reporting gave rise to significant items of
expense for financial reporting purposes that are not deductible for income tax
purposes. In large measure, it is these nondeductible (for income tax purposes)
expenses that result in income tax expense (for financial reporting purposes)
significantly greater than taxes computed at the current U.S. corporate
statutory rate of 35 percent. Nevertheless, the Company's actual income tax
liability (i.e., income taxes payable) is considerably lower than income tax
expense shown for financial reporting purposes.
For the period ended March 31, 1994, income tax expense pertains solely to
income from continuing operations.
6. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Cash paid for interest and income taxes during the three months ended March
31, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR
COMPANY | COMPANY
-------------- | --------------
THREE MONTHS | THREE MONTHS
ENDED | ENDED
MARCH 31, 1995 | MARCH 31, 1994
-------------- | --------------
(IN THOUSANDS) | (IN THOUSANDS)
<S> <C> | <C>
Interest (net of amounts capitalized).................. $ 18,317 | $ 11,362
Income taxes........................................... $ 14 | $ 221
</TABLE>
F-29
<PAGE> 108
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, during the three months ended March 31, 1995 and 1994, the
Company had the following non-cash financing and investing activities:
<TABLE>
<CAPTION>
REORGANIZED | PREDECESSOR
COMPANY | COMPANY
-------------- | --------------
THREE MONTHS | THREE MONTHS
ENDED | ENDED
MARCH 31, 1995 | MARCH 31, 1994
-------------- | --------------
(IN THOUSANDS) | (IN THOUSANDS)
<S> <C> | <C>
Equipment acquired through capital leases.............. $ -- | $ 111
Accrued interest reclassified to long-term debt........ $ 32 | $ 2,101
Notes payable issued to seller......................... $ 1,415 | $ --
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
(a) Leases
At March 31, 1995, the Company had a put agreement for seven aircraft with
deliveries to start no earlier than June 30, 1995 and end on June 30, 1999 (the
"1994 Put Agreement"). Under the agreement, new or used B737-300, B757-200, or
new or "like new" A320-200 aircraft may be put to the Company at a rate of no
more than two aircraft in 1995, and with respect to each ensuing year during the
put period, of no more than three aircraft. In addition, no more than five used
aircraft may be put to the Company, and for every new A320 aircraft put to the
Company, the Company has the right to reduce deliveries under an A320 purchase
contract on a one-for-one basis. During each January of the put period, the
Company will negotiate the type and delivery dates for terms ranging from three
to eighteen years, depending on the type and condition of the aircraft.
In February 1995, the Company entered into an agreement under the 1994 Put
Agreement to lease one Boeing 737-300 aircraft for five years at a rental rate
subject to reset every six months based on LIBOR. Payments for the aircraft are
due monthly.
In April 1995, the Company entered into agreements to lease one Boeing 757
aircraft and two A320 aircraft. Under the arrangements, the Boeing 757 aircraft
has a term of two years with payments due monthly and the two A320 aircraft have
a term of eight years with payments due monthly. The two A320 aircraft were
received under the 1994 Put Agreement, reducing the number of put aircraft from
seven at March 31, 1995 to five.
(b) Contingent Legal Obligations
Certain administrative and priority tax claims are pending against the
Company, which, if ultimately allowed by the bankruptcy court, would represent
general obligations of the Company. Such claims include claims of various state
and local tax authorities and certain contractual indemnification obligations.
Management cannot predict whether or to what extent any of the pending
administrative and priority tax claims will result in liabilities to the
Company. Should such liabilities be incurred, future operating results could be
adversely affected. However, based on information currently available,
management believes that the disposition will not have a material adverse effect
on the Company's financial condition.
8. RELATED PARTY TRANSACTIONS
The Company has entered into various aircraft acquisitions and leasing
arrangements with GPA, a stockholder of the Company, at terms comparable to
those obtained from third parties for similar transactions. The Company
currently leases 18 aircraft from GPA and the rental payments for such leases
amount to $16.6 million and $15.3 million for the three months ended March 31,
1995 and 1994, respectively. As of March 31, 1995, the Company was obligated to
pay approximately $1.1 billion under these leases through the year 2013.
F-30
<PAGE> 109
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
As part of the Reorganization, both Continental Airlines ("Continental")
and Mesa Airlines ("Mesa") made an investment in the Company. In addition, the
Company entered into alliance agreements with Continental and Mesa. Pursuant to
a code-sharing agreement with Mesa entered into in December 1992 (which was
prior to Mesa becoming a significant stockholder), the Company collects a
per-passenger charge for facilities, reservations and other services from Mesa
for enplanements in Phoenix on the Mesa system. Such payments by Mesa to the
Company totaled $598,000 and $655,000 for the three months ended March 31, 1995
and 1994, respectively.
9. REORGANIZATION EXPENSE
Reorganization expense is comprised of items of income, expense, gain or
loss that were realized or incurred by the Company as a result of the
Reorganization. Such items consisted of the following at March 31, 1994.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Professional fees and other expenses related to the Chapter 11
filing....................................................... $5,064
Provision for settlement of claims............................. 4,180
Interest income................................................ (848)
-------
$8,396
===========
</TABLE>
F-31
<PAGE> 110
======================================================
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Prospectus Summary.................... 4
Risk Factors.......................... 10
The Offer............................. 13
Capitalization........................ 20
Selected Financial Data............... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 33
Management............................ 43
Certain Transactions.................. 49
Principal Stockholders................ 51
Comparison of Existing Notes and New
Notes............................... 55
Description of the New Notes.......... 64
Legal Matters......................... 74
Experts............................... 74
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
AMERICA WEST
AIRLINES, INC.
OFFER TO PURCHASE
$48,000,000 PRINCIPAL AMOUNT
OF 11 1/4% SENIOR UNSECURED
NOTES DUE 2001
AND
OFFER TO EXCHANGE
$75,000,000 PRINCIPAL AMOUNT OF
10 3/4% SENIOR UNSECURED NOTES DUE 2005
FOR
$75,000,000 PRINCIPAL AMOUNT OF
11 1/4% SENIOR UNSECURED NOTES DUE 2001
------------------------
PROSPECTUS
------------------------
AUGUST , 1995
======================================================
<PAGE> 111
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders
America West Airlines, Inc.
Under date of February 24, 1995, we reported on the balance sheets of
America West Airlines, Inc. as of December 31, 1994 and 1993, and the related
statements of operations, cash flows and stockholders' equity (deficiency) for
the period August 26, 1994 to December 31, 1994, the period January 1, 1994 to
August 25, 1994 and for each of the years in the two-year period ended December
31, 1993, which are included herein.
We consent to the use of our reports included herein and to the reference
to our firm under the headings "Summary Financial Data", "Selected Financial
Data" and "Experts" in the prospectus.
The audit report on the financial statements of America West Airlines, Inc.
referred to above contains an explanatory paragraph that states that as
discussed in Notes 1 and 2 to the financial statements, on August 25, 1994,
America West Airlines, Inc. emerged from bankruptcy. The financial statements of
the Reorganized Company reflect the impact of adjustments to reflect the fair
value of assets and liabilities under fresh start reporting. As a result, the
financial statements of the Reorganized Company are presented on a different
basis than those of the Predecessor Company and, therefore, are not comparable
in all respects.
KPMG Peat Marwick LLP
Phoenix, Arizona
August 7, 1995
<PAGE> 112
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") authorizes,
inter alia, a corporation generally to indemnify any person ("indemnitee") who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (other than an action by or in right of
the corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation, in a similar position with another corporation or
entity, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. With respect to actions or
suits by or in the right of the corporation, however, an indemnitee who acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation is generally limited to attorneys' fees and
other expenses, and no indemnification shall be made if such person is adjudged
liable to the corporation unless and only to the extent that a court of
competent jurisdiction determines that indemnification is appropriate. Section
145 further provides that any indemnification shall be made by the corporation
only as authorized in each specific case upon a determination by (i) the
stockholders or (ii) the board of directors, as a majority vote of a quorum of
disinterested directors so directs, that indemnification of the indemnitee is
proper because he has met the applicable standard of conduct. Section 145
provides that indemnification pursuant to its provisions is not exclusive of
other rights of indemnification to which a person may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise.
Section 8.02 of the Company's By-laws, a copy of which is filed as Exhibit
3.2 to this Registration Statement, provides, in substance, that directors,
officers, employees and agents shall be indemnified to the fullest extent
permitted by Section 145 of the DGCL.
Article 12.0 of the Company's Restated Certificate of Incorporation, a copy
of which is filed as Exhibit 3.1 to this Registration Statement, limits the
liability of directors of the Company to the Company or its stockholders (in
their capacity as directors but not in their capacity as officers) to the
fullest extent permitted by the DGCL. Specifically, directors of the Company
will not be personally liable for monetary damages for breach of a director's
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or unlawful stock
repurchase or redemptions as provided in Section 174 of the DGCL or (iv) for any
transaction from which the director derived an improper personal benefit. The
Company's Restated Certificate of Incorporation also provides that if the DGCL
is amended after the approval of the Restated Certificate of Incorporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Company will be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended.
The form of the Third Revised Investment Agreement filed as Exhibit 10.1 to
this Registration Statement contains certain provisions for indemnification of
directors and officers of the Company and certain stockholders against civil
liabilities under the Securities Act. Certain of these provisions are set forth
in the form of the Registration Rights Agreement filed as Exhibit 4.6 to the
Registration Rights Agreement.
The Company entered into indemnification agreements with its directors
providing for indemnification to the fullest extent permitted by the laws of the
State of Delaware. These agreements provide for specific procedures to better
assure the directors' rights to indemnification, including procedures for
directors to submit claims, for determination of directors entitled to
indemnification (including the allocation of the burden of proof and selection
of a reviewing party) and for enforcement of directors indemnification rights.
II-1
<PAGE> 113
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of exhibits filed as part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
--------
<S> <C>
3.1 -- Restated Certificate of Incorporation of America West Airlines,
Inc. -- Incorporated by reference to the Company's Report on Form 8-K dated
September 8, 1994.
3.2 -- Restated By-laws of America West Airlines, Inc., as amended -- Incorporated
by reference to the Company's Report on Form 10-K dated December 31, 1994.
*4.1 -- Form of New Note Indenture relating to the New Notes due 2005.
*5.1 -- Opinion of Andrews & Kurth L.L.P.
10.1 -- Third Revised Investment Agreement dated April 21, 1994 between America West
Airlines, Inc. and AmWest Partners, L.P. -- Incorporated by reference to
Exhibit 10.A to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1994.
10.11 -- Third Revised Interim Procedures Agreement dated April 21, 1994 between
America West Airlines, Inc. and AmWest Partners, L.P. -- Incorporated by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
10.14 -- The GPA Term Sheet between America West Airlines, Inc. and GPA Group plc,
dated June 13, 1994 -- Incorporated by reference to the Company's
Registration Statement on Form S-1 (No. 54243), as amended.
10.15 -- America West Airlines Management Resignation Allowance Guidelines, as
amended, dated November 18, 1993 -- Incorporated by reference to the
Company's Registration Statement on Form S-1 (No. 54243), as amended.
10.16 -- Airbus A320 Purchase Agreement (including exhibits thereto), dated as of
September 28, 1990 between AVSA, S.A.R.L. and the Company, together with
Letter Agreement Nos. 1-10, inclusive -- Incorporated by reference to
Exhibit 10-(D)(1) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990.
10.17 -- Loan Agreement, dated as of September 28, 1990, among the Company, AVSA and
AVSA, as agent -- Incorporated by reference to Exhibit 10-(D)(2) to the
Company's Quarterly Report on Form 10-Q for the period ended September 30,
1990.
10.19 -- V2500 Support Contract Between the Company and International Aero Engines
AG, dated September 28, 1990, together with Side Letters Nos. 1-4,
inclusive -- Incorporated by reference to Exhibit 10-(D)(3) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1990.
10.20 -- Cash Management Agreement, dated September 28, 1991, among the Company, BT
and First Interstate of Arizona, N.A. -- Incorporated by reference to
Exhibit 10-D(21) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
10.21 -- First Amendment to Cash Management Agreement, dated December 1, 1991, among
the Company, BT and First Interstate of Arizona, N.A. -- Incorporated by
reference to Exhibit 10-D(22) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991.
10.22 -- Second Amendment to Cash Management Agreement, dated September 1, 1992,
among the Company, BT and First Interstate of Arizona, N.A. -- Incorporated
by reference to Exhibit 10-O(3) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.
10.23 -- Restructuring Agreement, dated December 1, 1991 between the Company and
Kawasaki -- Incorporated by reference to Exhibit 10-D(24) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.24 -- A320 Put Agreement, dated December 1, 1991 between the Company and
Kawasaki -- Incorporated by reference to Exhibit 10-D(25) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.25 -- First Amendment to A320 Put Agreement, dated September 1,
1992 -- Incorporated by reference to Exhibit 10-R(2) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
</TABLE>
II-2
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
--------
<S> <C>
10.26 -- A320 Put Agreement, dated as of June 25, 1991 between the Company and GPA
Group plc -- Incorporated by reference to Exhibit 10-D(26) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.27 -- First Amendment to A320 Put Agreement, dated as of September 1,
1992 -- Incorporated by reference to Exhibit 10-S(2) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
10.28 -- Restructuring Agreement, dated as of June 25, 1991 among GPA Group plc, GPA
Leasing USA I, Inc., GPA Leasing USA Sub I, and the Company -- Incorporated
by reference to Exhibit 10-D(27) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991.
10.29 -- Official Statement dated August 11, 1986 for the $54,000,000 Variable Rate
Airport Facility Revenue Bonds -- Incorporated by reference to Exhibit 10.e
to the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1986.
10.30 -- Airport Use Agreement dated July 1, 1989 (the "Airport Use Agreement") among
the City of Phoenix, The Industrial Development Authority of the City of
Phoenix, Arizona and the Company -- Incorporated by reference to Exhibit
10-D(9) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1989.
10.31 -- First Amendment dated August 1, 1990 to Airport Use
Agreement -- Incorporated by reference to Exhibit 10-(D)(9) to the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1990.
10.32 -- Revolving Loan Agreement dated April 17, 1990, by and among the Company, the
Bank signatories thereto, and Bank of America National Trust and Savings
Association, as Agent for the Banks (the "Revolving Loan
Agreement") -- Incorporated by reference to Exhibit 10-1 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 1990.
10.33 -- First Amendment dated April 17, 1990 to Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(10) to the
Company's Quarterly Report on Form 10-Q for the period ended September 30,
1990.
10.34 -- Second Amendment dated September 28, 1990 to the Revolving Loan Agreement --
Incorporated by reference to Exhibit 10-(D)(11) to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1990.
10.35 -- Third Amendment dated as of January 14, 1991 to the Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(13) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1990.
10.36 -- Spares Credit Agreement, dated as of September 28, 1990, between the Company
and IAE -- Incorporated by reference to Exhibit 10-(D)(4) to the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1990.
10.37 -- Master Credit Modification Agreement dated as of October 1, 1992, among the
Company, IAE International Aero Engines AG, Intlaero (Phoenix A320) Inc.,
Intlaero (Phoenix B737) Inc., CAE Electronics Ltd., and Hughes Rediffusion
Simulation Limited -- Incorporated by reference to Exhibit 10-L to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992.
10.38 -- Credit Agreement, dated as of September 28, 1990 between the Company and
IAE -- Incorporated by reference to Exhibit 10-(D)(5) to the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1990.
10.39 -- Amendment No. 1 to the Credit Agreement, dated March 1, 1991 -- Incorporated
by reference to Exhibit 10-(M)(2) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
10.40 -- Amendment No. 2 to the Credit Agreement, dated May 15, 1991 -- Incorporated
by reference to Exhibit 10-(M)(3) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
10.41 -- Amendment No. 3 to the Credit Agreement, dated October 1,
1992 -- Incorporated by reference to Exhibit 10-(M)(4) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
</TABLE>
II-3
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
-------
<S> <C>
10.42 -- Form of Third Amended and Restated Credit Agreement dated September 30,
1993, among the Company, various lenders, and BT Commercial Corp. as
Administrative Agent (without exhibits) -- Incorporated by reference to
Exhibit 10-(N)(1) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
10.43 -- Form of Amended and Restated Management Letter Agreement, dated as of
September 30, 1993 from the Company to the Lenders -- Incorporated by
reference to Exhibit 10-N(2) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
10.44 -- Form of Amendment to Amended and Restated Management Letter Agreement;
Consent to Amendment of By-laws dated February 8, 1994 from the Company to
the Lenders -- Incorporated by reference to Exhibit 10-N(3) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
10.45 -- Fourth Amended and Restated Credit Agreement dated June 30,
1994 -- Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1994.
10.46 -- Key Employee Protection Agreement dated as of June 27, 1994 between America
West Airlines, Inc. and William A. Franke -- Incorporated by reference to
the Company's Registration Statement on Form S-1 (No. 54243), as amended.
10.47 -- Management Rights Agreement dated August 25, 1994 between TPG Partners L.P.,
TPG GenPar, L.P. and America West Airlines, Inc. -- Incorporated by
reference to the Company's Registration Statement on Form S-1 (No. 54243),
as amended.
10.48 -- V2500 Support Contract dated December 23, 1994 between America West
Airlines, Inc. and International Aero Engineers, as amended -- Incorporated
by reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
10.49 -- Form of America West Airlines, Inc. 1994 Incentive Equity
Plan -- Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
10.50 -- Employment Agreement dated as of December 1, 1994 between America West
Airlines, Inc. and William A. Franke -- Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.
10.51 -- Employment Agreement dated as of December 1, 1994 between America West
Airlines, Inc. and A. Maurice Myers, as amended -- Incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended December 31,
1994.
11.1 -- Calculation of Earnings Per Share.
12.1 -- Statement re: computation of ratio of earnings to fixed charges.
23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1 above).
*23.2 -- Consent of KPMG Peat Marwick LLP (independent auditors).
24.1 -- Power of Attorney (included on the signature pages of this Registration
Statement).
*25.1 -- Statement of Eligibility on Form T-1 of the Trustee under the New Note
Indenture.
*99.1 -- Form of Letter of Transmittal.
</TABLE>
---------------
* Filed herewith.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnifica-
II-4
<PAGE> 116
tion by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 117
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PHOENIX,
STATE OF ARIZONA, ON THE 7TH DAY OF AUGUST, 1995.
AMERICA WEST AIRLINES, INC.
By: /s/ WILLIAM A. FRANKE
------------------------------------
William A. Franke
Chairman of the Board and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED BELOW ON AUGUST 7, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------ -----------------------------------------------
<S> <C>
/s/ WILLIAM A. FRANKE Chairman of the Board and Chief Executive
------------------------------------------ Officer
William A. Franke
* President and Chief Operating Officer
------------------------------------------
A. Maurice Myers
* Senior Vice President and Chief Financial
------------------------------------------ Officer
W. Douglas Parker
* Director
------------------------------------------
Julia Chang Bloch
* Director
------------------------------------------
Stephen F. Bollenbach
* Director
------------------------------------------
Frederick W. Bradley
* Director
------------------------------------------
James G. Coulter
Director
------------------------------------------
John F. Fraser
* Director
------------------------------------------
John L. Goolsby
</TABLE>
II-6
<PAGE> 118
<TABLE>
<CAPTION>
SIGNATURE TITLE
------------------------------------------ -----------------------------------------------
<S> <C>
* Director
------------------------------------------
Richard C. Kraemer
* Director
------------------------------------------
John R. Power, Jr.
Director
------------------------------------------
Larry L. Risley
* Director
------------------------------------------
Frank R. Ryan
Director
------------------------------------------
Richard P. Schifter
Director
------------------------------------------
John F. Tierney
Director
------------------------------------------
Raymond S. Troubh
*By: /s/ William A. Franke
------------------------------------------
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 119
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<S> <C>
3.1 -- Restated Certificate of Incorporation of America West Airlines,
Inc. -- Incorporated by reference to the Company's Report on Form
8-K dated September 8, 1994.
3.2 -- Restated By-laws of America West Airlines, Inc., as amended --
Incorporated by reference to the Company's Report on Form 10-K
dated December 31, 1994.
*4.1 -- Form of New Note Indenture relating to the New Notes due 2005.
*5.1 -- Opinion of Andrews & Kurth L.L.P.
10.1 -- Third Revised Investment Agreement dated April 21, 1994 between
America West Airlines, Inc. and AmWest Partners,
L.P. -- Incorporated by reference to Exhibit 10.A to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1994.
10.11 -- Third Revised Interim Procedures Agreement dated April 21, 1994
between America West Airlines, Inc. and AmWest Partners,
L.P. -- Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993.
10.14 -- The GPA Term Sheet between America West Airlines, Inc. and GPA
Group plc, dated June 13, 1994 -- Incorporated by reference to
the Company's Registration Statement on Form S-1 (No. 54243), as
amended.
10.15 -- America West Airlines Management Resignation Allowance
Guidelines, as amended, dated November 18, 1993 -- Incorporated
by reference to the Company's Registration Statement on Form S-1
(No. 54243), as amended.
10.16 -- Airbus A320 Purchase Agreement (including exhibits thereto),
dated as of September 28, 1990 between AVSA, S.A.R.L. and the
Company, together with Letter Agreement Nos. 1-10,
inclusive -- Incorporated by reference to Exhibit 10-(D)(1) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990.
10.17 -- Loan Agreement, dated as of September 28, 1990, among the
Company, AVSA and AVSA, as agent -- Incorporated by reference to
Exhibit 10-(D)(2) to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1990.
10.19 -- V2500 Support Contract Between the Company and International Aero
Engines AG, dated September 28, 1990, together with Side Letters
Nos. 1-4, inclusive -- Incorporated by reference to Exhibit
10-(D)(3) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990.
10.20 -- Cash Management Agreement, dated September 28, 1991, among the
Company, BT and First Interstate of Arizona, N.A. -- Incorporated
by reference to Exhibit 10-D(21) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1991.
10.21 -- First Amendment to Cash Management Agreement, dated December 1,
1991, among the Company, BT and First Interstate of Arizona,
N.A. -- Incorporated by reference to Exhibit 10-D(22) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1991.
10.22 -- Second Amendment to Cash Management Agreement, dated September 1,
1992, among the Company, BT and First Interstate of Arizona,
N.A. -- Incorporated by reference to Exhibit 10-O(3) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
</TABLE>
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<S> <C>
10.23 -- Restructuring Agreement, dated December 1, 1991 between the
Company and Kawasaki -- Incorporated by reference to Exhibit
10-D(24) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
10.24 -- A320 Put Agreement, dated December 1, 1991 between the Company
and Kawasaki -- Incorporated by reference to Exhibit 10-D(25) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
10.25 -- First Amendment to A320 Put Agreement, dated September 1, 1992 --
Incorporated by reference to Exhibit 10-R(2) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.26 -- A320 Put Agreement, dated as of June 25, 1991 between the Company
and GPA Group plc -- Incorporated by reference to Exhibit
10-D(26) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
10.27 -- First Amendment to A320 Put Agreement, dated as of September 1,
1992 -- Incorporated by reference to Exhibit 10-S(2) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
10.28 -- Restructuring Agreement, dated as of June 25, 1991 among GPA
Group plc, GPA Leasing USA I, Inc., GPA Leasing USA Sub I, and
the Company -- Incorporated by reference to Exhibit 10-D(27) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
10.29 -- Official Statement dated August 11, 1986 for the $54,000,000
Variable Rate Airport Facility Revenue Bonds -- Incorporated by
reference to Exhibit 10.e to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1986.
10.30 -- Airport Use Agreement dated July 1, 1989 (the "Airport Use
Agreement") among the City of Phoenix, The Industrial Development
Authority of the City of Phoenix, Arizona and the Company --
Incorporated by reference to Exhibit 10-D(9) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1989.
10.31 -- First Amendment dated August 1, 1990 to Airport Use Agreement --
Incorporated by reference to Exhibit 10-(D)(9) to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
1990.
10.32 -- Revolving Loan Agreement dated April 17, 1990, by and among the
Company, the Bank signatories thereto, and Bank of America
National Trust and Savings Association, as Agent for the Banks
(the "Revolving Loan Agreement") -- Incorporated by reference to
Exhibit 10-1 to the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 1990.
10.33 -- First Amendment dated April 17, 1990 to Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(10) to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1990.
10.34 -- Second Amendment dated September 28, 1990 to the Revolving Loan
Agreement -- Incorporated by reference to Exhibit 10-(D)(11) to
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1990.
10.35 -- Third Amendment dated as of January 14, 1991 to the Revolving
Loan Agreement -- Incorporated by reference to Exhibit 10-(D)(13)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1990.
10.36 -- Spares Credit Agreement, dated as of September 28, 1990, between
the Company and IAE -- Incorporated by reference to Exhibit
10-(D)(4) to the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1990.
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<S> <C>
10.37 -- Master Credit Modification Agreement dated as of October 1, 1992,
among the Company, IAE International Aero Engines AG, Intlaero
(Phoenix A320) Inc., Intlaero (Phoenix B737) Inc., CAE
Electronics Ltd., and Hughes Rediffusion Simulation
Limited -- Incorporated by reference to Exhibit 10-L to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
10.38 -- Credit Agreement, dated as of September 28, 1990 between the
Company and IAE -- Incorporated by reference to Exhibit 10-(D)(5)
to the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1990.
10.39 -- Amendment No. 1 to the Credit Agreement, dated March 1, 1991 --
Incorporated by reference to Exhibit 10-(M)(2) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.40 -- Amendment No. 2 to the Credit Agreement, dated May 15, 1991 --
Incorporated by reference to Exhibit 10-(M)(3) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.41 -- Amendment No. 3 to the Credit Agreement, dated October 1, 1992 --
Incorporated by reference to Exhibit 10-(M)(4) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.42 -- Form of Third Amended and Restated Credit Agreement dated
September 30, 1993, among the Company, various lenders, and BT
Commercial Corp. as Administrative Agent (without exhibits) --
Incorporated by reference to Exhibit 10-(N)(1) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
10.43 -- Form of Amended and Restated Management Letter Agreement, dated
as of September 30, 1993 from the Company to the
Lenders -- Incorporated by reference to Exhibit 10-N(2) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1993.
10.44 -- Form of Amendment to Amended and Restated Management Letter
Agreement; Consent to Amendment of By-laws dated February 8, 1994
from the Company to the Lenders -- Incorporated by reference to
Exhibit 10-N(3) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993.
10.45 -- Fourth Amended and Restated Credit Agreement dated June 30,
1994 -- Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1994.
10.46 -- Key Employee Protection Agreement dated as of June 27, 1994
between America West Airlines, Inc. and William A.
Franke -- Incorporated by reference to the Company's Registration
Statement on Form S-1 (No. 54243), as amended.
10.47 -- Management Rights Agreement dated August 25, 1994 between TPG
Partners L.P., TPG GenPar, L.P. and America West Airlines,
Inc. -- Incorporated by reference to the Company's Registration
Statement on Form S-1 (No. 54243), as amended.
10.48 -- V2500 Support Contract dated December 23, 1994 between America
West Airlines, Inc. and International Aero Engineers, as
amended -- Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
10.49 -- Form of America West Airlines, Inc. 1994 Incentive Equity Plan --
Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<S> <C>
10.50 -- Employment Agreement dated as of December 1, 1994 between America
West Airlines, Inc. and William A. Franke -- Incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
10.51 -- Employment Agreement dated as of December 1, 1994 between America
West Airlines, Inc. and A. Maurice Myers, as
amended -- Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
11.1 -- Calculation of Earnings Per Share
12.1 -- Statement re: computation of ratio of earnings to fixed charges.
23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1
above).
*23.2 -- Consent of KPMG Peat Marwick LLP (independent auditors).
24.1 -- Power of Attorney (included on the signature pages of this
Registration Statement).
*25.1 -- Statement of Eligibility on Form T-1 of the Trustee under the New
Note Indenture.
*99.1 -- Form of Letter of Transmittal
</TABLE>
---------------
* Filed herewith.
<PAGE> 1
Exhibit 4.1
================================================================================
AMERICA WEST AIRLINES, INC.,
AND
AMERICAN BANK NATIONAL ASSOCIATION,
TRUSTEE
INDENTURE
DATED AS OF AUGUST __, 1995
_________________________________
$75,000,000
10 3/4% SENIOR UNSECURED NOTES DUE SEPTEMBER 1, 2005
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET(1)
Provisions of Trust Indenture Act of 1939 and Indenture to be dated as
of August __, 1995 between AMERICA WEST AIRLINES, INC. and AMERICAN BANK
NATIONAL ASSOCIATION, Trustee:
<TABLE>
<CAPTION>
SECTION OF THE ACT SECTION OF INDENTURE
------------------ --------------------
<S> <C>
310(a)(1) and (2)................................... 6.9 and 6.10(b)
310(b).............................................. 6.8, 6.10(a), (b) and (d), 6.11 and 6.12
311(a).............................................. 6.13
312(a).............................................. 4.1 and 4.2
312(b).............................................. 4.2
312(c).............................................. 4.2
313(a).............................................. 4.4
313(c).............................................. 4.4, 5.11, 6.10, 6.11, 8.2 and 12.2
314(a).............................................. 4.3
314(a)(4)........................................... 3.5
314(c)(1) and (2)................................... 11.5
314(c)(3)........................................... Inapplicable
314(e).............................................. 11.5
315(a), (c) and (d)................................. 6.1
315(b).............................................. 5.11
315(e).............................................. 5.12 and 6.10(b)
316(a)(1)........................................... 5.9
316(a) (last sentence).............................. 7.4
316(b).............................................. 5.7
317(a).............................................. 5.2
317(b).............................................. 3.4(a) and (b)
318(a).............................................. 11.7
</TABLE>
________________________
(1) This Cross Reference Sheet is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE ONE -- DEFINITIONS........................................................................... 1
SECTION 1.1 Certain Terms Defined.......................................................... 1
"Acceleration Notice"............................................................... 1
"Adjusted Consolidated Net Income".................................................. 1
"Affiliates"........................................................................ 1
"Alliance Agreements"............................................................... 1
"Applicable Documents".............................................................. 1
"Asset Sale"........................................................................ 1
"Authenticating Agent".............................................................. 2
"Board of Directors"................................................................ 2
"Board Resolution".................................................................. 2
"Business Day"...................................................................... 2
"Capital Stock"..................................................................... 2
"Capitalized Lease Obligation"...................................................... 2
"Cash Equivalents".................................................................. 2
"Change of Control"................................................................. 2
"Closing Date"...................................................................... 2
"Commission"........................................................................ 2
"Commodity Agreement"............................................................... 3
"Common Stock"...................................................................... 3
"Company"........................................................................... 3
"Company Order"..................................................................... 3
"Consolidated" or "consolidated".................................................... 3
"Corporate Trust Office"............................................................ 3
"Currency Agreement"................................................................ 3
"Default"........................................................................... 3
"Depository"........................................................................ 3
"Event of Default".................................................................. 3
"Excess Proceeds Offer"............................................................. 3
"Excess Proceeds Purchase Date"..................................................... 3
"Exchange Act"...................................................................... 3
"GAAP".............................................................................. 3
"Global Security"................................................................... 3
"Guarantee"......................................................................... 3
"Holder", "Holder of Securities", "Securityholder".................................. 4
"Indebtedness"...................................................................... 4
"Indenture"......................................................................... 4
"Interest Payment Date"............................................................. 4
"Interest Rate Agreement"........................................................... 4
"Investment"........................................................................ 4
"Investment Grade".................................................................. 4
"Lien".............................................................................. 5
"Material Subsidiary"............................................................... 5
"Moody's"........................................................................... 5
"Net Cash Proceeds"................................................................. 5
"Officer"........................................................................... 5
"Officers' Certificate"............................................................. 5
"Opinion of Counsel"................................................................ 5
</TABLE>
i
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<TABLE>
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"Outstanding"....................................................................... 5
"Paying Agent"...................................................................... 5
"Payment Restriction"............................................................... 6
"Permitted Holders"................................................................. 6
"Person"............................................................................ 6
"Redeemable Dividends".............................................................. 6
"Redeemable Stock".................................................................. 6
"Redemption Date"................................................................... 6
"Redemption Price".................................................................. 6
"Refinancing Indebtedness".......................................................... 6
"Responsible Officer"............................................................... 7
"Restricted Payment"................................................................ 7
"Returned Investments".............................................................. 7
"S&P"............................................................................... 7
"Securities Act".................................................................... 7
"Security" or "Securities".......................................................... 7
"Stated Maturity"................................................................... 7
"Subsidiary"........................................................................ 7
"TIA"............................................................................... 7
"Trade Payables".................................................................... 7
"Trustee"........................................................................... 7
"U.S. Government Obligations"....................................................... 7
"U.S. Legal Tender"................................................................. 8
"Voting Stock"...................................................................... 8
"Wholly Owned"...................................................................... 8
ARTICLE TWO -- SECURITIES............................................................................ 8
SECTION 2.1 Form and Dating.......................................................... 8
SECTION 2.2 Execution and Authentication............................................. 8
SECTION 2.3 Certificate of Authentication............................................ 9
SECTION 2.4 Payments of Interest..................................................... 9
SECTION 2.5 Registration, Transfer and Exchange...................................... 9
SECTION 2.6 Mutilated, Defaced, Destroyed, Lost and Stolen Securities................ 11
SECTION 2.7 Cancellation of Securities; Destruction Thereof.......................... 11
SECTION 2.8 Temporary Securities..................................................... 11
SECTION 2.9 Currency and Manner of Payments in Respect of Securities................. 12
SECTION 2.10 CUSIP Number............................................................. 12
ARTICLE THREE -- REDEMPTIONS......................................................................... 12
SECTION 3.1 Notices to Trustee....................................................... 12
SECTION 3.2 Selection of Securities to be Redeemed................................... 12
SECTION 3.3 Notice of Redemption..................................................... 12
SECTION 3.4 Effect of Notice of Redemption........................................... 13
SECTION 3.5 Deposit of Redemption Price.............................................. 13
SECTION 3.6 Securities Redeemed in Part.............................................. 13
SECTION 3.7 Optional Redemption...................................................... 13
ARTICLE FOUR -- COVENANTS OF THE COMPANY............................................................. 14
SECTION 4.1 Payment of Principal and Interest........................................ 14
SECTION 4.2 Offices for Payments, etc................................................ 14
</TABLE>
ii
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<TABLE>
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SECTION 4.3 Appointment to Fill a Vacancy in Office of Trustee....................... 14
SECTION 4.4 Paying Agents............................................................ 14
SECTION 4.5 Reports and Information.................................................. 15
SECTION 4.6 Corporate Existence...................................................... 15
SECTION 4.7 Payment of Taxes and Other Claims........................................ 16
SECTION 4.8 Maintenance of Properties................................................ 16
SECTION 4.9 Maintenance of Insurance................................................. 16
SECTION 4.10 Compliance with Laws..................................................... 16
SECTION 4.11 Change of Control........................................................ 16
SECTION 4.12 Limitation on Issuances and Dispositions of Capital Stock of
Subsidiaries............................................................. 17
SECTION 4.13 Limitation on Restricted Payments........................................ 17
SECTION 4.14 Limitation on Transactions with Affiliates............................... 19
SECTION 4.15 Limitation on Asset Sales................................................ 19
SECTION 4.16 Limitation on Payment Restrictions Affecting Subsidiaries................ 21
SECTION 4.17 [INTENTIONALLY OMITTED].................................................. 21
SECTION 4.18 Limitation on Investments................................................ 21
SECTION 4.19 Waiver of Stay, Extension or Usury Laws.................................. 21
ARTICLE FIVE -- SECURITYHOLDERS LISTS AND
REPORTS BY COMPANY AND THE TRUSTEE................................................... 22
SECTION 5.1 The Company to Furnish Trustee Information as to Names
and Addresses of Securityholders......................................... 22
SECTION 5.2 Disclosure of Names and Addresses of Securityholders..................... 22
SECTION 5.3 Reports by the Trustee................................................... 22
ARTICLE SIX -- CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER......................................... 22
SECTION 6.1 Merger or Consolidation.................................................. 22
SECTION 6.2 Successor Corporation Substituted........................................ 23
ARTICLE SEVEN -- REMEDIES OF THE TRUSTEE AND
SECURITYHOLDERS ON EVENT OF DEFAULT................................................. 23
SECTION 7.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default.... 23
SECTION 7.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt............ 25
SECTION 7.3 Application of Proceeds.................................................. 26
SECTION 7.4 Suits for Enforcement.................................................... 27
SECTION 7.5 Restoration of Rights on Abandonment of Proceedings...................... 27
SECTION 7.6 Limitations on Suits by Securityholders.................................. 27
SECTION 7.7 Unconditional Right of Securityholders to Institute Certain Suits........ 27
SECTION 7.8 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default........................................................ 28
SECTION 7.9 Control by Holders of Securities......................................... 28
SECTION 7.10 Waiver of Past Defaults.................................................. 28
SECTION 7.11 Trustees to Give Notice of Default, But May Withhold in
Certain Circumstances.................................................... 29
SECTION 7.12 Right of Court to Require Filing of Undertaking to Pay Costs............. 29
</TABLE>
iii
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<TABLE>
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ARTICLE EIGHT -- CONCERNING THE TRUSTEE.............................................................. 29
SECTION 8.1 Duties and Responsibilities of the Trustee; During Default;
Prior to Default......................................................... 29
SECTION 8.2 Certain Rights of the Trustee............................................ 30
SECTION 8.3 Trustee Not Responsible for Recitals, Disposition of Securities or
Application of Proceeds Thereof.......................................... 31
SECTION 8.4 Trustee and Agents May Hold Securities; Collections, etc................. 31
SECTION 8.5 Monies Held by Trustee................................................... 31
SECTION 8.6 Compensation and Indemnification of Trustee and Its Prior Claim.......... 31
SECTION 8.7 Right of Trustee to Rely on Officers' Certificate, etc................... 31
SECTION 8.8 Persons Eligible for Appointment as Trustee.............................. 31
SECTION 8.9 Resignation and Removal; Appointment of Successor Trustee................ 32
SECTION 8.10 Acceptance of Appointment by Successor Trustee........................... 33
SECTION 8.11 Merger, Conversion, Consolidation or Succession to Business of Trustee... 33
SECTION 8.12 Preferential Collection of Claims Against the Company.................... 33
SECTION 8.13 Appointment of Authenticating Agent...................................... 33
ARTICLE NINE -- CONCERNING THE SECURITYHOLDERS....................................................... 34
SECTION 9.1 Evidence of Action Taken by Securityholders.............................. 34
SECTION 9.2 Proof of Execution of Instruments and of Holding of Securities........... 34
SECTION 9.3 Holders to be Treated as Owners.......................................... 35
SECTION 9.4 Securities Owned by the Company Deemed Not Outstanding................... 35
SECTION 9.5 Right of Revocation of Action Taken...................................... 35
ARTICLE TEN -- AMENDMENTS............................................................................ 35
SECTION 10.1 Amendments and Supplements Permitted Without Consent of Holders........... 35
SECTION 10.2 Amendments and Supplements Requiring Consent of Holders................... 36
SECTION 10.3 Compliance with TIA....................................................... 37
SECTION 10.4 Revocation and Effect of Consents......................................... 37
SECTION 10.5 Notation on or Exchange of Securities..................................... 37
SECTION 10.6 Trustee Protected......................................................... 37
ARTICLE ELEVEN -- SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONIES................................................................... 38
SECTION 11.1 Satisfaction and Discharge of Indenture................................... 38
SECTION 11.2 Application by Trustee of Funds Deposited for Payment of Securities;
Other Miscellaneous Provisions............................................ 41
SECTION 11.3 Repayment of Monies Held by Paying Agent.................................. 41
SECTION 11.4 Return of Monies Held by Trustee and Paying Agent
Unclaimed for Two Years................................................... 41
SECTION 11.5 Indemnity for U.S. Government Obligations................................. 41
ARTICLE TWELVE -- MISCELLANEOUS PROVISIONS........................................................... 41
SECTION 12.1 Incorporators, Stockholders, Officers and Directors of the Company
Exempt from Individual Liability.......................................... 41
SECTION 12.2 Provisions of Indenture for the Sole Benefit of Parties and
Holders of Securities..................................................... 41
SECTION 12.3 Successors and Assigns of the Company Bound by Indenture.................. 42
</TABLE>
iv
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<TABLE>
<S> <C>
SECTION 12.4 Notices.................................................................. 42
SECTION 12.5 Officers' Certificates and Opinions of Counsel;
Statements to be Contained Therein....................................... 42
SECTION 12.6 Payments Due on Saturdays, Sundays and Holidays.......................... 43
SECTION 12.7 Conflict of Any Provision of Indenture with Trust Indenture
Act of 1939.............................................................. 43
SECTION 12.8 New York Law to Govern................................................... 43
SECTION 12.9 Counterparts............................................................. 43
SECTION 12.10 Effect of Headings....................................................... 43
</TABLE>
v
<PAGE> 8
INDENTURE, dated as of August __, 1995, between America West Airlines,
Inc., a Delaware corporation (the "Company"), having its principal office at
4000 East Sky Harbor Blvd., Phoenix, Arizona 85034, and American Bank National
Association (the "Trustee"), having its principal office at 101 East 5th
Street, St. Paul, Minnesota 55101.
Each party hereto agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Company's 10 3/4%
Senior Unsecured Notes due September 1, 2005.
ARTICLE ONE -- DEFINITIONS
SECTION 1.1 Certain Terms Defined. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Indenture shall have the respective meanings specified
in this Section. All other terms used in this Indenture that are defined in the
TIA or the definitions of which in the Securities Act are referred to in the
TIA, including terms defined therein by reference to the Securities Act (except
as herein otherwise expressly provided or unless the context otherwise
requires), shall have the meanings assigned to such terms in the TIA and in the
Securities Act as in force at the date of this Indenture. All accounting terms
used herein and not expressly defined shall have the meanings assigned to such
terms in accordance with GAAP. The words "herein" "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision. The terms defined in this
Article have the meanings assigned to them in this Article and include the
plural as well as the singular.
"Acceleration Notice" shall have the meaning set forth in Section 7.1.
"Adjusted Consolidated Net Income" means, for any Person for any
period, the aggregate net income (or loss) of such Person and its consolidated
Subsidiaries for such period determined in accordance with GAAP; provided that
the following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication): (i) the net income (or loss) of any Person (other
than a Subsidiary of such first Person) in which any other Person (other than
such first Person or any of its Subsidiaries) has a joint or shared interest,
except to the extent of the amount of cash dividends or other distributions
actually paid to, and received by, such first Person or any of its Subsidiaries
during such period out of funds legally available therefor, (ii) the net income
(or loss) of any Person accrued prior to the date it becomes a Subsidiary of
such first Person or any of its Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by such first Person or any of
its Subsidiaries, (iii) the net income (or loss) of any Subsidiary of such
first Person which Subsidiary is subject to a Payment Restriction, except (A)
such exclusion shall not apply to the extent of the amount of cash dividends or
other distributions actually paid to, and received by, such first Person or any
of its Subsidiaries during such period from such Subsidiary in compliance with
such Payment Restriction out of funds legally available therefor and (B) such
exclusion shall apply only while such Payment Restriction is in effect, and
upon the elimination or reduction of such Payment Restriction, the previously
excluded net income (or loss) shall be added back retroactively; (iv) any gains
or losses (on an after-tax basis) attributable to Asset Sales; and (v) all
extraordinary gains and extraordinary losses.
"Affiliates" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Alliance Agreements" means those certain business alliance agreements
among the Company, Continental Airlines, Inc. and Mesa Airlines, Inc. that
include, but are not limited to, code-sharing, frequent flyer, ground handling
and marketing agreements.
"Applicable Documents" means, collectively, this Indenture and the
Securities.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation, exchange of assets or sale-leaseback
transactions), in one transaction or a series of related transactions, by the
Company or any of its Subsidiaries to any Person other than the Company or any
of its Subsidiaries of (i) all or any of the Capital Stock of any Subsidiary of
the Company, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Subsidiaries or (iii)
any other property and assets of the Company or any of its Subsidiaries outside
the ordinary course of business of the Company or such Subsidiary and, in each
case, that is not governed by the provisions
<PAGE> 9
of Article Six of this Indenture; provided that none of (A) sales or other
dispositions of inventory, receivables and other current assets, (B) sale or
other dispositions of surplus equipment, spare parts, expendable inventories,
furniture or fixtures in an aggregate amount not to exceed $10,000,000 in any
fiscal year of the Company, (C) sale leasebacks of aircraft and engines,
passenger loading bridges or other flight or ground equipment, flight
simulators or the Company's reservation facility located at 222 South Mill
Avenue, Tempe, Arizona or (D) $20,000,000 of other sales in any fiscal year of
the Company shall be included within the meaning of "Asset Sale".
"Authenticating Agent" shall have the meaning set forth in Section
8.13.
"Board of Directors" when used with reference to any Person, means the
Board of Directors of such Person or any committee of such Board duly
authorized, with respect to any particular matter, to exercise the power of the
Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person, as certified by the
Secretary or an Assistant Secretary of such Person.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York, New York, the City of Phoenix,
Arizona or the city of the Corporate Trust Office of the Trustee, are
authorized or required by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital stock, whether now outstanding
or issued after the date of this Indenture, including, without limitation, all
Common Stock.
"Capitalized Lease Obligation" means, as applied to any Person,
obligations of such Person under any lease of any property (whether real,
personal or mixed) which, in accordance with GAAP, is required to be
capitalized on the balance sheet of such Person, and the amount of Indebtedness
represented by such obligations shall be the capitalized amount of such
obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) U.S. Government Obligations, (ii)
commercial paper, (iii) time deposits, certificates of deposit and banker's
acceptances, (iv) repurchase agreements that are secured by a perfected
security interest in U.S. Government Obligations, and (v) money market funds
investing solely in one or both of the types of securities described in clauses
(i) and (ii) above.
"Change of Control" means (i) the acquisition at any time by any
Person (other than one or more Permitted Holders), of "beneficial ownership"
(within the meaning of Section 13(d) under the Exchange Act and the rules and
regulations promulgated thereunder) in excess of 50% of the total voting power
of the Voting Stock of the Company; (ii) the sale, lease, transfer or other
disposition, of all or substantially all of the assets of the Company to any
Person (other than one or more Permitted Holders) as an entirety or
substantially as an entirety in one transaction or a series of related
transactions; (iii) the merger or consolidation of the Company, with or into
another corporation, or the merger of another corporation into the Company, or
any other transaction, with the effect that a Person (other than one or more
Permitted Holders), has "beneficial ownership" (within the meaning of Section
13(d) under the Exchange Act and the rules and regulations promulgated
thereunder) in excess of 50% of the Voting Stock of the Company, or (if the
Company is not the surviving corporation in such transaction) such other
corporation, as the case may be (including indirect ownership through another
Person other than one or more Permitted Holders); or (iv) the liquidation or
dissolution of the Company. For purposes of this definition, the term Person
includes a "person" within the meaning of Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder.
"Closing Date" means the date on which the Securities are originally
issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, or if at any time after the execution and delivery of
this Indenture such Commission is not existing and performing the duties now
assigned to it under the TIA, then the body performing such duties on such
date.
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"Commodity Agreement" means any agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in the
prices of commodities used by the Company or any of its Subsidiaries in the
ordinary course of its business.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the date of this Indenture, including, without limitation, all
series and classes of such common stock.
"Company" means America West Airlines, Inc., a Delaware corporation
and, subject to Article Six hereof, its successors and assigns.
"Company Order" means a written statement, request or order of the
Company signed in its name by the Chairman, the President or a Vice President
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company and delivered to the Trustee.
"Consolidated" or "consolidated," when used with reference to any
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with GAAP, after elimination of
intercompany items.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located at 101 East 5th Street, St. Paul, Minnesota 55101.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
the Company or any of its Subsidiaries against fluctuations in currency values
or under which the Company or any of its Subsidiaries is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in the form
of one or more Global Securities, each Person designated as Depository by the
Company until a successor Depository shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Depository" shall mean
or include each Person who is then a Depository hereunder.
"Event of Default" means any event or condition specified as such in
Section 7.1.
"Excess Proceeds Offer" shall have the meaning set forth in Section
4.15.
"Excess Proceeds Purchase Date" shall have the meaning set forth in
Section 4.15.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of this Indenture, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board.
"Global Security" means a Security evidencing all or a part of the
Securities, issued to a Depository or its nominee in accordance with Section
2.2, and bearing the legend prescribed in Section 2.2.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation,
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<PAGE> 11
direct, or indirect, contingent or otherwise, of such first Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Holder", "Holder of Securities", "Securityholder" or other similar
terms means the person in whose name a Security is registered in the security
register kept by the Company for that purpose in accordance with the terms
hereof.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all Capitalized Lease Obligations of
such Person, (vi) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of
(A) the fair market value of such asset at such date of determination and (B)
the stated principal amount of such Indebtedness, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person, and (viii) to the extent not otherwise included in
this definition, obligations under Currency Agreements, Interest Rate
Agreements and Commodity Agreements. The amount of Indebtedness of any Person
at any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence
of the contingency giving rise to the obligation, of any contingent obligations
at such date; provided that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.
"Indenture" means this instrument as originally executed and delivered
or, if amended or supplemented as herein provided, as so amended or
supplemented or both, and shall include the form and terms of the Securities as
set forth herein.
"Interest Payment Date" means the first day of each March and
September, commencing March 1, 1996.
"Interest Rate Agreement" means any interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement designed to protect the Company or any
of its Subsidiaries against fluctuations in interest rates or under which the
Company or any of its Subsidiaries is a party or a beneficiary on the date of
this Indenture or becomes a party or a beneficiary thereafter.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business consistent with past practices that are recorded as accounts
receivable on the balance sheet of such Person or its Subsidiaries) or other
extension of credit or capital contribution by such Person to any other Person
(by means of any transfer of cash or other property to others or any payment
for property or services for the account or use of others; provided, that any
transfer of aircraft to a limited partnership or other entity in connection
with the transaction in which the aircraft are leased to the Company shall not
be an Investment), or any purchase or acquisition by such person of Capital
Stock, bonds, notes, debentures or other similar instruments issued by any
other Person.
"Investment Grade" means a rating of BBB- or higher by S&P or Baa3 or
higher by Moody's or the equivalent of such ratings by S&P or Moody's. In the
event that the Company shall select any other rating agency, the equivalent of
such ratings by such rating agency shall be used.
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<PAGE> 12
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof, any sale
with recourse against the seller or any Affiliate of the seller, or any
agreement to give any security interest); provided, that in no event shall a
true operating lease be deemed to constitute a Lien hereunder.
"Material Subsidiary" means each Subsidiary that is either (a) a
"significant subsidiary" as defined in Rule 1-02(v) of Regulation S-X under the
Securities Act and the Exchange Act (as such regulation is in effect on the
date hereof) or (b) material to the financial condition or results of
operations of the Company and its Subsidiaries taken as a whole.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or Cash Equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Subsidiary
of the Company) and proceeds from the conversion of other property received
when converted to cash or Cash Equivalents, net of (i) brokerage commissions
and other fees and expenses (including fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale without regard to the consolidated
results of operations of the Company and its Subsidiaries, taken as a whole,
(iii) payments made to repay Indebtedness or any other obligation outstanding
at the time of such Asset Sale that either (A) is secured by a Lien on the
property or assets sold or (B) is required by its own terms to be paid as a
result of such Asset Sale, and (iv) appropriate amounts to be provided by the
Company or any Subsidiary of the Company as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP.
"Officer" means with respect to any Person, the Chairman, the
President, the Secretary, any Assistant Secretary, the Chief Financial Officer,
the Controller, the Treasurer, the Assistant Treasurer or any Vice President of
such Person.
"Officers' Certificate" means a certificate signed by the Chairman,
the President or a Vice President of the Company and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who may
be either internal or outside counsel for the Company.
"Outstanding" when used with reference to Securities, subject to the
provisions of Section 9.4 means, as of any particular time, all Securities
authenticated and delivered by the Trustee under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or
redemption of which monies or U.S. Government Obligations (as provided
for in Section 11.1) in the necessary amount shall have been deposited
in trust with the Trustee or with any Paying Agent (other than the
Company) or shall have been set aside, segregated and held in trust by
the Company for the Holders of such Securities (if the Company shall
act as Paying Agent); provided, however, that, if such Securities, or
portions thereof, are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as herein provided, or
provision satisfactory to the Trustee shall have been made for giving
such notice; and
(c) Securities that shall have been paid or in
substitution for which other Securities shall have been authenticated
and delivered pursuant to the terms of Section 2.6.
"Paying Agent" means any Person (which may include the Company)
authorized by the Company to pay the principal of, premium (if any) or interest
on the Securities on behalf of the Company.
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<PAGE> 13
"Payment Restriction" means, with respect to a Subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such Subsidiary to (a) pay dividends or make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to
such Person or any other Subsidiary of such Person, (b) make loans or advances
to such Person or any other Subsidiary of such Person, or (c) transfer any of
its property or assets to such Person or any other Subsidiary of such Person,
or (ii) such Person or any other Subsidiary of such Person to receive or retain
any such (a) dividends, distributions or payments, (b) loans or advances, or
(c) property or assets.
"Permitted Holders" means (i) TPG Partners, L.P., (ii) Continental
Airlines, Inc., (iii) Mesa Airlines, Inc., (iv) funds or accounts managed or
advised by Fidelity Management Trust Company and its Affiliates, and their
respective successors and Affiliates.
"Person" means an individual, a corporation, a partnership, an
association, a business trust, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Redeemable Dividends" means, for any dividend payable with regard to
Redeemable Stock, the quotient of (i) the aggregate amount of the dividend
divided by (ii) the difference between one and the maximum statutory federal
and state income tax rate (expressed as a decimal number between one and zero)
then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise (i) is required to be redeemed prior to
the Stated Maturity of the Securities, (ii) may be required to be redeemed at
the option of the holder of such class or series of Capital Stock at any time
prior to the Stated Maturity of the Securities or (iii) is convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) above or
Indebtedness having a scheduled maturity prior to the Stated Maturity of the
Securities; provided that any Capital Stock that would not constitute
Redeemable Stock but for provisions thereof offering holders thereof the right
to require the Company to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" occurring prior to the Stated Maturity of the
Securities shall not constitute Redeemable Stock if the asset sale provisions
contained in such Capital Stock specifically provide that in respect of any
particular asset sale proceeds, the Company will not repurchase or redeem any
such Capital Stock pursuant to such provisions prior to the Company's
repurchase of such Securities as are required to be repurchased from Holders
accepting an Excess Proceeds Offer pursuant to the provisions of Section 4.15.
"Redemption Date" when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"Redemption Price" when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Securities.
"Refinancing Indebtedness" means any Indebtedness of the Company or
any Subsidiary issued in exchange for, or the net proceeds of which are applied
entirely to substantially concurrently repay, refinance, refund or replace,
outstanding Indebtedness of the Company or any of its Subsidiaries (the
"Refinanced Indebtedness"), to the extent such Indebtedness:
(a) is issued in a principal amount (or if such
Indebtedness is issued at an original issue discount, is issued at an
original issue price) not exceeding the outstanding principal amount
(or, if such Refinanced Indebtedness was issued at an original issue
discount, not exceeding the outstanding accreted principal amount) of
such Refinanced Indebtedness, and
(b) if the Refinanced Indebtedness is Indebtedness of the
Company and ranks by contract, by its terms or otherwise junior in
right of payment to the Securities, (i) does not have a final
scheduled maturity and is not subject to any principal payments,
including but not limited to payments upon mandatory or optional
redemption, prior to the dates of analogous payments under the
Refinanced Indebtedness, and (ii) has subordination provisions
effective to subordinate such Indebtedness to the Securities at least
to the extent that such Refinanced Indebtedness is subordinated to the
Securities, and
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<PAGE> 14
(c) if the Refinanced Indebtedness is Indebtedness of the
Company which is pari passu in right of payment with the Securities,
(i) is pari passu or subordinated in right of payment to the
Securities, (ii) does not have a final scheduled maturity and is not
subject to any principal payments, including but not limited to,
payments upon mandatory or optional redemption, prior to the final
scheduled maturity date of the Refinanced Indebtedness, and (iii) is
not secured by any Lien on any property of the Company or any
Subsidiary in addition to Liens securing the Refinanced Indebtedness.
"Responsible Officer" when used with respect to the Trustee means the
chairman of the board of directors, any vice chairman of the board of
directors, the chairman of the trust committee, the chairman of the executive
committee, any vice chairman of the executive committee, the president, any
vice president (whether or not designated by numbers or words added before or
after the title "vice president"), the secretary, the treasurer, any trust
officer, any assistant trust officer, any assistant secretary, any assistant
treasurer, or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Payment" shall have the meaning set forth in Section 4.13.
"Returned Investments" mean, with respect to all Investments made
pursuant to clause (xi) of Section 4.18 of this Indenture, the aggregate amount
of all payments made in respect of such Investments, other than interest,
dividends or other distributions not in the nature of a return or repurchase of
capital or a repayment of principal, that have been paid or returned, without
restriction, in cash to the Company and its Subsidiaries.
"S&P" means Standard & Poor's Corporation and its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" or "Securities" means the Company's 10 3/4% Senior
Unsecured Notes due September 1, 2005 issued under this Indenture.
"Stated Maturity" means, (i) with respect to the principal of the
Securities, September 1, 2005 and (ii) with respect to any scheduled
installment of interest on any Security, the date specified in such Security as
the fixed date on which such installment is due and payable.
"Subsidiary" means any corporation more than 50% of the outstanding
shares of Voting Stock of which at the time of determination are owned by the
Company directly or indirectly through one or more Subsidiaries, or both.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries and
arising in the ordinary course of business in connection with the acquisition
of goods or services.
"Trustee" means the Person identified as the "Trustee" in the first
paragraph hereof and, subject to the provisions of Article Eight, shall also
include any successor trustee. "Trustee" shall also mean or include each Person
who is then a trustee hereunder.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof at any time
prior to the Stated Maturity of the principal of the Securities, and shall also
include a depository receipt issued by a bank or trust company as custodian
with respect to any such U.S. Government Obligation or a specific payment of
interest on or principal of any such U.S. Government Obligation held by such
custodian for the account
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<PAGE> 15
of the holder of a depository receipt; provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of interest on or principal of the U.S. Government Obligation evidenced
by such depository receipt.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to vote for the election of directors, managers or trustees of
any Person (irrespective of whether or not at the time stock of any class or
classes will have or might have voting power by the reason of the happening of
any contingency).
"Wholly Owned" means a Subsidiary all of the Capital Stock or other
similar equity ownership interests of which (other than any director's
qualifying shares or Investments by foreign nationals mandated by applicable
law) is owned directly or indirectly by the Company.
ARTICLE TWO -- SECURITIES
SECTION 2.1 Form and Dating. The Securities and the related
Trustee's certificate of authentication shall be substantially in the
respective forms set forth in Exhibit A, which exhibit is a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule or usage. Whether or not issued on the Closing
Date, each Security shall be dated and bear interest from the Closing Date,
except as provided in Sections 2.5 and 2.6. The Securities shall be issuable
only in registered form in denominations of $1,000 and integral multiples
thereof.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and agree to be bound thereby.
SECTION 2.2 Execution and Authentication. One Officer of the Company
shall sign each Security for the Company by manual or facsimile signature,
which signature shall be attested to by another Officer of the Company (each of
which Officers shall have been duly authorized by all requisite corporate
actions). If an Officer whose signature is on a Security no longer holds that
office at the time any Securities are authenticated, such Securities shall
nevertheless be valid. The Company's seal shall be reproduced on each Security.
The seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Securities.
Typographical and other minor errors or defects in any such reproduction of the
seal or any such signature shall not affect the validity or enforceability of
any Security that has been duly authenticated and delivered by the Trustee.
With respect to the sale and issuance of the Securities, the Trustee
shall, upon receipt of a written order of the Company in the form of an
Officers' Certificate, authenticate Securities for issuance on the Closing Date
in the aggregate principal amount of $75,000,000. The maximum aggregate
principal amount of the Securities which may be issued and outstanding
hereunder shall be $75,000,000.
If any Securities are to be issued in the form of one or more Global
Securities, then the Company shall execute and the Trustee shall authenticate
and deliver one or more Global Securities, that (i) shall be in denominations
of $1,000 or integral multiples thereof, (ii) shall be registered in the name
of the Depository for such Global Security or Securities or the nominee of such
Depository, (iii) shall be delivered by the Trustee to such Depository or
pursuant to such Depository's instructions and (iv) shall bear a legend
substantially to the following effect:
Unless and until it is exchanged in whole or in part for Securities in
definitive registered form, this Security may not be transferred
except as a whole by the Depository to the nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee
of the
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<PAGE> 16
Depository or by the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
Each Depository must, at the time of its designation and at all times
while it serves as Depository, be a clearing agency registered under the
Exchange Act and any other applicable statute or regulation.
SECTION 2.3 Certificate of Authentication. Only such Securities as
shall bear thereon a certificate of authentication substantially in the form
set forth in Exhibit A hereto, executed (subject to Section 8.13) by the
Trustee by the manual signature of one of its authorized officers, shall be
entitled to the benefits of this Indenture or be valid or obligatory for any
purpose. The execution of such certificate by the Trustee upon any Security
executed by the Company shall be conclusive evidence, and the only evidence,
that the Security so authenticated has been duly authenticated and delivered
hereunder and that the Holder of such Security is entitled to the benefits of
this Indenture.
SECTION 2.4 Payments of Interest. The Securities shall bear interest
from the Closing Date, and such interest shall be payable on the Interest
Payment Dates.
The person in whose name any Security is registered at the close of
business on any record date applicable to such Security with respect to any
Interest Payment Date for such Security shall be entitled to receive the
interest, if any, payable on such Interest Payment Date notwithstanding any
transfer or exchange of such Security subsequent to the record date and prior
to such Interest Payment Date, except if and to the extent the Company shall
default in the payment of the interest due on such Interest Payment Date, in
which case such defaulted interest shall be paid to the persons in whose names
Outstanding Securities are registered at the close of business on a subsequent
record date (which shall be not less then five Business Days prior to the date
of payment of such defaulted interest) established by notice given by mail by
or on behalf of the Company to the Holders of Securities not less than 15 days
preceding such subsequent record date.
Subject to the foregoing provisions of this Section 2.4, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu
of any other Security shall carry the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Security.
SECTION 2.5 Registration, Transfer and Exchange. The Company will
keep at each office or agency to be maintained for the purpose as provided in
Section 4.2 a register or registers in which, subject to such reasonable
regulations as it may prescribe, it will provide for the registration of
Securities and the registration of transfer of Securities. Such register shall
be in written form in the English language or in any other form capable of
being converted into such form within a reasonable time. At all reasonable
times such register or registers shall be open for inspection by the Trustee.
Upon due presentation for registration of transfer of any Security at
any such office or agency to be maintained for the purpose as provided in
Section 4.2, the Company shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Security or
Securities.
At the option of the Holder thereof, Securities (other than a Global
Security, except as set forth below) may be exchanged for a Security or
Securities having authorized denominations in an equal aggregate principal
amount, upon surrender of such Securities to be exchanged at the agency of the
Company that shall be maintained for such purpose in accordance with Section
4.2 and upon payment, if the Company shall so require, of the amounts
hereinafter provided.
All Securities presented for registration of transfer, exchange,
redemption or payment shall (if so required by the Company or the Trustee) be
duly endorsed by, or be accompanied by a written instrument or instruments of
transfer, in form satisfactory to the Company and the Trustee and duly executed
by the Holder or his attorney duly authorized in writing.
The Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any
exchange or registration of transfer of Securities. No service charge shall be
made for any such transaction.
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The Company shall not be required to exchange or register a transfer
of (a) any Securities for a period of 15 days next preceding the first mailing
of notice of redemption of Securities to be redeemed or (b) any Securities
selected, called or being called for redemption, in whole or in part, except,
in the case of any Security to be redeemed in part, the portion thereof not so
to be redeemed.
Notwithstanding any other provision of this Section 2.5, unless and
until it is exchanged in whole or in part for Securities in non-global form, a
Global Security representing all or a portion of the Securities may not be
transferred except as a whole by the Depository to a nominee of such Depository
or by a nominee of such Depository to such Depository or another nominee of
such Depository or by such Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
If at any time the Depository for any Securities represented by one or
more Global Securities notifies the Company that it is unwilling or unable to
continue as Depository for such Securities or if at any time the Depository for
such Securities shall no longer be eligible under Section 2.2, the Company
shall appoint a successor Depository eligible under Section 2.2 with respect to
such Securities. If a successor Depository eligible under Section 2.2 for such
Securities is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company will
execute, and the Trustee, upon receipt of an Officer's Certificate of the
Company for the authentication and delivery of Securities in non-global form,
will authenticate and deliver Securities in non-global form in exchange for
such Global Security or Securities.
The Company may at any time and in its sole discretion determine that
the Securities issued in the form of one or more Global Securities shall no
longer be represented by a Global Security or Securities. In such event the
Company will execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of Securities in non-global form, will authenticate
and deliver, Securities in non-global form in exchange for such Global Security
or Securities.
Any person having a beneficial interest in a Global Security may upon
request exchange such beneficial interest for Securities in non-global form.
Upon receipt by the Trustee of written instructions (or such other form of
instructions as is customary for the Depository) from the Depository or its
nominee on behalf of any person having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written order or such other form
of instructions as is customary for the Depository or the person designated by
the Depository as having such a beneficial interest containing registration
instructions, then the Trustee will cause, in accordance with the standing
instructions and procedures existing between the Depository and the Trustee,
the aggregate principal amount of the Global Security to be reduced and
following such reduction, the Company will execute and upon receipt of an
authentication order in the form of an Officers' Certificate, the Trustee will
authenticate and deliver Securities in non-global form.
Securities in non-global form issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.5 shall be registered
in such names and in such authorized denominations as the Depository for such
Global Security, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee or an agent of the
Company or the Trustee. The Trustee or such agent shall deliver such Securities
to or as directed by the Person in whose names such Securities are so
registered.
The Securities executed by the Company, and authenticated and
delivered by the Trustee, upon any transfer or exchange contemplated by this
Section 2.5 shall be dated the date of their authentication, shall be in
authorized denominations, shall be in like aggregate principal amount and have
the same Stated Maturity date and interest rate as, and bear interest from the
later of (i) the Closing Date or (ii) the most recent date to which interest
has been paid on, the Securities surrendered upon such transfer or exchange (or
as the portion of any Global Security being exchanged for Securities in
non-global form, as the case may be), and shall bear a number or other
distinguishing symbol not appearing on any Security contemporaneously
Outstanding.
All Securities issued upon any transfer or exchange of Securities
shall be valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
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SECTION 2.6 Mutilated, Defaced, Destroyed, Lost and Stolen
Securities. In case any temporary or definitive Security shall become
mutilated, defaced or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon the written request of any Officer of the
Company, the Trustee shall authenticate and deliver a new Security dated the
date of its authentication, of the same principal amount, Stated Maturity date
and interest rate as, and bearing interest from the later of (i) the Closing
Date or (ii) the most recent date to which interest has been paid on the
mutilated or defaced Security, or the Security so destroyed, lost or stolen,
and bearing a number or other distinguishing symbol not appearing on any
Security contemporaneously Outstanding, in exchange and substitution for the
mutilated or defaced Security, or in lieu of or in substitution for the
Security so destroyed, lost or stolen. In every case the applicant for a
substitute Security shall furnish to the Company and to the Trustee and any
agent of the Company or the Trustee such security or indemnity as may be
required by them to indemnify and defend and to save each of them harmless and,
in every case of destruction, loss or theft, evidence to their satisfaction of
the destruction, loss or theft of such Security and of the ownership thereof
and in the case of mutilation or defacement, shall surrender the Security to
the Trustee or such agent.
Upon the issuance of any substitute Security, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee or its agent) connected therewith. In case any
Security that has matured or is about to mature or has been called for
redemption in full shall become mutilated or defaced or be destroyed, lost or
stolen, the Company may, instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated or defaced Security), if the applicant for such payment shall
furnish to the Company and to the Trustee and any agent of the Company or the
Trustee such security or indemnity as any of them may require to save each of
them harmless, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company and the Trustee and any agent of the Company
or the Trustee evidence to their satisfaction of the destruction, loss or theft
of such Security and of the ownership thereof.
Every substitute Security issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any such Security is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company
whether or not the destroyed, lost or stolen Security shall be at any time
enforceable by anyone and shall be entitled to all the benefits of (but shall
be subject to all the limitations of rights set forth in) this Indenture
equally and proportionately with any and all other Securities duly
authenticated and delivered hereunder. All Securities shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, defaced or destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement
or payment of negotiable instruments or other securities without their
surrender.
SECTION 2.7 Cancellation of Securities; Destruction Thereof.
(a) All Securities surrendered for payment, redemption,
registration of transfer or exchange, if surrendered to the Company or any
agent of the Company or any agent of the Trustee, shall be delivered to the
Trustee for cancellation and, upon receipt thereof by the Trustee, shall be
cancelled by it; and no Securities shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. The Trustee
shall destroy cancelled Securities held by it and deliver a certificate of
destruction to the Company. If the Company or any agent of the Company shall
acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities
unless and until the same are delivered to the Trustee for cancellation.
(b) At such time as all beneficial interests in a Global Security
have either been exchanged for Securities in non-global form, redeemed,
repurchased or cancelled, such Global Security shall be returned to and
cancelled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for Securities in
non-global form, redeemed, repurchased or cancelled, the principal amount of
Securities represented by such Global Security shall be reduced and an
endorsement shall be made on such Global Security by the Trustee to reflect
such reduction.
SECTION 2.8 Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable
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<PAGE> 19
delay, the Company shall prepare and the Trustee, upon receipt of a written
order signed by two Officers of the Company, shall authenticate definitive
Securities in exchange for temporary Securities. Until such exchange, temporary
Securities shall be entitled to the same rights, benefits and privileges as
definitive Securities.
SECTION 2.9 Currency and Manner of Payments in Respect of Securities.
Payment of the principal of and premium (if any) and interest on, any Security
will be made in U.S. Legal Tender.
SECTION 2.10 CUSIP Number. A "CUSIP" number will be printed on the
Securities, and the Trustee shall use the CUSIP number in notices of redemption,
purchase or exchange as a convenience to Holders, provided that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities and that reliance
may be placed only on the other identification numbers printed on the
Securities. The Company will promptly notify the Trustee of any change in the
CUSIP number.
ARTICLE THREE -- REDEMPTIONS
SECTION 3.1 Notices to Trustee. If the Company elects to redeem
Securities pursuant to Section 3.7, it shall furnish to the Trustee, at least
10 but not more than 15 days before notice of any redemption is to be mailed to
Holders (or such shorter time as may be satisfactory to the Trustee), an
Officers' Certificate stating that the Company has elected to redeem Securities
pursuant to Section 3.7, the date notice of redemption is to be mailed to
Holders, the Redemption Date, the aggregate principal amount of Securities to
be redeemed, the Redemption Price for such Securities and the amount of accrued
and unpaid interest on such Securities as of the Redemption Date. If the
Trustee is not the registrar for the Securities, the Company shall,
concurrently with delivery of its notice to the Trustee of a redemption, cause
the registrar for the Securities to deliver to the Trustee a certificate (upon
which the Trustee may rely) setting forth the name of, and the aggregate
principal amount of Securities held by each Holder. The Company will also
provide the Trustee with any additional information that the Trustee reasonably
requests in connection with any redemption.
SECTION 3.2 Selection of Securities to be Redeemed. If less than all
outstanding Securities are to be redeemed, the Company shall select the
outstanding Securities to be redeemed or accepted for payment in compliance
with the requirements of the principal national securities exchange, if any, on
which the Securities are listed or, if the Securities are not listed on a
securities exchange, on a pro rata basis, by lot or by any other method that
the Trustee deems fair and appropriate. If the Company elects to mail notice of
a redemption to Holders, the Trustee shall, at least 5 days prior to the date
notice of redemption is to be mailed, (i) select the Securities to be redeemed
from Securities Outstanding not previously called for redemption, and (ii)
promptly notify the Company of the names of each Holder of Securities selected
for redemption, the principal amount of Securities held by each such Holder and
the principal amount of such Holder's Securities that are to be redeemed. The
Trustee shall select for redemption Securities or portions of Securities in
principal amounts of $1,000 or integral multiples of $1,000; except that if all
of the Securities of a Holder are selected for redemption, the aggregate
principal amount of the Securities held by such Holder, even if not a multiple
of $1,000, may be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Securities called for redemption
also apply to portions of Securities called for redemption.
SECTION 3.3 Notice of Redemption.
(a) At least 30 days but not more than 60 days before any
Redemption Date, the Company shall mail by first class mail to each such
Holder's registered address a notice of redemption to each Holder of Securities
or portions thereof that are to be redeemed. With respect to any redemption of
Securities, the notice shall identify the Securities or portions thereof to be
redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price for
the Securities and the amount of unpaid and accrued interest on such Securities
as of the date of redemption; (3) if any Security is being redeemed in part,
the portion of the principal amount of such Security to be redeemed and that,
after the Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
delivered; (4) the name and address of the Paying Agent; (5) that Securities
called for redemption must be surrendered to the Paying Agent to collect the
Redemption Price for, and any accrued and unpaid interest on, such Securities;
(6) that, unless the Company defaults in making such redemption payment,
interest on Securities called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such Securities
is to receive payment of the Redemption
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<PAGE> 20
Price upon surrender to the Paying Agent of the Securities redeemed; and (7) if
fewer than all the Securities are to be redeemed, the identification of the
particular Securities (or portions thereof) to be redeemed, as well as the
aggregate principal amount of Securities to be redeemed and the aggregate
principal amount of Securities to be outstanding after such partial redemption.
(b) At the Company's request, the Trustee shall (at the Company's
expense) give the notice of any redemption to Holders; provided, however, that
the Company shall deliver to the Trustee, at least 10 days prior to the date
that notice of the redemption is to be mailed to Holders, an Officers'
Certificate that (i) requests the Trustee to give notice of the redemption to
Holders, (ii) sets forth the information to be provided to Holders in the
notice of redemption, as set forth in the preceding paragraph, and (iii) sets
forth the aggregate principal amount of Securities to be redeemed and the
amount of accrued and unpaid interest thereon as of the redemption date. If the
Trustee is not the registrar for the Securities, the Company shall,
concurrently with any such request, cause the registrar for the Securities to
deliver to the Trustee a certificate (upon which the Trustee may rely) setting
forth the name of, the address of, and the aggregate principal amount of
Securities held by, each Holder; provided further that any such Officers'
Certificate may be delivered to the Trustee on a date later than permitted
under this Section 3.3(b) if such later date is acceptable to the Trustee.
SECTION 3.4 Effect of Notice of Redemption. Once notice of
redemption is mailed to the Holders, Securities called for redemption shall
become due and payable on the Redemption Date at the Redemption Price. Upon
surrender to the Trustee or the Paying Agent, the Securities called for
redemption shall be paid at the Redemption Price.
SECTION 3.5 Deposit of Redemption Price.
(a) On or prior to any Redemption Date, the Company shall deposit
with the Paying Agent money sufficient to pay the Redemption Price of, and
accrued interest on, all Securities to be redeemed on that date. After any
Redemption Date, the Trustee or the Paying Agent shall promptly return to the
Company any money that the Company deposited with the Trustee or the Paying
Agent in excess of the amounts necessary to pay the Redemption Price of, and
accrued interest on, all Securities to be redeemed.
(b) If the Company complies with the preceding paragraph, unless
the Company defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue on such Securities on the
applicable Redemption Date, whether or not such Securities are presented for
payment. If a Security is redeemed on or after an interest record date but on
or prior to the related Interest Payment Date, then any accrued and unpaid
interest shall be paid to the Person in whose name such Security was registered
at the close of business on such record date. If any Security called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid principal and interest from the redemption date until such
principal and interest is paid, at the rate of interest provided in the
Securities and Section 4.1.
SECTION 3.6 Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder at the Company's expense a new
Security equal in principal amount to the unredeemed portion of the Security
surrendered. If a Global Security is so surrendered, such new Security so
issued shall be a new Global Security.
SECTION 3.7 Optional Redemption. The Company, at its option on
notice to the Holders as provided herein, may redeem the Securities on and
after September 1, 2000, at any time in whole or from time to time in part, at
a Redemption Price equal to the applicable percentage of the aggregate
principal amount of the Securities so to be redeemed, set forth below, plus
accrued and unpaid interest thereon to the Redemption Date.
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<TABLE>
<CAPTION>
IF REDEEMED DURING THE
12 MONTHS BEGINNING
SEPTEMBER 1 PERCENTAGE
----------- ----------
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.375%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.583%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.792%
2003 and thereafter . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
ARTICLE FOUR -- COVENANTS OF THE COMPANY
SECTION 4.1 Payment of Principal and Interest. The Company covenants
and agrees that it will duly and punctually pay or cause to be paid the
principal of, premium (if any) and interest on, each of the Securities at the
place or places, at the respective times and in the manner provided in such
Securities and in this Indenture. To the extent lawful, the Company shall pay
interest on overdue principal, premium and interest at a rate equal to the then
applicable interest rate on the Securities, compounded semi-annually.
SECTION 4.2 Offices for Payments, etc. So long as any Securities are
authorized for issuance pursuant to this Indenture or are outstanding
hereunder, the Company will maintain in the Borough of Manhattan, the City of
New York, an office or agency where the Securities may be presented for payment
and for exchange and registration of transfer as in this Indenture provided.
Presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee as specified in Section 12.4 hereof.
Presentations and surrenders may also be made at the aforementioned office or
agency in the Borough of Manhattan, the City of New York, the address of which,
from time to time, may be obtained by contacting the Corporate Trust Office of
the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York, for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 4.3 Appointment to Fill a Vacancy in Office of Trustee. The
Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 8.9, a Trustee so that
there shall at all times be a Trustee with respect to the Securities.
SECTION 4.4 Paying Agents. Whenever the Company shall appoint a
Paying Agent other than the Trustee with respect to the Securities, it will
cause such Paying Agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of
this Section 4.4,
(a) that it will hold all sums received by it as such
agent for the payment of the principal of, premium (if any) and
interest on the Securities (whether such sums have been paid to it by
the Company or any other obligor on the Securities) in trust for the
benefit of the Holders of the Securities or of the Trustee,
(b) that it will give the Trustee notice of any failure
by the Company (or by any other obligor on the Securities) to make any
payment of the principal of, premium (if any) or interest on the
Securities when the same shall be due and payable, and
(c) that it will pay any such sums so held in trust by it
to the Trustee upon the Trustee's written request, at any time during
the continuance of the failure referred to in clause (b) above.
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<PAGE> 22
The Company will, on or prior to each due date of the principal of,
premium (if any) or interest on the Securities, deposit with the Paying Agent a
sum sufficient to pay such principal, premium or interest so becoming due, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of any failure to take such action.
If the Company shall act as its own Paying Agent with respect to the
Securities it will, on or before each due date of the principal of, premium (if
any) or interest on the Securities set aside, segregate and hold in trust for
the benefit of the Holders of the Securities a sum sufficient to pay such
amount so becoming due. The Company will promptly notify the Trustee of any
failure to take such action.
Anything in this Section 4.4 to the contrary notwithstanding, but
subject to Section 11.1, the Company may at any time, for the purpose of
obtaining a satisfaction and discharge with respect to the Securities or for
any other reason, pay or cause to be paid to the Trustee all sums held in trust
with respect to the Securities by the Company or any Paying Agent hereunder, as
required by this Section, such sums to be held by the Trustee upon the trusts
herein contained.
Anything in this Section 4.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 4.4 is subject to
the provisions of Sections 11.3 and 11.4 hereof.
SECTION 4.5 Reports and Information.
(a) The Company will furnish to the Trustee within 120 days after
the end of each fiscal year an Officers' Certificate stating that (i) a review
of the activities of the Company and its Subsidiaries during the preceding
fiscal year has been made to determine whether the Company has kept, observed,
performed and fulfilled all of its obligations under this Indenture and the
Securities, (ii) such review was supervised by the Officers of the Company
signing such certificate, and (iii) that to the best knowledge of each Officer
signing such certificate, (A) during such year the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default occurred, describing all such Defaults or Events of Default of which
each such Officer may have knowledge and what action the Company has taken or
proposes to take with respect thereto), and (B) no event has occurred and
remains in existence by reason of which payments on account of the principal
of, premium (if any) or interest on, the Securities are prohibited or if such
event has occurred, a description of the event and what action the Company is
taking or proposes to take with respect thereto. The Company will, so long as
any of the Securities are outstanding, deliver to the Trustee, promptly after
any Officer of the Company becomes aware of (i) any Default or Event of
Default, or (ii) any default or event of default under any issue of
Indebtedness that could result in an Event of Default under Section 7.1, an
Officers' Certificate specifying such Default, Event of Default or default and
what action the Company is taking or proposes to take with respect thereto.
(b) If the Company is subject to the requirements of Section 13 or
15(d) of the Exchange Act, the Company shall file with the Commission all
quarterly and annual reports and such other information, documents or other
reports (or copies of such portions of any of the foregoing as the Commission
may by rules and regulations prescribe) required to be filed pursuant to such
provisions of the Exchange Act. The Company shall file with the Trustee, within
5 days after it files the same with the Commission, copies of the quarterly and
annual reports and such other information, documents, and reports (or copies of
such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) that it files with the Commission as contemplated by
this Section 4.5(b). The Company shall also comply with the other provisions of
Section 314(a) of the TIA. If the Company is not required to file the
aforementioned reports, the Company (at its own expense) shall file with the
Trustee and mail, or cause the Trustee to mail, to Holders at their addresses
appearing in the register of Securities at the time of such mailing within 5
days after it would have been required to file such information with the
Commission, all information and financial statements, including any notes
thereto and with respect to annual reports, an auditors' report by an
accounting firm of established national reputation, and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
comparable to the disclosure that the Company would have been required to
include in annual and quarterly reports, information, documents or other
reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K, if
the Company was subject to the requirements of Section 13 or 15(d) of the
Exchange Act.
SECTION 4.6 Corporate Existence. Subject to Article Six, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or
other
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<PAGE> 23
existence of each Subsidiary of the Company and the rights (charter and
statutory) and franchises of the Company and any Subsidiary of the Company;
provided, that the Company shall not be required to preserve any such
corporate, partnership or other existence of any Subsidiary or any such right
or franchise, if the Board of Directors of the Company shall determine in the
exercise of its business judgment that the preservation thereof is no longer
desirable in the conduct of the business of the Company or any Subsidiary and
that abandonment of any such right or franchise shall have no material adverse
effect on the Company and its Subsidiaries taken as a whole, or the Holders.
SECTION 4.7 Payment of Taxes and Other Claims. The Company will pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and (2) all lawful claims for labor,
materials and supplies that, if unpaid, might by law become a lien upon the
property of the Company, or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim the amount, applicability or validity of
which is being contested in good faith by appropriate proceedings and with
respect to which an adequate reserve has been established by the Company to the
extent required by GAAP.
SECTION 4.8 Maintenance of Properties. The Company shall, and shall
cause each of its Subsidiaries to, maintain all properties used or useful in
the conduct of its business in good condition, repair and working order and
supply such properties with all necessary equipment and make all necessary
repairs, renewals, replacements, betterments and improvements thereto, all as
in the judgment of the Company may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section shall prevent the
Company or any Subsidiary from discontinuing the operation and maintenance of
any of such properties if such discontinuance is, in the good faith judgment of
the Company or such Subsidiary, as the case may be, desirable in the conduct of
its respective business and not disadvantageous in any material respect to the
Holders.
SECTION 4.9 Maintenance of Insurance. The Company will insure and
keep insured, and will cause each Subsidiary to insure and keep insured, with
reputable insurance companies, such of their respective properties, to such an
extent and against such risks, and will maintain liability insurance, to the
extent that property of a similar character is usually so insured by companies
engaged in a similar business and owning similar properties in accordance with
good business practice.
SECTION 4.10 Compliance with Laws. The Company shall comply, and shall
cause each of its Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, all states
and municipalities thereof, and of any governmental department, commission,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except such as are being contested in
good faith and by appropriate proceedings and except for such noncompliance as
would not in the aggregate have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
SECTION 4.11 Change of Control.
(a) Upon a Change of Control, each Holder shall have the right to
require the Company to repurchase all or any part of such Holder's Securities
at a repurchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of Holders of record on the relevant record date to receive interest due
on the Relevant Interest Payment Date).
(b) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder stating:
(i) that a Change of Control has occurred and that such
Holder has the right to require the Company to purchase all or any
part of such Holder's Securities at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the record Holders' right
on the relevant record date to receive interest due on the relevant
interest payment date);
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<PAGE> 24
(ii) the circumstances and relevant facts regarding such
Change of Control;
(iii) the purchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(iv) the instructions, consistent with this Section 4.11,
that the Company determines that a Holder must follow to have its
Securities repurchased.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least 10 Business Days prior
to the purchase date. Holders will be entitled to withdraw their election if
the Company receives not later than three Business Days prior to the purchase
date, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Company to the Trustee for
cancellation, together with an Officer's Certificate requesting such
cancellation and stating that they are being delivered for cancellation in
accordance with the terms of this Section 4.11 and that the Company shall pay
the purchase price plus accrued and unpaid interest, if any, to the Holders
entitled thereto.
(e) The Company shall comply with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of Securities pursuant to this Section 4.11. To
the extent that the provisions of any securities laws or regulations conflict
with provisions of this Section 4.11, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.11 by virtue thereof.
(f) The Trustee shall be under no obligation to ascertain the
occurrence of a Change of Control or to give notice with respect thereto other
than as provided above, upon receipt of the written notice of Change of Control
from the Company. The Trustee may conclusively assume, in the absence of
written notice to the contrary from the Company, that no Change of Control has
occurred.
SECTION 4.12 Limitation on Issuances and Dispositions of Capital Stock
of Subsidiaries. Each Subsidiary of the Company shall at all times be a Wholly
Owned Subsidiary of the Company. The Company (i) shall not, and shall not permit
any Subsidiary to, transfer, convey, sell, or otherwise dispose of any Capital
Stock of a Subsidiary, or securities convertible or exchangeable into, or
options, warrants, rights or any other interest with respect to, Capital Stock
of a Subsidiary to any Person (other than the Company or a Wholly Owned
Subsidiary) and (ii) shall not permit any Subsidiary to issue shares of its
Capital Stock (other than directors' qualifying shares), or securities
convertible or exchangeable into, or options, warrants, rights or any other
interest with respect to, its Capital Stock to any Person other than to the
Company or a Wholly Owned Subsidiary PROVIDED, that the limitations of this
Section 4.12 shall not apply to any transaction between or among the Company
and one or more direct or indirect Wholly Owned Subsidiaries of the Company
pursuant to which all existing holders of Capital Stock of the Company receive,
upon conversion or otherwise in exchange for securities owned by such holders,
Capital Stock of a corporation which immediately prior to such exchange is a
Wholly Owned Subsidiary, and which securities have rights and preferences
identical to those of the securities replaced, so long as (i) immediately
before and after giving effect to such transaction no Default or Event of
Default shall have occurred and be continuing, and (ii) such transaction is not
otherwise prohibited by this Indenture.
SECTION 4.13 Limitation on Restricted Payments.
(a) Except as otherwise provided in this Section 4.13, the Company
shall not, and shall not permit any Subsidiary to, directly or indirectly,
(i) declare or pay any dividends on or make any
distributions in respect of the Capital Stock of the Company (other
than dividends or distributions payable solely in shares of Capital
Stock (other than Redeemable Stock) or in options, warrants, or other
rights to purchase Capital Stock (other than Redeemable Stock)) to
holders of Capital Stock of the Company;
(ii) purchase, redeem or otherwise acquire or retire for
value (other than through the issuance solely of Capital Stock (other
than Redeemable Stock) or options, warrants or other rights to
purchase Capital Stock (other than Redeemable Stock)) any Capital
Stock or warrants, rights (other than exchangeable or convertible
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Indebtedness of the Company not prohibited under clause (iii) below)
or options to acquire Capital Stock of the Company; or
(iii) redeem, repurchase, defease (including, but not
limited to, in substance or legal defeasance), or otherwise acquire or
retire for value (other than through the issuance solely of Capital
Stock (other than Redeemable Stock) or warrants, rights or options to
acquire Capital Stock (other than Redeemable Stock)) (collectively, a
"prepayment"), directly or indirectly (including by way of amendment
of the terms of any Indebtedness in connection with any retirement or
acquisition of such Indebtedness), other than at any scheduled
maturity thereof or by any scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company which is subordinated in
right of payment to the Securities or which matures after the maturity
date of the Securities (except out of the proceeds of Refinancing
Indebtedness);
if, at the time of such transaction described in clause (i), (ii) or (iii)
(such transactions being hereinafter collectively referred to as "Restricted
Payments") or after giving effect thereto, either (x) a Default or an Event of
Default shall have occurred and be continuing or (y) the aggregate amount
expended by the Company and its Subsidiaries for all Restricted Payments (the
amount of any Restricted Payment if other than cash to be the fair market value
of the property included in such payment as determined in good faith by the
Board of Directors as evidenced by a Board Resolution) from and after the
Closing Date shall exceed the sum of (A) 50% (or, if the Securities at the
time of the proposed Restricted Payment are rated Investment Grade by both S&P
and Moody's, 75%) of the aggregate Adjusted Consolidated Net Income (or if such
Adjusted Consolidated Net Income is a loss, minus 100% of such loss) of the
Company and its Subsidiaries for the period from the first day of the first
quarter ended subsequent to the Closing Date and through the last day of the
most recently completed quarter immediately preceding the quarter in which the
Restricted Payment occurs, calculated on a cumulative basis as if such period
were a single accounting period; (B) the aggregate net proceeds received by the
Company after the Closing Date (including the fair market value of non-cash
proceeds as determined in good faith by the Board of Directors as evidenced by
a Board Resolution) from any Person other than a Subsidiary, as a result of the
issuance of (or contribution to capital on) Capital Stock of the Company (other
than any Redeemable Stock) or warrants, rights or options to acquire Capital
Stock (other than any Redeemable Stock); (C) the aggregate net proceeds
received by the Company after the Closing Date from any Person other than a
Subsidiary as a result of the issuance of Capital Stock (other than Redeemable
Stock) upon conversion or exchange of Indebtedness or upon exercise of options,
warrants or other rights to acquire such Capital Stock and (D) $125,000,000;
provided that the sum of the foregoing clauses (A), (B), (C), and (D) shall be
reduced, dollar for dollar, by the amount of any Investments made solely in
reliance on clause (xi) of Section 4.18 of this Indenture (less the amount of
Returned Investments). For purposes of any calculation that is required to be
made in respect of, or after, the declaration of a dividend by the Company,
such dividend shall be deemed to be paid at the date of declaration and shall
be included in determining the aggregate amount of Restricted Payments.
For the purposes of this Section 4.13, the net proceeds from the
issuance of shares of Capital Stock of the Company upon conversion of debt
securities shall be deemed to be an amount equal to the net book value of such
debt securities (plus the additional amount required to be paid upon such
conversion, if any), less any cash payment on account of fractional shares; the
"net book value" of a security shall be the net amount received by the Company
on the issuance of such security, as adjusted on the books of the Company to
the date of conversion.
(b) Notwithstanding the foregoing, if no Default or Event of
Default shall have occurred or be continuing at the time or as a result
thereof, the provisions of this Section 4.13 shall not prohibit (i) the payment
of any dividend in respect of the Company's Capital Stock within 60 days after
the date of declaration thereof, if at such date of declaration such payment
complied with the provisions hereof; (ii) the purchase, redemption or other
acquisition or retirement for value of any shares of the Company's Capital
Stock or the prepayment of any indebtedness of the Company which is
subordinated in right of payment to the Securities or which matures after the
maturity date of the Securities by any exchange for, or out of and to the
extent the Company has received cash proceeds from the substantially concurrent
sale or issuance (other than to a Subsidiary) of, shares of Capital Stock
(other than any Redeemable Stock) of the Company or warrants, rights or options
to acquire Capital Stock (other than any Redeemable Stock); or (iii) the
purchase or redemption of shares of Capital Stock of the Company (including
options on any such shares or related stock appreciation rights or similar
securities) held by officers or employees of the Company or its Subsidiaries
(or their estates or beneficiaries under their estates) upon death, disability,
retirement, termination of employment of any such Person pursuant to the terms
of any Plan or any other agreement
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under which such shares of stock or related rights were issued; provided that
the aggregate amount of such purchases or redemptions of such Capital Stock
shall not exceed $3,000,000 in any one fiscal year of the Company. For purposes
of determining the aggregate amount of Restricted Payments permitted under
clause (y) of Section 4.13(a), all amounts expended pursuant to clauses (i) (to
the extent deemed to have been paid and already included in determining the
aggregate amount of Restricted Payments pursuant to clause (y) of Section
4.13(a)), (ii) and (iii) of this paragraph shall be excluded.
Prior to making any Restricted Payment under this Section, the Company
shall deliver to the Trustee an Officers' Certificate setting forth the
computation by which the amount available for Restricted Payments was
determined. The Trustee shall have no duty or responsibility to determine the
accuracy or correctness of this computation or that the provisions of this
Section have been satisfied and shall be fully protected in relying on such
Officers' Certificate.
SECTION 4.14 Limitation on Transactions with Affiliates.
(a) Neither the Company nor any Subsidiary of the Company shall,
directly or indirectly (i) sell, lease, transfer or otherwise dispose of any of
its properties or assets, or issue securities to, (ii) purchase any property,
assets or securities from, (iii) make any Investment in, or (iv) enter into or
suffer to exist any contract or agreement with or for the benefit of, an
Affiliate or holder of 5% or more of any class of Capital Stock (and any
Affiliate of such holder) of the Company (an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under Section 4.14(b) and (y)
Affiliate Transactions (including lease transactions) which are on fair and
reasonable terms no less favorable to the Company or such Subsidiary, as the
case may be, than those as might reasonably have been obtainable at such time
from an unaffiliated party; provided that if an Affiliate Transaction or series
of related Affiliate Transactions involves or has a value in excess of
$10,000,000, the Company or such Subsidiary, as the case may be, shall not
enter into such Affiliate Transaction or series of related Affiliate
Transactions unless a majority of the disinterested members of the Board of
Directors of the Company or such Subsidiary shall reasonably and in good faith
determine that such Affiliate Transaction is fair to the Company or such
Subsidiary, as the case may be, or is on terms no less favorable to the Company
or such Subsidiary, as the case may be, than those as might reasonably have
been obtainable at such time from an unaffiliated party.
(b) The provisions of Section 4.14(a) shall not apply to (i) any
agreement as in effect as of the Closing Date, or any amendment thereto so long
as any such amendment is not disadvantageous to the Holders in any material
respect or any transaction contemplated thereby (including pursuant to any
amendment thereto); (ii) any transaction between the Company and any Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries, provided such
transactions are not otherwise prohibited by this Indenture; (iii) reasonable
and customary fees and compensation paid to, and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company or any
Subsidiary, as determined by the Board of Directors of the Company or any
Subsidiary or the senior management thereof in good faith; (iv) any Restricted
Payments not prohibited by Section 4.13; (v) any payments or other transactions
pursuant to any tax sharing agreement between the Company and any other Person
with which the Company is required or permitted to file a consolidated tax
return or with which the Company is or could be part of a consolidated group
for tax purposes; and (vi) transactions with Continental Airlines, Inc., Mesa
Airlines, Inc. and their respective Affiliates as contemplated by the Alliance
Agreements.
SECTION 4.15 Limitation on Asset Sales. Subject to the following
paragraphs of this Section, in the event and to the extent that on any date
after the Closing Date the Company and its Subsidiaries shall receive Net Cash
Proceeds from one or more Asset Sales (other than Asset Sales by the Company or
any Subsidiary to the Company or another Subsidiary), then the Company shall, or
shall cause such Subsidiary to, within 12 months after such date apply an amount
equal to such Net Cash Proceeds (A) to repay Indebtedness of the Company or
Indebtedness of any Subsidiary, in each case owing to a Person other than the
Company or any of its Subsidiaries, and/or (B) as an Investment (or enter into a
definitive agreement committing to so invest within 12 months after the date of
such agreement), in property or assets of a nature or type or that are used in a
business (or in a Person having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or the business of, the Company and its Subsidiaries existing on
the date thereof (as determined in good faith by the Board of Directors of the
Company or such Subsidiary, as the case may be, whose determination shall be
conclusive and evidenced by a Board Resolution). The amount of such Net Cash
Proceeds required to be applied (or to be committed to be applied) during such
12-month period as set forth in clause (A) or (B) of the preceding sentence
shall constitute "Excess Proceeds."
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If on the first Business Day following any 12-month period referred to
in the preceding paragraph, the aggregate amount of Excess Proceeds from all
Asset Sales, not previously applied as provided in clause (A) or (B) of the
preceding paragraph, exceeds $15,000,000, the Company, within 10 Business Days
after the end of any such 12-month period, shall make an offer to purchase on a
pro rata basis from all Holders (an "Excess Proceeds Offer"), and shall
purchase from Holders accepting such Excess Proceeds Offer, the maximum
principal amount (expressed as an integral multiple of $1,000) of Securities
that may be purchased from funds in an amount equal to all such outstanding
Excess Proceeds at a purchase price equal to 100% of the principal amount of
the Securities so purchased, plus accrued and unpaid interest thereon (if any)
to the date of purchase ("Excess Proceeds Payment"). Upon completion of an
Excess Proceeds Offer (or upon termination of such offer if no repurchases are
required), the amount of such Excess Proceeds relating thereto shall be equal
to zero.
The Company shall commence an Excess Proceeds Offer by causing the
Trustee to mail a notice to each Holder stating: (i) that the Excess Proceeds
Offer is being made pursuant to this Section 4.15 and that all Securities
validly tendered will be accepted for purchase; provided, however, that if the
aggregate purchase price of Securities tendered in an Excess Proceeds Offer
(including accrued interest to the date of purchase) exceeds the aggregate
amount of the Excess Proceeds required to be applied in such Excess Proceeds
Offer, the Company shall select the Securities to be purchased on a pro rata
basis (with such adjustments as may be deemed appropriate by the Company so
that only Securities in denominations of $1,000 or integral multiples thereof
shall be purchased); (ii) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be a Business Day no earlier than
30 days nor later than 60 days from the date such notice is mailed) (the
"Excess Proceeds Purchase Date"); (iii) that any Security not tendered will
continue to accrue interest pursuant to its terms; (iv) that, unless the
Company defaults in the purchase of such Security on the Excess Proceeds
Purchase Date, any Security accepted for purchase pursuant to the Excess
Proceeds Offer shall cease to accrue interest after the Excess Proceeds
Purchase Date; (v) that Holders electing to have a Security purchased pursuant
to the Excess Proceeds Offer will be required to surrender the Security,
together with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side of the Security completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
immediately preceding the Excess Proceeds Purchase Date; (vi) that each Holder
will be entitled to withdraw its election (in whole but not in part) if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Excess Proceeds Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Securities delivered for purchase and a
statement that such Holder is withdrawing its election to have such Securities
purchased; and (vii) that Holders whose Securities are being purchased only in
part will be issued new Securities equal in aggregate principal amount to the
unpurchased portion of the Securities surrendered.
On the Excess Proceeds Purchase Date, the Company shall: (i) accept
for purchase on a pro rata basis Securities or portions thereof tendered
pursuant to the Excess Proceeds Offer; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Securities or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all
Securities or portions thereof so accepted together with an Officers'
Certificate specifying the Securities or portions thereof accepted for purchase
by the Company. The Paying Agent shall promptly mail to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and
the Company shall execute and the Trustee shall promptly authenticate and mail
to each such Holder a new Security equal in principal amount to any unpurchased
portion of the Security surrendered; provided that each Security purchased and
each new Security delivered shall be in a principal amount of $1,000 or an
integral multiple thereof. The Company will publicly announce the results of
the Excess Proceeds Offer as soon as practicable after the Excess Proceeds
Purchase Date. For purposes of this Section 4.15, the Trustee shall act as the
Paying Agent.
Notwithstanding the foregoing:
(i) to the extent that any or all of the Net Cash
Proceeds of any Asset Sale are prohibited or delayed by applicable
local law from being repatriated to the United States of America, the
portion of such Net Cash Proceeds so affected will not be required to
be applied pursuant to this Section 4.14 but may be retained for so
long, but only for so long, as the applicable local law will not
permit repatriation to the United States of America (the Company
hereby agrees to promptly take all reasonable actions required by the
applicable local law to permit such repatriation) and once such
repatriation of any such affected Net Cash Proceeds is permitted under
the applicable local law, such repatriation will be immediately
effected and such repatriated Net Cash Proceeds will
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be applied in the manner set forth in this Section 4.15 as if such
Asset Sale had occurred on the date of repatriation; and
(ii) to the extent that the Board of Directors of the
Company has determined in good faith that repatriation of any or all
of the Net Cash Proceeds would have an adverse tax consequence to the
Company, the Net Cash Proceeds so affected may be retained outside the
United States of America for so long as such adverse tax consequences
would continue.
The Company will comply with Rule 14e-1 under the Securities Exchange
Act of 1934, as amended, and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable, in the event
that such Excess Proceeds are received by the Company as contemplated by this
Section 4.15 and the Company is required to repurchase Securities as described
above.
SECTION 4.16 Limitation on Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Subsidiary to, create or
otherwise cause or suffer to exist or become effective any Payment Restriction
or consensual encumbrance with respect to any Subsidiary thereof to (a) pay
dividends or make any other distributions on such Subsidiary's Capital Stock;
(b) make any loans or advances to the Company or any other Subsidiary; or (c)
transfer any of its property or assets to the Company or any other Subsidiary
except (i) restrictions imposed by applicable law; (ii) any restrictions
existing under this Indenture; and (iii) encumbrances or restrictions contained
in any agreement or instrument (A) relating to any property acquired or leased
by the Company or any of its Subsidiaries after the Closing Date, provided that
such encumbrance or restriction relates only the property which is acquired or
leased; (B) relating to any Indebtedness of any Subsidiary at the date of
acquisition of such Subsidiary by the Company or any Subsidiary of the Company,
provided that such Indebtedness was not incurred in connection with, or in
contemplation of, such acquisition (the Company being entitled to rely upon a
certificate of such Subsidiary as to whether such Indebtedness was incurred in
contemplation thereof); (C) arising pursuant to an agreement effecting a
refinancing of Indebtedness issued pursuant to an agreement referred to in the
foregoing clauses (A) and (B), so long as the encumbrances and restrictions
contained in any such refinancing agreement are no more restrictive than the
encumbrances and restrictions contained in such agreements; (D) which constitute
customary provisions restricting subletting or assignment of any lease of the
Company or any Subsidiary or provisions in agreements that restrict the
assignment of such agreement or any rights thereunder; and (E) which constitute
restrictions on the sale or other disposition of any property securing
Indebtedness as a result of a lien on such property.
SECTION 4.17 [INTENTIONALLY OMITTED].
SECTION 4.18 Limitation on Investments. The Company shall not, and
shall not permit any Subsidiary to make any Investment other than (i)
Investments consisting of non-cash proceeds from Asset Sales as contemplated by
Section 4.15 of this Indenture; (ii) Investments consisting of Cash Equivalents;
(iii) accounts receivable if credited or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(iv) payroll advances and advances for business and travel expenses in the
ordinary course of business; (v) Investments by the Company in its Subsidiaries
in the ordinary course of business; (vi) Investments by any Subsidiary of the
Company in the Company or in any Subsidiary; (vii) Investments by the Company
for the purpose of acquiring businesses reasonably related to the business of
the Company, in an aggregate amount not exceeding $5,000,000 in any fiscal year
of the Company; (viii) Investments made by way of any endorsement of negotiable
instruments received by the Company or any Subsidiary in the ordinary course of
its business and presented by it to any bank for collection or deposit; (ix)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business owing to the Company or any Subsidiary; (x)
Investments by the Company in any Subsidiary for the purpose of receivables
financing; (xi) an Investment not in excess of the amount of Restricted Payments
that the Company is permitted to make (immediately prior to making such
Investment) under Section 4.13 of this Indenture; and (xii) in addition to any
other permitted investments, any other Investments by the Company in an
aggregate amount not exceeding $1,000,000 at any time.
SECTION 4.19 Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Securities as contemplated
herein, wherever
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enacted, now or at any time hereafter in force, or that may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE FIVE- SECURITYHOLDERS LISTS AND
REPORTS BY COMPANY AND THE TRUSTEE
SECTION 5.1 The Company to Furnish Trustee Information as to Names
and Addresses of Securityholders. If and so long as the Trustee shall not be
the Security registrar for the Securities, the Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee a list in such
form as the Trustee may reasonably require of the names and addresses of the
Holders of the Securities pursuant to Section 312 of the TIA:
(a) semi-annually and not more than 15 days after each
record date for the payment of interest on such Securities, as
hereinabove specified and as of such record date; and
(b) at such other times as the Trustee may request in
writing, within 30 days after receipt by the Company of any such
request as of a date not more than 15 days prior to the time such
information is furnished.
SECTION 5.2 Disclosure of Names and Addresses of Securityholders.
Each and every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of the Company or the Trustee shall be held accountable by reason of
the disclosure of any such information as to the names and addresses of the
Holders of Securities in accordance with Section 312 of the TIA, regardless of
the source from which such information was derived, and that the Trustee shall
not be held accountable by reason of mailing any material pursuant to a request
made under Section 312(b) of the TIA.
SECTION 5.3 Reports by the Trustee. Any Trustee's report required
under Section 313(m) of the TIA shall be transmitted on or before May 15 in
each year beginning May 15, 1995, as provided in Section 313(c) of the TIA, so
long as any Securities are outstanding hereunder, and shall be dated as of a
date convenient to the Trustee no more than 60 days prior thereto.
ARTICLE SIX - CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 6.1 Merger or Consolidation. The Company shall not
consolidate with or merge into any other corporation or convey, lease or
transfer its properties and assets substantially as an entirety to any Person,
unless:
(a) the corporation formed by such consolidation or into
which the Company is merged or the Person that acquires by conveyance,
lease or transfer the properties and assets of the Company
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America or any State
or the District of Columbia, and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the Company's obligation for the
due and punctual payment of the principal of and interest on all the
Securities according to their tenor and the performance of every
covenant of this Indenture on the part of the Company to be performed
or observed;
(b) immediately before and after giving effect to such
transaction, no Event of Default, and no event that, after notice or
lapse of time, or both, would become an Event of Default, shall have
happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, lease or transfer and such
supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
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This Section shall only apply to a merger or consolidation in which
the Company is not the surviving corporation and to conveyances, leases, and
transfers by the Company, as transferee or lessor.
SECTION 6.2 Successor Corporation Substituted. Upon any
consolidation or merger by the Company with or into any other corporation, or
any conveyance or transfer by the Company of its properties and assets
substantially as an entirety to any Person, in accordance with Section 6.1, the
successor corporation formed by such consolidation or into which the Company is
merged or to which such conveyance or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor corporation had been
named as the Company and in the event of any such conveyance or transfer, the
Company, except in the event of a conveyance by way of lease, shall be
discharged from all obligations and covenants under this Indenture and the
Securities and may be dissolved and liquidated. Such successor corporation may
cause to be signed, and may issue either in its own name or in the name of the
Company prior to such succession, any or all of the Securities issuable
hereunder that theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor corporation,
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities that previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication, and any Securities
that such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as
the Securities theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Securities had been issued at the date of
the execution hereof.
In case of any such consolidation, merger, conveyance or transfer,
such changes in phrasing and form (but not in substance) may be made in the
Securities that may be endorsed thereon, as the case may be, thereafter to be
delivered as may be appropriate.
ARTICLE SEVEN - REMEDIES OF THE TRUSTEE
AND SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 7.1 Event of Default Defined; Acceleration of Maturity;
Waiver of Default. "Event of Default", with respect to the Securities, means
any one of the following events that shall have occurred and be continuing
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of the principal of or premium
(if any) on any Security when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise;
(b) default in the payment of interest on any Security
when the same becomes due and payable, and such default continues for
a period of 30 days;
(c) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in this
Indenture or under the Securities and such default or breach continues
for a period of 30 consecutive days after the date on which written
notice specifying such failure, stating that such notice is a "Notice
of Default" under the Indenture and demanding that the Company remedy
the same, shall have been given by registered or certified mail,
return receipt requested, to the Company by the Trustee or to the
Company and the Trustee by the Holders of 25% or more in aggregate
principal amount of the Securities Outstanding;
(d) there occurs with respect to any issue or issues of
Indebtedness of the Company and/or one or more Subsidiaries having an
outstanding principal amount of $10 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, an event of default that has
caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not
been discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration;
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(e) any final judgment or order (not covered by
insurance) for the payment of money in excess of $10 million in the
aggregate for all such final judgments or orders against all such
Persons (treating any deductibles, self-insurance or retention as not
so covered) shall be rendered against the Company or any Subsidiary
and shall not be discharged, and there shall be any period of 60
consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders
outstanding against all such Persons to exceed $10 million during
which a stay of enforcement of such final judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect;
(f) a court having jurisdiction in the premises enters a
decree or order for (i) relief in respect of the Company or any
Material Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, (ii) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or
any Material Subsidiary or for all or substantially all of the
property and assets of the Company or any Material Subsidiary or (iii)
the winding up or liquidation of the affairs of the Company or any
Material Subsidiary and, in each case, such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days;
(g) the Company or any Material Subsidiary (i) commences
a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (ii)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Material Subsidiary or for all or
substantially all of the property and assets of the Company or any
Material Subsidiary or (iii) effects any general assignment for the
benefit of creditors of the Company or any Material Subsidiary;
(h) the Company and/or one or more Subsidiaries fail to
make at the final (but not any interim) fixed maturity of one or more
issues of Indebtedness a principal payment or principal payments
aggregating more than $10 million and all such defaulted payments
shall not have been made, waived or extended within 30 days of the
payment default that caused the aggregate amount of such defaulted
payments to exceed $10 million; or
(i) any of the Applicable Documents shall cease, for any
reason, to be in full force and effect in any material respect, except
as a result of an amendment, waiver or termination thereof as
contemplated or permitted therein.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% of the aggregate
principal amount of the Securities then Outstanding, by written notice to the
Company (and to the Trustee if such notice is given by the Holders (the
"Acceleration Notice" )), may, and the Trustee at the request of the Holders
shall, declare the entire unpaid principal, premium (if any) and accrued
interest on the Securities to be immediately due and payable as specified
below. Upon a declaration of acceleration, such principal, premium (if any) and
accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (d)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default shall be remedied, cured by the Company or waived by the
holders of the relevant Indebtedness within 30 days after the occurrence of the
Event of Default with respect thereto and the Company has delivered an
Officer's Certificate as to such effect. If an Event of Default specified in
clause (f) or (g) above occurs with respect to the Company, all unpaid
principal of, premium (if any) and accrued interest on the Securities then
outstanding shall ipso facto become and be immediately due and payable without
declaration or other act on the part of the Trustee or any Holder.
The Holders of at least a majority in principal amount of the
outstanding Securities, by written notice to the Company and the Trustee, may
waive all past defaults and rescind and annul a declaration of acceleration and
its consequences if (i) all existing Events of Default, other than the
non-payment of the principal of, premium, if any, and interest on Securities
that have become due solely by such declaration of acceleration, have been
cured or waived and (ii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction.
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Upon receipt by the Trustee of any Notice of Default pursuant to this
Section 7.1 with respect to Securities all or part of which are represented by
a Global Security, a record date shall be established for determining Holders
of Outstanding Securities entitled to join in such Notice of Default, which
record date shall be at the close of business on the day the Trustee receives
such Notice of Default. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
Notice of Default, whether or not such Holders remain Holders after such record
date; provided, that unless Holders of at least 25% in principal amount of the
Outstanding Securities, or their proxies, shall have joined in such Notice of
Default prior to the day which is 90 days after such record date, such Notice
of Default shall automatically and without further action by any Holder be
cancelled and of no further effect. Nothing in this paragraph shall prevent a
Holder, or a proxy of a Holder, from giving, after expiration of such 90-day
period, a new Notice of Default identical to a Notice of Default which has been
cancelled pursuant to the proviso to the preceding sentence, in which event a
new record date shall be established pursuant to the provisions of this Section
7.1.
Upon receipt by the Trustee of any Acceleration Notice or any
rescission and annulment thereof, with respect to Securities all or part of
which are represented by a Global Security, a record date shall be established
for determining Holders of Outstanding Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, that unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day which is 90
days after such record date, such notice of declaration of acceleration or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be cancelled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been cancelled pursuant to the proviso
to the preceding sentence, in which event a new record date shall be
established pursuant to the provisions of this Section 7.1.
SECTION 7.2 Collection of Indebtedness by Trustee; Trustee May Prove
Debt. The Company covenants that (a) in case default shall be made in the
payment of any installment of interest on any of the Securities when such
interest shall have become due and payable, and such default shall have
continued for a period of 30 days or (b) in case default shall be made in the
payment of all or any part of the principal of any of the Securities when the
same shall have become due and payable, whether upon maturity of the Securities
or upon any redemption or by declaration or otherwise, then upon demand of the
Trustee, the Company will pay to the Trustee for the benefit of the Holders of
the Securities the whole amount that then shall have become due and payable on
all Securities for principal or interest, as the case may be (with interest to
the date of such payment upon the overdue principal and, to the extent that
payment of such interest is enforceable under applicable law, on overdue
installments of interest at the same rate as the rate of interest specified in
the Securities); and in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and any expenses and liabilities incurred, and
all advances made by the Trustee and each predecessor Trustee except as a
result of its negligence or bad faith.
Until such demand is made by the Trustee, the Company may pay the
principal of and interest on the Securities to the registered Holders, whether
or not the Securities are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any
such judgment or final decree against the Company or other obligor upon the
Securities and collect in the manner provided by law out of the property of the
Company or other obligor upon the Securities, wherever situated, the monies
adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the Company or
any other obligor upon the Securities under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have
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been appointed for or taken possession of the Company or the property of the
Company or such other obligor, or in case of any other judicial proceedings
relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee will have made any demand pursuant to the provisions of
this Section, shall be entitled and empowered, by intervention in such
proceedings or otherwise:
(a) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and
each predecessor Trustee and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee, except as a result of negligence or bad faith) and of the
Securityholders allowed in any judicial proceedings relative to the
Company or other obligor upon the Securities, or to the creditors or
property of the Company or such other obligor,
(b) unless prohibited by applicable law and regulations,
to vote on behalf of the Holders of the Securities in any election of
a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or person
performing similar functions in comparable proceedings, and
(c) to collect and receive any monies or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Securityholders and
of the Trustee on their behalf; and any trustee, receiver, or
liquidator, custodian or other similar official is hereby authorized
by each of the Securityholders to make payments to the Trustee, and,
in the event that the Trustee shall consent to the making of payments
directly to the Securityholders, to pay to the Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar person.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities may be enforced by the Trustee without the
possession of any of the Securities or the production thereof on any trial or
other proceedings relative thereto, and any such action or proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee, each predecessor
Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the Holders of the Securities in respect of which such judgment has
been recovered.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the
Holders of the Securities in respect of which such action was taken, and it
shall not be necessary to make any Holders of such Securities parties to any
such proceedings.
SECTION 7.3 Application of Proceeds. Any monies collected by the
Trustee pursuant to this Article Seven in respect of the Securities shall be
applied in the following order at the date or dates fixed by the Trustee and,
in the case of the distribution of such monies on account of principal or
interest, upon presentation of the several Securities in respect of which
monies have been collected and stamping (or otherwise noting) thereon the
payment, or issuing Securities in reduced principal amounts in exchange for the
presented Securities if only partially paid, or upon surrender thereof if fully
paid:
FIRST: To the payment of amounts due the Trustee or any
predecessor Trustee under Section 8.6;
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SECOND: In case the principal of the Securities shall not
have become and be then due and payable, to the payment of interest on
the Securities in default in the order of the maturity of the
installments of such interest, with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue
installments of interest at the same rate as the rate of interest
specified in the Securities, such payments to be made ratably to the
persons entitled thereto, without discrimination or preference;
THIRD: In case the principal of the Securities shall have
become and shall be then due and payable, to the payment of the whole
amount then owing and unpaid upon all the Securities for principal and
interest, with interest upon the overdue principal, and (to the extent
that such interest has been collected by the Trustee) upon overdue
installments of interest at the same rate as the rate of interest
specified in the Securities and in case such monies shall be
insufficient to pay in full the whole amount so due and unpaid upon
the Securities, then to the payment of such principal and interest
without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over any
other installment of interest, or of any Security over any other
Security, ratably to the aggregate of such principal and accrued and
unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the
Company or any other person lawfully entitled thereto.
SECTION 7.4 Suits for Enforcement. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
SECTION 7.5 Restoration of Rights on Abandonment of Proceedings. In
case the Trustee shall have proceeded to enforce any right under this Indenture
and such proceedings shall have been discontinued or abandoned for any reason,
or shall have been determined adversely to the Trustee, then and in every such
case the Company and the Trustee shall be restored respectively to their former
positions and rights hereunder, and all rights, remedies and powers of the
Company, the Trustee and the Securityholders shall continue as though no such
proceedings had been taken.
SECTION 7.6 Limitations on Suits by Securityholders. A Holder of
Securities may not pursue any remedy with respect to this Indenture or the
Securities unless: (i) such Holder gives to the Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in aggregate
principal amount of outstanding Securities make a written request to the
Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any costs, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity; and (v) during such 60-day period,
the Holders of a majority in aggregate principal amount of the outstanding
Securities do not give the Trustee a direction that is inconsistent with the
request.
For purposes of this Section 7.6, the Trustee shall comply with
Section 316(a) of the TIA in making any determination of whether the Holders of
the required aggregate principal amount of outstanding Securities have
concurred in any request or direction of the Trustee to pursue any remedy
available to the Trustee or the Holders with respect to this Indenture or the
Securities or otherwise under the law.
A Holder of Securities may not use this Indenture to prejudice the
rights of another Holder or to obtain a preference or priority over such other
Holder.
SECTION 7.7 Unconditional Right of Securityholders to Institute
Certain Suits. Notwithstanding any other provision in this Indenture and any
provision of any Security, the right of any Holder of any Security to receive
payment of the principal of, premium (if any) and interest on such Security on
or after the respective due dates expressed in such Security, or to institute
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
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SECTION 7.8 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default. Except as provided in Section 7.6, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder to exercise any
right or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein; and, subject to
Section 7.6, every power and remedy given by this Indenture or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
shall be deemed expedient, by the Trustee or by the Holders.
SECTION 7.9 Control by Holders of Securities. The Holders of a
majority in aggregate principal amount of the Securities at the time
outstanding shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to the
Securities by this Indenture; provided, that such direction shall not be
otherwise than in accordance with law and the provisions of this Indenture; and
provided, further, that (subject to the provisions of Section 8.1) the Trustee
shall have the right to decline to follow any such direction if the Trustee,
being advised by counsel, shall determine that the action or proceeding so
directed may not lawfully be taken or if the Trustee in good faith by its board
of directors, the executive committee, or a trust committee of directors or
Responsible Officers of the Trustee shall determine that the action or
proceedings so directed would involve the Trustee in personal liability or if
the Trustee in good faith shall so determine that the actions or forbearance
specified in or pursuant to such direction would be unduly prejudicial to the
interests of Holders not joining in the giving of said direction. It being
understood that (subject to Section 8.1) the Trustee shall have no duty to
ascertain whether or not such actions or forbearance are unduly prejudicial to
such Holders.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and that is not
inconsistent with such direction or directions by the Holders.
Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such trust
or power, with respect to Securities all or part of which are represented by a
Global Security, a record date shall be established for determining Holders of
Outstanding Securities entitled to join in such notice, which record date shall
be at the close of business on the day the Trustee receives such notice. The
Holders on such record date, or their duly designated proxies, and only such
Persons, shall be entitled to join in such notice, whether or not such Holders
remain Holders after such record date; provided, that unless the Holders of a
majority in principal amount of the Outstanding Securities shall have joined in
such notice prior to the day which is 90 days after such record date, such
notice shall automatically and without further action by any Holder be
cancelled and of no further effect. Nothing in this paragraph shall prevent a
Holder, or a proxy of a Holder, from giving, after expiration of such 90-day
period, a new notice identical to a notice which has been cancelled pursuant to
the proviso to the preceding sentence, in which event a new record date shall
be established pursuant to the provisions of this Section 7.9.
SECTION 7.10 Waiver of Past Defaults. Subject to Sections 7.1 and 7.7,
the Holders of at least a majority in principal amount of the outstanding
Securities, by notice to the Trustee, may waive an existing Event of Default and
its consequences, except a default in the payment of principal of or interest on
any Security as specified in clause (a) or (b) of Section 7.1.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to waive any past default
hereunder. If a record date is fixed, the Holders on such record date, or their
duly designated proxies, and only such Persons, shall be entitled to waive any
default hereunder, whether or not such Holders remain Holders after such record
date; provided, that unless such majority in principal amount shall have waived
such default prior to the date which is 90 days after such record date, any
such waiver previously given shall automatically and without further action by
any Holder be cancelled and of no further effect.
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Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
SECTION 7.11 Trustees to Give Notice of Default, But May Withhold in
Certain Circumstances. The Trustee shall, within ninety days after the
occurrence of a Default with respect to the Securities, give notice of all
Defaults known to the Trustee to all Holders of Securities in the manner and to
the extent provided in Section 313(c) of the TIA, unless in each case such
Defaults shall have been cured before the mailing or publication of such notice;
provided, however, that, except in the case of Default in the payment of the
principal of or interest on any of the Securities, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors or trustees or
Responsible Officers of the Trustee, or any combination of the foregoing, in
good faith determines that the withholding of such notice is in the interests of
the Securityholders.
SECTION 7.12 Right of Court to Require Filing of Undertaking to Pay
Costs. All parties to this Indenture agree, and each Holder of any Security by
its acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken, suffered
or omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merit and good
faith of the claims or defenses made by such party litigant; but the provisions
of this Section shall not apply to any suit instituted by the Trustee, to any
suit instituted by any Securityholder or group of Securityholders holding in the
aggregate more than 10% in aggregate principal amount of the Securities or to
any suit instituted by any Securityholder for the enforcement of the payment of
the principal of or interest on any Security on or after the due date expressed
in such Security or any date fixed for redemption.
ARTICLE EIGHT - CONCERNING THE TRUSTEE
SECTION 8.1 Duties and Responsibilities of the Trustee; During
Default; Prior to Default. With respect to the Holders of the Securities
issued hereunder, the Trustee, prior to the occurrence of an Event of Default
with respect to the Securities and after the curing or waiving of all Events of
Default that may have occurred, has undertaken to perform such duties and only
such duties as are specifically set forth in this Indenture. In case an Event
of Default with respect to the Securities has occurred (that has not been cured
or waived), the Trustee shall exercise with respect to such Securities such of
the rights and powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(a) prior to the occurrence of an Event of Default with
respect to the Securities and after the curing or waiving of all such
Events of Default with respect to such Securities that may have
occurred:
(i) the duties and obligations of the Trustee
with respect to the Securities shall be determined solely by
the express provisions of this Indenture, and the Trustee
shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of
the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any statements, certificates or
opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such
statements, certificates or opinions that by any provision
hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements
of this Indenture;
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(b) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders pursuant to Section 7.9 relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that
the repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.
Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
The provisions of this Section 8.1 are in furtherance of and subject to
Section 315 of the TIA.
SECTION 8.2 Certain Rights of the Trustee. In furtherance of and
subject to the TIA, and subject to Section 8.1:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, Officers' Certificate
or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, note, coupon,
security or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the
Company mentioned herein shall be sufficiently evidenced by an
Officers' Certificate of the Company (unless other evidence in respect
thereof be herein specifically prescribed); and any resolution of the
Board of Directors of the Company may be evidenced to the Trustee by a
copy thereof certified by the secretary or an assistant secretary of
the Company;
(c) the Trustee may consult with counsel and any written
advice or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted to be taken by it hereunder in good faith and in reliance
thereon in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this Indenture at the
request, order or direction of any of the Securityholders pursuant to
the provisions of this Indenture, unless such Securityholders shall
have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities that might be incurred therein or
thereby;
(e) the Trustee shall not be liable for any action taken
or omitted by it in good faith and believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this
Indenture; and
(f) prior to the occurrence of an Event of Default
hereunder and after the curing or waiving of all Events of Default,
the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing to so do by the Holders
of not less than a majority in aggregate principal amount of the
Securities then Outstanding; provided, however, that, if the payment
within a reasonable time to the Trustee of the costs, expenses, or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Indenture, the Trustee may require reasonable indemnity against
such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such
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investigation shall be paid by the Company or, if paid by the Trustee
or any predecessor Trustee, shall be repaid by the Company upon
demand.
SECTION 8.3 Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof. The recitals contained herein
and in the Securities, except the Trustee's certificates of authentication,
shall be taken as the statements of the Company and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the use or application by
the Company of any of the Securities or of the proceeds thereof.
The Trustee shall have no duty to inquire as to the
performance of the Company's covenants in Article Four hereof. In addition,
the Trustee shall not be deemed to have knowledge of any Default or Event of
Default, except (i) any Default or Event of Default occurring pursuant to
Section 7.1(a), 7.1(b) or 4.1, or (ii) any Default or Event of Default of which
the Trustee shall have received written notification or obtained actual
knowledge.
SECTION 8.4 Trustee and Agents May Hold Securities; Collections, etc.
The Trustee or any agent of the Company or the Trustee, in its individual or
any other capacity, may become the owner or pledgee of Securities with the same
rights it would have if it were not the Trustee or such agent and may otherwise
deal with the Company and receive, collect, hold and retain collections from
the Company with the same rights it would have if it were not the Trustee or
such agent.
SECTION 8.5 Monies Held by Trustee. Subject to the provisions of
Section 11.4 hereof, all monies received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Neither the Trustee nor any agent of
the Company or the Trustee shall be under any liability for interest on any
monies received by it hereunder.
SECTION 8.6 Compensation and Indemnification of Trustee and Its Prior
Claim. The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) and the Company covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on
behalf of it in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of
its counsel and of all agents and other persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Company also covenants to indemnify the Trustee
and each predecessor Trustee for, and to hold it harmless against, any loss,
liability or expense incurred, without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and its duties hereunder, including the costs
and expenses of defending itself against or investigating any claim of
liability in the premises. The obligations of the Company under this Section to
compensate and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses, disbursements
and advances shall constitute additional indebtedness of the Company hereunder
and shall survive the satisfaction and discharge of this Indenture. Such
additional indebtedness shall be a senior claim to that of the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the Holders of particular Securities, and the
Securities are hereby subordinated to such senior claim.
SECTION 8.7 Right of Trustee to Rely on Officers' Certificate, etc.
Subject to Sections 8.1 and 8.2, whenever in the administration of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate of the Company delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 8.8 Persons Eligible for Appointment as Trustee. The Trustee
shall at all times be a corporation organized and doing business under the laws
of the United States of America or of any State or the District of Columbia, or
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a corporation or other Person permitted to act as Trustee by the Commission
pursuant to the TIA, having a combined capital and surplus of at least
$50,000,000, and that is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by Federal, State or
District of Columbia authority. Such corporation shall have an address or agent
in the Borough of Manhattan, The City of New York for the presentment of
Securities. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect specified in Section 8.9.
The provisions of this Section 8.8 are in furtherance of and subject
to Section 310(a) of the TIA.
SECTION 8.9 Resignation and Removal; Appointment of Successor Trustee.
(a) The Trustee, or any trustee or trustees hereafter appointed,
may at any time resign by giving written notice of resignation to the Company
and by mailing notice of such resignation to the Holders of then Outstanding
Securities at their addresses as they shall appear on the registry books. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee or trustees by written instrument in duplicate, executed by
authority of the Board of Directors of the Company, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee or trustees. If no successor trustee shall have been so
appointed and have accepted appointment within 30 days after the mailing of
such notice of resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide Holder of a Security or Securities for
at least six months may, subject to the provisions of Section 8.12, on behalf
of itself and all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions
of Section 310(b) of the TIA with respect to the Securities after
written request therefor by the Company or by any Securityholder who
has been a bona fide Holder of a Security or Securities for at least
six months; or
(ii) the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.8 and Section 310(a) of the TIA and
shall fail to resign after written request therefor by the Company or
by any Securityholder; or
(iii) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent, or a receiver or liquidator of
the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation;
then, in any such case, unless the Trustee's duty to resign has been stayed as
provided pursuant to Section 310(b) of the TIA, the Company may remove the
Trustee and appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors of the Company, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee, or, subject to the provisions of Section 315(e) of the TIA,
any Securityholder who has been a bona fide Holder of a Security or Securities
of such series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper, remove the
Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the
Securities at the time Outstanding may at any time remove the Trustee and
appoint a successor trustee by delivering to the Trustee so removed, to the
successor trustee so appointed, and to the Company the evidence provided for in
Section 9.1 of the action in that regard taken by the Securityholders.
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(d) Any resignation or removal of the Trustee and any appointment
of a successor trustee pursuant to any of the provisions of this Section 8.9
shall become effective upon acceptance of appointment by the successor trustee
as provided in Section 8.10.
SECTION 8.10 Acceptance of Appointment by Successor Trustee. Any
successor trustee appointed as provided in Section 8.9 shall execute and deliver
to the Company and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee hereunder; but nevertheless, on the written
request of the Company or of the successor trustee, upon payment of its charges
then unpaid, the Trustee ceasing to act shall, subject to Section 11.4, pay over
to the successor trustee all monies at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 8.6.
No successor trustee shall accept appointment as provided to this
Section 8.10 unless at the time of such acceptance such successor trustee shall
be qualified under Section 310(b) of the TIA and eligible under the provisions
of Section 8.8.
Upon acceptance of appointment by any successor trustee as provided in
this Section 8.10, the Company shall give notice thereof to the Holders of
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the registry books. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
8.9. If the Company fails to give such notice within ten days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
SECTION 8.11 Merger, Conversion, Consolidation or Succession to
Business of Trustee. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder; provided, however,
that such corporation shall be qualified under Section 310(b) of the TIA and
eligible under the provisions of Section 8.8, without the execution or filing of
any paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trust created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force that it has anywhere in the Securities or
in this Indenture; provided, however, that the right to adopt the certificate
of authentication of any predecessor Trustee or to authenticate Securities in
the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
SECTION 8.12 Preferential Collection of Claims Against the Company.
The Trustee shall comply with Section 311(a) of the TIA. Any Trustee that has
resigned or been removed is subject to Section 311(s) of the TIA to the extent
indicated therein.
SECTION 8.13 Appointment of Authenticating Agent. As long as any
Securities remain Outstanding, the Trustee may, by an instrument in writing,
appoint an authenticating agent (the "Authenticating Agent") that shall be
authorized to act on behalf of the Trustee to authenticate Securities, including
Securities issued upon exchange, registration of transfer, partial redemption or
pursuant to Section 2.5. Securities authenticated by such Authenticating Agent
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee. Whenever
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reference is made in this Indenture to the authentication and delivery of
Securities by the Trustee or to the Trustee's Certificate of Authentication
(including, without limitation, in Section 2.3), such reference shall be deemed
to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a Certificate of Authentication executed on behalf of
the Trustee by such Authenticating Agent. Such Authenticating Agent shall at
all times be a corporation organized and doing business under the laws of the
United States of America or of any State or the District of Columbia,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $5,000,000 (determined as provided in
Section 8.8 with respect to the Trustee) and subject to supervision or
examination by Federal or State authority.
Any corporation into which any Authenticating Agent may be merged or
converted, or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency
business of any Authenticating Agent, shall continue to be the Authenticating
Agent with respect to all Securities for which it served as Authenticating
Agent without the execution or filing of any paper or any further act on the
part of the Trustee or such Authenticating Agent. Any Authenticating Agent may
at any time, and if it shall cease to be eligible shall, resign by giving
written notice of resignation to the Trustee and to the Company.
Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section 8.13, the Trustee
shall upon receipt of a Company Order appoint a successor Authenticating Agent
and the Company shall provide notice of such appointment to all Holders in the
manner and to the extent provided in Section 12.4. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
rights, powers, duties and responsibilities of its predecessor hereunder, with
like effect as if originally named as Authenticating Agent. The Company agrees
to pay to the Authenticating Agent from time to time reasonable compensation.
The Authenticating Agent for the Securities shall have no responsibility or
liability for any action taken by it as such at the direction of the Trustee.
Sections 8.2, 8.3, 8.4, 8.6, 8.8 and 9.3 shall be applicable to any
Authenticating Agent as if each reference to "Trustee" therein referred to the
Authenticating Agent.
ARTICLE NINE -- CONCERNING THE SECURITYHOLDERS
SECTION 9.1 Evidence of Action Taken by Securityholders. Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by a specified
percentage in principal amount of the Securityholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such specified percentage of Securityholders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee. Proof of execution of any instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Indenture and
(subject to Sections 8.1 and 8.2) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Article Nine.
SECTION 9.2 Proof of Execution of Instruments and of Holding of
Securities. Subject to Sections 8.1 and 8.2, the execution of any instrument
by a Securityholder or his agent or proxy may be proved in the following
manner:
(a) The fact and date of the execution by any Holder of
any instrument may be proved by the certificate of any notary public
or other officer of any jurisdiction authorized to take
acknowledgments of deeds or administer oaths that the person executing
such instruments acknowledged to him the execution thereof, or by an
affidavit of a witness to such execution sworn to before any such
notary or other such officer. Where such execution is by or on behalf
of any legal entity other than an individual, such certificate or
affidavit shall also constitute sufficient proof of the authority of
the person executing the same.
(b) The ownership of Securities shall be proved by the
Security register or by a certificate of the Security registrar.
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The Company may set a record date for purposes of determining the
identity of Holders of Securities entitled to vote or consent to any action
referred to in Section 9.1, which record date may be set at any time or from
time to time by notice to the Trustee, for any date or dates (in the case of
any adjournment or reconsideration), not more than 60 days nor less than five
days prior to the proposed date of such vote or consent, and thereafter,
notwithstanding any other provisions hereof, only Holders of Securities of
record on such record date shall be entitled to so vote or give such consent or
revoke such vote or comment.
SECTION 9.3 Holders to be Treated as Owners. The Company, the
Trustee and any agent of the Company or the Trustee may deem and treat the
person in whose name any Security shall be registered upon the Security
register as the absolute owner of such Security (whether or not such Security
shall be overdue and notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on account of the principal
of, premium (if any) and interest on such Security and for all other purposes,
and neither the Company or the Trustee nor any agent of the Company or the
Trustee shall be affected by any notice to the contrary.
SECTION 9.4 Securities Owned by the Company Deemed Not Outstanding.
In determining whether the Holders of the requisite aggregate principal amount
of Outstanding Securities have concurred in any direction, consent or waiver
under this Indenture, Securities that are owned by the Company or any other
obligor on the Securities with respect to which such determination is being
made or by any Affiliate of the Company or any other obligor on the Securities
with respect to which such determination is being made shall be disregarded and
deemed not to be Outstanding for the purpose of any such determination, except
that for the purpose of determining whether the Trustee shall be protected in
relying on any such direction, consent or waiver only Securities that the
Trustee knows are so owned shall be so disregarded. Securities so owned that
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company or any other obligor on the Securities. In case of a dispute as to
such right, the advice of counsel shall be full protection in respect of any
decision made by the Trustee in accordance with such advice. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an Officer's
Certificate listing and identifying all Securities, if any, known by the
Company, to be owned or held by or for the account of any of the above-
described persons; and, subject to Sections 8.1 and 8.2, the Trustee shall be
entitled to accept such Officer's Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Securities not listed therein
are Outstanding for the purpose of any such determination.
SECTION 9.5 Right of Revocation of Action Taken. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section 9.1,
of the taking of any action by the Holders of the percentage in aggregate
principal amount of the Securities specified in this Indenture in connection
with such action, any Holder of a Security the serial number of which is shown
by the evidence to be included among the serial numbers of the Securities the
Holders of which have consented to such action may, by filing written notice at
the Corporate Trust Office and upon proof of holding as provided in this
Article Nine, revoke such action so far as it concerns such Security. Except as
aforesaid, any such action taken by the Holder of any Security shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of such Security and of any Securities issued in exchange of substitution
therefor or on registration of transfer thereof, irrespective of whether or not
any notation in regard thereto is made upon any such Security. Any action taken
by the Holders of the percentage in aggregate principal amount of the
Securities specified in this Indenture in connection with such action shall be
conclusively binding upon the Company, the Trustee and the Holders of all the
Securities affected by such action.
ARTICLE TEN -- AMENDMENTS
SECTION 10.1 Amendments and Supplements Permitted Without Consent of
Holders.
(a) Notwithstanding Section 10.2, the Company and the
Trustee may amend or supplement this Indenture or the Securities
without the consent of any Holder to: (i) cure any ambiguity, correct
or supplement any provisions herein which may be inconsistent with any
other provision herein, or make any other provisions with respect to
matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture; provided that such
amendment does not adversely affect the rights of the Holders; (ii)
provide for
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uncertificated Securities in addition to or in place of certificated
Securities; (iii) evidence the succession of another corporation to
the Company and provide for the assumption by such successor of the
Company's obligations to the Holders hereunder and under the Notes as
permitted under Article Six; (iv) make any change that would (1)
provide any additional rights or benefits to Holders or (2) not
adversely affect the legal rights under the Indenture of any Holder;
or (v) comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA.
(b) Upon the Company's request, after receipt by the
Trustee of a resolution of the Board of Directors authorizing the
execution of any amended or supplemental indenture, and the documents
described in Section 10.6, the Trustee shall join with the Company in
the execution of any amended or supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be contained in any
such amended or supplemental indenture, but the Trustee shall not be
obligated to enter into an amended or supplemental indenture that
affects its own rights, duties or immunities under this Indenture or
otherwise.
SECTION 10.2 Amendments and Supplements Requiring Consent of Holders.
(a) Except as otherwise provided in Section 10.1(a) and
10.2(c), this Indenture and the Securities may be amended or
supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the then outstanding
Securities (including consents obtained in connection with a tender
offer or exchange offer for the Securities), and any existing Default
or Event of Default or non-compliance with any provision of the
Indenture or the Securities may be waived with the consent of Holders
of at least a majority in principal of the then outstanding Securities
(including consents obtained in connection with a tender offer or
exchange offer for the Securities).
(b) Upon the Company's request and after receipt by the
Trustee of a resolution of the Board of Directors authorizing the
execution of any supplemental indenture, evidence of the Holders'
consent, and the documents described in Section 10.6, the Trustee
shall join with the Company in the execution of such amended or
supplemental indenture unless such amended or supplemental indenture
affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental indenture.
(c) Without the consent of each Holder affected, no
amendment, supplement or waiver to this Indenture shall: (i) reduce
the principal amount of Securities whose Holders must consent to an
amendment, supplement or waiver of any provision of this Indenture on
the Securities, (ii) reduce the principal of or change the fixed
maturity of any Security, or alter the provisions with respect to the
redemption of the Securities in a manner adverse to the Holders, (iii)
reduce the rate of or change the time for payment of interest on any
Security, (iv) waive a Default or Event of Default in the payment of
principal of, or premium (if any) or interest on, the Securities
(except that Holders of at least a majority in aggregate principal
amount of the then outstanding Securities may (1) rescind an
acceleration of the Securities that resulted from a non-payment
default, and (2) waive the payment default that resulted from such
acceleration), (v) make any Security payable in money other than U.S.
Legal Tender, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders to
receive payments of principal of, or premium (if any) or interest on,
the Securities, (vii) waive a redemption payment with respect to any
Security, or (viii) make any change in Section 7.7, Section 7.10 or
this sentence.
(d) The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Persons entitled to
consent to any indenture supplemental hereto. If a record date is
fixed, the Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to consent to such
supplemental indenture, whether or not such Holders remain Holders
after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been
obtained prior to the date which is 90 days after such record date,
any such consent previously given shall automatically and without
further action by any Holder be cancelled and of no further effect.
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(e) It shall not be necessary for the consent of the
Holders under this Section 10.2 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such
consent approves the substance thereof. After an amendment, supplement
or waiver under this Section 10.2 becomes effective, the Company shall
mail to each Holder affected thereby a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to mail
such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such amended or supplemental
indenture or waiver.
SECTION 10.3 Compliance with TIA. Every amendment or supplement to
this Indenture or the Securities shall be set forth in an amended supplemental
indenture that complies with the TIA as then in effect.
SECTION 10.4 Revocation and Effect of Consents.
(a) Until an amendment, supplement or waiver becomes
effective, a consent to it by a Holder of a Security is a continuing
consent by the Holder and every subsequent holder of a Security or
portion of a Security that evidences the same Indebtedness as the
consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder
may revoke the consent as to its Security or portion of a Security if
the Trustee receives the notice of revocation before the date on which
the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Securities have consented
(and not theretofore revoked such consent) to the amendment or waiver.
(b) The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the holders of Securities
entitled to consent to any amendment or waiver. If a record date is
fixed, then notwithstanding the provisions of the immediately
preceding paragraph, those Persons who were holders of Securities at
such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment or waiver or
to revoke any consent previously given, whether or not such Persons
continue to be holders of Securities after such record date. No
consent shall be valid or effective for more than 90 days after such
record date.
(c) After an amendment or waiver becomes effective it
shall bind every Holder, unless it is of the type described in Section
10.2(c), in which case the amendment or waiver shall only bind each
Holder that consented to it and every subsequent holder of a Security
that evidences the same debt as the consenting Holder's Security.
SECTION 10.5 Notation on or Exchange of Securities. The Trustee may
place an appropriate notation about an amendment, supplement or waiver on any
Security thereafter authenticated. The Company in exchange for all Securities
may issue and the Trustee shall authenticate new Securities that reflect the
amendment, supplement or waiver. Failure to make the appropriate notation or
issue a new Security shall not affect the validity and effect of such amendment,
supplement or waiver.
SECTION 10.6 Trustee Protected. The Trustee shall sign any amendment
or supplemental indenture authorized pursuant to this Article Ten if the
amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing such amendment or supplemental indenture, the Trustee shall be
entitled to receive and, subject to Section 8.1, shall be fully protected in
relying upon, an Officers' Certificate and Opinion of Counsel as conclusive
evidence that such amendment or supplemental indenture is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company in accordance with its terms. The
Company may not sign an amendment or supplemental indenture until the Board of
Directors approves it.
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ARTICLE ELEVEN -- SATISFACTION AND DISCHARGE
OF INDENTURE; UNCLAIMED MONIES
SECTION 11.1 Satisfaction and Discharge of Indenture.
(A) Except as otherwise provided in this Section 11.1,
the Company may terminate its obligations under the Securities and this
Indenture with respect to the Securities if:
(i) all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities that have been
replaced or Securities that are paid pursuant to Section 4.1 of this
Indenture or Securities for whose payment money or securities have
theretofore been held in trust and thereafter repaid to the Company,
as provided in Section 11.4 of this Indenture) have been delivered to
the Trustee for cancellation and the Company has paid all sums payable
by it hereunder; or
(ii) (A) the Securities mature within one year or all of them
are to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B)
the Company irrevocably deposits in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely
for the benefit of the Holders for that purpose, money or U.S.
Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal and interest on the Securities to maturity or redemption, as
the case may be, and to pay all other sums payable by it hereunder,
(C) no Event of Default with respect to the Securities shall have
occurred and be continuing on the date of such deposit, (D) such
deposit will not result in a breach or violation of, or constitute a
default under, this Indenture or any other agreement or instrument to
which the Company is a party or by which either is bound and (E) the
Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations
under Section 8.6 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 4.1, 4.2, 4.3, 4.4,
8.6, 8.9, 11.2, 11.4 and 11.5 of this Indenture shall survive until the
Securities are no longer outstanding. Thereafter, only the Company's
obligations in Section 8.6 and 11.2 of this Indenture shall survive. After any
such irrevocable deposit, the Trustee upon request shall acknowledge in writing
the discharge of the Company's obligations under the Securities and this
Indenture with respect to the Securities except for those surviving obligations
specified above.
(B) The Company will be deemed to have paid and will be
discharged from any and all obligations in respect of the Securities on the
123rd day after the deposit referred to in clause (d) of this paragraph, and
the provisions of this Indenture will no longer be in effect with respect to
the Securities, except as to (i) rights of registration of transfer and
exchange, (ii) substitution of apparently mutilated, defaced, destroyed, lost
or stolen Securities, (iii) rights of Holders to receive payments of principal
thereof and interest thereon, (iv) the Company's obligations under Section
4.1, (v) the rights, obligations and immunities of the Trustee hereunder, and
(vi) the rights of the Holders of Securities as beneficiaries of this Indenture
with respect to the property so deposited with the Trustee payable to all or
any of them, and the Trustee, at the expense of the Company, shall at the
Company's request execute proper instruments acknowledging the same; provided
that the following conditions shall have been satisfied:
(a) with reference to this Section 11.1(B), the Company
has irrevocably deposited or caused to be irrevocably deposited with
the Trustee (or another trustee satisfying the requirements of Section
8.8) and conveyed all right, title and interest for the benefit of the
Holders of the Securities, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, in and to (1) money in an amount, (2) U.S. Government
Obligations that, through the payment of interest and principal in
respect thereof in accordance with their terms, will provide, not
later than one day before the due date of any payment referred to in
this clause (a), money in an amount, or (3) a combination thereof in
an amount sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification
thereof delivered
38
<PAGE> 46
to the Trustee, to pay and discharge, without consideration of the
reinvestment of such interest and after payment of all federal, state
and local taxes or other charges and assessments in respect thereof
payable by the Trustee, the principal of, premium, if any, and
interest on the outstanding Securities on the Stated Maturity or on
the applicable redemption date; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds
of such U.S. Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Securities;
(b) such deposit will not result in a breach or violation
of, or constitute a default under, this Indenture or any other
agreement or instrument to which the Company is a party or by which
either is bound;
(c) the Company shall have delivered to the Trustee (1)
either (x) a ruling directed to the Trustee received from the Internal
Revenue Service to the effect that the Holders of Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of its option under this Section
11.1(B) and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the
case if such option had not been exercised or (y) an Opinion of
Counsel to the same effect as the ruling described in clause (x) above
and (2) an Opinion of Counsel to the effect that (w) the creation of
the defeasance trust does not violate the Investment Company Act of
1940, (x) the Holders have a valid first-priority security interest in
the trust funds and (y) after the passage of 123 days following the
deposit (except, with respect to any trust funds for the account of
any Holder who may be deemed to be an "insider" for purposes of the
United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of
the United States Bankruptcy Code or Section 15 of the New York Debtor
and Creditor Law in a case commenced by or against the Company under
either such statute, and either (I) the trust funds will no longer
remain the property of the Company (and therefore will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally) or (II) if a
court were to rule under any such law in any case or proceeding that
the trust funds remained property of the Company, (a) assuming such
trust funds remained in the possession of the Trustee prior to such
court ruling to the extent not paid to the Holders, the Trustee will
hold, for the benefit of the Holders, a valid and perfected security
interest in such trust funds that is not avoidable in bankruptcy or
otherwise except for the effect of Section 552(b) of the United States
Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute and (b) the Holders will be
entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used in such case or proceeding;
(d) if the Securities are then listed on a national
securities exchange, the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that such deposit, defeasance and
discharge will not cause the Securities to be delisted; and
(e) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 11.1(B) have been complied with.
Notwithstanding the foregoing clause (a), prior to the end of the
123-day period referenced to in clause (c)(2)(y) above, none of the Company's
obligations under this Indenture shall be discharged. Subsequent to the end of
such 123-day period with respect to this Section 11.1, the Company's
obligations in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 4.1, 4.2, 4.3, 4.4, 8.6, 8.9,
11.2, 11.4 and 11.5 shall survive until the Securities are no longer
outstanding. Thereafter, only the Company's obligations in Section 8.6 and 11.2
shall survive. If and when a ruling from the Internal Revenue Service or an
Opinion of Counsel referred to in clause (d)(1) above is able to be provided
specifically without regard to, and not in reliance upon, the continuance of
the Company's obligations under Section 4.1, then the Company's obligations
under such Section 4.1 shall cease upon delivery to the Trustee of such ruling
or Opinion of Counsel and compliance with the other conditions precedent
provided for herein relating to the defeasance contemplated by this Section
11.1.
After any such irrevocable deposit, the Trustee upon request, shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture with respect to the Securities except for those
surviving obligations in the immediately preceding paragraph.
39
<PAGE> 47
(C) The Company may omit to comply with any term,
provision or condition set forth in clause (d) of Section 6.1 of this
Indenture, the covenants described in Sections 4.11, 4.13, 4.14, 4.15 and 4.18
of this Indenture and clause (c) of Section 7.1 of this Indenture with respect
to such covenants, and clauses (d), (e) and (h) of Section 7.1 shall be deemed
not to be Events of Default, in each case with respect to the outstanding
Securities if:
(a) with reference to this Section 11.1(C), the Company
has irrevocably deposited or caused to be irrevocably deposited with
the Trustee (or another trustee satisfying the requirements of Section
8.8) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable
trust agreement in form and substance satisfactory to the
Trustee as trust funds in trust, specifically pledged to the Trustee
as security for payment of the principal of, premium, if any, and
interest, if any, on the Securities for, and dedicated solely to, the
benefit of the Holders of the Securities, in and to (1) money in an
amount, (2) U.S. Government Obligations that, through the payment of
interest and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (a), money in an amount or (3) a
combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
and discharge, without consideration of the reinvestment of such
interest and after payment of all federal, state and local taxes or
other charges and assessments in respect thereof payable by the
Trustee, the principal of, premium, if any, and interest on the
outstanding Securities on the Stated Maturity or on the applicable
redemption date; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of such principal, premium, if any, and
interest with respect to the Securities;
(b) such deposit will not result in a breach or violation
of, or constitute a default under, this Indenture or any other
agreement or instrument to which the Company is a party or by which it
is bound;
(c) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit;
(d) the Company has delivered to the Trustee an Opinion
of Counsel to the effect that (1) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (2) the Holders
of the Securities have a valid first-priority security interest in
the trust funds, (3) the Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit and
defeasance of certain obligations and will be subject to federal
income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had
not occurred and (4) after the passage of 123 days following the
deposit (except, with respect to any trust funds for the account of
any Holder who may be deemed to be an "insider" for purposes of the
United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of
the United States Bankruptcy Code or Section 15 of the New York Debtor
and Creditor Law in a case commenced by or against the Company under
either such statute, and either (x) the trust funds will no longer
remain the property of the Company (and therefore will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally) or (y) if a
court were to rule under any such law in any case or proceeding that
the trust funds remained property of the Company, and (i) assuming
such trust funds remained in the possession of the Trustee prior to
such court ruling to the extent not paid to the Holders the Trustee
will hold, for the benefit of the Holders, a valid and perfected
security interest in such trustee funds that is not avoidable in
bankruptcy or otherwise except for the effect of Section 552(b) of the
United States Bankruptcy Code on interest on the trust funds accruing
after the commencement of a case under such statute and (ii) the
Holders will be entitled to receive adequate protection of their
interests in such trust funds if such trust funds are used in such
case or proceeding;
(e) if the Securities are then listed on a national
securities exchange, the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that such deposit, defeasance and
discharge will not cause the Securities to be delisted; and
(f) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 11.1 have been complied with.
40
<PAGE> 48
SECTION 11.2 Application by Trustee of Funds Deposited for Payment of
Securities; Other Miscellaneous Provisions. Subject to Section 11.4, all monies
deposited with the Trustee (or other trustee) pursuant to Section 11.3 shall be
held in trust and applied by it to the payment, either directly or through any
Paying Agent (including the Company or the guarantor acting as Paying Agent), to
the Holders of the Securities for the payment or redemption of which such monies
have been deposited with the Trustee, of all sums due and to become due thereon
for principal, premium, if any, and interest if any; but such money need not be
segregated from other funds except to the extent required by law.
If the Trustee or any Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 11.1 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such applications, the
Company's obligations under this Indenture and the Securities related thereto
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 11.1(B)(a) or 11.1(C)(a) until such time as the Trustee or any Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with Section 11.1; provided, however, that if the Company has made
any payment of interest on or principal of and premium (if any) on the
Securities because of the reinstatement of its obligations hereunder, the
Company shall be subrogated to the rights of the holders of the Securities to
receive such payment from the money or U.S. Government obligations held by the
Trustee for such purpose.
SECTION 11.3 Repayment of Monies Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to
Securities, all monies then held by any Paying Agent under the provisions of
this Indenture with respect to such Securities shall, upon demand of the
Company, be repaid to the Company or paid to the Trustee and thereupon such
Paying Agent shall be released from all further liability with respect to such
monies.
SECTION 11.4 Return of Monies Held by Trustee and Paying Agent
Unclaimed for Two Years. Any monies deposited with or paid to the Trustee or
any Paying Agent for the payment of the principal of, premium (if any) or
interest on any Security and not applied but remaining unclaimed for two years
after the date upon which such principal or interest shall have become due and
payable shall, upon the written request of the Company and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Company by the Trustee or such Paying Agent, and
the Holder of the Securities shall, unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property laws,
thereafter look only to the Company for any payment that such Holder may be
entitled to collect, and all liability of the Trustee or any Paying Agent with
respect to such monies shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment
with respect to monies deposited with it for any payment, may at the expense of
the Company, mail by first-class mail to Holders of such Securities at their
addresses as they shall appear on the security register notice, that such monies
remain and that, after a date specified therein, which shall not be less than
thirty days from the date of such mailing, any unclaimed balance of such money
then remaining will be, repaid to the Company.
SECTION 11.5 Indemnity for U.S. Government Obligations. The Company
shall pay and indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against the U.S. Government Obligations deposited by the Company
pursuant to Section 11.1 or the principal or interest received in respect of
such obligations.
ARTICLE TWELVE -- MISCELLANEOUS PROVISIONS
SECTION 12.1 Incorporators, Stockholders, Officers and Directors of the
Company Exempt from Individual Liability. No director, officer, employee,
incorporator or shareholder of the Company or the Trustee shall have any
liability for any obligation of the Company under this Indenture or the
Securities or for any claim based on, in respect of, or by reason of, any such
obligation or the creation of any such obligation. Each Holder by accepting a
Security waives and releases such Persons from all such liability and such
waiver and release is part of the consideration for the issuance of the
Securities.
SECTION 12.2 Provisions of Indenture for the Sole Benefit of Parties
and Holders of Securities. Nothing in this Indenture or in the Securities
expressed or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and their successors and the Holders
of the Securities any legal or equitable right, remedy or claim under this
Indenture or under any covenant or provision herein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
their successors and of the Holders of the Securities.
41
<PAGE> 49
SECTION 12.3 Successors and Assigns of the Company Bound by Indenture.
All the covenants, stipulations, promises and agreements in this Indenture
contained by or on behalf of the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 12.4 Notices. Any notice, communication or demand that by any
provision of this Indenture is required or permitted to be given or served may
be given or served by being personally delivered, deposited postage prepaid,
first-class mail, return receipt requested or delivered by telecopier or
overnight air courier guaranteeing next day delivery addressed if to the Company
to: 4000 East Sky Harbor Blvd., Phoenix, Arizona 85034; if to the Trustee to:
American Bank National Association, 101 East Fifth Avenue, St. Paul, Minnesota
55101, Attention: Corporate Trust Department. The Company or the Trustee by
notice to the other may designate additional or different addresses for
subsequent notices or communications.
Where this Indenture provides for notice to Holders of Registered
Securities, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder entitled thereto, at his last address as it appears in the Security
register. In any case where notice to such Holders is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
each filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 12.5 Officers' Certificates and Opinions of Counsel; Statements
to be Contained Therein. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or
covenant provided for in this Indenture shall include (a) a statement that the
person making such certificate or opinion has read such covenant or condition,
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based, (c) a statement that, in the opinion of such
person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with and (d) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon
which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous. Any certificate, statement or opinion of counsel may be based,
insofar as it relates to factual matters, information with respect to which is
in the possession of the Company, upon the certificate, statement or opinion of
or representations by an officer or officers of the Company unless such counsel
knows that the certificate, statement or opinion or representations with
respect to the matters upon which his certificate, statement or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as
the case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
42
<PAGE> 50
Any certificate or opinion of any independent firm of public
accountants filed with and directed to the Trustee shall contain a statement
that such firm is independent.
SECTION 12.6 Payments Due on Saturdays, Sundays and Holidays. If the
date of maturity of interest on or principal of the Securities the date fixed
for redemption or repayment of any Security shall not be a Business Day, then
payment of interest or principal need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period after such date.
SECTION 12.7 Conflict of Any Provision of Indenture with Trust
Indenture Act of 1939. If and to the extent that any provision of this
Indenture limits, qualifies or conflicts with the duties imposed by, or with
another provision (an "incorporated provision") included in this Indenture by
operation of, Sections 310 to 316, inclusive, of the Trust Indenture Act of
1939, such imposed duties or incorporated provision shall control.
SECTION 12.8 New York Law to Govern. This Indenture and each Security,
shall be deemed to be a contract under the law of the State of New York, and for
all purposes shall be construed in accordance with the law of such State, except
as may otherwise be required by mandatory provisions of law.
SECTION 12.9 Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 12.10 Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of August __, 1995.
AMERICA WEST AIRLINES, INC.
By:
----------------------------------
Title:
-------------------------------
Attest:
By:
-------------------------------
Title:
----------------------------
43
<PAGE> 51
AMERICAN BANK NATIONAL ASSOCIATION
By:
----------------------------------
Title:
-------------------------------
Attest:
By:
-------------------------------
Title:
----------------------------
44
<PAGE> 52
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __________ of ____________________, 1995, before me personally
came ______________________________, to me personally known, who, being by me
duly sworn, did depose and say that he resides at______________________________;
that he is the _____________________________ of America West Airlines, Inc., one
of the corporations described in and which executed the above instrument; that
he knows the corporate seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
(NOTARIAL SEAL)
-------------------------------------------
Notary Public
STATE OF MINNESOTA )
) ss.:
COUNTY OF RAMSEY )
On this __________ day of ____________________, 1995, before me
personally came ______________________________, to me personally known who,
being by me duly sworn, did depose and say that he resides at
______________________________________, and ______________________________, to
me personally known who, being by me duly sworn, did depose and say that he
resides at ______________________________________: that they are the
_____________________________ and ___________________________, respectively, of
American Bank National Association, one of the corporations described in and
which executed the above instrument; that they know the corporate seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was affixed by authority of the Board of Directors of said corporation;
and that they signed their names thereto by like authority.
(NOTARIAL SEAL)
-------------------------------------------
Notary Public
45
<PAGE> 53
EXHIBIT A
[FORM OF FACE OF SECURITY]
AMERICA WEST AIRLINES, INC.
10 3/4% SENIOR UNSECURED NOTES DUE SEPTEMBER 1, 2005
No. R- $____________________
America West Airlines, Inc., a Delaware corporation (the "Company"),
which term includes any successor corporation, for value received, promises to
pay ____________________, or registered assigns, the principal sum of
____________________ on September 1, 2005.
Interest Payment Dates: March 1 and September 1, commencing March 1,
1996.
Record Dates: February 15 and August 15.
This Security is continued on the reverse hereof and the additional
provisions set forth therein shall for all purposes have the same effect as if
set forth at this place.
46
<PAGE> 54
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed to, or imprinted on, this Security.
Dated: AMERICA WEST AIRLINES, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Attest:
-----------------------------------
Assistant Secretary
[Seal]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within mentioned
Indenture.
AMERICAN BANK NATIONAL ASSOCIATION,
as trustee
By:
-------------------------------
Authorized Signature
47
<PAGE> 55
AMERICA WEST AIRLINES, INC.
[FORM OF REVERSE OF SECURITY]
10 3/4% SENIOR UNSECURED NOTES DUE SEPTEMBER 1, 2005
1. Interest.
America West Airlines, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the unpaid principal amount of this Security to
Persons who are registered Holders at the close of business on the relevant
Record Date at the rate of 10 3/4% per annum.
Interest shall be computed on the basis of a 360-day year of twelve
30-day months and shall be payable semi-annually on March 1 and September 1 of
each year commencing March 1, 1996, or if any such day is not a Business Day,
on the next succeeding Business Day. Interest will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance. Interest shall accrue with respect to principal on this
Security to, but not including, the date of repayment of such principal;
provided, however, that if payment to the Paying Agent occurs after 1:30 p.m.,
New York City time, interest shall be deemed to accrue until the following
Business Day.
To the extent lawful, the Company shall pay interest on overdue
principal, premium (if any) and interest at the rate of interest borne by this
Security. On each Interest Payment Date, interest on the Securities will be
paid for the immediately preceding accrual period.
2. Method of Payment.
The Company will pay interest on the Securities (except defaulted
interest) to the persons who are registered Holders at the close of business on
the Record Date next preceding the applicable Interest Payment Date. If the
Company defaults in the payment of the interest due on such Interest Payment
Date, such defaulted interest will be paid to the Persons who are registered
Holders of Securities at the close of business on a subsequent record date
established by notice given not less than 15 days prior to such subsequent
record date. The Company will pay the principal of this Security to the Holder
that surrenders this Security to a Paying Agent on or after September 1, 2005
or, in the event of a redemption of this Security, on or after the Redemption
Date, as described below. The Company will pay principal and interest in U.S.
Legal Tender by Federal funds bank wire transfer or (in the case of payment of
interest) by check. If this Security is a Global Security, all payments in
respect of this Security will be made to the Depository or its nominee in
immediately available funds in accordance with customary procedures established
from time to time by the Depository.
3. Paying Agent and Registrar.
Initially, American Bank National Association (the "Trustee"), will
act as Paying Agent and registrar for the Securities. The Company may change
any Paying Agent, co-Paying Agent, registrar or co-registrar without notice.
Except as provided in the Indenture, the Company or any of its Subsidiaries
may, subject to certain exceptions, act as Paying Agent, registrar or co-
registrar.
4. Indenture.
The Company issued this Security under an Indenture dated as of August
__, 1995 (the "Indenture") between the Company and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code Sections 77aaa -- 77bbbb). The Securities are subject
to all such terms, and Holders of the Securities are referred to the
Indenture and said Act for a statement of such terms. In the event of any
conflict between this Security and the Indenture, the Indenture shall govern.
The Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $75,000,000.
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<PAGE> 56
5. Optional Redemption.
The Securities further may be redeemed on and after September 1, 2000,
at any time in whole or from time to time in part, at a Redemption Price equal
to the applicable percentage of the aggregate principal amount of the
Securities so to be redeemed, set forth below, plus accrued and unpaid interest
thereon to the Redemption Date.
<TABLE>
<CAPTION>
IF REDEEMED DURING THE
12 MONTHS BEGINNING PERCENTAGE OF
SEPTEMBER 1, PRINCIPAL AMOUNT
-------------------- ----------------
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.375%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.583%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.792%
2003 and thereafter . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
If the Redemption Date is subsequent to a Record Date with respect to
any Interest Payment Date and on or prior to such Interest Payment Date, then
such accrued interest, if any, will be paid to the person in whose name such
Securities are registered at the close of business on such Record Date and no
other interest will be payable thereon.
6. Notice of Redemption.
Notice of Redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may
be redeemed in part, but not in denominations of less than $1,000.
From and after any Redemption Date, if monies for the redemption of
the Securities called for redemption shall have been made available for
redemption on such Redemption Date, the Securities called for redemption will
cease to bear interest and the only right of the Holders of such Securities
will be to receive payment of the Redemption Price.
7. Put Provisions.
As provided in and subject to the terms of the Indenture, upon a
Change of Control, any Holder will have the right to cause the Company to
repurchase all or any part of the Securities of such Holder at a repurchase
price equal to 101% of the principal amount of the Securities to be repurchased
plus accrued and unpaid interest, if any, to the date of repurchase.
8. Denominations; Transfer; Exchange.
The Securities are in fully registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Company need not register
the transfer of or exchange any Securities selected for redemption. Also, the
Company need not issue, exchange or register the transfer of any Securities for
a period of 15 days prior to the selection of the Securities to be redeemed.
In accordance with the provisions of the Indenture and subject to
certain limitations therein set forth, an owner of a beneficial interest in a
Global Security may request a Security in certificated form, in exchange in
whole or in part, as the case may be, for such beneficial owner's interest in
the Global Security. In any such instance, an owner of a beneficial interest in
a Global Security will be entitled to physical delivery in certificated form of
Securities in authorized denominations equal in principal amount to such
beneficial interest and to have such Securities registered in its name.
9. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
49
<PAGE> 57
With respect to Global Securities, the Depository shall grant proxies
and otherwise authorize Holders of Global Securities to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action which a Holder of a Security is entitled to give or take under the
Indenture.
10. Unclaimed Money.
If money deposited with or paid to the Trustee or any Paying Agent for
the payment of principal, premium (if any) or interest on the Securities
remains unclaimed for 2 years, the Trustee and any such Paying Agent will pay
the money back to the Company at its request. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits with the Trustee money or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including the financial
covenants, but excluding certain obligations, including without limitation its
obligation to pay the principal of or interest on the Securities).
12. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the outstanding Securities and certain
existing Defaults or Events of Default or compliance with any provisions may be
waived with the consent of the Holders of at least a majority in aggregate
principal amount of the outstanding Securities. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, correct or supplement
any provision which may be inconsistent with any other provision, or make any
other provisions with respect to matters or questions arising under the
Indenture which shall not be inconsistent with the provisions of the Indenture
(provided such amendment or supplement does not adversely affect the rights of
any of the Holders), provide for any additional rights or benefits to Holders
or make any change that does not adversely affect the rights of any Holder.
13. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to, among other things, make payments in respect
of its Capital Stock or certain Indebtedness, merge or consolidate with any
other person or sell, lease, transfer or otherwise dispose of all or
substantially all of its properties or assets and undertake certain
transactions with Affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually (and in
certain instances, more frequently) report to the Trustee on compliance with
such limitations.
14. Asset Sales.
As more fully set forth in the Indenture, the Indenture provides that
the Company must apply certain proceeds resulting from certain Asset Sales to
the repurchase of Securities under certain circumstances in an Excess Proceeds
Offer at a purchase price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon to the date of purchase. A Holder of
Securities may tender or refrain from tendering in any Excess Proceeds Offer
all or any portion of its Securities at its discretion by completing the form
entitled "Option of Holder to Elect Purchase" appearing on the reverse side of
this Security.
15. Successors.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
50
<PAGE> 58
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, subject to certain
exceptions, the Trustee or the Holders of at least 25% in principal amount of
Securities may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in principal amount of the Securities then outstanding
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold notice in certain circumstances.
17. Trustee Dealings With Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligation of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration of the issue for the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the face of this Security.
20. Abbreviation.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TENANT (=
tenants by the entireties), TEN (= joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
21. Indenture.
The Holder hereof, by accepting this Security, agrees to be bound by
all of the terms and provisions of the Indenture applicable to such Holder.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
America West Airlines, Inc., 4000 East Sky Harbor Blvd., Phoenix, Arizona
85034.
51
<PAGE> 59
[FORM OF ASSIGNMENT]
I or we assign and transfer this Security to
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert social security or other
identifying number of assignee
----------------------------------------------------
and irrevocably appoint ____________________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
Dated Signed
-------------------------- -------------------------------------
--------------------------------------------------------------------------
(Sign exactly as name appears on the other side of this Security)
Signature Guarantee:
-----------------------------------
52
<PAGE> 60
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Security purchased by the Company pursuant
to Section 4.11 or 4.15 of the Indenture, check the box: / /
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 4.11 or 4.15 of the Indenture, state the amount (in
original principal amount):
$ .
-------------------------
Date: Your Signature:
----------------------------- ---------------------------
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee:
--------------
53
<PAGE> 1
Exhibit 5.1
August 7, 1995
Board of Directors
America West Airlines, Inc.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
Gentlemen:
We have acted as counsel for America West Airlines, Inc. (the
"Company") in connection with the Company's Registration Statement on Form S-4
(the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), relating to $75,000,000 principal amount of 10 3/4% Senior Unsecured
Notes due 2005 (the "New Notes") to be issued by the Company in exchange for
11 1/4% Senior Unsecured Notes due 2001.
In our capacity as counsel for the Company in connection with the
registration by the Company and proposed issuance of the securities described
herein, we have examined the charter and bylaws of the Company, and have
examined the originals, or copies otherwise identified, of corporate records of
the Company, as furnished to us by the Company, certificates, advices and
assurances of public officials and of representatives of the Company, statutes
and other instruments and documents, as a basis for the opinions hereinafter
expressed. In giving such opinions, we have relied upon certificates of
officers of the Company with respect to the accuracy of the material factual
matters contained in such certificates.
We have assumed that all signatures on all documents examined by
us are genuine, that all documents submitted to us as originals are authentic,
that all documents submitted to us as copies are true and correct copies of the
originals thereof and that all information submitted to us was accurate and
complete.
Based upon our examination as aforesaid, and subject to the
assumptions and limitations herein set forth, we are of the opinion that the
New Notes have been duly authorized by all necessary corporate action on the
part of the Company and, upon the issuance of the New Notes pursuant to and in
accordance with the Indenture, the New Notes will constitute valid and binding
obligations of the Company enforceable in accordance with their terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws and by principles of equity.
This opinion is limited in all respects to the corporate law of
the State of Delaware, the laws of the State of New York and of the United
States of America. To the extent any of such opinions relate to the corporate
law of the State of Delaware,
<PAGE> 2
Board of Directors
America West Airlines, Inc.
August 7, 1995
Page 2
we have formed our opinion based solely upon a reading of the Delaware General
Corporation Law. We express no opinion with respect to the laws or regulations
of other jurisdictions applicable by virtue of conflict of laws or other
principles.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and to the use of our
name in the Registration Statement under the caption "Legal Matters."
Very truly yours,
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders
America West Airlines, Inc.
Under date of February 24, 1995, we reported on the balance sheets of
America West Airlines, Inc. as of December 31, 1994 and 1993, and the related
statements of operations, cash flows and stockholders' equity (deficiency) for
the period August 26, 1994 to December 31, 1994, the period January 1, 1994 to
August 25, 1994 and for each of the years in the two-year period ended December
31, 1993, which are included herein.
We consent to the use of our reports included herein and to the reference
to our firm under the headings "Summary Financial Data", "Selected Financial
Data" and "Experts" in the prospectus.
The audit report on the financial statements of America West Airlines, Inc.
referred to above contains an explanatory paragraph that states that as
discussed in Notes 1 and 2 to the financial statements, on August 25, 1994,
America West Airlines, Inc. emerged from bankruptcy. The financial statements of
the Reorganized Company reflect the impact of adjustments to reflect the fair
value of assets and liabilities under fresh start reporting. As a result, the
financial statements of the Reorganized Company are presented on a different
basis than those of the Predecessor Company and, therefore, are not comparable
in all respects.
KPMG Peat Marwick LLP
Phoenix, Arizona
August 7, 1995
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------
AMERICAN BANK NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 41-0122055
(STATE OF INCORPORATION IF NOT (I.R.S. EMPLOYER IDENTIFICATION NO.)
A NATIONAL BANK)
101 EAST FIFTH STREET 55101
CORPORATE TRUST DEPARTMENT (ZIP CODE)
ST. PAUL, MINNESOTA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
AMERICAN BANK NATIONAL ASSOCIATION
101 EAST FIFTH STREET
ST. PAUL, MINNESOTA 55101
(612) 298-6280
(EXACT NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
AMERICA WEST AIRLINES, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 86-0418245
(STATE OR OTHER JURISDICTION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
4000 EAST SKY HARBOR BOULEVARD 85034
PHOENIX, ARIZONA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
10 3/4% SENIOR UNSECURED NOTES DUE 2005
(TITLE OF THE INDENTURE SECURITIES)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
Comptroller of the Currency, Treasury Department, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington,
D.C.
(B) THE TRUSTEE IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
GENERAL
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR OR ANY UNDERWRITER FOR THE OBLIGOR IS AN
AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
None.
See Note following Item 16.
ITEMS 3-15 ARE NOT APPLICABLE BECAUSE TO THE BEST OF THE TRUSTEE'S KNOWLEDGE THE
OBLIGOR IS NOT IN DEFAULT UNDER ANY INDENTURE FOR WHICH THE TRUSTEE ACTS AS
TRUSTEE.
ITEM 16. LIST OF EXHIBITS.
LISTED BELOW ARE ALL THE EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY AND QUALIFICATION.
Such exhibits are incorporated by reference from previous filing
#33-79088.
Exhibit 1. Copy of Articles of Association of the trustee now in effect.
Exhibit 2. a. A copy of the certificate of the Comptroller of Currency
dated June 1, 1965, authorizing American Bank National
Association to act as fiduciary.
b. A copy of the certificate of authority of the trustee to
commence business issued June 9, 1903, by the Comptroller of
the Currency to American Bank National Association of St.
Paul.
Exhibit 3. A copy of the authorization of the trustee to exercise corporate
trust powers issued by the Federal Reserve Board.
Exhibit 4. Copy of By-laws of the trustee as now in effect.
Exhibit 5. Copy of each Indenture referred to in Item 4. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the
Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority.
1
<PAGE> 3
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligor, or affiliates, are based
upon information furnished to the Trustee by the obligor. While the Trustee has
no reason to doubt the accuracy of any such information it cannot accept any
responsibility therefor.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE TRUSTEE, A
NATIONAL BANKING ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED
STATES, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY AND QUALIFICATION TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, AND ITS SEAL
TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE CITY OF SAINT PAUL AND STATE OF
MINNESOTA ON THE 4TH DAY OF AUGUST, 1995.
AMERICAN BANK NATIONAL
ASSOCIATION
By /s/ FRANK P. LESLIE III
---------------------------------
Frank P. Leslie III
Assistant Vice President
2
<PAGE> 4
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, American Bank National Association, hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: August 4, 1995
AMERICAN BANK NATIONAL
ASSOCIATION
By /s/ FRANK P. LESLIE III
----------------------------------
Frank P. Leslie III
Assistant Vice President
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO PURCHASE
$48,000,000 PRINCIPAL AMOUNT OF
11 1/4% SENIOR UNSECURED NOTES DUE 2001
AND
OFFER TO EXCHANGE
$75,000,000 PRINCIPAL AMOUNT OF
10 3/4% SENIOR UNSECURED NOTES DUE 2005
FOR
$75,000,000 PRINCIPAL AMOUNT OF
11 1/4% SENIOR UNSECURED NOTES DUE 2001
AMERICA WEST AIRLINES, INC.
PURSUANT TO THE PROSPECTUS DATED AUGUST 8, 1995
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON AUGUST 11, 1995,
UNLESS THE OFFER IS EXTENDED.
To: American Bank National Association (the "Exchange Agent")
Deliver to:
101 East Fifth Street
St. Paul, Minnesota 55101
Attn: Corporate Trust Department
Mr. Frank P. Leslie
Delivery of this instrument to an address or transmission to a facsimile
number other than as set forth above does not constitute a valid delivery. The
method of delivery of all documents, including certificates, is at the risk of
the Holder. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned acknowledges that he or she has received the Prospectus
dated August 8, 1995 (the "Prospectus") of America West Airlines, Inc. (the
"Company") and this Letter of Transmittal and the instructions hereto (this
"Letter of Transmittal"), which together constitute the Company's offer, upon
the terms and subject to the conditions set forth in the Prospectus and this
Letter of Transmittal, (i) to purchase an aggregate of $48,000,000 principal
amount of the Company's outstanding 11 1/4% Senior Unsecured Notes due 2001 (the
"Existing Notes") for cash equal to the face amount thereof plus accrued and
unpaid interest to the date of purchase (the "Purchase Offer") and (ii) to
exchange an aggregate of $75,000,000 principal amount of its 10 3/4% Senior
Unsecured Notes due 2005 (the "New Notes") for $75,000,000 principal amount of
Existing Notes (the "Exchange Offer" and, collectively with the Purchase Offer,
the "Offer").
In order for either the Purchase Offer or the Exchange Offer to be
consummated, all of the Existing Notes must be validly tendered as provided
herein and not withdrawn prior to 5:00 p.m., New York City time, on the date the
Offer expires, which will be Friday, August 11, 1995, unless extended (the
"Expiration Date"). The Offer is subject to certain conditions that may be
waived by the Company. To accept the Offer a holder must tender all of the
Existing Notes held by such holder and must tender such notes with respect to
both the Purchase Offer and the Exchange Offer. Capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be used if certificates representing
Existing Notes are to be physically delivered to the Exchange Agent herewith by
Holders. Delivery of this Letter of Transmittal and any other required documents
must be made to the Exchange Agent. Holders who wish to tender their Existing
Notes must complete this Letter of Transmittal in its entirety and comply with
all its terms.
THE INSTRUCTIONS INCLUDED IN THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. SEE
INSTRUCTION 12 HEREIN.
<PAGE> 2
List below the Existing Notes to which this Letter of Transmittal relates.
Holders must tender all of their Existing Notes to constitute a valid tender.
--------------------------------------------------------------------------------
DESCRIPTION OF 11 1/4% SENIOR UNSECURED NOTES DUE 2001
--------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK) CERTIFICATE NUMBER(S)
--------------------------------------------------------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
--------------------------------------------------------------------------------
SPECIAL REGISTRATION
INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for New Notes issued in exchange for
Existing Notes accepted for exchange, are to be issued in the name of someone
other than the undersigned.
Issue certificate(s) to:
Name
------------------------------------------
(Please Print)
Address:
------------------------------------------
------------------------------------------
(Include Zip Code)
------------------------------------------
(Tax Identification or Social Security No.)
________________________________________________________________________________
SPECIAL DELIVERY
INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for New Notes issued in exchange for
Existing Notes accepted for exchange, are to be delivered to someone other than
the undersigned.
Issue certificate(s) to:
Name
------------------------------------------
(Please Print)
Address:
------------------------------------------
------------------------------------------
(Include Zip Code)
------------------------------------------
(Tax Identification or Social Security No.)
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
THE CERTIFICATE(S) FOR EXISTING NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Offer, the undersigned hereby
tenders to America West Airlines, Inc. (the "Company") all of the Existing Notes
held by the undersigned.
Subject to and effective upon the acceptance by the Company of the Existing
Notes tendered in accordance with this Letter of Transmittal, the undersigned
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to the Existing Notes tendered hereby. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of the Company and as Trustee and Registrar under the Existing Note
Indenture and the New Note Indenture with respect to the tendered Existing Notes
with full power of substitution (such power of attorney being deemed an
irrevocable power coupled with an interest) to (i) deliver certificates for such
Existing Notes to the Company, together with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company and (ii) present
such Existing Notes for transfer on the books of the Company and receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Existing Notes, all in accordance with the terms of the Offer.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving New Notes (which shall be the undersigned unless otherwise
indicated in the box entitled "Special Delivery Instructions" above) (the
"Recipient"), (ii) neither the undersigned nor the Recipient (if different) has
any arrangement with any person to participate in the distribution of such New
Notes, and (iii) neither the undersigned nor the Recipient (if different) is an
"affiliate" of the Company as defined in Rule 405 under the Securities Act. The
undersigned further represents that it is not engaged in, and does not intend to
engage in, a distribution of the New Notes.
The undersigned understands and agrees that the Company may terminate the
Offer at any time prior to the purchase or exchange of Existing Notes if its
ability to proceed with the Offer could result in a violation of applicable
securities laws.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Existing
Notes tendered hereby and to acquire New Notes issuable upon the exchange of
such tendered Existing Notes and cash for those Existing Notes to be purchased
by the Company pursuant to the Purchase Offer, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned also warrants that it will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
exchange, purchase, assignment and transfer of tendered Existing Notes or
transfer of ownership of such Existing Notes on the account books of the
Trustee.
For purposes of the Offer, the Company shall be deemed to have accepted
validly tendered Existing Notes when, as and if the Company has given oral
(which shall be confirmed in writing) or written notice thereof to the Exchange
Agent.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. This tender may be withdrawn only in
accordance with the procedures set forth in this Letter of Transmittal.
The undersigned understands that tenders of Existing Notes pursuant to the
procedures described under the caption "The Offer -- Procedures for Tendering"
in the Prospectus and in the instructions hereto will constitute a binding
agreement among the undersigned, the Exchange Agent and the Company upon the
terms and subject to the conditions of the Offer.
3
<PAGE> 4
Unless otherwise indicated under "Special Registration Instructions,"
please issue the certificates representing the New Notes issued in exchange for
the Existing Notes accepted for exchange, any check or Existing Notes purchased
in the Purchase Offer and return any certificates for Existing Notes not
tendered or not exchanged, in the name(s) of the undersigned. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please send the
certificates representing the New Notes issued in exchange for the Existing
Notes accepted for exchange, any check or Existing Notes purchased in the
Purchase Offer and any certificates for Existing Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s). In the event that both
"Special Registration Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the New Notes issued in
exchange for the Existing Notes accepted for exchange, any check or Existing
Notes purchased in the Purchase Offer in the name(s) of, and return any
certificates for Existing Notes not tendered or not exchanged to, the person(s)
so indicated. The undersigned understands that the Company has no obligations
pursuant to the "Special Registration Instructions" or "Special Delivery
Instructions" to transfer any Existing Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange or purchase any of
the Existing Notes so tendered.
4
<PAGE> 5
PLEASE SIGN HERE
This Letter of Transmittal must be signed by the registered Holder(s) as
his name(s) appears on the Existing Notes. If Existing Notes to which this
Letter of Transmittal relate are held of record by two or more joint Holders,
then all such Holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 4 herein.
X
--------------------------------------------------------------- --------------
X Date
--------------------------------------------------------------- --------------
Date
Signature(s) of Holder(s) or Authorized Signatory
Name(s): Address:
-------------------------------------- -------------------------
-------------------------------------- -------------------------
(Please Print) (including Zip Code)
Area Code and
Capacity: Telephone Number:
------------------------------------ --------------
Social Security No.:
-------------------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE
(SEE INSTRUCTION 1 HEREIN)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
--------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
--------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number(including area code) of Firm)
--------------------------------------------------------------------------------
(Authorized Signature)
--------------------------------------------------------------------------------
(Printed Name)
--------------------------------------------------------------------------------
(Title)
Date:
-----------------
5
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of Transmittal need
not be guaranteed if (a) this Letter of Transmittal is signed by the registered
Holder(s) of the Existing Notes tendered herewith and such Holder(s) has not
completed the box set forth herein entitled "Special Registration Instructions"
or the box entitled "Special Delivery Instructions" or (b) such Existing Notes
are tendered for the account of an Eligible Institution. See Instruction 6.
Otherwise, all signatures on this Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States (an "Eligible Institution"). All
signatures on bond powers and endorsements on certificates must also be
guaranteed by an Eligible Institution.
2. Delivery of this Letter of Transmittal and Existing Notes. Certificates
for all Existing Notes, as well as a properly completed and duly executed copy
of this Letter of Transmittal or facsimile hereof and any other documents
required by this Letter of Transmittal must be received by the Exchange Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date.
THE METHOD OF DELIVERY OF THE TENDERED EXISTING NOTES, THIS LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF EXISTING NOTES ARE SENT BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTER OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Existing Notes, and withdrawal of tendered
Existing Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. All tendering Holders, by execution of
this Letter of Transmittal (or facsimile thereof), shall waive any right to
receive notice of the acceptance of the Existing Notes for exchange and
purchase. The Company reserves the absolute right to reject any and all Existing
Notes not properly tendered or any Existing Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any irregularities or conditions of tender as
to particular Existing Notes. The Company's interpretation of the terms and
conditions of the Offer (including the instructions in this Letter of
Transmittal) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Existing Notes must be
cured within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Existing Notes, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Existing Notes will not be deemed to have been made until such
defects or irregularities have been cured to the Company's satisfaction or
waived. Any Existing Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holders pursuant
to the Company's determination, unless otherwise provided in this Letter of
Transmittal as soon as practicable following the Expiration Date. The Exchange
Agent has no fiduciary duties to the Holders with respect to the Exchange Offer
and is acting solely on the basis of directions of the Company.
3. Inadequate Space. If the space provided is inadequate, the certificate
numbers and/or the number of Existing Notes should be listed on a separate
signed schedule attached hereto.
4. Tender by Holder. Only a Holder of Existing Notes may tender such
Existing Notes in the Offer. Any beneficial owner of Existing Notes who is not
the registered Holder and who wishes to tender should arrange with such Holder
to execute and deliver this Letter of Transmittal on such owner's behalf or
must, prior to completing and executing this Letter of Transmittal and
delivering his Existing Notes, either make appropriate arrangements to register
ownership of the Existing Notes in such owner's name or obtain a
6
<PAGE> 7
properly completed bond power from the registered Holder or properly endorsed
certificates representing such Existing Notes.
5. Complete Tenders; Withdrawals. Tenders of Existing Notes will be
accepted only if all Existing Notes held by such Holder are tendered.
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. To withdraw a tender of Existing Notes in the Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Existing Notes to be withdrawn (the
"Depositor"), (ii) identify the Existing Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Existing Notes),
(iii) be signed by the Holder in the same manner as the original signature on
the Letter of Transmittal by which such Existing Notes were tendered (including
any required signature guarantees) and (iv) specify the name in which any such
Existing Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Existing Notes so withdrawn will
be deemed not to have been validly tendered for purposes of the Offer and no New
Notes will be issued or cash delivered with respect thereto unless the Existing
Notes so withdrawn are validly retendered. Any Existing Notes which have been
tendered but which are not accepted for exchange or purchase by the Company will
be returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Existing Notes may be retendered at any time prior to
the Expiration Date.
6. Signatures on the Letter of Transmittal; Bond Powers and
Endorsements. If this Letter of Transmittal (or facsimile hereof) is signed by
the registered Holder(s) of the Existing Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the Existing Notes
without alteration, enlargement or any change whatsoever.
If any of the Existing Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Existing Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many copies of this Letter
of Transmittal as there are different registrations of Existing Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Existing Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor are to be issued to the
registered Holder, then such Holder need not and should not endorse any tendered
Existing Notes, nor provide a separate bond power. In any other case, such
Holder must either properly endorse the Existing Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Existing Notes listed, such
Existing Notes must be endorsed or accompanied by appropriate bond powers in
each case signed as the name of the registered Holder or Holders appears on the
Existing Notes.
If this Letter of Transmittal (or facsimile hereof) or any Existing Notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with this Letter of Transmittal.
Endorsements on Existing Notes or signatures on bond powers required by
this Instruction 6 must be guaranteed by an Eligible Institution.
7
<PAGE> 8
7. Special Registration and Delivery Instructions Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal, and must provide the taxpayer
identification or social security number of the person named.
8. Backup Federal Income Tax Withholding and Substitute Form W-9. Under
the federal income tax laws, payments that may be made by the Company on account
of New Notes issued pursuant to the Exchange Offer may be subject to backup
withholding at the rate of 31%. In order to avoid such backup withholding, each
tendering Holder should complete and sign the Substitute Form W-9 included in
this Letter of Transmittal and either (a) provide the correct taxpayer
identification number ("TIN") and certify, under penalties of perjury, that the
TIN provided is correct and that (i) the Holder has not been notified by the
Internal Revenue Service (the "IRS") that the Holder is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the Holder that the Holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
Holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such Holder should write "Applied For" in the space
provided for the TIN in Part I of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Company (or
the Paying Agent under the New Note Indenture) shall retain 31% of payments made
to the tendering Holder during the sixty-day period following the date of the
Substitute Form W-9. If the Holder furnishes the Exchange Agent or the Company
with its TIN within sixty days after the date of the Substitute Form W-9, the
Company (or the Paying Agent) shall remit such amounts retained during the
sixty-day period to the Holder and no further amounts shall be retained or
withheld from payments made to the Holder thereafter. If, however, the Holder
has not provided the Exchange Agent or the Company with its TIN within such
sixty-day period, the Company (or the Paying Agent) shall remit such previously
retained amounts to the IRS as backup withholding. In general, if a Holder is an
individual, the TIN is the Social Security number of such individual. If the
Exchange Agent or the Company is not provided with the correct TIN, the Holder
may be subject to a $50 penalty imposed by the IRS. Certain Holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, such Holder must submit a
statement (generally, IRS Form W-8), signed under penalties of perjury,
attesting to that individual's exempt status. Such statements can be obtained
from the Exchange Agent. For further information concerning backup withholding
and instructions for completing the Substitute Form W-9 (including how to obtain
a taxpayer identification number if you do not have one and how to complete the
Substitute Form W-9 if Existing Notes are registered in more than one name),
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9."
Failure to complete the Substitute Form W-9 will not, by itself, cause
Existing Notes to be deemed invalidly tendered, but may require the Company (or
the Paying Agent) to withhold 31% of the amount of any payments made on account
of the New Notes. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
9. Transfer Taxes. The Company will pay all transfer taxes, if any,
imposed by Article 12 of the New York State Tax Law applicable to the exchange
or purchase of Existing Notes pursuant to the Offer. If, however, certificates
representing New Notes or Existing Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered in the
name of, any person other than the registered Holder of the Existing Notes
tendered hereby, or if tendered Existing Notes are registered in the name of a
person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange or purchase of
Existing Notes pursuant to the Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
8
<PAGE> 9
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes listed in this Letter of
Transmittal.
10. Waiver of Conditions. The Company reserves the right, in its sole
discretion, to amend, waive or modify specified conditions in the Offer in the
case of any Existing Notes tendered.
11. Mutilated, Lost, Stolen or Destroyed Existing Notes. Any tendering
Holder whose Existing Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
12. Requests for Assistance or Additional Copies. Requests for assistance
and requests for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<S> <C> <C>
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CERTIFICATE SURRENDERED EXISTING NOTES TENDERED EXISTING NOTES ACCEPTED
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Date Received Accepted by Checked by
------------------- ---------------------- ----------------------
Delivery Prepared by Checked by Date
------------ --------------------- -----------------------
</TABLE>
9
<PAGE> 10
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Existing Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the IRS, and payments made
with respect to Existing Notes purchased pursuant to the Purchase Offer may be
subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed IRS Form W-8, signed under penalties of
perjury, attesting to that Holder's exempt status. A Form W-8 can be obtained
from the Exchange Agent. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is not
an additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the Exchange
Offer, the Holder is required to provide the Exchange Agent with either: (i) the
Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) the Holder has not been notified by the IRS that the Holder is
subject to backup withholding as a result of failure to report all interest or
dividends or (B) the IRS has notified the Holder that the Holder is no longer
subject to backup withholding, or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Existing Notes. If the Existing Notes are held in more than one name or are
held not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
10
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYER'S NAME: AMERICA WEST AIRLINES, INC.
<TABLE>
<S> <C> <C>
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SUBSTITUTE PART I -- TAXPAYER IDENTIFICATION NUMBER -------------------------------
FORM W-9 Enter your taxpayer identification number Social Security Number
Department of the Treasury in the appropriate box. For most OR
Internal Revenue Service individuals, this is your social security -------------------------------
Payer's Request for number. If you do not have a number, see Employer Identification Number
Taxpayer Identification how to obtain a "TIN" in the enclosed
Number (TIN) Guidelines.
and Certification NOTE: If the account is in more than one
name, see the chart on page 2 of the
enclosed Guidelines to determine what
number to give.
-----------------------------------------------------------------------------
PART II -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
-----------------------------------------------------------------------------
CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends or the IRS has notified me that I am no longer subject to
backup withholding.
-----------------------------------------------------------------------------
SIGNATURE DATE
--------------------------------------------------------------------------------------------------------
Certification Guidelines -- You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
--------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31% of all payments made
to me on account of the New Notes shall be retained until I provide a Taxpayer
Identification Number to the payer and that, if I do not provide my Taxpayer
Identification Number within sixty days, such retained amounts shall be remitted
to the Internal Revenue Service as backup withholding and 31% of all reportable
payments made to me thereafter will be withheld and remitted to the Internal
Revenue Service until I provide a Taxpayer Identification Number.
<TABLE>
<S> <C>
SIGNATURE _____________________________________________ DATE ________________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW NOTES. PLEASE
REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
11
