-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JwylPfIhd6f/aDXmpa0YOdqZ0RfRzkD+aGqqpltuLpl2AdErc3Q4f+yZPJiPgzAM TpcuenrI/Psx0LqMjuObCw== 0000950153-98-000898.txt : 19980812 0000950153-98-000898.hdr.sgml : 19980812 ACCESSION NUMBER: 0000950153-98-000898 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980810 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA WEST AIRLINES INC CENTRAL INDEX KEY: 0000706270 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 860418245 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12337 FILM NUMBER: 98680197 BUSINESS ADDRESS: STREET 1: 4000 E SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 BUSINESS PHONE: 6026930800 MAIL ADDRESS: STREET 1: 4000 EAST SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 10-Q 1 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - -------- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - -------- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO ------ ------ COMMISSION FILE NUMBER 1-10140 AMERICA WEST AIRLINES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 86-0418245 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 4000 EAST SKY HARBOR BLVD, PHOENIX, ARIZONA 85034 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (602) 693-0800 N/A (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES XX NO ---- ---- INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN CONFIRMED BY A COURT. YES XX NO ---- ---- THE COMPANY HAS 1,000 SHARES OF CLASS B COMMON STOCK OUTSTANDING AS OF JULY 31, 1998. THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF AMERICA WEST HOLDINGS CORPORATION, MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1) (A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H (2). 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICA WEST AIRLINES, INC. CONDENSED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, ASSETS 1998 1997 - ------ ---- ---- (Unaudited) Current assets: Cash and cash equivalents ................................................................. $ 165,079 $ 171,638 Short-term investments .................................................................... 64,423 -- Accounts receivable, net .................................................................. 96,562 88,138 Advances to parent company and affiliate, net.............................................. 48,001 -- Expendable spare parts and supplies, net .................................................. 27,141 27,135 Prepaid expenses .......................................................................... 34,537 36,917 ---------- ---------- Total current assets .................................................................. 435,743 323,828 ---------- ---------- Property and equipment: Flight equipment .......................................................................... 839,851 783,384 Other property and equipment .............................................................. 140,482 143,172 Equipment purchase deposits ............................................................... 48,936 45,246 ---------- ---------- 1,029,269 971,802 Less accumulated depreciation and amortization ............................................ 337,933 276,430 ---------- ---------- Net property and equipment ............................................................ 691,336 695,372 ---------- ---------- Other assets: Restricted cash ........................................................................... 29,931 57,158 Reorganization value in excess of amounts allocable to identifiable assets, net .............................................................. 321,645 363,268 Deferred income taxes ..................................................................... 74,700 74,700 Other assets, net ......................................................................... 33,963 33,005 Long-term note receivable from affiliate .................................................. 16,150 -- Investment in affiliate.................................................................... 16,150 -- ---------- ---------- Total other assets .................................................................... 492,539 528,131 ---------- ---------- $1,619,618 $1,547,331 ========== ==========
See accompanying notes to condensed financial statements. 2 3 AMERICA WEST AIRLINES, INC. CONDENSED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 1998 1997 ---- ---- (Unaudited) LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Current maturities of long-term debt ............... $ 46,924 $ 54,000 Accounts payable ................................... 104,848 140,908 Air traffic liability .............................. 211,870 173,149 Accrued compensation and vacation benefits ......... 41,150 37,277 Accrued taxes ...................................... 82,748 36,376 Other accrued liabilities .......................... 64,921 43,574 ---------- ---------- Total current liabilities ...................... 552,461 485,284 ---------- ---------- Long-term debt, less current maturities ................ 227,438 272,760 Deferred credits and other liabilities ................. 98,405 104,519 Commitments and contingencies Stockholder's equity: Common Stock $.01 par value. Authorized, issued and outstanding; 1,000 shares ...................... -- -- Additional paid-in capital ......................... 533,650 539,301 Retained earnings .................................. 207,664 145,467 ---------- ---------- Total stockholder's equity ..................... 741,314 684,768 ---------- ---------- $1,619,618 $1,547,331 ========== ==========
See accompanying notes to condensed financial statements. 3 4 AMERICA WEST AIRLINES, INC. CONDENSED STATEMENTS OF INCOME (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1998 1997 1998 1997 ---- ---- ---- ---- Operating revenues: Passenger ................................... $ 491,042 $ 450,753 $ 934,834 $ 886,293 Cargo ....................................... 11,887 12,054 24,492 24,810 Other ....................................... 16,560 14,949 31,116 28,840 --------- --------- --------- --------- Total operating revenues ................ 519,489 477,756 990,442 939,943 --------- --------- --------- --------- Operating expenses: Salaries and related costs .................. 112,262 102,326 217,846 203,343 Aircraft rents .............................. 60,195 55,089 118,940 110,021 Other rents and landing fees ................ 28,794 28,862 58,252 59,678 Aircraft fuel ............................... 47,798 57,608 98,082 126,724 Agency commissions .......................... 34,900 40,452 66,517 78,764 Aircraft maintenance materials and repairs .. 44,041 37,669 86,469 68,981 Depreciation and amortization ............... 12,765 12,348 25,063 24,425 Amortization of excess reorganization value . 4,974 6,256 9,948 12,511 Other ....................................... 99,968 86,563 187,710 171,450 --------- --------- --------- --------- Total operating expenses ................ 445,697 427,173 868,827 855,897 --------- --------- --------- --------- Operating income ................................ 73,792 50,583 121,615 84,046 --------- --------- --------- --------- Nonoperating income (expenses): Interest income ............................. 6,041 4,390 11,086 8,630 Interest expense, net ....................... (8,263) (12,059) (17,935) (24,140) Other, net .................................. - (168) (264) 128 --------- --------- --------- --------- Total nonoperating expenses, net ........ (2,222) (7,837) (7,113) (15,382) --------- --------- --------- --------- Income before income taxes ...................... 71,570 42,746 114,502 68,664 --------- --------- --------- --------- Income taxes .................................... 31,381 19,749 49,921 31,723 --------- --------- --------- --------- Net income ...................................... $ 40,189 $ 22,997 $ 64,581 $ 36,941 ========= ========= ========= =========
See accompanying notes to condensed financial statements. 4 5 AMERICA WEST AIRLINES, INC. CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 1997 ---- ---- Net cash provided by operating activities .............. $ 187,220 $ 88,846 --------- --------- Cash flows from investing activities: Purchases of property and equipment ................ (67,215) (76,459) Sales (purchases) of short-term investments ........ (64,423) 38,075 Equipment purchase deposits and other .............. (10,456) (6,345) --------- --------- Net cash used in investing activities .......... (142,094) (44,729) --------- --------- Cash flows from financing activities: Repayment of debt .................................. (45,634) (21,624) Repurchase of warrants ............................. (5,651) (13,342) Other .............................................. (400) -- --------- --------- Net cash used in financing activities ........... (51,685) (34,966) --------- --------- Net increase (decrease) in cash and cash equivalents ... (6,559) 9,151 --------- --------- Cash and cash equivalents at beginning of period ....... 171,638 137,499 --------- --------- Cash and cash equivalents at end of period ............. $ 165,079 $ 146,650 ========= ========= Cash, cash equivalents and short-term investments at end of period ...................................... $ 229,502 $ 147,706 ========= ========= Cash paid for: Interest, net of amounts capitalized ............... $ 11,898 $ 15,978 ========= ========= Income taxes ....................................... $ 4,211 $ 132 ========= ========= Non-cash financing activities: Notes payable issued for equipment purchase deposits $ 3,500 $ 16,553 ========= ========= Notes payable canceled under the aircraft purchase agreement ............................. $ (10,309) $ -- ========= =========
See accompanying notes to condensed financial statements. 5 6 AMERICA WEST AIRLINES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS JUNE 30, 1998 1. BASIS OF PRESENTATION The unaudited condensed financial statements included herein have been prepared by America West Airlines, Inc., ("AWA" or the "Company"), a wholly-owned subsidiary of America West Holdings Corporation ("Holdings"), pursuant to the rules and regulations of the Securities and Exchange Commission and 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, 1997. 2. FLIGHT EQUIPMENT AIRCRAFT PURCHASE AGREEMENT AMENDMENT In April 1998, AWA and AVSA executed Amendment No. 1 to the aircraft purchase agreement which provided for the reduction of the firm order of Airbus aircraft from 34 to 29. The aggregate net cost of firm commitments remaining is approximately 1.0 billion based on a 3.5 percent annual price escalation. ENGINE HUSH KITS In May 1998, AWA entered into an agreement to purchase 14 737 hush kits at an aggregate net cost of approximately $14 million to comply with Federal Aviation Administration's ("FAA") Stage III noise reduction requirements. Delivery of the hush kits began in May 1998 and will continue through the first quarter of 1999. As of June 30, 1998, one aircraft has been outfitted with a hush kit. ENGINE MAINTENANCE AGREEMENT In April 1998, AWA entered into a long-term maintenance agreement to have certain aircraft engines maintained on a flight hour basis. 3. BOND FINANCING In April 1998 AWA completed the refunding of its $29.3 million variable rate industrial development revenue bonds due 2016 ("old bonds") by issuing $29.3 million of 6.3 percent fixed rate industrial development revenue bonds due April 2023 ("new bonds"). Interest on the new bonds is payable semiannually (April 1 and October 1) and commences on October 1, 1998. The new bonds are subject to optional redemption prior to the maturity date on or after April 1, 2008, in whole or in part, on any interest payment date at the following redemption prices: 102 percent on April 1 or October 1, 2008; 101 percent on April 1 or October 1, 2009; and 100 percent on April 1, 2010 and thereafter. As a result of the refinancing, $29.9 million of cash, which secured the irrevocable direct pay letter of credit that backed the old bonds, was released and available for general corporate purposes. 6 7 AMERICA WEST AIRLINES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS JUNE 30, 1998 4. PASSENGER COMMISSIONS Effective May 1, 1998, AWA revised its eight percent travel agent commission program to limit commissions paid to a maximum $50 payment per round trip and a maximum $25 payment per one way itinerary on all tickets issued in the United States and Canada. AWA also announced a new Internet commission policy which offers to all online vendors selling AWA travel a five percent commission with a maximum $10 payment. 5. ADVANCES TO PARENT COMPANY AND AFFILIATE As of June 30, 1998, AWA has advanced to Holdings $56.3 million. In addition, AWA has net obligations of $8.3 million due to The Leisure Company ("Leisure Co."), a wholly owned subsidiary of Holdings. All amounts bear interest at market rates. 6. SUBSEQUENT EVENTS MESA CODE SHARE AGREEMENT In July 1998, AWA entered into a codesharing agreement with Mesa Airlines ("Mesa") whereby Mesa serves as a feeder carrier for AWA to provide America West Express regional airline service from AWA's Phoenix hub using Canadair regional jets, deHavilland turboprops, and Hawker-Beech 1900 aircraft. The agreement contemplates adding regional operations in the airline's hubs in Las Vegas and Columbus. The codesharing agreement with Mesa provides for convenient flight schedules, passenger handling and computer reservations under AWA flight designator code. The Mesa agreement will be in effect through August 2004. FAA SETTLEMENT On July 15, 1998, AWA and the FAA entered into an agreement to settle disputes over alleged maintenance violations. Under the agreement, AWA did not admit any wrongdoing, will implement certain changes in maintenance oversight and will pay a civil penalty of $2.5 million. An additional civil penalty of $2.5 million will be forgiven upon implementation of the terms of the agreement. AWA's response to the FAA initiatives as well as protracted labor negotiations resulted in a deterioration in AWA's on time performance and schedule completion in late June and in July 1998. AIRCRAFT LEASES In July 1998, AWA entered into aircraft lease arrangements for two B737-300 aircraft with lease terms of five and six years, respectively. 7 8 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS In January 1998, Leisure Co. began operations as a new travel subsidiary of Holdings to develop and grow the vacation package tour business of the former America West Vacation division. With the commencement of Leisure Co. operations, management believes that an improved understanding of AWA's results can be gained by comparing the three and six months ended June 30, 1998 to pro forma results for the same periods in 1997, which assumes Leisure Co. had commenced operations as a subsidiary of Holdings on January 1, 1997. The unaudited pro forma statements of income presented herein have been prepared based upon certain pro forma adjustments to AWA's historical statements of income for the three and six months ended June 30, 1997. The 1997 pro forma results are for information purposes only and are not necessarily indicative of what actually would have been achieved if Leisure Co. had functioned as a separate entity during such period. In addition, the pro forma information is not intended to be a projection of results that will be obtained in the future. America West Airlines, Inc. Statements of Income (In thousands) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 ---- ---- ---- ---- Pro Forma Pro Forma Operating revenues: Passenger ................................ $ 491,042 $ 450,753 $ 934,834 $ 886,293 Cargo .................................... 11,887 12,054 24,492 24,810 Other .................................... 16,560 14,949 31,116 28,840 --------- --------- --------- --------- Total operating revenues .............. 519,489 477,756 990,442 939,943 --------- --------- --------- --------- Operating expenses: Salaries and related costs ............... 112,262 100,554 217,846 199,616 Aircraft rental .......................... 60,195 55,089 118,940 110,021 Rentals and landing fees ................. 28,794 28,862 58,252 59,678 Aircraft fuel ............................ 47,798 57,608 98,082 126,724 Agency commissions ....................... 34,900 38,529 66,517 75,123 Aircraft maintenance materials and repairs 44,041 37,669 86,469 68,981 Depreciation and amortization ............ 12,765 12,258 25,063 24,230 Reorganization value amortization ........ 4,974 5,923 9,948 11,845 Other .................................... 99,968 94,064 187,710 186,006 --------- --------- --------- --------- Total operating expenses .............. 445,697 430,556 868,827 862,224 --------- --------- --------- --------- Operating income ............................. 73,792 47,200 121,615 77,719 --------- --------- --------- --------- Nonoperating income (expenses): Interest income .......................... 6,041 4,390 11,086 8,630 Interest expense ......................... (8,263) (12,059) (17,935) (24,140) Other, net ............................... -- (168) (264) 128 --------- --------- --------- --------- Total nonoperating expenses, net ...... (2,222) (7,837) (7,113) (15,382) --------- --------- --------- --------- Income before income taxes ................... $ 71,570 $ 39,363 $ 114,502 $ 62,337 ========= ========= ========= =========
8 9 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 The table below sets forth selected operating data for AWA.
Three Months Ended Percent Six Months Ended Percent June 30, Change June 30 Change 1998 1997 1998-1997 1998 1997 1998-1997 ---- ---- --------- ---- ---- --------- Aircraft (end of period)....................... 104 100 4.0 104 100 4.0 Average daily aircraft utilization (hours)..... 12.2 12.4 (1.6) 12.3 12.4 (0.8) Available seat miles (in millions)............. 6,082 5,848 4.0 11,928 11,638 2.5 Block hours.................................... 115,050 113,089 1.7 228,252 225,812 1.1 Average stage length (miles)................... 819 770 6.4 811 769 5.5 Average passenger journey (miles).............. 1,227 1,145 7.2 1,170 1,117 4.7 Revenue passenger miles (in millions).......... 4,287 4,144 3.4 7,923 8,126 (2.5) Load factor (percent).......................... 70.5 70.9 (0.4) pts 66.4 69.8 (3.4) pts Passenger enplanements (in thousands).......... 4,643 4,674 (0.7) 8,792 9,264 (5.1) Yield per revenue passenger mile (cents)....... 11.46 10.88 5.3 11.80 10.91 8.2 Revenue per available seat mile: Passenger (cents)........................... 8.07 7.71 4.7 7.84 7.62 2.9 Total (cents)............................... 8.54 8.17 4.5 8.30 8.08 2.7 Fuel consumption (gallons in millions)......... 97.1 93.4 4.0 190.2 185.5 2.5 Fuel price (cents per gallon).................. 49.23 61.70 (20.2) 51.56 68.32 (24.5) Average number of full-time equivalent employees................................... 9,667 9,651 0.2 9,567 9,571 -
The table below sets forth the major components of operating cost per available seat mile ("CASM") for AWA. CASM for 1997 is based on the 1997 pro forma numbers for AWA.
Three Months Ended Percent Six Months Ended Percent June 30, Change June 30 Change 1998 1997 1998-1997 1998 1997 1998-1997 ---- ---- --------- ---- ---- --------- (in cents) Pro Forma Pro Forma Salaries and related costs..................... 1.85 1.72 7.6 1.83 1.71 7.0 Aircraft rents................................. .99 .94 5.3 1.00 .95 5.3 Other rents and landing fees................... .47 .49 (4.1) .49 .51 (3.9) Aircraft fuel.................................. .79 .99 (20.2) .82 1.09 (24.8) Agency commissions............................. .57 .66 (13.6) .56 .65 (13.8) Aircraft maintenance materials and repairs..... .72 .64 12.5 .72 .59 22.0 Depreciation and amortization.................. .21 .21 - .21 .21 - Amortization of excess reorganization value.... .08 .10 (20.0) .08 .10 (20.0) Other.......................................... 1.65 1.61 2.5 1.57 1.60 (1.9) ---- ---- ---- ---- 7.33 7.36 (0.4) 7.28 7.41 (1.8) ==== ==== ==== ====
9 10 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 Three Months Ended June 30, 1998 and 1997 For the three months ended June 30, 1998 and 1997, AWA realized operating income of $73.8 million and $47.2 million, respectively. Income before income taxes for the three month period in 1998 was $71.6 million compared to $39.4 million in 1997. Total operating revenues for the 1998 second quarter were $519.5 million. Passenger revenues were $491.0 million for the three months ended June 30, 1998, an increase of $40.3 million or 8.9 percent from 1997. Passenger revenue per available seat mile ("RASM") for the quarter increased 4.7 percent to 8.07 cents from 7.71 cents driven by a 5.3 percent increase in passenger yield. The increase in RASM and yield reflects the continued benefits of AWA's improved product and revenue management capabilities. The increases occurred despite a 6.4 percent increase in aircraft stage length due to increased flying to long-haul business markets. Capacity, as measured by available seat miles ("ASMs"), increased 4.0 percent in the 1998 second quarter as compared to 1997 while load factor decreased by .4 points to 70.5 percent. Cargo and other revenues increased 5.3 percent to $28.4 million for the second quarter of 1998. CASM decreased .4 percent to 7.33 cents in the second quarter of 1998 from 7.36 cents for the comparable 1997 period, primarily due to lower fuel prices. Significant changes in the components of operating expense per ASM are explained as follows: - Salaries and related costs per ASM increased 7.6 percent primarily due to increases in the accrual for AWArd Pay ($5.1 million) resulting from higher operating income in 1998 and employee benefit related costs. AWArd Pay is the program by which AWA awards performance bonuses to eligible non-executive, non-union employees provided certain annually established operating income and performance targets are attained. In addition, a salary level increase in the pilot contract that was effective May 1997 and increased training drove pilot salaries per ASM higher in the 1998 quarter over the comparable 1997 period. - Aircraft rent expense per ASM increased 5.3 percent due to the net addition of four leased aircraft to the fleet during the 1998 quarter as compared to 1997. - Other rents and landing fees expense per ASM decreased 4.1 percent in the second quarter of 1998 as landings decreased by 2.9 percent. - Aircraft fuel expense per ASM decreased 20.2 percent due to a 20.2 percent decrease in the average price per gallon of fuel to 49.23 cents in the 1998 quarter from 61.70 cents in 1997. - Agency commissions expense per ASM decreased 13.6 percent as cost reductions associated with the change in agency commission rate from 10 percent to eight percent in October 1997 and the $50 commission cap implemented on May 1, 1998 more than offset the effects of higher passenger revenues in the 1998 quarter. - Aircraft maintenance materials and repairs expense per ASM increased 12.5 percent primarily due to a $5.0 million increase in capitalized maintenance amortization expense for the second quarter of 1998 when compared to the 1997 second quarter. - Amortization of excess reorganization value expense per ASM decreased 20.0 percent as a result of the reduction in the unamortized balance of excess reorganization value due to the utilization of tax attributes of the pre-reorganized Company. 10 11 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 - Other operating expenses per ASM increased 2.5 percent to 1.65 cents from 1.61 cents primarily due to the effect in the 1998 quarter of the FAA settlement (see Note 6. "Subsequent Events - FAA Settlement" in Notes to Condensed Financial Statements) and Year 2000 costs and higher interrupted trip expense and crew accommodation costs. These increases were offset in part by reduced advertising costs. Net nonoperating expenses decreased $5.6 million to $2.2 million in the three months ended June 30, 1998 from $7.8 million in 1997. Excluding $2.1 million of interest income and $2.0 million of interest expense associated with inter-company notes, the year-over-year change was primarily due to a net decrease in interest expense as AWA's average outstanding debt was $94.7 million lower in the second quarter of 1998 as compared to 1997. Six Months Ended June 30, 1998 and 1997 For the six months ended June 30, 1998 and 1997, AWA realized operating income of $121.6 million and $77.7 million, respectively. Income before income taxes for the six month period in 1998 was $114.5 million compared to $62.3 million in 1997. Total operating revenues for the six months ended June 30, 1998 were $990.4 million. Passenger revenues were $934.8 million for the six months ended June 30, 1998, an increase of $48.5 million or 5.5 percent from 1997. RASM for the six months ended June 30, 1998 increased 2.9 percent to 7.84 cents from 7.62 cents driven by an 8.2 percent increase in passenger yield. The increase in RASM and yield occurred despite a 5.5 percent increase in aircraft stage length due to increased flying to long-haul business markets and the lapse of a federal transportation excise tax for the period January 1 to March 6, 1997. Capacity, as measured by ASMs, increased 2.5 percent in the six months ended June 30, 1998 as compared to 1997 while load factor decreased by 3.4 points to 66.4 percent. Cargo and other revenues increased 3.6 percent to $55.6 million for the six months ended June 30, 1998. CASM decreased 1.8 percent to 7.28 cents in the six months ended June 30, 1998 from 7.41 cents for the comparable 1997 period, primarily due to lower fuel prices. Significant changes in the components of operating expense per ASM are explained as follows: - Salaries and related costs per ASM increased 7.0 percent primarily due to increases in the accrual for AWArd Pay ($6.3 million) resulting from higher operating income in 1998. In addition, a salary level increase in the pilot contract that was effective May 1997 and higher headcount increased pilot salaries in the six month period ended June 30, 1998 compared to 1997. - Aircraft rent expense per ASM increased 5.3 percent due primarily to the net addition of four leased aircraft to the fleet during the six months ended June 30, 1998 as compared to 1997. - Other rents and landing fees expense per ASM decreased 3.9 percent in the six months ended June 30, 1998 as landings decreased by 3.4 percent. An increase in airport rents of $1.8 million was offset by lower equipment rentals as fewer spare parts were on loan from other airlines. - Aircraft fuel expense per ASM decreased 24.8 percent due to a 24.5 percent decrease in the average price per gallon of fuel to 51.56 cents in the 1998 period from 68.32 cents in 1997. 11 12 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 - Agency commissions expense per ASM decreased 13.8 percent as the cost reduction associated with the change in agency commission rate from 10 percent to eight percent in October 1997 more than offset the effects of higher passenger revenues in the six month period ended June 30, 1998. A $50 commission cap implemented on May 1, 1998 also contributed to the decrease. - Aircraft maintenance materials and repairs expense per ASM increased 22.0 percent primarily due to a $9.5 million increase in capitalized maintenance amortization expense for the six months ended June 30, 1998 when compared to the comparable period in 1997 and higher airframe maintenance and component repair costs. - Amortization of excess reorganization value expense per ASM decreased 20.0 percent as a result of the reduction in the unamortized balance of excess reorganization value due to the utilization of tax attributes of the pre-reorganized Company. - Other operating expenses per ASM decreased 1.9 percent to 1.57 cents from 1.60 cents primarily due to reduced advertising costs and traffic liability insurance rates which were offset in part by the effect in 1998 of the FAA settlement and Year 2000 costs, and higher crew accommodation expenses. Net nonoperating expenses decreased $8.3 million to $7.1 million in the six months ended June 30, 1998 from $15.4 million in 1997. Excluding $4.2 million of interest income and $3.9 million of interest expense associated with inter-company notes, the year-over-year change was primarily due to a net decrease in interest expense as AWA's outstanding debt was $97.1 million lower in the 1998 period as compared to 1997. LIQUIDITY AND CAPITAL RESOURCES Unrestricted cash and cash equivalents and short-term investments increased to $229.5 million at June 30, 1998 from $171.6 million at December 31, 1997. Net cash provided by operating activities increased to $187.2 million for the six months ended June 30, 1998 from $88.8 million in 1997 due principally to the period-over-period change in air traffic liability, which grew 22.4 percent in the 1998 period as compared to a decrease of 13.7 percent in the 1997 period and higher net income in 1998. Net cash used in investing activities increased to $142.1 million for the six months ended June 30, 1998 period from $44.7 million for the 1997 period. This increase was primarily due to the purchase of short-term investments totaling $64.4 million and the payment of $10.5 million in equipment purchase deposits for aircraft. Net cash used in financing activities was $51.7 million for the six months ended June 30, 1998 compared to $35.0 million in the 1997 period primarily due to the repayment of $30 million of revolving credit facility debt and the repurchase of AWA warrants. Operating with a working capital deficiency is common in the airline industry as tickets sold for transportation which have not yet been provided are classified as a current liability while the related income producing assets, the aircraft, are classified as non-current. AWA's working capital deficiency at June 30, 1998 was $116.7 million, a decrease of 27.7 percent from December 31, 1997. In April 1998, AWA completed the refunding of its $29.3 million variable rate industrial development revenue bonds due 2016 ("old bonds") by issuing $29.3 million of 6.3 percent fixed rate industrial development revenue bonds due April 2023 ("new bonds"). Interest on the new bonds is payable semiannually (April 1 and October 1) and commences on October 1, 1998. The new bonds are subject to optional redemption prior to the maturity date on or after April 1, 2008, in whole or in part, on any interest payment date at the following redemption prices: 102 percent on April 1 or October 1, 2008; 101 percent on April 1 or October 1, 2009; and 12 13 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 100 percent on April 1, 2010 and thereafter. As a result of the refinancing, $29.9 million of cash, which secured the irrevocable direct pay letter of credit that backed the old bonds, was released and became available for general corporate purposes. At June 30, 1998, AWA had firm commitments to AVSA, to purchase a total of 29 Airbus aircraft, with three to be delivered in the fourth quarter of 1998. AWA also has an option to purchase 52 more Airbus aircraft of which 12 are subject to reconfirmation by AWA. The aggregate net cost of firm commitments remaining under the aircraft order is approximately $1.0 billion based on a 3.5 percent annual price escalation. AWA has arranged for financing from AVSA for more than two-thirds of such commitment. AWA intends to seek additional financing (which may include public debt financing or private financing) in the future when and as appropriate. There can be no assurance that sufficient funding will be obtained for all aircraft. A default by AWA under the AVSA purchase commitment could have a material adverse effect on the Company. As of June 30, 1998, AWA's fleet consisted of 104 aircraft of which 17 aircraft meet the FAA's Stage II (but not Stage III) noise reduction requirements and must be retired or significantly modified prior to the year 2000. In May 1998, AWA entered into an agreement to purchase 14 737 hush kits at an aggregate net cost of approximately $14 million to comply with Stage III requirements. Delivery of the hush kits began in May 1998 and will continue through the first quarter of 1999. As of June 30, 1998, one aircraft had been outfitted with a hush kit. The remaining four non-compliant aircraft will be retired. Capital expenditures for the six months ended June 30, 1998 and 1997 were approximately $67.2 million and $76.5 million, respectively. Included in these amounts are capital expenditures for capitalized maintenance of approximately $55.3 million for the six months ended June 30, 1998 and $47.3 million for the six months ended June 30, 1997. Certain of AWA's long-term debt agreements contain minimum cash balance requirements, leverage ratios, coverage ratios and other financial covenants with which AWA was in compliance at June 30, 1998. OTHER INFORMATION YEAR 2000 COMPLIANCE Many currently installed computer systems and software products are coded to accept two digit entries in the date code field. These date code fields will need to accept four digit entries to distinguish 21st century dates from 20th century dates. Any programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in the computer shutting down or performing incorrect computations. As a result, before December 31, 1999, computer systems and software used by many companies may need to be upgraded to comply with such "Year 2000" requirements. Many of the Company's systems, including information and computer systems and automated equipment, will be affected by the Year 2000 issue. The Company is also heavily reliant on the FAA's management of the nation's air traffic control system, local authorities' management of the airports at which AWA operates, and vendors to provide goods (fuel, catering, etc.), services (telecommunications, data networks, satellites, etc.) and data (frequent flyer partnerships, alliances, etc.). 13 14 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 The Company has underway a Year 2000 Project to identify the programs and infrastructure that could be affected by the Year 2000 issues and is implementing a plan to resolve the problems identified on a timely basis. The plan will require the Company to devote a considerable amount of internal resources and hire substantial external resources to assist with the implementation and monitoring of the plan, and will require the replacement of certain equipment and modification of certain software. The Company currently estimates that the total cost of its Year 2000 Project will be approximately $29 million, including approximately $23 million which has been or will be expensed as incurred and approximately $6 million of capital expenditures. These costs include approximately $6 million of normal system software and equipment upgrades and replacements which the Company anticipated incurring in the ordinary course regardless of the Year 2000 issue. Substantially all of those costs will be incurred during the second half of 1998 and during 1999. If the Company's plan to address the Year 2000 issue is not successfully or timely implemented, the Company may need to devote more resources to the process and additional costs may be incurred, which could have a material adverse effect on the Company's financial condition and results of operations. The Company is also in the process of discussing with the FAA, airport authorities and its vendors the potential impact the Year 2000 issue will have on their systems. Problems encountered by the FAA, the airport authorities or vendors in connection with the Year 2000 issue also may have a material adverse effect on the Company's financial condition and results of operations. As a component of its Year 2000 Project, the Company is developing contingency plans to mitigate the affects of problems experienced by it or key vendors or service providers in the timely implementation of Year 2000 programs. The costs of the Company's Year 2000 Project and the date on which the Company plans to complete the Year 2000 compliance program are based on management's best estimates, and reflect assumptions regarding the availability and cost of personnel trained in this area, the compliance plans of third parties (including the FAA and other third parties mentioned above) and similar uncertainties. However, due to the complexity and pervasiveness of the Year 2000 issue and in particular the uncertainty regarding the compliance programs of third parties, no assurance can be given that these estimates will be achieved, and actual results could differ materially from those anticipated. FORWARD LOOKING INFORMATION This report contains various forward-looking statements and information that are based on management's beliefs as well as assumptions made by and information currently available to management. Whether such forward-looking statements and information ultimately prove to be accurate depends on various uncertainties and future developments that cannot be predicted. The results of operations in the air travel business historically fluctuate in response to general economic conditions. The airline industry is sensitive to changes in economic conditions that affect business and leisure travel and is highly susceptible to unforeseen events, such as political instability, regional hostilities, recession, fuel price escalation, inflation, adverse weather conditions or other adverse occurrences that result in a decline in air travel. Any event that results in decreased travel or increased competition among airlines could have a material adverse effect on the Company's financial condition and results of operations. The Company's results of operations for interim periods are not necessarily indicative of those for an entire year, because the travel business is subject to seasonal fluctuations. Due to the greater demand for air travel during the summer months, revenues in the airline travel industries in the second and third quarters of the year tend to be greater than revenues in the first and fourth quarters of the year. In addition, the Company's business is subject to significant risks, including, the competitive nature of the industry, the lack of significant unencumbered assets and significant future capital requirements, the results of union negotiations, the concentration of the voting power of the Company, the cost of aircraft fuel, certain regulatory matters, operating and financial restrictions on the Company imposed by certain loan and debt instruments and Year 2000 compliance issues. For a more complete discussion of these and other risks and uncertainties that may affect the Company's business and future operating results, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, which is on file with the Securities and Exchange Commission. 14 15 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits EXHIBIT NUMBER DESCRIPTION AND METHOD OF FILING *10.28** Amendment No. 1 dated March 31, 1998 to Airbus A320/A319 Purchase Agreement dated September 12, 1997 between AVSA S.A.R.L. and AWA *10.29 Financing Agreement dated April 1, 1998 between the Industrial Development Authority of the City of Phoenix, Arizona and AWA *10.30 Indenture of Trust dated April 1, 1998 from the Industrial Development Authority of the City of Phoenix, Arizona to Norwest Bank, Arizona N.A. *27.1 Financial Data Schedule. _____ * Filed herewith. ** The Company has sought confidential treatment for portions of the referenced exhibits. b. Reports on Form 8-K None 15 16 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICA WEST AIRLINES, INC. By /s/ W. Douglas Parker ----------------------------- W. Douglas Parker Senior Vice President and Chief Financial Officer DATED: August 7, 1998 16 17 AMERICA WEST AIRLINES, INC. JUNE 30, 1998 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION AND METHOD OF FILING *10.28** Amendment No. 1 dated March 31, 1998 to Airbus A320/A319 Purchase Agreement dated September 12, 1997 between AVSA S.A.R.L. and AWA *10.29 Financing Agreement dated April 1, 1998 between the Industrial Development Authority of the City of Phoenix, Arizona and AWA *10.30 Indenture of Trust dated April 1, 1998 from the Industrial Development Authority of the City of Phoenix, Arizona to Norwest Bank, Arizona N.A. *27.1 Financial Data Schedule. _____ * Filed herewith. ** The Company has sought confidential treatment for portions of the referenced exhibit. 17 EX-10.28 2 EX-10.28 1 Exhibit 10.28 *** Text Omitted and Filed Separately Confidential Treatment Requested Under 17 C.F.R. Sections 200.80(b)(4), 200.83 and 240.24 b-2. AMENDMENT NO. 1 TO THE A319/A320 PURCHASE AGREEMENT dated as of September 12, 1997 between AVSA, S.A.R.L. and AMERICA WEST AIRLINES, INC. This Amendment No. 1 (hereinafter referred to as the "Amendment") is entered into as of March 31, 1998, by and between AVSA, S.A.R.L., a societe a responsabilite limitee organized and existing under the laws of the Republic of France, having its registered office located at 2, Rond Point Maurice Bellonte, 31700 Blagnac, France (hereinafter referred to as the "Seller"), and AMERICA WEST AIRLINES, INC., a corporation organized and existing under the laws of the State of Delaware, United States of America, having its principal corporate offices located at Phoenix Sky Harbor International Airport, 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, U.S.A. (hereinafter referred to as the "Buyer"). WITNESSETH: WHEREAS, the Buyer and the Seller have entered into an A319/A320 Purchase Agreement, dated as of September 12, 1997 (which agreement, as previously amended by and supplemented with all Exhibits, Appendices, Letter Agreements and amendments attached thereto is hereinafter called the "Agreement"), which Agreement relates to the sale by the Seller and the purchase by the Buyer of certain firmly ordered Airbus Industrie A319-100 and A320-200 model aircraft (the "Aircraft"). WHEREAS, the Buyer and the Seller agree to further describe in this Amendment certain flexibility rights to be provided by the Seller to the Buyer with respect to A320 Aircraft. WHEREAS, capitalized terms used herein and not otherwise defined in this Amendment will have the meaning assigned to them in the Agreement. The terms "herein," "hereof," and "hereunder" and words of similar import refer to this Amendment. NOW, THEREFORE, IT IS AGREED AS FOLLOWS: 2 1. SCOPE OF THE AMENDMENT The Buyer has indicated to the Seller that the Buyer has entered into ten (10) year operating leases with an operating lessor ("SALE") for five (5) new production A320 aircraft (MSN 762, 770, 803, 856 and 866), such lease or leases to begin at a date prior to delivery of the first A319 Aircraft by the Seller to the Buyer (each such A320 aircraft a "New Leased A320 Aircraft") under the Agreement. In consideration thereof and under terms and conditions defined in this Amendment, the Seller hereby agrees to grant to the Buyer the right to cancel one (1) A320 Aircraft from its firm order under the Agreement for each New Leased A320 Aircraft leased by and delivered to the Buyer by SALE prior to delivery of the first A319 Aircraft (such flexibility right is referred to as the "A320 Aircraft Cancellation Right"). 2. A320 AIRCRAFT CANCELLATION RIGHT 2.1 The A320 Aircraft Cancellation Right shall be limited to five (5) A320 Aircraft. The Buyer hereby irrevocably exercises upon the date hereof the five A320 Cancellation Rights against each of A320 Aircraft [...***...] (for delivery pursuant to Clause 9 of the Agreement respectively in [...***...] these Aircraft are referred to herein as the "Exchanged Aircraft"). The Buyer hereby irrevocably waives and releases to the Seller and the Manufacturer its rights to the Exchanged Aircraft and neither the Seller nor the Buyer shall have any further obligation or right to the other with respect to the Exchanged Aircraft. The Buyer grants the Seller and the Manufacturer the unlimited right to remarket these delivery positions upon the date hereof. 2.2 Except as otherwise agreed, the specification of the New Leased A320 Aircraft will be the specification defined by SALE and the Manufacturer in the SALE purchase agreement, and the Seller or the Manufacturer shall not incur any extra cost or liability in order to bring the specification of the New Leased A320 Aircraft to the level of the Specification or to another specification desired by the Buyer. 2.3 The parties hereby agree that the terms and conditions applicable to the sale by the Seller or the Manufacturer and the purchase by SALE of the New Leased A320 Aircraft shall be solely negotiated between the Seller or the Manufacturer and SALE and that the terms of the Agreement shall not in any manner apply to the New Leased A320 Aircraft, except * Confidential Treatment Requested 3 that (i) all of the warranties and guarantees set forth in Clauses 12, 13, and 17 of the Agreement and in Letter Agreement N. 6 (limited, however, to the provisions contained in Paragraphs 1, 2 and 3 only), Letter Agreement N. 7, Letter Agreement N. 8, Letter Agreement N. 9 and Letter Agreement N. 10 of the Agreement (the "Exchange Provisions") shall apply to the New Leased A320 Aircraft as if they were A320 Aircraft and shall be in lieu of the warranties and guarantees set out in the New Leased A320 Aircraft purchase agreement, such Exchange Provisions to apply during the operation by the Buyer of these New Leased A320 Aircraft on the same terms as if the New Leased A320 Aircraft were A320 Aircraft and (ii) all of the provisions relating to assignment included in the Agreement shall apply to the Exchange Provisions. The Buyer shall be responsible for negotiating any lease terms and conditions applicable to the New Leased A320 Aircraft directly with SALE and the Seller or the Manufacturer shall have no obligation or liability relating thereto except as otherwise agreed. Nothing contained in this Amendment shall subject the Seller or the Manufacturer to any liability it would not have otherwise incurred had the A320 Aircraft Cancellation Right not been available to the Buyer except as otherwise agreed. The parties also agree that the Buyer shall not be entitled to any duplicate remedies from the Seller under the warranties and guarantees provisions of (i) the Agreement, as amended by this Amendment and (ii) any other purchase or lease agreement involving the Buyer, the Manufacturer or SALE. 3. [...***...] In consideration for the execution of the Amendment, the Seller agrees to provide upon the date hereof the Buyer with a [...***...]. 4. EFFECT OF AMENDMENT The Agreement will be deemed amended to the extent herein provided, and, except as specifically amended hereby, will continue in full force and effect in accordance with its original terms. 5. CONFIDENTIALITY * Confidential Treatment Requested 4 Subject to any legal or governmental requirements of disclosure, the parties (which for this purpose will include their employees, agents, advisors and accountants) will maintain the terms and conditions of this Amendment and any reports or other data furnished hereunder strictly confidential. Without limiting the generality of the foregoing, the Buyer will use its best efforts to limit the disclosure of the contents of this Amendment to the extent legally permissible in any filing required to be made by the Buyer with any governmental agency and will make such applications as will be necessary to implement the foregoing. With respect to any public disclosure or filing, the Buyer agrees to submit to the Seller a copy of the proposed document to be filed or disclosed and will give the Seller a reasonable period of time in which to review the document. The Buyer and the Seller will consult with each other prior to the making of any other public disclosure or filing, permitted hereunder, of this Amendment or the terms and conditions thereof. The provisions of this Paragraph 5 will survive any termination of the Agreement. 5 If the foregoing correctly sets forth our understanding, please indicate your acceptance by signing in the space provided below. Agreed an Accepted, Agreed and Accepted, AMERICA WEST AIRLINES, INC. AVSA, S.A.R.L. By: /s/ Jacques C. Lazard By: /s/ illegible ---------------------------- ------------------------------- Its: Vice President & Treasurer Its: Director Contracts ---------------------------- ------------------------------- Date: April 27, 1998 Date: April 27, 1998 ---------------------------- ------------------------------- EX-10.29 3 EX-10.29 1 Exhibit 10.29 =============================================================================== FINANCING AGREEMENT Dated as of April 1, 1998 By and Between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA and AMERICA WEST AIRLINES, INC. Relating to $29,300,000 THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA AIRPORT FACILITIES REFUNDING BONDS (AMERICA WEST AIRLINES, INC. PROJECT) SERIES 1998 =============================================================================== The amounts payable to the Issuer (except for amounts payable to, and certain rights and privileges of, the Issuer under Sections 4.2(d), 4.2(e), 5.3 and 6.4 hereof and any rights of the Issuer to receive any notices, certificates, requests, requisitions or communications hereunder) and certain other rights of the Issuer under this Financing Agreement have been pledged and assigned under the Indenture of Trust dated as of April 1, 1998, between the Issuer and Norwest Bank Arizona, N.A., as Trustee. 2 FINANCING AGREEMENT TABLE OF CONTENTS (This Table of Contents is not a part of this Agreement and is only for convenience of reference).
SECTION HEADING PAGE Parties................................................................................ 1 Preambles.............................................................................. 1 ARTICLE I DEFINITIONS.......................................................... 1 ARTICLE II REPRESENTATIONS...................................................... 4 Section 2.1. Representations and Covenants by the Issuer....................... 4 Section 2.2. Representations by the Company.................................... 5 ARTICLE III ISSUANCE OF THE BONDS................................................ 5 Section 3.1. Agreement to Issue Bonds; Application of Bond Proceeds............ 5 Section 3.2. Reserved.......................................................... 6 Section 3.3. Reserved.......................................................... 6 Section 3.4. Reserved.......................................................... 6 Section 3.5. Investment of Moneys in Funds..................................... 6 Section 3.6. Tax Exempt Status of Bonds........................................ 7 ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT.................................... 7 Section 4.1. Loan of Bond Proceeds............................................. 7 Section 4.2. Loan Repayments and Other Amounts Payable......................... 7 Section 4.3. No Defense or Set-Off............................................. 9 Section 4.4. Payments Pledged and Assigned..................................... 9 Section 4.5. Payment of the Bonds and Other Amounts............................ 9 ARTICLE V SPECIAL COVENANTS AND AGREEMENTS..................................... 10 Section 5.1. Company to Maintain its Corporate Existence; Conditions Under Which Exceptions Permitted........................................ 10 Section 5.2. Annual Statement.................................................. 10 Section 5.3. Maintenance and Repair; Insurance; Taxes; Etc..................... 11 Section 5.4. Recordation and Other Instruments................................. 11 Section 5.5. No Warranty by the Issuer......................................... 11 Section 5.6. Agreement as to Ownership and Use of the Project.................. 11 Section 5.7. Information Reporting, Etc........................................ 11
-i- 3 Section 5.8. Limited Liability of Issuer....................................... 12 Section 5.9. Inspection of Project............................................. 12 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES....................................... 12 Section 6.1. Events of Default Defined......................................... 12 Section 6.2. Remedies on Default............................................... 14 Section 6.3. No Remedy Exclusive............................................... 15 Section 6.4. Agreement to Pay Fees and Expenses of Counsel..................... 15 Section 6.5. No Additional Waiver Implied by One Waiver; Consents to Waivers... 15 ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS................................................................ 16 Section 7.1. Option to Prepay.................................................. 16 Section 7.2. Obligation to Prepay.............................................. 16 Section 7.3. Notice of Prepayment.............................................. 16 ARTICLE VIII MISCELLANEOUS........................................................ 17 Section 8.1. Notices........................................................... 17 Section 8.2. Assignments....................................................... 17 Section 8.3. Severability...................................................... 17 Section 8.4. Execution of Counterparts......................................... 17 Section 8.5. Amounts Remaining in Bond Fund.................................... 17 Section 8.6. Amendments, Changes and Modifications............................. 17 Section 8.7. Governing Law..................................................... 18 Section 8.8. Authorized Issuer and Company Representatives..................... 18 Section 8.9. Term of the Agreement............................................. 18 Section 8.10. Cancellation at Expiration of Term................................ 18 Section 8.11. Notice Regarding Cancellation of Contracts........................ 18 Signatures and Seals................................................................... 20
EXHIBIT A -- Project Description -ii- 4 THIS FINANCING AGREEMENT made and entered into as of April 1, 1998, by and between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA, an Arizona nonprofit corporation and political subdivision of the State of Arizona, party of the first part (hereinafter referred to as the "Issuer"), and AMERICA WEST AIRLINES, INC., a corporation duly organized and existing under the laws of the State of Delaware, party of the second part (hereinafter referred to as the "Company"). WITNESSETH: In consideration of the respective representations and agreements hereinafter contained, the parties hereto agree as follows (provided, that in the performance of the agreements of the party of the first part herein contained, any obligation it may thereby incur shall not constitute or give rise to a pecuniary liability or a charge upon its general credit or against its taxing powers but shall be payable solely out of the Revenues (as hereinafter defined) derived from this Financing Agreement and the Bonds, as hereinafter defined): ARTICLE I DEFINITIONS The following terms shall have the meanings specified in this Article unless the context clearly requires otherwise. The singular shall include the plural and the masculine shall include the feminine. "Act" means Title 35, Chapter 5, Arizona Revised Statutes, and all acts supplemental thereto or amendatory thereof. "Administrative Expenses" means the reasonable expenses (including, without limitation, the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, this Agreement, the Indenture and any transaction or event contemplated by this Agreement or the Indenture. "Agreement" means this Financing Agreement between the Issuer and the Company and all amendments and supplements hereto. "Authorized Company Representative" means any person who, at the time, shall have been designated as such by a written certificate furnished to the Issuer and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by the 5 President, Vice President, Secretary or Assistant Secretary. Such certificate may designate an alternate or alternates. "Bond" or "Bonds" means the Issuer's bonds identified in Section 2.02 of the Indenture. "Bond Counsel" means the counsel who renders the opinion as to the tax exempt status of interest on the Bonds or such other nationally recognized municipal bond counsel of recognized expertise with respect to such matters as may be mutually acceptable to the Issuer, the Trustee and the Company. "Bond Fund" means the fund created by Section 5.02 of the Indenture. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. "Company" means America West Airlines, Inc., a Delaware corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted under Section 5.1 hereof. "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law before the highest court of any state of the United States of America or of the District of Columbia. "Extraordinary Services" and "Extraordinary Expenses" mean all services rendered and all expenses (including fees and expenses of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "Force Majeure" means acts of God, strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the governments of the United States or of the State of Arizona or of the State, or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; lightning; earthquakes; fires; tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or malfunction or accident to machinery, transmission lines, pipes or canals, even if resulting from negligence; civil disturbances; or any other cause not reasonably within the control of the Company. "Governing Body" means the Board of Directors of the Issuer. "Hereof", "herein", "hereunder" and other words of similar import refer to this Agreement as a whole. "Indenture" means the Indenture of Trust relating to this Agreement between the Issuer and Norwest Bank Arizona, N.A., as Trustee, of even date herewith, pursuant to -2- 6 which the Bonds are authorized to be issued, including any indentures supplemental thereto or amendatory thereof. "Issuer" means The Industrial Development Authority of the City of Phoenix, Arizona and any successor body to the duties or functions of the Issuer. "1954 Code" means the Internal Revenue Code of 1954, as amended. "Ordinary Services" and "Ordinary Expenses" mean those services normally rendered and those expenses (including fees and expenses of Counsel) normally incurred by a trustee under instruments similar to the Indenture and the Tax Agreement. "Owner" or "Owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept by the Bond Registrar for that purpose in accordance with the terms of the Indenture. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Prior Bonds" means The Industrial Development Authority of the City of Phoenix, Arizona Variable Rate Airport Facility Revenue Bonds (America West Airlines, Inc. Project) Series 1986 originally issued in the aggregate principal amount of $54,000,000 and currently outstanding in the aggregate principal amount of $29,300,000. "Project" means the Company's undivided interest in those facilities described in Exhibit A to this Agreement. "Project Certificate" means the Company's Project Certificate, delivered concurrently with the issuance of the Bonds, with respect to certain facts which are within the knowledge of the Company and certain reasonable assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel, to determine that interest on the Bonds is not includable in the gross income of the Owners of the Bonds for federal income taxes purposes. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement. "State" means the State of Arizona. "Tax Agreement" means the Tax Exemption Certificate and Agreement with respect to the Bonds, dated the date of delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Tax-Exempt" means, with respect to interest on any obligations of a state or local government, including the Bonds, that such interest is excluded from the gross income of the holders thereof (other than any holder who is a "substantial user" of facilities financed with such obligations or a "related person" within the meaning of Section 103(b)(13) of the 1954 -3- 7 Code or Section 147(a) of the Code) for federal income tax purposes, whether or not such interest is includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax or environmental tax under the 1954 Code or the Code. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture. "Trustee" means Norwest Bank Arizona, N.A., as Trustee under the Indenture, and any successor Trustee appointed pursuant to the Indenture at the time serving as Trustee thereunder, and any co-trustee serving as such thereunder. All other terms used herein which are defined in the Indenture shall have the same meanings assigned them in the Indenture unless the context otherwise requires. ARTICLE II REPRESENTATIONS SECTION 2.1. REPRESENTATIONS AND COVENANTS BY THE ISSUER. The Issuer makes the following representations and covenants as the basis for the undertakings on its part herein contained: (a) The Issuer is a duly organized and existing nonprofit corporation and political subdivision of the State. Under the provisions of the Act, the Issuer is authorized to enter into the transactions contemplated by this Agreement, the Indenture and the Tax Agreement and to carry out its obligations hereunder and thereunder. The Issuer has duly authorized the execution and delivery of this Agreement, the Indenture and the Tax Agreement. (b) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer's interests in this Agreement and the Revenues derived by the Issuer pursuant to this Agreement will be pledged and assigned as security for payment of the principal of, premium, if any, and interest on, the Bonds. (c) The Governing Body of the Issuer has found that the issuance of the Bonds will further the public purposes of the Act. (d) The Issuer has not assigned and will not assign any of its interests in this Agreement other than pursuant to the Indenture. (e) Except as otherwise disclosed by the Issuer, no member of the Governing Body of the Issuer, nor any other officer of the Issuer, has any interest, financial, employment or other, in the Company or in the transactions contemplated hereby. -4- 8 (f) To the extent within its reasonable control, the Issuer will not knowingly engage in any activity which might result in the income of the Issuer to be received hereunder becoming taxable to it or interest on the Bonds becoming taxable to the Bondholders under Federal income tax laws. SECTION 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the following representations as the basis for the undertakings on its part herein contained: (a) The Company is a corporation duly incorporated under the laws of the State of Delaware and is in good standing in the State of Delaware, is qualified to do business as a foreign corporation in the State and in all other states and jurisdictions wherein the nature of the business transacted by the Company or the nature of the property owned or leased by it would make the failure to so qualify reasonably likely to have a material adverse effect on its business or financial condition, has power to enter into and by proper corporate action has been duly authorized to execute and deliver this Agreement and the Tax Agreement. (b) Neither the execution and delivery of this Agreement or the Tax Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement and the Tax Agreement, conflicts with or results in a material breach of any of the terms, conditions or provisions of any corporate restriction or any material agreement or material instrument to which the Company is now a party or by which it is bound (in each case material to the ability of the Company to fulfill its obligations under this Agreement and the Tax Agreement), or constitutes a default under any of the foregoing, or results in the creation or imposition of any material lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement other than the Indenture. (c) The statements, information and descriptions contained in the Project Certificate and the Tax Agreement, as of the date hereof and at the time of the delivery of the Bonds to the Original Purchasers, are and will be true, correct and complete, do not and will not contain any untrue statement or misleading statement of a material fact, and do not and will not omit to state a material fact required to be stated therein or necessary to make the statements, information and descriptions contained therein, in the light of the circumstances under which they were made, not misleading. ARTICLE III ISSUANCE OF THE BONDS SECTION 3.1. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. To provide funds to refinance the cost of the Project, the Issuer agrees that it will issue under the Indenture, sell and cause to be delivered to the purchasers thereof, the Bonds. The -5- 9 Issuer will thereupon apply the proceeds received from the sale of the Bonds as provided in the Indenture. SECTION 3.2. RESERVED. SECTION 3.3. RESERVED. SECTION 3.4. RESERVED. SECTION 3.5. INVESTMENT OF MONEYS IN FUNDS. Except as otherwise herein provided, any moneys held as a part of the Bond Fund shall be invested or reinvested by the Trustee at the written direction, or the oral direction promptly confirmed in writing, of an Authorized Company Representative as to specific investments, to the extent permitted by law, in: (a) bonds or other obligations of the United States of America; (b) bonds or other obligations, the payment of the principal of and interest on which is unconditionally guaranteed by the United States of America; (c) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (d) obligations issued or guaranteed by any state of the United States of America, or any political subdivision of any such state, or in funds consisting of such obligations to the extent described in Treasury Regulation 1.148-8(e)(3)(iii); (e) prime commercial paper; (f) prime finance company paper; (g) bankers' acceptances drawn on and accepted by commercial banks; (h) repurchase agreements fully secured by obligations issued or guaranteed as to principal and interest by the United States of America or by any person controlled or supervised by and acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America; (i) certificates of deposit issued by commercial banks, including banks domiciled outside of the United States of America; and -6- 10 (j) units of taxable government money market portfolios composed of obligations guaranteed as to principal and interest by the United States of America or repurchase agreements fully collateralized by such obligations. The investments so purchased shall be held by the Trustee and shall be deemed at all times a part of the Bond Fund and the interest accruing thereon and any profit realized therefrom shall be credited to such fund, subject to the provisions of the Tax Agreement. The Company agrees that to the extent any moneys in the Bond Fund represent moneys held for the payment of the principal of Bonds which have become due at maturity or on a redemption date and the premium, if any, on such Bonds or interest due on Bonds in all cases where Bonds have not been presented for payment and paid or such interest is unclaimed, such moneys shall not be invested. SECTION 3.6. TAX EXEMPT STATUS OF BONDS. The Company covenants and agrees that it has not taken or permitted and will not take or permit any action which results in interest paid on the Bonds being included in gross income of the holders or beneficial owners of the Bonds for purposes of federal income taxation (other than a holder or beneficial owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code or Section 103(b)(13) of the 1954 Code). The Company covenants that none of the proceeds of the Bonds or the payments to be made under this Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested or used in such a way, and that no actions will be taken or not taken, as to cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148(a) of the Code. Without limiting the generality of the foregoing, the Company covenants and agrees that it will comply with the provisions of the Tax Agreement and the Project Certificate. ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer and the Company agree, upon the terms and conditions in this Agreement, that the application of the proceeds of sale of the Bonds to refund and retire the Prior Bonds will be deemed to be and treated for all purposes as a loan to the Company of an amount equal to the principal amount of the Bonds. (b) The Issuer and the Company expressly reserve the right to enter into, to the extent permitted by law, an agreement or agreements other than this Agreement, with respect to the issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide additional funds to refund all or any principal amount of the Bonds. SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE. (a) By 10:00 a.m. (Phoenix, Arizona time) on each date provided in or pursuant to the Indenture for the payment (whether at maturity or upon optional redemption or acceleration) of principal of, -7- 11 and premium, if any, and interest on, the Bonds, until the principal of, and premium, if any, and interest on, the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture and thirty-five (35) days prior to a mandatory redemption date under Section 3.03 of the Indenture, the Company shall pay to the Trustee in immediately available funds, for deposit in the Bond Fund, as a repayment installment of the loan of the proceeds of the Bonds pursuant to Section 4.1 hereof, a sum equal to the amount payable on such date (whether at maturity or upon redemption or acceleration) as principal of, and premium, if any, and interest on, the Bonds as provided in the Indenture; and provided further, that the obligation of the Company to make any such repayment installment shall be reduced by the amount of any moneys then on deposit in the Bond Fund and available for such payment. (b) The Company agrees to pay to the Trustee (i) the fees of the Trustee for the Ordinary Services rendered by it and an amount equal to the Ordinary Expenses incurred by it under the Indenture and the Tax Agreement, as and when the same become due, and (ii) the reasonable fees, charges and expenses of the Trustee for reasonable Extraordinary Services and Extraordinary Expenses, as and when the same become due, incurred under the Indenture and the Tax Agreement. The Company agrees that the Trustee, its officers, agents, servants and employees, shall not be liable for, and agrees that it will at all times indemnify and hold harmless the Trustee, its officers, agents, servants and employees against, and pay all expenses of the Trustee, its officers, agents, servants and employees, relating to any lawsuit, proceeding or claim and resulting from any action or omission taken or made by or on behalf of the Trustee, its officers, agents, servants and employees pursuant to this Agreement, the Indenture or the Tax Agreement, that may be occasioned by any cause (other than the negligence or willful misconduct of the Trustee, its officers, agents, servants and employees). In case any action shall be brought against the Trustee in respect of which indemnity may be sought against the Company, the Trustee shall promptly notify the Company in writing and the Company shall be entitled to assume control of the defense thereof, including the employment of Counsel and the payment of all expenses. The Trustee shall have the right to employ separate Counsel in any such action and participate in the defense thereof, but the fees and expenses of such Counsel shall be paid by the Trustee unless the employment of such Counsel has been authorized by the Company. The Company shall not be liable for any settlement of any such action without its consent, but if any such action is settled with the consent of the Company or if there be final judgment for the plaintiff in any such action, the Company agrees to indemnify and hold harmless the Trustee from and against any loss or liability by reason of such settlement or final judgment. The Company agrees that the indemnification provided herein shall survive the termination of this Agreement or the Indenture or the resignation or removal of the Trustee. (c) The Company agrees to pay all costs incurred in connection with the issuance of the Bonds and the Issuer shall have no obligation with respect to such costs. (d) The Company agrees to indemnify and hold harmless the Issuer and any member, officer, official or employee of the Issuer against any and all losses, costs, charges, expenses, judgments and liabilities created by or arising out of this Agreement, the Indenture or the Tax Agreement or otherwise incurred in connection with the issuance of the Bonds -8- 12 (other than from the willful misconduct of the Issuer, its members, officers, officials or employees). The Issuer may submit to the Company periodic statements, not more frequently than monthly, for its Administrative Expenses and the Company shall make payment to the Issuer of the full amount of each such statement within 30 days after the Company receives such statement. (e) In the event the Company shall fail to make any of the payments required by (a) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid and the Company will pay interest to the extent permitted by law, on any overdue amount at the rate of interest borne by the Bonds on the date on which such amount became due and payable until paid. In the event that the Company shall fail to make any of the payments required by (b), (c) or (d) of this Section 4.2, the payment so in default shall continue as an obligation of the Company until the amount in default shall have been fully paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law at a rate 1% above the rate of interest then charged by the Trustee on 90-day commercial loans to its prime commercial borrowers until paid. (f) In the event that moneys are not available for transfer from the Bond Fund to the Rebate Fund as required by the Tax Agreement, the Company agrees to pay any such amount required to be so transferred and not available for such purpose in the Bond Fund by paying such amount to the Trustee for deposit directly into the Rebate Fund. The obligation of the Company set forth in this Section 4.2(f) shall survive the termination of this Agreement. SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the Company to make the payments pursuant to this Agreement shall be absolute and unconditional without defense or set-off by reason of any default by the Issuer under this Agreement or under any other agreement between the Company and the Issuer or for any other reason, it being the intention of the parties that the payments required hereunder will be paid in full when due without any delay or diminution whatsoever. SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is understood and agreed that all payments required to be made by the Company pursuant to Section 4.2 hereof (except payments made to the Trustee pursuant to Section 4.2(b) hereof, to the Issuer pursuant to Section 4.2(d) hereof and to either or both of the foregoing pursuant to Section 4.2(e) hereof) and certain rights of the Issuer hereunder are pledged and assigned by the Indenture. The Company consents to such pledge and assignment. The Issuer hereby directs the Company and the Company hereby agrees to pay or cause to be paid to the Trustee all said amounts. The Project will not constitute any part of the security for the Bonds. SECTION 4.5. PAYMENT OF THE BONDS AND OTHER AMOUNTS. The Bonds and interest and premium, if any, thereon shall be payable solely from (i) payments made by the Company to the Trustee under Section 4.2(a) hereof, and (ii) other moneys on deposit in the Bond Fund and available therefor. -9- 13 Payments of principal of, and premium, if any, or interest on, the Bonds with moneys in the Bond Fund constituting proceeds from the sale of the Bonds or earnings on investments made under the provisions of the Indenture shall be credited against the obligation to pay required by Section 4.2(a) hereof. Whenever any Bonds are redeemable in whole or in part at the option of the Company, the Trustee, on behalf of the Issuer, shall redeem the same upon the request of the Company and such redemption (unless conditional) shall be made from payments made by the Company to the Trustee under Section 4.2(a) hereof equal to the redemption price of such Bonds. Whenever payment or provision therefor has been made in respect of the principal of, or premium, if any, or interest on, all or any portion of the Bonds in accordance with the Indenture (whether at maturity or upon redemption or acceleration or upon provision for payment in accordance with Article VII of the Indenture), payments shall be deemed paid to the extent such payment or provision therefor has been made and is considered to be a payment of principal of, or premium, if any, or interest on, such Bonds. If such Bonds are thereby deemed paid in full, the Trustee shall notify the Company and the Issuer that such payment requirement has been satisfied. Subject to the foregoing, or unless the Company is entitled to a credit under this Agreement or the Indenture, all payments shall be in the full amount required by Section 4.2(a) hereof. ARTICLE V SPECIAL COVENANTS AND AGREEMENTS SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS PERMITTED. The Company agrees that during the term of this Agreement, it will maintain its corporate existence and its good standing in the State of Delaware, will be qualified to do business as a foreign corporation in the State, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another corporation unless the acquirer of its assets or the corporation with which it shall consolidate or into which it shall merge shall (i) be a corporation organized under the laws of one of the states of the United States of America, (ii) be qualified to do business in the State, and (iii) assume in writing all of the obligations of the Company under this Agreement and the Tax Agreement. Any transfer of all or substantially all of the Company's assets to any of its wholly owned subsidiaries shall not be deemed to constitute a "disposition of all or substantially all of the Company's assets" within the meaning of the preceding paragraph. Any such transfer of the Company's assets shall not relieve the Company of any of its obligations under this Agreement. SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have an annual audit made by its regular independent certified public accountants and to furnish the Trustee -10- 14 (within thirty days after receipt by the Company) with a balance sheet and statement of income and surplus showing the financial condition of the Company and its consolidated subsidiaries, if any, at the close of each fiscal year and the results of operations of the Company and its consolidated subsidiaries, if any, for each fiscal year, accompanied by a report of said accountants that such statements have been prepared in accordance with generally accepted accounting principles. The Company's obligations under this Section 5.2 may be satisfied by delivering a copy of America West Holdings Corporation's Annual Report to the Trustee at the same time that it is mailed to stockholders. SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; ETC.. The Company shall maintain or cause to be maintained the Project in good repair and keep it properly insured and shall promptly pay or cause to be paid all costs thereof. The Company shall promptly pay or cause to be paid all installments of taxes, installments of special assessments, and all governmental, utility and other charges with respect to the Project, when due. The Company may, at its own expense and in its own name in good faith contest or appeal any such taxes, assessments or other charges, or installments thereof, but shall not permit any such taxes, assessments or other charges, or installments thereof, to remain unpaid if such nonpayment shall subject the Project or any part thereof to loss or forfeiture. SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS. The Company shall cause such security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time pursuant to the Indenture to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve, protect and perfect the security of the Owners of the Bonds and the rights of the Trustee, and to perfect the security interest created by the Indenture in this Agreement. The Company agrees to abide by the provisions of Section 4.04 of the Indenture to the extent applicable to the Company. SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no warranty, either express or implied, as to the Project or that it will be suitable for the purposes of the Company or needs of the Company. SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT. The Issuer and the Company agree that title to the Project shall be in and remain in the Company, and that the Project shall be the sole property of the Company in which the Issuer shall have no interest. SECTION 5.7. INFORMATION REPORTING, ETC.. The Issuer covenants and agrees that, upon the direction of the Company or Bond Counsel, it will mail or cause to be mailed to the Secretary of the Treasury (or his designee as prescribed by regulation, currently the Internal Revenue Service Center, Philadelphia, PA 19255) a statement setting forth the information required by Section 149(e) of the Code, which statement shall be in the form of the Information Return for Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal Revenue Service (or any successor form) and which shall be completed based in part upon information supplied by the Company and Bond Counsel. -11- 15 SECTION 5.8. LIMITED LIABILITY OF ISSUER. Any obligation or liability of the Issuer created by or arising out of this Agreement or otherwise incurred in connection with the issuance of the Bonds (including without limitation any liability created by or arising out of the representations, warranties or covenants set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the Issuer or the State or any political subdivision thereof, or a charge upon the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the Revenues or other amounts payable by the Company to the Issuer hereunder or otherwise. Neither the issuance of the Bonds nor the delivery of this Agreement shall, directly or indirectly or contingently, obligate the Issuer or the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. Nothing in the Bonds or in the Indenture or this Agreement or the proceedings of the Issuer authorizing the Bonds or in the Act or in any other related document shall be construed to authorize the Issuer to create a debt of the Issuer or the State or any political subdivision thereof within the meaning of any constitutional or statutory provision of the State. The principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the funds pledged for their payment in accordance with the Indenture and available therefor under this Agreement. Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of, premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Issuer. No breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the Issuer or the State or any political subdivision thereof, or any charge upon the general credit or against the taxing power of the Issuer or the State or any political subdivision thereof. SECTION 5.9. INSPECTION OF PROJECT. The Company agrees that the Issuer and the Trustee and their duly authorized representatives shall have the right at all reasonable times upon proper notice to enter upon and examine and inspect the Project property and shall also be permitted, at all reasonable times upon proper notice, to examine the books and records of the Company insofar as they relate to the Project. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events of default" under this Agreement and the terms "event of default" or "default" shall mean, whenever they are used in this Agreement, any one or more of the following events: (a) Failure by the Company to pay when due any amounts required to be paid under Section 4.2(a) hereof, which failure results in an event of default under subparagraph (a) or (b) of Section 8.01 of the Indenture; or -12- 16 (b) Failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Agreement, other than as referred to in (a) above, for a period of 90 days after written notice, or in the case of failure by the Company to observe and perform any covenant, condition or agreement on its part to be observed or performed in Section 4.2(f) hereof, for a period of 30 days after written notice, specifying such failure and requesting that it be remedied and stating that such notice is a "Notice of Default" hereunder, given to the Company by the Trustee or to the Company and the Trustee by the Issuer, unless the Issuer and the Trustee shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted within the applicable period and diligently pursued until the failure is corrected and such corrective action or diligent pursuit is evidenced to the Trustee by a certificate of an Authorized Company Representative provided, however, further that such failure (other than a failure to perform the agreement in Section 5.1 relating to the Company's existence) is not an Event of Default if it is a result of any cause or event not reasonably within the Company's control; or (c) A proceeding or case shall be commenced, without the application or consent of the Company, in any court of competent jurisdiction seeking (i) liquidation, reorganization, dissolution, winding-up or composition or adjustment of debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or cause shall continue undismissed, or an order, judgment, or decree approving or ordering any of the foregoing shall be entered and shall continue in effect for a period of 90 days; or an order for relief against the Company shall be entered against the Company in an involuntary case under the United States Bankruptcy Code (as now or hereafter in effect) or other applicable law; or (d) The Company shall admit in writing its inability to pay its debts generally as they become due or shall file a petition in voluntary bankruptcy or shall make any general assignment for the benefit of its creditors, or shall consent to the appointment of a receiver or trustee of all or substantially all of its property, or shall commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect), or shall file in any court of competent jurisdiction a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, or shall fail to controvert in a timely or appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under such United States Bankruptcy Code or other applicable law; or (e) Dissolution or liquidation of the Company; provided that the term "dissolution or liquidation of the Company" shall not be construed to include the -13- 17 cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 5.1 hereof; or (f) The occurrence of an "event of default" under the Indenture. The foregoing provisions of Section 6.1(b) are subject to the following limitations: If by reason of Force Majeure the Company is unable in whole or in part to carry out its agreements on its part herein contained, other than the obligations on the part of the Company contained in Article IV and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default during the continuance of such inability. The Company agrees, however, to remedy with all reasonable dispatch the cause or causes preventing the Company from carrying out its agreements; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the sole judgment of the Company unfavorable to the Company. SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of default referred to in Section 6.1 hereof shall have happened and be continuing, the Trustee, as assignee of the Issuer: (a) shall, by notice in writing to the Company, declare the unpaid indebtedness under Section 4.2(a) hereof to be due and payable immediately, if concurrently with or prior to such notice the unpaid principal amount of the Bonds shall have been declared to be due and payable, and upon any such declaration the same (being an amount sufficient, together with other moneys available therefor in the Bond Fund, to pay the unpaid principal of, premium, if any, and interest accrued on, the Bonds) shall become and shall be immediately due and payable as liquidated damages; and (b) may take whatever action at law or in equity as may appear necessary or desirable to collect the payments and other amounts then due and thereafter to become due hereunder or to enforce performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Any amounts collected pursuant to action taken under this Section 6.2 shall be paid into the Bond Fund (unless otherwise provided in this Agreement) and applied in accordance with the provisions of the Indenture. No action taken pursuant to this Section 6.2 shall relieve the Company from the Company's obligations pursuant to Section 4.2 hereof. No recourse shall be had for any claim based on this Agreement against any officer, director or stockholder, past, present or future, of the Company as such, either directly or -14- 18 through the Company, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any of its rights under the Sections 4.2(d), 4.2(e), 5.3 and 6.4 hereof. SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Subject to the provisions of the Indenture and hereof, such rights and remedies as are given the Issuer hereunder shall also extend to the Trustee. The Owners of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements herein contained. SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL. In the event the Company should default under any of the provisions of this Agreement and the Issuer or the Trustee should employ Counsel or incur other expenses for the collection of the indebtedness hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained, the Company agrees that it will on demand therefor pay to the Trustee, the Issuer or, if so directed by the Issuer, to the Counsel for the Issuer, the reasonable fees of such Counsel and such other expenses so incurred by or on behalf of the Issuer or the Trustee. SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO WAIVERS. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver shall be effective unless in writing and signed by the party making the waiver. The Issuer shall have no power to waive any default hereunder by the Company without the consent of the Trustee to such waiver. The Trustee shall have the power to waive any default by the Company hereunder, except a default under Section 3.6, 4.2(d), 5.3 or 6.4 hereof, or under Section 4.2(e) hereof in so far as it pertains to the Issuer, without the prior written concurrence of the Issuer. Notwithstanding the foregoing, if, after the acceleration of the maturity of the outstanding Bonds by the Trustee pursuant to Section 8.02 of the Indenture, (i) all arrears of principal of and interest on the outstanding Bonds and interest on overdue principal and (to the extent permitted by law) on overdue installments of interest at the rate of interest borne by the Bonds on the date on which such principal or interest became due and payable and the premium, if any, on all Bonds then Outstanding which have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of and the interest on such Bonds which by such -15- 19 acceleration shall have become due and payable, shall have been paid, (ii) all other things shall have been performed in respect of which there was a default, (iii) there shall have been paid the reasonable fees and expenses of the Trustee and of the Owners of such Bonds, including reasonable attorneys' fees paid or incurred and (iv) such event of default under the Indenture shall be waived in accordance with Section 8.09 of the Indenture with the consequence that such acceleration under Section 8.02 of the Indenture is rescinded, then the Company's default hereunder shall be deemed to have been waived and its consequences rescinded and no further action or consent by the Trustee or the Issuer shall be required; provided that there has been furnished an opinion of Bond Counsel to the effect that such waiver will not adversely affect the exemption from federal income taxes of interest on the Bonds. ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS; REDEMPTION OF BONDS SECTION 7.1. OPTION TO PREPAY. The Company shall have, and is hereby granted, the option to prepay the payments due hereunder in whole or in part at any time or from time to time (a) to provide for the redemption of Bonds pursuant to the provisions of Section 3.01 of the Indenture or (b) to provide for the defeasance of the Bonds pursuant to Article VII of the Indenture. In the event the Company elects to provide for the redemption of Bonds as permitted by this Section, the Company shall notify and instruct the Trustee in accordance with Section 7.3 hereof to redeem all or any portion of the Bonds in advance of maturity. If the Company so elects, any redemption of Bonds pursuant to Section 3.01 of the Indenture may be made conditional. SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and agrees that if all or any part of the Bonds become subject to mandatory redemption, it will prepay the indebtedness hereunder in whole or in part, prior to the date on which notice of such redemption is given to the owners of such Bonds, in an amount sufficient to redeem such Bonds on the date fixed for the redemption of the Bonds. SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of the option granted to the Company in Section 7.1 hereof, or upon the Company having knowledge of the occurrence of any event requiring mandatory redemption of the Bonds in accordance with Section 3.03 of the Indenture, the Company shall give written notice to the Issuer and the Trustee. The notice shall provide for the date of the application of the prepayment made by the Company hereunder to the retirement of the Bonds in whole or in part pursuant to call for redemption and shall be given by the Company not less than 45 days prior to the date of the redemption which is to occur as a result of such prepayment (or such later date as is acceptable to the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant to Section 3.03 of the Indenture shall be given on a date which will permit the redemption of the Bonds within the time required by Section 3.03 of the Indenture. -16- 20 ARTICLE VIII MISCELLANEOUS SECTION 8.1. NOTICES. Except as otherwise expressly provided herein, all notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given on the day on which the same have been mailed by first class mail postage prepaid, or delivered by hand, or sent by telecopy or similar facsimile transmission, as follows: if to the Issuer, c/o Lewis & Roca, LLP, 40 North Central Avenue, Phoenix, Arizona 85004-4429, or to telecopy number (602) 262-5311, if to the Company, at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, or to telecopy number (602) 693-5886, Attention: Treasurer; if to the Trustee, at 3300 North Central Avenue, 15th Floor, Phoenix, Arizona 85012, or to telecopy number (602) 248-1200, Attention: Corporate Trust Services; provided, however, that notice to the Trustee shall be deemed given when received by the Trustee. A duplicate copy of each notice, certificate or other communication given hereunder by either the Issuer or the Trustee to the other shall also be given to the Company. The Issuer, the Company and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 8.2. ASSIGNMENTS. This Agreement may not be assigned by either party without consent of the other, except that the Issuer shall assign to the Trustee its rights under this Agreement (except under Sections 4.2(d), 4.2(e), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the Company may assign its rights under this Agreement to any transferee or any surviving or resulting corporation as provided by Section 5.1 hereof. SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent whatever. SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the parties hereto that after payment in full of (i) the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture), (ii) the fees, charges and expenses of the Trustee in accordance with the Indenture, (iii) the Administrative Expenses, (iv) the fees and expenses of the Issuer and (v) all other amounts required to be paid under this Agreement and the Indenture, any amounts remaining in the Bond Fund shall belong to and be paid to the Company by the Trustee. SECTION 8.6. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may be amended, changed, modified, altered or terminated only by written instrument executed by the Issuer and the Company as provided in Section 11.01 and Section 11.02 of -17- 21 the Indenture, and, under either such Section, only if the written consent of the Trustee to the amendment, change or modification is obtained and provided, however, that the Issuer shall not thereby incur any monetary obligation or liability (except only to the extent that the same shall be payable solely and only out of funds provided or to be provided by the Company) or surrender or abdicate in whole or in part any of its essential governmental functions or powers or any of its discretion in exercising the same. SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively by and construed in accordance with the applicable laws of the State. SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES. Whenever under the provisions of this Agreement the approval of the Issuer or the Company is required to take some action at the request of the other, such approval of such request shall be given for the Issuer by the Authorized Issuer Representative and for the Company by the Authorized Company Representative, and the other party hereto and the Trustee shall be authorized to act on any such approval or request and neither party hereto shall have any complaint against the other or against the Trustee as a result of any such action taken. SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds issued under the Indenture shall have been fully paid or retired (or provision for such payment shall have been made as provided in the Indenture), provided that all representations and certifications by the Company as to all matters affecting the tax-exempt status of the Bonds and the covenants of the Company in Sections 4.2(b), 4.2(d), 4.2(e) and 4.2(f) hereof shall survive the termination of this Agreement. SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At the acceleration, termination or expiration of the term of this Agreement and following full payment of the Bonds or provision for payment thereof and of all other fees and charges having been made in accordance with the provisions of this Agreement and the Indenture, the Issuer shall deliver to the Company any documents and take or cause the Trustee to take such actions as may be necessary to effectuate the cancellation and evidence the termination of this Agreement. SECTION 8.11. NOTICE REGARDING CANCELLATION OF CONTRACTS. As required by the provisions of Section 38-511, Arizona Revised Statutes, as amended, notice is hereby given that political subdivisions of the State of Arizona or any of their departments or agencies may, within three (3) years of its execution, cancel any contract, without penalty or further obligation, made by the political subdivisions or any of their departments or agencies on or after September 30, 1988, if any person significantly involved in initiating, negotiating, securing, drafting or creating the contract on behalf of the political subdivisions or any of their departments or agencies is, at any time while the contract or any extension of the contract is in effect, an employee or agent of any other party to the contract in any capacity or a consultant to any other party of the contract with respect to the subject matter of the contract. The cancellation shall be effective when written notice from the chief -18- 22 executive officer or governing body of the political subdivision is received by all other parties to the contract unless the notice specifies a later time. The Company covenants and agrees not to employ as an employee, agent or, with respect to the subject matter of the Agreement, a consultant, any person significantly involved in initiating, negotiating, securing, drafting or creating this Agreement on behalf of the Issuer within three (3) years from the execution hereof, unless a waiver is provided by the Issuer. IN WITNESS WHEREOF, the Issuer has caused these presents to be signed in its name and behalf by its President and attested by its Assistant Secretary, and the Company has caused these presents to be signed in its name and behalf by one of its __________________ and its official seal to be hereunto affixed, and the same to be attested by one of its __________________, all as of the date first above written. THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA By /s/ illegible ------------------------------------- President Attest: /s/ illegible - ---------------------------------- Assistant Secretary AMERICA WEST AIRLINES, INC. By /s/ illegible ------------------------------------- (SEAL) Its Vice President and Treasurer Attest: - ---------------------------------- Its ------------------------------- -19- 23 EXHIBIT A PROJECT DESCRIPTION The Project consists of aircraft hangar facilities, a two-aircraft simulator bay and related facilities located at Sky Harbor International Airport, Phoenix, Arizona, on property owned by the City and leased to the Company. EX-10.30 4 EX-10.30 1 Exhibit 10.30 THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA TO NORWEST BANK ARIZONA, N.A. Trustee -------------------------------- INDENTURE OF TRUST -------------------------------- SECURING $29,300,000 THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA AIRPORT FACILITIES REFUNDING BONDS (AMERICA WEST AIRLINES, INC. PROJECT) SERIES 1998 -------------------------------- Dated as of April 1, 1998 2 TABLE OF CONTENTS
Page Recitals.........................................................................................................................1 Form of Face of Bond.............................................................................................................3 Form of Trustee's Certificate of Authentication..................................................................................5 Form of Reverse of Bond..........................................................................................................5 Form of Assignment...............................................................................................................8 Granting Clauses.................................................................................................................9 ARTICLE I DEFINITIONS..........................................................................................11 Section 1.01. Definitions......................................................................................11 ARTICLE II THE BONDS............................................................................................16 Section 2.01. Authorized Amount and Purpose of Bonds...........................................................16 Section 2.02. Issuance of Bonds................................................................................16 Section 2.03. Ownership, Transfer, Exchange and Registration of Bonds..........................................17 Section 2.04. Execution; Limited Obligation....................................................................18 Section 2.05. Authentication...................................................................................18 Section 2.06. Mutilated, Destroyed, Lost or Stolen Bonds.......................................................18 Section 2.07. Cancellation and Destruction of Surrendered Bonds................................................19 Section 2.08. Delivery of the Bonds............................................................................19 Section 2.09. Book Entry System................................................................................20 ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY..................................................................20 Section 3.01. Optional Redemption..............................................................................20 Section 3.02. Reserved.........................................................................................21 Section 3.03. Mandatory Redemption.............................................................................21 Section 3.04. Notice of Redemption.............................................................................21 Section 3.05. Deposit of Funds.................................................................................23 Section 3.06. Partial Redemption of Bonds......................................................................23 Section 3.07. Selection Of Bonds For Redemption................................................................23 ARTICLE IV PAYMENT; FURTHER ASSURANCES..........................................................................24 Section 4.01. Payment of Principal or Redemption Price of and Interest on Bonds................................24 Section 4.02. Performance of Covenants; The Issuer.............................................................24 Section 4.03. Right to Payments Under Agreement; Instruments of Further Assurance..............................24 Section 4.04. Financing Statements.............................................................................25 Section 4.05. Inspection of Project Books......................................................................25 Section 4.06. Rights under Agreement...........................................................................25
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ARTICLE V REVENUES AND FUNDS...................................................................................26 Section 5.01. Source of Payment of Bonds.......................................................................26 Section 5.02. Creation of the Bond Fund........................................................................26 Section 5.03. Payments into the Bond Fund......................................................................26 Section 5.04. Use of Moneys in the Bond Fund...................................................................26 Section 5.05. Custody of the Bond Fund.........................................................................26 Section 5.06. Non-Presentment of Bonds.........................................................................27 Section 5.07. Trustee's Fees, Charges and Expenses.............................................................27 Section 5.08. Moneys To Be Held in Trust.......................................................................27 Section 5.09. Repayment to the Company from the Bond Fund......................................................27 Section 5.10. Revenues To Be Paid Over to Trustee..............................................................27 Section 5.11. Payments of Principal and Interest...............................................................28 Section 5.12. Revenues To Be Held for All Bondholders; Certain Exceptions......................................28 Section 5.13. Tax Agreement....................................................................................28 Section 5.14. Cost of Issuance Fund............................................................................28 ARTICLE VI INVESTMENT OF MONEYS.................................................................................28 Section 6.01. Investment of Bond Fund Moneys...................................................................28 Section 6.02. Investments; Arbitrage...........................................................................28 ARTICLE VII DEFEASANCE...........................................................................................29 Section 7.01. Defeasance.......................................................................................29 ARTICLE VIII DEFAULT PROVISIONS; REMEDIES.........................................................................30 Section 8.01. Defaults; Events of Default......................................................................30 Section 8.02. Acceleration.....................................................................................31 Section 8.03. Remedies; Rights Of Bondholders..................................................................31 Section 8.04. Right of Bondholders to Direct Proceedings.......................................................32 Section 8.05. Application of Moneys............................................................................32 Section 8.06. Remedies Vested in Trustee.......................................................................32 Section 8.07. Rights and Remedies of Bondholders...............................................................33 Section 8.08. Termination of Proceedings.......................................................................33 Section 8.09. Waivers of Events of Default.....................................................................33 Section 8.10. Opportunity of Company to Cure Events of Default.................................................34 ARTICLE IX THE TRUSTEE..........................................................................................35 Section 9.01. Acceptance of the Trusts.........................................................................35 Section 9.02. Corporate Trustee Required; Eligibility..........................................................38 Section 9.03. Fees, Charges and Expenses of Trustee............................................................38 Section 9.04. Notice to Bondholders If Default Occurs..........................................................39 Section 9.05. Intervention by Trustee..........................................................................39 Section 9.06. Successor Trustee................................................................................39
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Section 9.07. Resignation by the Trustee.......................................................................39 Section 9.08. Removal of the Trustee...........................................................................40 Section 9.09. Appointment of Successor Trustee.................................................................40 Section 9.10. Concerning Any Successor Trustees................................................................40 Section 9.11. Appointment of Co-Trustee........................................................................41 ARTICLE X SUPPLEMENTAL INDENTURES..............................................................................42 Section 10.01. Supplemental Indentures Not Requiring Consent of Bondholders.....................................42 Section 10.02. Supplemental Indentures Requiring Consent of Bondholders.........................................43 Section 10.03. Consents to Supplemental Indentures..............................................................44 Section 10.04. Reliance on Opinions of Counsel..................................................................44 ARTICLE XI AMENDMENT OF AGREEMENT...............................................................................44 Section 11.01. Amendments, Etc., to Agreement Not Requiring Consent of Bondholders..............................44 Section 11.02. Amendments, Etc., to Agreement Requiring Consent of Bondholders..................................45 Section 11.03. Reliance on Opinions of Counsel..................................................................45 ARTICLE XII MISCELLANEOUS........................................................................................46 Section 12.01. Consents, Etc., Of Bondholders...................................................................46 Section 12.02. Limitation of Rights.............................................................................46 Section 12.03. Severability.....................................................................................46 Section 12.04. Notices..........................................................................................46 Section 12.05. Holidays.........................................................................................47 Section 12.06. Counterparts.....................................................................................47 Section 12.07. Applicable Law...................................................................................47 Section 12.08. Captions.........................................................................................47 Section 12.09. Notice Regarding Cancellation of Contracts.......................................................47 Signature Page..................................................................................................................48 EXHIBIT I FORM OF INVESTOR LETTER
-iii- 5 THIS INDENTURE OF TRUST, made and entered into as of April 1, 1998, by and between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA, an Arizona nonprofit corporation and political subdivision of the State of Arizona (the "Issuer"), and NORWEST BANK ARIZONA, N.A., as Trustee (the "Trustee"), a banking corporation duly organized, existing and authorized to accept and execute trusts of the character herein set out under the laws of the State of Arizona, with its principal corporate trust office located in Phoenix, Arizona; WITNESSETH: WHEREAS, the Issuer is authorized and empowered under Title 35, Chapter 5, Arizona Revised Statutes, as amended (the "Act"), to issue revenue bonds in accordance with Article 2 of the Act and to make secured or unsecured loans for the purpose of financing or refinancing costs of certain airport facilities, to charge and collect interest on such loans and pledge the proceeds of loan agreements as security for the payment of principal of and interest on bonds, or designated issues of bonds, issued by the Issuer and any agreements in connection therewith, whenever the board of directors finds such loans to be in furtherance of the purposes of the Issuer; and WHEREAS, the Issuer has heretofore issued and sold its Variable Rate Airport Facility Revenue Bonds (America West Airlines, Inc. Project) Series 1986 in the original aggregate principal amount of $54,000,000, of which $29,300,000 is currently outstanding (the "Prior Bonds"), pursuant to an Indenture of Trust, dated as of August 1, 1986 (the "Prior Indenture"), between the Issuer and Norwest Bank Arizona, N.A., as successor trustee, and has loaned the proceeds thereof to America West Airlines, Inc., a Delaware corporation (the "Company"), for the purpose of financing the airport facilities more particularly described in the Prior Indenture (the "Project"). WHEREAS, the Company has requested that the Issuer issue and sell bonds to refund the Prior Bonds and refinance the Project; and WHEREAS, pursuant to the Act, the Issuer has determined to issue and sell its airport facility refunding bonds as provided herein (the "Bonds") and to lend the proceeds thereof to the Company pursuant to the Financing Agreement of even date herewith (the "Agreement"), between the Issuer and the Company, for the purpose of refunding the Prior Bonds; and WHEREAS, the issuance and sale of the Bonds and the loan of the proceeds thereof to the Company to refund the Prior Bonds will serve the purposes of the Issuer and the Act and in all respects conform to the provisions and requirements of the Act; and WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof and of the interest and premium, if any, thereon, the Issuer has authorized the execution and delivery of this Indenture, and 6 WHEREAS, all Bonds issued under this Indenture will be secured by a pledge and assignment of the Issuer's rights under the aforesaid Agreement; and WHEREAS, the Bonds and the Trustee's certificate of authentication and the form of assignment to be endorsed thereon are all to be in substantially the following forms, with necessary and appropriate variations, omissions and insertions as permitted or required by this Indenture, to wit: -2- 7 [FORM OF FACE OF BOND] UNITED STATES OF AMERICA THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA AIRPORT FACILITIES REFUNDING BOND (AMERICA WEST AIRLINES, INC. PROJECT) SERIES 1998 Registered Registered No. R- $29,300,000 Interest Rate: Dated Date: Maturity Date: CUSIP: 6.30% April 1, 1998 April 1, 2023 Registered Owner: Cede & Co. Principal Amount: Twenty-nine million three hundred thousand Dollars [1] THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA (the "Issuer"), an Arizona nonprofit corporation and political subdivision of the State of Arizona, for value received, hereby promises to pay (but in each case only out of the source hereinafter provided) to the Registered Owner identified above, or registered assigns as hereinafter provided, on the Maturity Date identified above, the Principal Amount identified above, and to pay interest on said Principal Amount until payment of said Principal Amount has been made or duly provided for at the Interest Rate identified above, on April 1 and October 1 of each year, commencing on October 1, 1998, and to pay interest on overdue principal and, to the extent permitted by law, on overdue interest at the rate borne by this Bond, except as the provisions hereinafter set forth with respect to redemption prior to maturity may become applicable hereto, the principal of, premium, if any, and interest on this Bond being payable in lawful money of the United States of America at the designated Corporate Trust Office of Norwest Bank Arizona, N.A., as Trustee, or its successor in trust (the "Trustee"); provided, however, payment of interest on any Interest Payment Date shall be made to the Owner hereof as of the close of business on the Record Date with respect to such Interest Payment Date and shall be (i) paid by check or draft mailed on such Interest Payment Date to such Owner hereof at his address as it appears on the registration books of the Issuer maintained by the Trustee or at such other address as is furnished in writing by such Owner to the Trustee as Bond Registrar not later than the close of business on the Record Date or (ii) transmitted by wire transfer to an account with a commercial bank located within the United States of America if such Owner owns at least -3- 8 $1,000,000 in aggregate principal amount of the Bonds and shall have provided wire transfer instructions to the Trustee prior to the close of business on such Record Date. -------------------------------- REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. -------------------------------- [16] THIS BOND DOES NOT, AND SHALL NEVER, CONSTITUTE AN INDEBTEDNESS OF THE CITY OF PHOENIX, THE STATE OF ARIZONA OR THE ISSUER WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION, AND THIS BOND SHALL NEVER CONSTITUTE OR GIVE RISE TO A PECUNIARY LIABILITY OF SAID CITY, SAID STATE OR THE ISSUER OR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF SAID CITY OR SAID STATE OR A CHARGE AGAINST THE GENERAL CREDIT OF THE ISSUER. THE ISSUER HAS NO TAXING POWER. [17] IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts and conditions required to be performed precedent to and in the execution and delivery of the Indenture and the issuance of this Bond have been performed in due time, form and manner as required by law, and that the issuance of this Bond and the issue of which it forms a part does not exceed or violate any constitutional or statutory limitation. [18] This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture unless and until the certificate of authentication hereon shall have been duly executed by the Trustee. [19] IN WITNESS WHEREOF, THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA has caused this Bond to be executed in its name by the manual or facsimile signature of its President and attested by the manual or facsimile signature of its Secretary, all as of April 1, 1998. THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA By -------------------------------------------- President Attest: - -------------------------------- Secretary -4- 9 [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This Bond is one of the Bonds described in the within-mentioned Indenture of Trust. Date of Authentication: _____________________________________, as Trustee By ________________________________ ______________________________________ Authorized Signatory [FORM OF REVERSE OF BOND] [2] This Bond is one of an authorized issue of bonds limited in aggregate principal amount to $29,300,000 (the "Bonds") issued pursuant to a resolution duly adopted by the governing body of the Issuer on March 19, 1998 (the "Resolution"), and the applicable provisions of Title 35, Chapter 5, Arizona Revised Statutes, as supplemented and amended to the date hereof (the "Act"), and issued under an Indenture of Trust (the "Indenture") dated as of April 1, 1998, between the Issuer and the Trustee, for the purpose of refunding bonds of the Issuer the proceeds of which were used to finance costs of certain airport facilities located within the boundaries of the Issuer (the "Project") for America West Airlines, Inc. (the "Company"). Proceeds from the sale of the Bonds are to be loaned by the Issuer to the Company under the terms of a Financing Agreement, dated as of April 1, 1998 (the "Agreement"), between the Issuer and the Company, which provides for the repayment of such loan by the Company. [3] The Bonds are all issued under and equally and ratably secured by and entitled to the benefits of the Indenture (except as otherwise expressly set forth in the Indenture), including the security of a pledge and assignment of certain revenues and receipts derived by the Issuer pursuant to the Agreement, and all receipts of the Trustee credited under the provisions of the Indenture against such payments, and from any other moneys held by the Trustee under the Indenture for such purpose, and there shall be no other recourse against the Issuer or any property now or hereafter owned by it. [4] The Bonds are issuable as registered Bonds without coupons in Authorized Denominations. Subject to the limitations, upon payment of the charges provided in the Indenture and upon surrender and cancellation hereof, this Bond may be exchanged for a like aggregate principal amount of Bonds of other Authorized Denominations. This Bond is transferable by the Owner hereof in person or by his attorney duly authorized in writing at the designated Corporate Trust Office of the Trustee but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond or Bonds, of Authorized Denomination or Authorized Denominations, for the same aggregate principal amount, will be issued to the transferee in exchange herefor. -5- 10 [5] The Bonds are subject to redemption prior to maturity, at the option of the Company, on or after April 1, 2008, in whole or in part on the dates set forth below, at the redemption prices (expressed as percentages of principal amount) set forth in the following table plus accrued interest, if any, to the redemption date:
Redemption Dates Redemption Prices ---------------- ----------------- April 1, 2008 and October 1, 2008 102% April 1, 2009 and October 1, 2009 101% April 1, 2010 and any Interest Payment Date thereafter 100%
[6] The Bonds shall be redeemed at 100% of the principal amount thereof plus accrued interest, if any, to the redemption date within 180 days after (i) receipt by the Company of written notice of the issuance of a private letter ruling or a technical advice memorandum by the Internal Revenue Service in a proceeding in connection with which the Company has had the opportunity to participate or (ii) the Company receives written notice of a final determination by any court of competent jurisdiction of the United States in a proceeding to which the Company is a party or in which the Company has had the opportunity to participate, in either case, to the effect that, as a result of a failure by the Company to observe any covenant, agreement, representation or warranty in the Agreement or the Project Certificate, the interest payable on the Bonds is included in the gross income for federal income tax purposes of the Owners or beneficial owners thereof (other than a person who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code or Section 103(b)(13) of the 1954 Code). Upon the occurrence of any such event, the Bonds shall be redeemed in whole unless, in the opinion of Bond Counsel, the redemption of a portion of the Outstanding Bonds would have the result that interest payable on the Bonds remaining Outstanding after such redemption would not be included in the gross income for federal income tax purposes of any Owners or beneficial owners of the Bonds (other than a person who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code or Section 103(b)(13) of the 1954 Code), in which event only such portion of the Outstanding Bonds shall be redeemed. [7] In the event any of the Bonds or Authorized Denominations thereof are called for redemption, notice thereof identifying the Bonds or portions thereof to be redeemed will be given by the Trustee upon mailing a copy of the redemption notice by first class mail at least thirty days prior to the date fixed for redemption to the Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of the proceedings for the redemption of any Bond or portion thereof with respect to which no such failure occurred. All Bonds so called for redemption will cease to bear interest after the specified redemption date provided funds for their redemption are on deposit at the place of payment at that time. In the event any Bond is called for redemption -6- 11 in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to the Owner thereof a new Bond or new Bonds of Authorized Denominations in aggregate principal amount equal to the unredeemed portion of the Bond surrendered. Additional notice of redemption of Bonds or portions thereof may be given by the Trustee as provided in the Indenture, including notice to certain services and by publication, but no failure to give any such additional notice or any defect therein shall defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. [8] With respect to any notice of optional redemption of Bonds, unless upon the giving of such notice such Bonds shall be deemed to have been paid within the meaning of Article VII of the Indenture, such notice may state (if so directed by the Company in writing) that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, and premium, if any, and interest on, such Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the Issuer shall not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption shall not be made and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. [9] This Bond and all other Bonds of the series of which it forms a part are issued pursuant to and in full compliance with the Constitution and laws of the State of Arizona, particularly the Act, and pursuant to further proceedings adopted by the governing authority of the Issuer, which proceedings authorize the execution and delivery of the Indenture. This Bond and the series of which it forms a part are special limited obligations of the Issuer payable solely from the sources described herein. The Project is not security for the Bonds. [10] No recourse shall be had for the payment of the principal of, or premium, if any, or interest on, any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Indenture contained, against any past, present or future member, director, officer, employee or agent of the Issuer, or through the Issuer, or any successor to the Issuer, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such member, director, officer, employee or agent as such is hereby expressly waived and released as a condition of and in consideration for the execution of the Indenture and the issuance of any of the Bonds. [11] The Owner of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. If an Event of Default as defined in the Indenture occurs and is continuing, the principal of all Bonds then outstanding may be declared due and payable upon the conditions and in the manner and with the effect provided in the Indenture. -7- 12 [12] The Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the person in whose name this Bond is registered as the Owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. [13] The Indenture prescribes the manner in which it may be discharged and after which the Bonds shall no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of registration and exchange of Bonds and of such payment, including a provision that under certain circumstances the Bonds shall be deemed to be paid if Government Obligations maturing as to principal and interest in such amounts and at such times as to insure the availability of sufficient moneys to pay the principal of, and premium, if any, and interest on, the Bonds and all necessary and proper fees, compensation and expenses of the Trustee shall have been deposited with the Trustee. [14] Modifications or alterations of the Indenture, or of any supplements thereto, may be made only to the extent and in the circumstances permitted by the Indenture. [15] Terms which are used herein as defined terms and which are not otherwise defined herein shall have the meanings attributed to them in the Indenture. [FORM OF ASSIGNMENT] The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations: UNIF GIFT MIN ACT--
TEN COM -- as tenants in common ____________ Custodian ___________ TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right under Uniform Gifts to Minors Act of survivorship and not ________________________________ as tenants in common State
Additional abbreviations may also be used though not in the above list. FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto - --------------------------------------------------------------------------- (Name and Address of Assignee) the within Bond of The Industrial Development Authority of the City of Phoenix, Arizona and does hereby irrevocably constitute and appoint __________________ to transfer the said -8- 13 Bond on the books kept for registration thereof with full power of substitution in the premises. Dated:_________________ Signature Guaranteed: _______________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever. NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. [END OF BOND FORM] WHEREAS, the execution and delivery of the Bonds and of this Indenture have been duly authorized and all things necessary to make the Bonds, when executed by the Issuer and authenticated by the Trustee, valid and binding legal obligations of the Issuer and to make this Indenture a valid and binding agreement have been done; NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSETH: That the Issuer in consideration of the premises, the acceptance by the Trustee of the trusts hereby created, the purchase and acceptance of the Bonds by the purchasers thereof, one dollar duly paid to the Issuer by the Trustee at or before the execution and delivery of these presents and of other good and valuable considerations, the receipt of which is hereby acknowledged, and in order to secure the payment of the principal of, and premium, if any, and interest on, all Bonds outstanding hereunder from time to time, according to their tenor and effect, and to secure the observance and performance by the Issuer of all the covenants expressed or implied herein and in the Bonds, does hereby pledge and assign unto the Trustee, and unto its successors and assigns forever; GRANTING CLAUSE FIRST The Agreement, including all extensions and renewals of the term thereof, if any, together with all right, title and interest of the Issuer therein (except for the right of the Issuer to the payment of costs, expenses, indemnification and counsel fees pursuant to Sections 4.2(d), 4.2(e), 5.3 and 6.4 of the Agreement and any rights of the Issuer to receive any notices, certificates, requests, requisition or other communications under the Agreement) including, but without limiting the generality of the foregoing, the present and continuing right to receive, receipt for, collect or make claim for any of the moneys, income, revenues, issues, profits and other amounts payable or receivable thereunder, -9- 14 including payments made by the Company, whether payable under the Agreement or otherwise, to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which the Issuer or any other person is or may become entitled to do under the Agreement; GRANTING CLAUSE SECOND All payments to be received by the Issuer (except as provided in the preceding paragraph) under the Agreement, together with all other Revenues, and all moneys and earnings thereon held by the Trustee in the Bond Fund under the terms of the Indenture; and GRANTING CLAUSE THIRD Any and all other property of each name and nature from time to time hereafter by delivery or by writing of any kind pledged or assigned as and for additional security hereunder, by the Issuer or by anyone on its behalf or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors in said trusts and assigns forever. IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future owners of the Bonds, from time to time issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds (except only as otherwise expressly stated herein). PROVIDED HOWEVER, that if the Issuer, its successors or assigns, shall well and truly cause to be paid, the principal of the Bonds and the interest and premium, if any, due or to become due thereon, at the times and in the manner mentioned in the Bonds, according to the true intent and meaning thereof, and shall cause the payments to be made into the Bond Fund as required under Article V hereof or shall provide, as permitted by Article VII hereof, for the payment thereof, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the Trustee all sums of money due or to become due in accordance with the terms and provisions hereof, then this Indenture and the rights hereby granted shall cease, determine and be void; otherwise this Indenture to be and remain in full force and effect. THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and the Revenues hereby assigned and pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and -10- 15 purposes as hereinafter expressed, and the Issuer has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the respective owners from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINITIONS. (A) For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) All references in this Indenture to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Indenture. (2) The words "herein", "hereof", "hereto", "hereby", and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. (3) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular. (4) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles as in effect from time to time. (5) Every "request", "order", "demand", "application", "appointment", "notice", "statement", "certificate", "consent" or similar action hereunder by the Issuer shall, unless the form thereof is specifically provided, be in writing signed by the Authorized Issuer Representative. (6) Every reference herein to the delivery of Bonds by the Trustee, or similar references, shall mean that Bonds shall be available to be picked up at the appointed time at the Corporate Trust Office of the Trustee. (7) All other terms used herein which are defined in the Agreement shall have the same meanings assigned them in the Agreement unless the context otherwise requires. (B) For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: "Act" means Title 35, Chapter 5, Arizona Revised Statutes, and all acts supplementary thereto or amendatory thereof. -11- 16 "Administrative Expenses" means the reasonable and necessary expenses (including the reasonable value of employee services and fees of Counsel) incurred by the Issuer in connection with the Bonds, the Agreement, this Indenture and any transaction or event contemplated by the Agreement or this Indenture. "Agreement" means the Financing Agreement with respect to the Bonds of even date herewith by and between the Issuer and the Company, as from time to time amended and supplemented. "Authorized Company Representative" means any person who, at the time, shall have been designated as such by a written certificate furnished to the Issuer and the Trustee containing the specimen signature of such person and signed on behalf of the Company by any officer of the Company. Such certificate may designate an alternate or alternates. "Authorized Denominations" means $100,000 or any integral multiple thereof. "Authorized Issuer Representative" means any person at the time designated to act on behalf of the Issuer by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its President, Vice President, Secretary or Assistant Secretary. Such certificate may designate an alternate or alternates. "Bond" or "Bonds" means any one or more of the bonds authorized, authenticated and delivered under this Indenture. "Bond Counsel" means the Counsel who renders the opinion as to the tax-exempt status of interest on the Bonds or other nationally recognized municipal bond counsel mutually acceptable to the Issuer, the Trustee and the Company. "Bond Fund" means the fund created by Section 5.02 hereof. "Bondholder" or "Holder" or "Owner" or "Owner of Bonds" means the Person or Persons in whose name or names a Bond shall be registered on books of the Issuer kept for that purpose in accordance with the terms of this Indenture. "Bond Registrar" means the Trustee. "Book Entry Bond" means a Bond authorized to be issued to and restricted to being registered, in the name of, a Securities Depository as provided in Section 2.09 hereof. "Business Day" means a day on which banks located in the city in which the Corporate Trust Office of the Trustee is located are not required or authorized to remain closed and on which the New York Stock Exchange is not closed. "Code" means the United States Internal Revenue Code of 1986, as amended, and regulations promulgated or proposed thereunder. -12- 17 "Company" means America West Airlines, Inc., a Delaware corporation, and its successors and assigns and any surviving, resulting or transferee corporation as permitted in Section 5.1 of the Agreement. "Corporate Trust Office" means the designated principal office of the Trustee from which at any particular time its corporate trust business shall be administered, which office at the date of original execution of this Indenture is located at 3300 North Central Avenue, 15th Floor, Phoenix, Arizona 85012. "Counsel" means an attorney at law or a firm of attorneys (who may be an employee of or counsel to the Issuer or the Company or the Trustee) duly admitted to the practice of law before the highest court of any state of the United States of America. "Dated Date" means April 1, 1998. "Default" or "event of default" means an occurrence or event specified in and defined by Section 8.01 hereof. "DTC" means the Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York, and its successors and assigns. "Executive Officer" means the President of the Governing Body of the Issuer. "Extraordinary Services" and "Extraordinary Expenses" mean all services rendered and all expenses (including fees of Counsel) incurred under the Indenture and the Tax Agreement other than Ordinary Services and Ordinary Expenses. "Governing Body" means the Board of Directors of the Issuer. "Government Obligations" means non-callable direct general obligations of, or non-callable obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America. "Indenture" means this Indenture of Trust, including any indentures supplemental hereto or amendatory hereof. "Interest Payment Date" means April 1 and October 1 of each year, commencing October 1, 1998. "Issue Date" means April 2, 1998, the date of issuance and delivery of the Bonds. "Issuer" means The Industrial Development Authority of the City of Phoenix, Arizona and any successor body to the duties or functions of the Issuer. "1954 Code" means the Internal Revenue Code of 1954, as amended. -13- 18 "Ordinary Services" and "Ordinary Expenses" mean those services normally rendered and those expenses, including fees of Counsel, normally incurred by a trustee, paying agent or bond registrar under instruments similar to this Indenture and the Tax Agreement. "Original Purchaser" means Citicorp Securities, Inc. "Outstanding" or "outstanding" or "Bonds Outstanding", in connection with the Bonds means, as of the time in question, all Bonds authenticated and delivered under this Indenture, except: A. Bonds theretofore cancelled or required to be cancelled under Section 2.07 hereof; B. Bonds which are deemed to have been paid in accordance with Article VII hereof; and C. Bonds in substitution for which other Bonds have been authenticated and delivered pursuant to Article II hereof. In determining whether the Owners of a requisite aggregate principal amount of outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of the Indenture, Bonds which are owned of record by the Company or any affiliate thereof or held by the Trustee for the account of the Company shall be disregarded and deemed not to be Outstanding hereunder for the purpose of any such determination (except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned or held shall be disregarded) unless all Bonds are owned by the Company or any affiliate thereof and/or held by the Trustee for the account of the Company, in which case such Bonds shall be considered outstanding for the purpose of such determination. For the purpose of this definition, an "affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Paying Agent" means the Trustee. "Person" means natural persons, firms, partnerships, associations, corporations, trusts and public bodies. "Prior Bonds" has the meaning assigned to such term in the recitals to this Indenture. "Prior Indenture" has the meaning assigned to such term in the recitals to this Indenture. -14- 19 "Project" means the facilities described in Exhibit A to the Agreement. "Rebate Fund" means the Rebate Fund, if any, created and established pursuant to the Tax Agreement and Section 5.13 hereof. "Record Date" means the fifteenth (15th) day of the calendar month immediately preceding an Interest Payment Date, or if such day shall not be a Business Day, the immediately preceding Business Day. "Recording Officer" means the Secretary of the Issuer. "Resolution" means the resolution duly adopted and approved by the Governing Body of the Issuer on March 19, 1998 authorizing the issuance and sale of the Bonds and the execution of this Indenture and the Agreement. "Revenues" means the amounts pledged hereunder to the payment of principal of, and premium, if any, and interest on, the Bonds, consisting of the following: (i) all amounts payable from time to time by the Company under Section 4.2(a) of the Agreement, and all receipts of the Trustee credited under the provisions of this Indenture against said amounts payable, and (ii) any portion of the net proceeds of the Bonds deposited with the Trustee under Section 5.03(a) hereof. "Securities Depository" means, with respect to a Book Entry Bond, DTC or any person, firm, association or corporation constituting a "clearing agency" (securities depository) registered under Section 17A of the Securities Exchange Act of 1934, as amended, which may at any time be substituted in its place to act as Securities Depository for the Bonds, or its successors, or any nominee therefor. "State" means the State of Arizona. "Tax Agreement" means the Tax Exemption Certificate and Agreement with respect to the Bonds, dated as of the date of the delivery of the Bonds, among the Company, the Issuer and the Trustee, as from time to time amended and supplemented. "Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses hereof. "Trustee" means Norwest Bank Arizona, N.A., as trustee hereunder, and any successor trustee pursuant to Section 9.06 or 9.09 hereof at the time serving as successor Trustee hereunder, and any co-trustee serving as such hereunder. "Written Consent of the Issuer," "Written Order of the Issuer," "Written Request of the Issuer" and "Written Requisition of the Issuer" mean, respectively, a written consent, order, request or requisition signed by or on behalf of the Issuer by an authorized Issuer Representative. -15- 20 ARTICLE II THE BONDS SECTION 2.01. AUTHORIZED AMOUNT AND PURPOSE OF BONDS. No Bonds may be issued under the provisions of this Indenture except in accordance with this Article. The total principal amount of Bonds that may be issued hereunder is hereby expressly limited to $29,300,000 except as provided in Section 2.06 hereof. The Bonds shall be issued for the purpose of refinancing the cost of the Project by refunding the Prior Bonds, as provided in the Agreement. SECTION 2.02. ISSUANCE OF BONDS. The Issuer may issue the Bonds following the execution of this Indenture; and the Trustee shall, at the Issuer's written request, authenticate such Bonds and deliver them as specified in such request. The Bonds shall be designated "The Industrial Development Authority of the City of Phoenix, Arizona Airport Facilities Refunding Bonds (America West Airlines, Inc. Project) Series 1998." The Bonds shall be substantially in the form hereinabove set forth with such appropriate variations, omissions and insertions as are permitted or required by this Indenture. The Bonds shall be issuable as fully registered bonds without coupons in Authorized Denominations. Unless the Issuer shall otherwise direct, the Bonds shall be numbered R-1 and upwards. Each Bond shall be dated as of April 1, 1998 and shall mature, subject to prior redemption, upon the terms and conditions hereinafter set forth, on April 1, 2023. The Bonds shall bear interest at the rate of six and three tenths percent (6.30%) per annum from and including the date thereof until payment of the principal or redemption price thereof shall have been made or provided for in accordance with the provisions hereof, whether at maturity, upon redemption or otherwise. Interest on the Bonds shall be computed upon the basis of a 360-day year, consisting of twelve (12) thirty (30) day months. Each Bond shall bear interest on overdue principal and, to the extent permitted by law, on overdue interest at the rate borne by the Bonds. The Trustee shall insert the date of authentication of each Bond in the place provided for such purpose in the form of certificate of authentication of Trustee to be printed on each Bond. The principal of, and premium, if any, and interest on, the Bonds shall be payable in any coin or currency of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, and except as otherwise provided for Book Entry Bonds as permitted by Section 2.09 hereof, such principal and premium, if any, shall be payable at the Corporate Trust Office of the Trustee. Payment of interest on any Interest Payment Date on any Bond shall be made to the Owner thereof as of the close of business on the Record Date immediately prior thereto and except as otherwise provided for Book Entry Bonds as permitted by Section 2.09 hereof, shall be (i) made by check or draft mailed on the Interest Payment Date to such Owner at his address as it appears on the registration books of the Issuer maintained by the Trustee or at such other address as is furnished to the Trustee in writing by such Owner not later than the close of business on such Record Date or (ii) transmitted by wire transfer to an account with a commercial bank located within the United States of America if such Owner owns at least -16- 21 $1,000,000 in aggregate principal amount of the Bonds and shall have provided wire transfer instructions to the Trustee prior to the close of business on such Record Date, except that, if and to the extent that there shall be a default in the payment of the interest due on such Interest Payment Date, such defaulted interest shall be paid to the Owners in whose names any such Bonds are registered at the close of business on the fifth Business Day next preceding the date of payment of such defaulted interest. Interest on the Bonds shall be payable on each Interest Payment Date for the period ending on the day immediately preceding such Interest Payment Date and commencing on the immediately preceding Interest Payment Date, or if no interest has been paid on the Bonds, on the date of the Bonds. Notwithstanding the foregoing, if as shown by the records of the Trustee, interest on the Bonds shall be in default, Bonds issued in exchange for Bonds surrendered for registration of transfer or exchange shall bear interest from the date to which interest has been paid in full on the Bonds, or if no interest has been paid on the Bonds, from the date of the Bonds. SECTION 2.03. OWNERSHIP, TRANSFER, EXCHANGE AND REGISTRATION OF BONDS. The Issuer shall cause books for the registration and for the transfer of the Bonds as provided herein to be kept at the Corporate Trust Office of the Trustee, which is hereby constituted and appointed the Bond Registrar and transfer agent for the Bonds. The Issuer shall prepare and deliver to the Trustee, and the Trustee shall keep custody of, a supply of forms of Bonds duly executed by the Issuer, as provided in Section 2.04 hereof, for use in the transfer and exchange of Bonds. The Trustee is hereby authorized and directed to complete such forms of Bonds as to principal amounts and registered owners, in accordance with the provisions hereof, in effecting transfers and exchanges of Bonds as provided herein. Upon surrender for transfer of any Bond at the Corporate Trust Office of the Trustee, duly endorsed for transfer or accompanied by a written instrument or instruments of transfer in form satisfactory to the Trustee duly executed by the Owner or his attorney duly authorized in writing, the Trustee shall date and execute the certificate of authentication on and deliver in the name of the transferee or transferees a new Bond or Bonds duly executed by the Issuer of Authorized Denominations and for a like aggregate principal amount. Any Bond or Bonds may be exchanged at the Corporate Trust Office of the Trustee for a new Bond or Bonds of like aggregate principal amount of other Authorized Denominations. Upon surrender of any Bond or Bonds for exchange, the Trustee shall date and execute the certificate of authentication on and deliver a new Bond or Bonds duly executed by the Issuer which the Bondholder making the exchange is entitled to receive. The Trustee shall not be required to transfer or exchange any Bond after the mailing of notice calling such Bond or portion thereof for redemption, nor during the period of fifteen days next preceding the mailing of such notice of redemption. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of the principal of, or premium, -17- 22 if any, or interest on, any Bond shall be made only to or upon the written order of the registered Owner thereof or his legal representative, but such registration may be changed as hereinabove provided. All such payments shall be valid and effective to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. The Trustee shall require the payment by the Bondholder requesting exchange or transfer (other than an exchange upon a partial redemption of a Bond) of any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer, but otherwise no charge shall be made to the Bondholder for such exchange or transfer. SECTION 2.04. EXECUTION; LIMITED OBLIGATION. The Bonds shall be executed on behalf of the Issuer with the manual or facsimile signature of its President and attested with the manual or facsimile signature of its Secretary. All authorized facsimile signatures shall have the same force and effect as if manually signed. The Bonds, together with interest thereon, are not general obligations of the Issuer but are special, limited obligations payable solely from the Revenues, and shall be a valid claim of the respective Owners thereof only against the Bond Fund and the Revenues, which Revenues are hereby pledged, assigned and otherwise secured for the equal and ratable payment of the Bonds and shall be used for no other purpose than to pay the principal of, premium, if any, and interest on the Bonds, except as may be otherwise expressly authorized in this Indenture or the Tax Agreement. The Bonds and interest and premium, if any, thereon shall never constitute the debt or indebtedness of the Issuer within the meaning of any provision or limitation of the Constitution of the State or statutes and shall not constitute nor give rise to a pecuniary liability of the Issuer or a charge against its general credit. The Issuer has no taxing power. In case any official of the Issuer whose signature or facsimile of whose signature shall appear on the Bonds shall cease to be such official before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, the same as if he had remained in office until delivery. SECTION 2.05. AUTHENTICATION. No Bond shall be valid for any purpose until the certificate of authentication on such Bond shall have been duly executed by the Trustee, and such authentication shall be conclusive proof that such Bond has been duly authenticated and delivered under this Indenture and that the Owner thereof is entitled to the benefits of the trust hereby created. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if manually signed by an authorized signatory of the Trustee, but it shall not be necessary that the same signatory sign the certificate of authentication on all of the Bonds issued hereunder. SECTION 2.06. MUTILATED, DESTROYED, LOST OR STOLEN BONDS. In the event any Bond or temporary Bond is mutilated, lost, stolen or destroyed, the Trustee may authenticate a new Bond duly executed by the Issuer of like date and denomination as that mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the Trustee evidence of such loss, theft or destruction satisfactory to the Trustee, together with indemnity to the Issuer, the Trustee and the Company satisfactory to them. In the event any such Bond shall have matured or been -18- 23 redeemed, instead of issuing a duplicate Bond, the Trustee on behalf of the Issuer may pay the same without surrender thereof. The Issuer and the Trustee may charge the Owner of such Bond with their reasonable fees and expenses in this connection. The Issuer shall cooperate with the Trustee in connection with the issue of replacement Bonds, but nothing in this Section shall be construed in derogation of any rights which the Issuer, the Company or the Trustee may have to receive indemnification against liability, or payment or reimbursement of expenses, in connection with the issue of a replacement Bond. All Bonds shall be held and owned upon the express condition that the foregoing provisions are, to the extent permitted by law, exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other rights or remedies. SECTION 2.07. CANCELLATION AND DESTRUCTION OF SURRENDERED BONDS. Whenever any Outstanding Bond shall be delivered to the Trustee for transfer, exchange or cancellation pursuant to this Indenture, upon payment of the principal amount represented thereby, or for replacement pursuant to Section 2.06 hereof, such Bond shall be promptly cancelled and cremated or otherwise destroyed by the Trustee. SECTION 2.08. DELIVERY OF THE BONDS. Upon the execution and delivery of this Indenture, the Issuer shall execute and deliver to the Trustee and the Trustee shall authenticate the Bonds and deliver them to the Original Purchasers as directed by the Issuer as hereinafter in this Section provided. Prior to the delivery by the Trustee of any of the Bonds there shall be filed with the Trustee: (1) A duly certified copy of the Resolution. (2) Original executed counterparts of the Agreement, the Tax Agreement and this Indenture. (3) An opinion of Bond Counsel to the effect that the Bonds have been validly issued under this Indenture and that all requirements under this Indenture precedent to the delivery of the Bonds have been satisfied. (4) A request and authorization to the Trustee on behalf of the Issuer and signed by the Executive Officer to authenticate and deliver the Bonds to or as directed by the Original Purchaser, registered in the names and in the Authorized Denominations specified to the Trustee by the Original Purchaser, upon payment by the Original Purchaser of a sum specified in such request to the Trustee (such sum to be applied in accordance with the Written Order of the Issuer furnished to the Trustee on the Issue Date), plus accrued interest, if any, on the Bonds to the date of delivery (which accrued interest shall be deposited in the Bond Fund). (5) Original executed Investor Letter(s) in the form attached as Exhibit I hereto. -19- 24 SECTION 2.09. BOOK ENTRY SYSTEM. The Trustee and the Issuer (or the Issuer with advice to the Trustee), at the direction of the Company, may from time to time enter into, and discontinue, an agreement with a "clearing agency" (securities depository) registered under Section 17A of the Securities Exchange Act of 1934, as amended (the "Securities Depository"), which is the owner of the Bonds, to establish procedures with respect to the Bonds not inconsistent with the provisions of this Indenture; provided, however, that, notwithstanding any other provisions of this Indenture, any such agreement may provide: (a) that the Securities Depository is not required to present a Bond to the Trustee in order to receive a partial payment of principal; (b) that different provisions for notice to such Securities Depository may be set forth therein; and (c) that a legend shall appear on each Bond so long as the Bonds are subject to such agreement. With respect to Bonds registered in the name of a Securities Depository (or its nominee) neither the Trustee, the Issuer nor the Company shall have any obligation to any of its members or participants or to any person on behalf of whom an interest is held in the Bonds. It is hereby acknowledged that the Issuer has entered into an agreement (the "Letter of Representation") with DTC which applies to the Bonds, and while the Letter of Representations is in effect, the procedures established by DTC shall apply to the Bonds notwithstanding any other provisions of this Indenture to the contrary. As long as DTC is the Securities Depository with respect to the Bonds, the Trustee shall be a DTC Participant. ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY SECTION 3.01. OPTIONAL REDEMPTION. The Bonds shall be subject to redemption, at the option of the Company, prior to maturity on or after April 1, 2008, in whole or in part on the dates set forth below, at the redemption prices (expressed as percentages of the principal amount) set forth in the following table, plus accrued interest, if any, to the redemption date:
Redemption Dates Redemption Prices ---------------- ----------------- April 1, 2008 and October 1, 2008 102% April 1, 2009 and October 1, 2009 101%
-20- 25
April 1, 2010 and any Interest Payment Date thereafter. 100%
SECTION 3.02. RESERVED. SECTION 3.03. MANDATORY REDEMPTION. The Bonds shall be subject to mandatory redemption prior to maturity in whole, or as hereafter provided in part, at any time prior to their maturity at a redemption price equal to 100% of the principal amount thereof plus accrued interest, if any, to the redemption date, not more than one hundred eighty (180) days after (i) receipt by the Company of written notice of the issuance of a private letter ruling or a technical advice memorandum by the Internal Revenue Service in a proceeding in connection with which the Company has had the opportunity to participate or (ii) the Company receives written notice of a final determination by any court of competent jurisdiction of the United States in a proceeding to which the Company is a party or in which the Company has had the opportunity to participate, in either case, to the effect that, as a result of a failure by the Company to observe any covenant, agreement, representation or warranty in the Agreement or the Project Certificate, the interest payable on the Bonds is included in the gross income for federal income tax purposes of the Owners or beneficial owners thereof (other than a person who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code or Section 103(b)(13) of the 1954 Code). Upon the occurrence of any event described in the first sentence of this Section 3.03, the Bonds shall be redeemed in whole unless, in the opinion of Bond Counsel, the redemption of a portion of the Outstanding Bonds would have the result that interest payable on the Bonds remaining Outstanding after such redemption would not be included in the gross income for federal income tax purposes of any Owners or beneficial owners of the Bonds (other than a person who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code or Section 103(b)(13) of the Prior Code), in which event only such portion of the Outstanding Bonds shall be redeemed. SECTION 3.04. NOTICE OF REDEMPTION. Upon receipt of notice given by the Company pursuant to Section 7.3 of the Agreement, notice of the call for any redemption of Bonds or any portions thereof pursuant to Section 3.01 or 3.03 hereof identifying the Bonds or portions thereof to be redeemed, specifying the redemption date, the redemption price, the place and manner of payment and that from the redemption date interest will cease to accrue (provided that funds for the redemption of such Bonds or portions thereof are on deposit with the Trustee on such redemption date) shall be given by the Trustee by mailing a copy of the redemption notice by first-class mail to the Owner of each Bond to be redeemed in whole or in part at the address shown on the registration books; provided, however, except in the case of a conditional notice of optional redemption as described in the next succeeding paragraph, the Trustee shall not give any notice of redemption unless funds sufficient for such redemption are then on deposit with the Trustee. Notice of redemption shall be provided at least thirty (30) days prior to the date fixed for redemption to the Owners of Bonds to be redeemed; provided, however, that failure to duly give such notice, or any defect therein, shall not affect the validity of any proceedings for the redemption of Bonds with respect to which no such failure or defect occurred. Upon presentation and -21- 26 surrender of Bonds so called for redemption in whole or in part at the place or places of payment, such Bonds or portions thereof shall be redeemed. With respect to any notice of optional redemption of Bonds, unless upon the giving of such notice such Bonds shall be deemed to have been paid within the meaning of Article VII hereof, such notice may state (if so directed by the Company in writing) that such redemption shall be conditioned upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, and premium, if any, and interest on, such Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the Issuer shall not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption shall not be made and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Any notice mailed as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Owner receives the notice. In addition to the foregoing notice, further notice may be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. A. Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (i) the CUSIP number of the Bonds; (ii) the Dated Date of the Bonds; (iii) the rate of interest borne by the Bonds; (iv) the maturity date of the Bonds; and (v) any other descriptive information needed to identify accurately the Bonds being redeemed. B. Each further notice of redemption shall be sent at least five days before the date the redemption notice to the Owners is required to be given as provided in the first paragraph of this Section 3.04, by registered or certified mail or overnight delivery service, to all registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds (such depositories now being Depository Trust Company of New York, New York; Midwest Securities Trust Company of Chicago, Illinois; Pacific Securities Depository Trust Company of San Francisco, California; and Philadelphia Depository Trust Company of Philadelphia, Pennsylvania). C. Each further notice of redemption may be published one time in the Bond Buyer of New York, New York or, if such publication is impractical, in some other financial newspaper or journal which regularly carries notices of redemption of other obligations similar to the Bonds, such publication to be made at the time the redemption notice to the Owners is required to be given as provided in the first paragraph of this Section 3.04. -22- 27 D. Each further notice of redemption shall be given at least two days before the date the redemption notice to the Owners is required to be given as provided in the first paragraph of this Section 3.04, by (i) registered or certified mail, postage prepaid, or (ii) overnight delivery service, to two of the following services selected by the Company and at the address provided to the Trustee by the Company: (1) Financial Information, Inc.'s Financial Daily Called Bond Service; (2) Interactive Data Corporation's Bond Service; (3) Kenny Information Service's Called Bond Service; (4) Moody's Municipal and Government Called Bond Service; or (5) Standard & Poor's Called Bond Record. The Company shall pay, or shall reimburse the Trustee for payment of, all costs and expenses of redeeming Bonds. SECTION 3.05. DEPOSIT OF FUNDS. For the redemption of any of the Bonds, the Issuer shall cause to be deposited in the Bond Fund out of the Revenues moneys sufficient to pay when due the principal of, and premium, if any, and interest on, the Bonds or portions thereof to be redeemed on the redemption date. Moneys in the Bond Fund which are available therefor shall be credited against any moneys which the Issuer is required to cause to be so deposited in the Bond Fund. SECTION 3.06. PARTIAL REDEMPTION OF BONDS. In case a Bond is of a denomination larger than the minimum Authorized Denomination, all or a portion of such Bond may be redeemed in an Authorized Denomination. Upon surrender of any Bond for redemption in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to the Owner thereof, without cost to the Owner, a new Bond or Bonds of Authorized Denominations in aggregate principal amount equal to the unredeemed portion of the Bond surrendered. SECTION 3.07. SELECTION OF BONDS FOR REDEMPTION. If less than all of the Bonds are called for redemption, the Trustee shall select the Bonds or portions thereof to be redeemed from the Bonds outstanding not previously called for redemption, in such manner as in the Trustee's sole discretion it shall deem appropriate and fair. If it is determined that one or more, but not all, of the portions of principal amount represented by any such Bond is to be called for redemption, then, upon notice of intention to redeem such portion or portions, the Owner of such Bond shall forthwith surrender such Bond to the Trustee for (a) payment to such Owner of the redemption price of the portion or portions of principal amount called for redemption, and (b) delivery to such Owner of a new Bond or Bonds in the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. New Bonds representing the unredeemed portion of the principal amount of such Bond shall be issued to the Owner thereof, without charge therefor. If the Owner of any -23- 28 such Bond shall fail to present such Bond to the Trustee for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the date fixed for redemption to the extent of the portion or portions of principal amount called for redemption (and to that extent only) and interest with respect to such portion or portions will cease to accrue. ARTICLE IV PAYMENT; FURTHER ASSURANCES SECTION 4.01. PAYMENT OF PRINCIPAL OR REDEMPTION PRICE OF AND INTEREST ON BONDS. The Issuer shall promptly pay or cause to be paid the principal of, and premium, if any, and interest on, every Bond issued hereunder according to the terms thereof, but shall be required to make such payment or cause such payment to be made only out of Revenues. The Issuer hereby appoints the Trustee to act as the Paying Agent for the Bonds and designates the Corporate Trust Office of the Trustee as the place of payment of principal and premium, if any, of the Bonds. SECTION 4.02. PERFORMANCE OF COVENANTS; THE ISSUER. The Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all of its proceedings pertaining thereto; provided, however, that except for the matters set forth in Section 4.01 hereof the Issuer shall not be obligated to take any action or execute any instrument pursuant to any provision hereof until it shall have been requested to do so by the Company, or shall have received the instrument to be executed and at the Issuer's option shall have received from the Company assurance satisfactory to Issuer that the Issuer shall be reimbursed for its reasonable expenses incurred or to be incurred in connection with taking such action or executing such instrument. The Bonds and interest and premium, if any, thereon, and any obligation of the Issuer under the Agreement or this Indenture, shall never constitute a debt or indebtedness of the Issuer within the meaning of any constitutional or statutory provision or limitation and shall not constitute nor give rise to a pecuniary liability of the Issuer or a charge against its general credit. The Issuer has no taxing power. SECTION 4.03. RIGHT TO PAYMENTS UNDER AGREEMENT; INSTRUMENTS OF FURTHER ASSURANCE. The Issuer covenants that it will defend its right to the payment of amounts due from the Company under the Agreement to the Trustee, for the benefit of the Owners of the Bonds against the claims and demands of all persons whomsoever. Notwithstanding the foregoing, the Issuer shall not be obligated to take any action under this Section 4.03 unless the Issuer receives satisfactory indemnification for the reimbursement of all expenses to which it may be put and to protect it against all liability. The Issuer covenants that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, conveying, pledging, assigning and confirming unto the Trustee all and -24- 29 singular the rights assigned hereby and the amounts pledged hereto, to the payment of the principal of, and premium, if any, and interest on, the Bonds. The Issuer covenants and agrees that, except as herein and in the Agreement and the Tax Agreement provided, it will not sell, convey, mortgage, encumber or otherwise dispose of any part of the Revenues or its rights under the Agreement. No provision of this Indenture shall require the Issuer to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it believes that repayment of such funds or adequate indemnity against such risk or liability is not assured to it. SECTION 4.04. FINANCING STATEMENTS. The Issuer shall cause a financing statement related to this Indenture to be filed at the time of execution and delivery of the Bonds. The Company shall provide to the Trustee thirty days prior to the sixth anniversary of such financing statement (or any continuation statement with respect thereto) a certificate as to whether a continuation statement under Arizona Revised Statutes Section 47-9403B is required to be filed to continue the effectiveness of the financing statement and if a continuation statement is required, the Company shall provide the completed continuation statement to the Trustee. The Trustee and the Issuer shall, if necessary, execute or join in the execution of the continuation statement and file or join in the filing thereof at such time or times and in such place or places as it may be advised by said certificate will preserve the effectiveness of the financing statement until the principal and interest on the Bonds shall have been paid or provided for. The Trustee shall, to the extent reasonably possible, take such actions as may be specified in such certificate, but shall have no further obligation or responsibility to take any other actions to preserve the lien of this Indenture upon the Trust Estate or any part thereof. SECTION 4.05. INSPECTION OF PROJECT BOOKS. The Issuer and the Trustee covenant and agree that all books and documents in their possession relating to the Project and the Revenues derived from the Project shall at all times be open to inspection by such accountants or other agencies as the other party may from time to time designate. SECTION 4.06. RIGHTS UNDER AGREEMENT. The Agreement, a duly executed counterpart of which has been filed with the Trustee, sets forth the covenants and obligations of the Issuer and the Company, and reference is hereby made to the same for a detailed statement of said covenants and obligations of the Company thereunder, and the Issuer agrees that the Trustee in its name or in the name of the Issuer may enforce all rights of the Issuer and all obligations of the Company under and pursuant to the Agreement for and on behalf of the Bondholders, whether or not the Issuer is in default hereunder. Nothing herein contained shall be construed to prevent the Issuer from enforcing directly any and all of its rights under Sections 4.2(d), 4.2(e), 5.3 and 6.4 of the Agreement. -25- 30 ARTICLE V REVENUES AND FUNDS SECTION 5.01. SOURCE OF PAYMENT OF BONDS. The Bonds and all payments required of the Issuer hereunder are not general obligations of the Issuer but are limited obligations as described in Section 2.04 hereof. The Revenues are pledged and assigned to the payment of the principal of, and premium, if any, and interest on, the Bonds. The payments provided in Sections 4.2(a) of the Agreement are to be remitted directly to the Trustee and deposited in the Bond Fund. Such payments, sufficient in amount to insure the prompt payment of the principal of, and premium, if any, and interest on, the Bonds, are pledged to such payment. SECTION 5.02. CREATION OF THE BOND FUND. There is hereby created by the Issuer and ordered established with the Trustee a trust fund to be designated "The Industrial Development Authority of the City of Phoenix, Arizona - - Airport Facilities Refunding Bond Fund - America West Airlines, Inc. Project - Series 1998", which shall be used to pay the principal of, and premium, if any, and the interest on, the Bonds. SECTION 5.03. PAYMENTS INTO THE BOND FUND. There shall be deposited into the Bond Fund from time to time the following: (a) all accrued interest, if any, paid by the Original Purchaser of the Bonds; (b) all payments specified in Section 4.2 (a) of the Agreement; and (c) all other moneys received by the Trustee under and pursuant to any of the provisions of the Agreement or otherwise, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into the Bond Fund. The Issuer hereby covenants and agrees that so long as any of the Bonds issued hereunder are outstanding it will cause to be deposited in the Bond Fund sufficient amounts from Revenues promptly to meet and pay the principal of, and premium, if any, and interest on, the Bonds as the same become due and payable. Nothing herein shall be construed as requiring the Issuer to use any funds or revenues from any source other than Revenues. SECTION 5.04. USE OF MONEYS IN THE BOND FUND. Except as provided in Sections 5.06, 5.09 and 9.03 hereof, moneys in the Bond Fund shall be used solely for the payment of the principal of, and premium, if any, and interest on, the Bonds as the same shall become due and payable at maturity, upon redemption or otherwise. SECTION 5.05. CUSTODY OF THE BOND FUND. The Bond Fund shall be in the custody of the Trustee, and the Issuer hereby authorizes and directs the Trustee to withdraw sufficient funds from the Bond Fund to pay the principal of, and premium, if any, and interest on, the Bonds as the same become due and payable and to comply with Article VI of the Tax Agreement, which authorization and direction the Trustee hereby accepts. -26- 31 SECTION 5.06. NON-PRESENTMENT OF BONDS. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or on the date fixed for the redemption thereof, or in the event any interest payment thereon is unclaimed, if moneys sufficient to pay such Bond and premium, if any, or interest shall have been deposited in the Bond Fund, all liability of the Issuer to the Owner thereof for the payment of such Bond and premium, if any, or interest shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys, without liability for interest thereon, for the benefit of the Owner of such Bond who shall thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his part under this Indenture or on, or with respect to, said Bond. Any moneys so deposited with and held by the Trustee not so applied to the payment of Bonds and premium, if any, or interest, if any, within one (1) year after the date on which the same shall have become due shall be paid by the Trustee to the Company upon the written direction of an Authorized Company Representative and thereafter Owners shall be entitled to look only to the Company for payment, and then only to the extent of the amount so repaid, and the Company shall not be liable for any interest thereon and shall not be regarded as a trustee of such moneys and the Trustee shall have no further responsibility with respect to such moneys. SECTION 5.07. TRUSTEE'S FEES, CHARGES AND EXPENSES. The Trustee agrees that the Issuer shall have no liability for any fees, charges and expenses of the Trustee, and the Trustee agrees to look only to the Company for the payment of all fees, charges and expenses of the Trustee as provided in the Agreement and in this Indenture. SECTION 5.08. MONEYS TO BE HELD IN TRUST. All moneys and securities held by the Trustee in the Bond Fund, all moneys required to be deposited with or paid to the Trustee for deposit into the Bond Fund under any provision hereof, all moneys withdrawn from the Bond Fund and held by the Trustee, shall be held by the Trustee in trust, and such moneys (other than as provided in Sections 5.06 and 5.12 hereof and subject to the provisions of the Tax Agreement as provided in Section 5.13 hereof) shall, while so held, constitute part of the Trust Estate and be subject to the lien hereof. SECTION 5.09. REPAYMENT TO THE COMPANY FROM THE BOND FUND. Any amounts remaining in the Bond Fund after payment in full of the principal of, and premium, if any, and interest on, the Bonds (or provision for payment thereof as provided in this Indenture), the fees, charges and expenses of the Issuer and the Trustee and all other amounts required to be paid under the Agreement and this Indenture shall be paid to the Company as provided in Section 8.5 of the Agreement, subject to the provisions of the Tax Agreement. SECTION 5.10. REVENUES TO BE PAID OVER TO TRUSTEE. The Issuer will cause the Revenues to be paid to the Trustee for deposit in the Bond Fund in accordance with the terms of this Indenture to effect payment of the principal of, and premium, if any, and interest on, the Bonds as the same become due. -27- 32 SECTION 5.11. PAYMENTS OF PRINCIPAL AND INTEREST. The Trustee shall pay from Revenues received by the Trustee the principal of, and premium, if any, and interest on, the Bonds as the same become due and payable. SECTION 5.12. REVENUES TO BE HELD FOR ALL BONDHOLDERS; CERTAIN EXCEPTIONS. Revenues and investments thereof shall, until applied as provided in this Indenture, be held by the Trustee for the benefit of the Owners of all Outstanding Bonds (except as provided by Section 5.06 hereof), except that any portion of the Revenues representing principal of, and premium, if any, and interest on, any Bonds previously called for redemption in accordance with Article III of this Indenture shall be held for the benefit of the Owners of such Bonds only and shall not be deposited or invested pursuant to Article VI hereof, notwithstanding any provision of Article VI. SECTION 5.13. TAX AGREEMENT. Notwithstanding anything in the Agreement or this Indenture to the contrary, the Trustee is hereby authorized to deposit moneys in the Bond Fund and to withdraw moneys from the Bond Fund, and to establish and administer the Rebate Fund, if any, in order to comply with the provisions of the Tax Agreement. SECTION 5.14. COST OF ISSUANCE FUND. The Trustee is authorized to create a Costs of Issuance Fund to be funded solely from amounts paid by the Company. Amounts in such Fund shall be disbursed at the written direction of the Company. The Issuer shall direct the Trustee in writing on the date of issuance of the Bonds as to whether such fund shall be created. ARTICLE VI INVESTMENT OF MONEYS SECTION 6.01. INVESTMENT OF BOND FUND MONEYS. Subject to the provisions of the Tax Agreement and Sections 5.06 and 5.12 hereof, any moneys held as part of the Bond Fund, shall be invested and reinvested by the Trustee at the direction of the Company in accordance with the provisions of Section 3.5 of the Agreement. Any such investments shall be held by or under the control of the Trustee and shall be deemed at all times a part of the Bond Fund. The interest accruing thereon, any profit realized from such investments and any loss resulting from such investments shall be credited or charged to such fund in accordance with Section 3.5 of the Agreement. The Trustee shall sell and reduce to cash a sufficient amount of such investments in the Bond Fund whenever the cash balance in the Bond Fund is insufficient to pay the principal of, and premium, if any, and interest on, the Bonds when due and whenever required in order to comply with the provisions of the Tax Agreement. SECTION 6.02. INVESTMENTS; ARBITRAGE. The Trustee may make any and all investments permitted by the provisions of Section 6.01 hereof through its own investment department or that of an affiliate. The Company has covenanted in Section 3.6 of the Agreement that none of the proceeds of the Bonds or the payments to be made under the -28- 33 Agreement, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be invested in such a way as to cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148(a) of the Code. ARTICLE VII DEFEASANCE SECTION 7.01. DEFEASANCE. If the Issuer shall pay or cause to be paid, or there shall be otherwise paid or provision for payment made to or for the Owners of the Bonds the principal, premium, if any, and interest due or to become due thereon at the times and in the manner stipulated therein, and if the Issuer shall keep, perform and observe all and singular the covenants and promises in the Bonds and in this Indenture expressed as to be kept, performed and observed by it or on its part, and shall pay or cause to be paid to the Trustee all sums of money due or to become due according to the provisions hereof, then this Indenture and the lien, rights and interests created hereby shall cease, determine and become null and void (except as to any surviving rights of payment, registration, transfer or exchange of Bonds herein provided for), whereupon the Trustee upon written request of an Authorized Issuer Representative shall cancel and discharge this Indenture, and execute and deliver to the Issuer such instruments in writing as shall be requested by an Authorized Issuer Representative and requisite to discharge this Indenture, and release, assign and deliver unto the Issuer any and all of the estate, right, title and interest in and to any and all rights assigned or pledged to the Trustee or otherwise subject to this Indenture, except amounts in the Bond Fund required to be paid to the Company under Section 5.09 hereof and except moneys or securities held by the Trustee for the payment of the principal of and premium, if any, and interest on the Bonds and except for any amounts required to be transferred to the Rebate Fund. Any Bond or Authorized Denomination thereof shall be deemed to be paid within the meaning of this Indenture when (a) payment of the principal of, and premium, if any, on, such Bond or Authorized Denomination thereof, plus interest thereon to the due date thereof (whether such due date is by reason of maturity or upon redemption as provided herein) either (i) shall have been made or caused to be made in accordance with the terms thereof or (ii) shall have been provided for by irrevocably depositing with the Trustee in trust and irrevocably set aside exclusively for such payment (1) moneys sufficient to make such payment and/or (2) Government Obligations maturing as to principal and interest in such amount and at such time as will insure the availability of sufficient moneys to make such payment, and (b) all necessary and proper fees, compensation and expenses of the Trustee pertaining to any such deposit shall have been paid or the payment thereof provided for to the satisfaction of the Trustee. At such times as a Bond or Authorized Denomination thereof shall be deemed to be paid hereunder, as aforesaid, such Bond or Authorized Denomination thereof shall no longer be secured by or entitled to the benefits of this Indenture (except as to any surviving rights to payment, registration of transfer, exchange or replacement of Bonds herein provided for, and except for the purposes of any such payment from such moneys or Government Obligations). -29- 34 Notwithstanding the foregoing paragraph, in the case of a Bond or Authorized Denomination thereof which by its terms may be redeemed prior to the stated maturity thereof, no deposit under clause (a)(ii) of the immediately preceding paragraph shall be deemed a payment of such Bond or Authorized Denomination thereof as aforesaid until proper notice of redemption of such Bond or Authorized Denomination thereof shall have been previously given in accordance with Article III of this Indenture, or in the event said Bond or Authorized Denomination thereof is not to be redeemed within the next succeeding sixty (60) days, until the Company shall have given the Trustee on behalf of the Issuer, in form satisfactory to the Trustee, irrevocable instructions to notify, as soon as practicable, the Owner of such Bond or Authorized Denomination thereof in accordance with Article III hereof, that the deposit required by (a)(ii) above has been made with the Trustee and that said Bond or Authorized Denomination thereof is deemed to have been paid in accordance with this Article and stating the maturity or redemption date upon which moneys are to be available for the payment of the principal of and the applicable premium, if any, on said Bond or Authorized Denomination thereof, plus interest thereon to the due date thereof. Notwithstanding any provision of any other Article of this Indenture which may be contrary to the provisions of this Article, all moneys or Government Obligations set aside and held in trust pursuant to the provisions of this Article for the payment of Bonds or Authorized Denominations thereof (including interest and premium thereon, if any) shall be applied to and used solely for the payment of the particular Bonds or Authorized Denominations thereof (including interest and premium thereon, if any) with respect to which such moneys and Government Obligations have been so set aside in trust. Anything in Article X hereof to the contrary notwithstanding, if moneys or Government Obligations have been deposited or set aside with the Trustee pursuant to this Article for the payment of Bonds or Authorized Denominations thereof and the interest and premium, if any, thereon and such Bonds or Authorized Denominations thereof and the interest and premium, if any, thereon shall not have in fact been actually paid in full, no amendment to the provisions of this Article shall be made without the consent of the Owner of each of the Bonds affected thereby. ARTICLE VIII DEFAULT PROVISIONS; REMEDIES SECTION 8.01. DEFAULTS; EVENTS OF DEFAULT. If any of the following events occurs, it is hereby defined as and declared to be and to constitute a default or an event of default: (a) Failure to make due and punctual payment of any installment of interest on any Bond when the same shall have become due and payable and the continuation of such failure for a period of two (2) Business Days after such payment has become due and payable; -30- 35 (b) Failure to make due and punctual payment of the principal of and premium, if any, on any Bond at the stated maturity thereof, or upon proceedings for the unconditional redemption thereof; (c) The occurrence of an "event of default" under the Agreement; (d) Failure on the part of the Issuer to perform or observe any of its covenants, agreements or conditions in this Indenture or in the Bonds contained and failure to remedy the same after notice thereof pursuant to Section 8.10 hereof. SECTION 8.02. ACCELERATION. Upon the occurrence of an event of default under Section 8.01 the Trustee may, and upon the written request of the Owners of not less than a majority in aggregate principal amount of Bonds then outstanding shall, declare the principal of all Bonds then outstanding and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. The Trustee shall immediately thereafter give notice of such declaration to the Company and the Issuer. After such declaration of acceleration the Trustee shall immediately declare all indebtedness payable under Section 4.2(a) of the Agreement to be immediately due and payable in accordance with Section 6.2 of the Agreement. The above provisions are subject to waiver, rescission and annulment as provided in Section 8.09 hereof. SECTION 8.03. REMEDIES; RIGHTS OF BONDHOLDERS. Upon the occurrence and continuation of an event of default the Trustee may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, and premium, if any, and interest on, the Bonds then outstanding, and to enforce and compel the performance of the duties and obligations of the Issuer as herein set forth. In addition, the Trustee may, without notice to the Issuer or the Company, exercise any and all remedies afforded the Issuer under Article VI of the Agreement in its name or the name of the Issuer without the necessity of joining the Issuer. If an event of default shall have occurred and be continuing and if requested so to do by the Owners of not less than a majority in aggregate principal amount of Bonds then outstanding and upon being indemnified as provided in Section 9.01(i) hereof, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Section 8.03 and Section 8.02 hereof as the Trustee being advised by Counsel shall deem most expedient in the interests of the Bondholders. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the Bondholders) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bondholders hereunder or now or hereafter existing at law or in equity or by statute. -31- 36 No delay or omission to exercise any right, power or remedy accruing upon any event of default shall impair any such right, power or remedy or shall be construed to be a waiver of any such event of default or acquiescence therein; and every such right, power or remedy may be exercised from time to time and as often as may be deemed expedient. No waiver of any event of default hereunder, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent event of default or shall impair any rights or remedies consequent thereon. SECTION 8.04. RIGHT OF BONDHOLDERS TO DIRECT PROCEEDINGS. Anything in this Indenture to the contrary notwithstanding, the Owners of not less than a majority in aggregate principal amount of Bonds then outstanding shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or for the appointment of a receiver or any other proceedings hereunder; provided, that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture. SECTION 8.05. APPLICATION OF MONEYS. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article shall, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the fees, expenses, liabilities and advances incurred or made by the Trustee and its Counsel, be deposited in the Bond Fund and all such moneys and all other moneys then on deposit in the Bond Fund (except as provided in Section 5.06 hereof and subject to the Tax Agreement) shall be applied to the payment of the principal of, premium, if any, and interest then due and unpaid upon the Bonds (except as provided in Section 5.06 hereof), without preference or priority of any kind, ratably, according to the amounts due and payable on such Bonds for principal, premium, if any, and interest, respectively, to the persons entitled thereto without any discrimination or privilege. Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine. Whenever the Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date. Whenever all principal of, and premium, if any, and interest on, all Bonds have been paid under the provisions of this Section 8.05 and all expenses and charges of the Trustee have been paid, any balance remaining in the Bond Fund shall be paid to the Company as provided in Section 5.09 hereof, subject to the provisions of the Tax Agreement. SECTION 8.06. REMEDIES VESTED IN TRUSTEE. All rights of action (including the right to file proofs of claims) under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto and any such suit or proceeding instituted -32- 37 by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Owners of the Bonds, and any recovery of judgment shall be for the equal and ratable benefit of the Owners of the outstanding Bonds. SECTION 8.07. RIGHTS AND REMEDIES OF BONDHOLDERS. No Owner of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust thereof or for the appointment of a receiver or any other remedy hereunder, unless (i) a default has occurred of which the Trustee is deemed to have notice or has been notified as provided in Section 9.0l(g) hereof, (ii) such default shall have become an event of default and be continuing, (iii) the Owners of not less than a majority in aggregate principal amount of Bonds then outstanding shall have made written request to the Trustee, either to proceed to exercise the powers herein granted or to institute such action, suit or proceeding in its own name, and shall have offered to the Trustee indemnity as provided in Section 9.01(i), and (iv) the Trustee shall for sixty (60) days after such notice, request and offer of indemnity fail or refuse to exercise the powers herein granted, or to institute such action, suit or proceeding in its own name; and such notification, request and offer of indemnity are hereby declared in every case at the option of the Trustee to be conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture, or for the appointment of a receiver or for any other remedy hereunder. No one or more Owners of the Bonds shall have any right in any manner whatsoever to enforce any right hereunder except in the manner herein provided, and all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal and ratable benefit of the Owners of all Bonds then outstanding. Nothing in this Indenture contained shall, however, affect or impair the right of any Bondholder to enforce the payment of the principal of, and premium, if any, and interest on, any Bond at and after the maturity thereof. SECTION 8.08. TERMINATION OF PROCEEDINGS. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case the Issuer, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. SECTION 8.09. WAIVERS OF EVENTS OF DEFAULT. The Trustee may in its discretion waive any event of default hereunder and rescind its consequences and shall do so upon the written request of the Owners of not less than a majority in aggregate principal amount of all Bonds then outstanding; provided, however, that there shall not be waived any event of default in the payment of the principal of, or premium on, any outstanding Bonds when due (whether at maturity or by redemption), or any event of default in the payment when due of the interest on any such Bonds, unless prior to such waiver and rescission, all arrears of principal of and interest, with interest at the rate borne by the Bonds on overdue principal and (to the extent permitted by law) on overdue installments of interest, and all arrears of premium, if any, when due, together with the reasonable fees and expenses of the Trustee -33- 38 and of the holders of such Bonds, including reasonable attorneys' fees paid or incurred, shall have been paid or provided for; provided further, that if the Owners of not less than a majority in aggregate principal amount of the Bonds then outstanding shall have made the written request specified in the first paragraph of Section 8.02 hereof, then only upon receipt by the Trustee of the express written consent of the Owners of a majority in principal amount of the Bonds then outstanding (which consents the Trustee shall have no duty or obligation to solicit). In the case of any such waiver and rescission, or in case any proceeding taken by the Trustee on account of any such default shall have been discontinued or abandoned or determined adversely, then and in every such case the Issuer, the Trustee and the Bondholders shall be restored to their former positions and rights hereunder, respectively, but no such waiver and rescission shall extend to any subsequent or other default, or impair any right consequent thereon. All waivers under this Indenture shall be in writing and a copy thereof shall be delivered to the Issuer and to the Company. SECTION 8.10. OPPORTUNITY OF COMPANY TO CURE EVENTS OF DEFAULT. Anything herein to the contrary notwithstanding, no default under Section 8.01(d) hereof shall constitute an event of default until actual notice of such default by registered or certified mail shall be given to the Issuer and the Company by the Trustee or to the Issuer and the Company and the Trustee by the Owners of not less than a majority in aggregate principal amount of all Bonds Outstanding, and the Company shall have had sixty days after receipt of such notice to correct said default or cause said default to be corrected, and shall not have corrected said default or caused said default to be corrected within the applicable period; provided, however, if said default be such that it cannot be corrected within the applicable period, it shall not constitute an event of default if corrective action is instituted within the applicable period and diligently pursued until the default is corrected. Whenever, so long as the Company is not in default under the Agreement, after a reasonable request by the Company, the Issuer shall fail, refuse or neglect to give any direction to the Trustee or to require the Trustee to take any other action which the Issuer is required to have the Trustee take pursuant to the provisions of the Agreement or this Indenture, the Company instead of the Issuer may give any such direction to the Trustee or require the Trustee to take any such action. Upon receipt by the Trustee of a written notice signed by the Authorized Company Representative stating that the Company has made reasonable request of the Issuer, and that the Issuer has failed, refused or neglected to give any direction to the Trustee or to require the Trustee to take any such action (subject to indemnification which the Trustee deems adequate), the Trustee is hereby irrevocably empowered and directed to accept such direction from the Company as sufficient for all purposes of this Indenture. The Company shall have the direct right to cause the Trustee to comply with any of the Trustee's obligations under this Indenture to the same extent that the Issuer is empowered so to do. Certain actions or failures to act by the Issuer under this Indenture may create or result in an event of default under this Indenture and the Issuer hereby grants the Company full authority, to the extent permitted by law, for the account of the Issuer to perform or observe any covenant or obligation of the Issuer alleged in a written notice to the Issuer and the Company from the Trustee or from the requisite percentage of Owners of the Bonds not -34- 39 to have been performed or observed, in the name and stead of the Issuer with full power to do any and all things and acts to remedy any default. ARTICLE IX THE TRUSTEE SECTION 9.01. ACCEPTANCE OF THE TRUSTS. The Trustee hereby accepts the trusts imposed upon it by this Indenture, represents and covenants that it is fully empowered to accept said trusts, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions, and no implied covenants or obligations shall be read into this Indenture against the Trustee: (a) The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, agents, receivers or employees and shall not be responsible for the acts of any attorneys, agents or receivers appointed by it in good faith and without negligence, shall not be responsible for the acts of any agents over which the Trustee has no control and has no power to appoint or remove and shall be entitled to advice of Counsel concerning all matters of trusts hereof and the duties hereunder, and may in all cases require that the Company pay such reasonable compensation to all such attorneys, agents and receivers as may reasonably be employed by the Trustee in connection with the trusts hereof. The Trustee may act upon the opinion or advice of Counsel. The Trustee shall not be responsible for any loss or damage resulting from any action or non-action in good faith in reliance upon such opinion or advice or any misconduct or negligence on the part of any agent or attorney appointed with due care. (b) Except for its certificate of authentication on the Bonds, the Trustee shall not be responsible for any recital herein or in the Bonds, or the validity, priority, recording, or re-recording, filing, or refiling of this Indenture or any financing statement, amendments to this Indenture, or continuation statements, or for reviewing any annual reports, financial statements or audits, or for insuring the Project or collecting any insurance moneys, or for the validity of the execution by the Issuer of this Indenture or for any supplements hereto or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby, for the value or title of the Project or as to the maintenance of the security hereof. The Trustee makes no representations as to the value or condition of the Trust Estate or any part thereof, or as to the title of the Issuer thereto or as to the security afforded thereby or hereby, or as to the validity or genuineness of any securities at any time pledged and deposited with the Trustee hereunder, or as to the validity or sufficiency of this Indenture or of the Bonds. The Trustee shall not be accountable for the use or application by the Company of the proceeds of the Bonds or of any money paid to the Company or upon the order of the Company under any provision hereof. The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of -35- 40 the Issuer or on the part of the Company under the Agreement, except as hereinafter set forth, but the Trustee may require of the Issuer or the Company full information and advice as to the performance of the covenants, conditions and agreements aforesaid. Except as otherwise provided in Sections 8.02 and 8.03 hereof, the Trustee shall have no obligation to perform any of the rights or duties of the Issuer under the Agreement. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with Article VI hereof including, without limitation, any loss suffered in connection with the sale of any investment pursuant to Article VI hereof. (c) The Trustee shall not be accountable for the use of any Bonds authenticated or delivered hereunder. The Trustee, in its individual capacity, may become the owner of Bonds with the same rights which it would have if it were not Trustee. (d) The Trustee shall be protected in acting in good faith upon any notice, request, resolution, consent, certificate, affidavit, letter, telegram, fax or other paper or document, or oral communication or direction, believed to be genuine and correct and to have been signed or sent or given by the proper person or persons. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the owner of any Bond shall be conclusive and binding upon all future owners of the same Bond and upon Bonds issued in exchange therefor or upon transfer or in place thereof. (e) As to the existence or non-existence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a certificate signed on behalf of the Issuer by an Authorized Issuer Representative as sufficient evidence of the facts therein contained, and prior to the occurrence of a default of which the Trustee has been notified as provided in subsection (g) of this Section, or subsequent to the waiver, rescission or annulment of a default as provided in Article VIII hereof, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed necessary or advisable, but shall in no case be bound to secure the same. The Trustee may accept a certificate signed on behalf of the Issuer by the Recording Officer to the effect that a resolution or ordinance in the form therein set forth has been adopted by the Issuer as conclusive evidence that such resolution or ordinance has been duly adopted, and is in full force and effect. (f) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and the Trustee shall not be liable in the performance of its obligations hereunder except for its negligence or willful misconduct. -36- 41 (g) The Trustee shall not be required to take notice or be deemed to have notice of any default hereunder, except failure by the Issuer to cause to be made any of the payments to the Trustee required to be made by Article IV and all defaults under Section 8.01(a) or (b), unless the Trustee shall be specifically notified in writing of such default by the Issuer or the Owners of at least a majority in aggregate principal amount of all Bonds then affected or outstanding. (h) The Trustee shall not be required to give any bond or surety in respect of the execution of its trusts and powers hereunder. (i) Before taking any action under Article VIII hereof or this Section at the request or direction of the Bondholders, the Trustee may require that a satisfactory indemnity bond be furnished by the Bondholders, for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct in connection with any action so taken. (j) All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law or this Indenture. The Trustee shall not be under any liability for interest on any moneys received hereunder except such as may be agreed upon. (k) The Trustee, prior to the occurrence of an event of default specified in Section 8.0l of this Indenture of which it is deemed to have knowledge pursuant to clause (g) above and after the curing of all events of default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and, in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. In case an event of default has occurred (which has not been cured or waived) of which it is deemed to have knowledge pursuant to clause (g) above, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (l) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) This subsection shall not be construed to limit the effect of subsection (k) of this Section; -37- 42 (ii) The Trustee shall not be liable for any error of judgment made in good faith by an officer of the Trustee unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of a majority in aggregate principal amount of the Bonds outstanding relating to the time, method and place of conducting any proceeding or any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (iv) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (m) Notwithstanding anything elsewhere in this Indenture contained, the Trustee shall have the right, but shall not be required, to demand, in respect of the authentication of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required as a condition of such action by the Trustee, deemed desirable for the purpose of establishing the right of the Issuer to the authentication of any Bonds, the withdrawal of any cash, or as a condition to the taking of any action by the Trustee. SECTION 9.02. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business and authorized under such laws to exercise corporate trust powers, authorized to accept and exercise the trusts herein provided, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.02, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article, and shall immediately provide notice of such resignation by registered or certified mail to the Issuer, the Company and the Owner of each Bond. SECTION 9.03. FEES, CHARGES AND EXPENSES OF TRUSTEE. The Trustee shall be entitled to payment and/or reimbursement from the Company for reasonable fees for its Ordinary Services rendered hereunder and all advances, Counsel fees and other Ordinary Expenses reasonably and necessarily made or incurred by the Trustee in connection with -38- 43 such Ordinary Services hereunder and under the Tax Agreement and, in the event that it should become necessary that the Trustee perform Extraordinary Services, it shall be entitled to reasonable extra compensation therefor from the Company, and to reimbursement from the Company for reasonable and necessary Extraordinary Expenses (including fees of Counsel) in connection therewith; provided, that if such Extraordinary Services or Extraordinary Expenses are occasioned by the neglect or misconduct of the Trustee it shall not be entitled to compensation or reimbursement therefor. The Trustee shall be entitled to payment and reimbursement from the Company for the reasonable fees and charges of the Trustee as Bond Registrar and Paying Agent. Upon the occurrence and continuation of an Event of Default hereunder, the Trustee shall have a first lien with right of payment prior to payment on account of interest or principal of, or premium, if any, on any Bond upon all moneys in its possession under any provisions hereof for the foregoing advances, fees, costs and expenses incurred. SECTION 9.04. NOTICE TO BONDHOLDERS IF DEFAULT OCCURS. If a default occurs of which the Trustee is by Section 9.01(g) hereof required to take notice or if notice of default be given as in said Section 9.01(g) provided, the Trustee shall, within fifteen (15) days thereafter (unless such default is cured or waived), give notice of such default to each Owner of Bonds then outstanding, provided that, except in the case of a default in the payment of the principal of, or premium, if any, or interest on, any Bond, the Trustee may withhold such notice to the Bondholders if and so long as the board of directors, the executive committee, or a trust committee of directors and/or responsible officers, of the Trustee in good faith determine that the withholding of such notice is in the interests of the Bondholders. SECTION 9.05. INTERVENTION BY TRUSTEE. In any judicial proceeding to which the Issuer is a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the interests of Owners of the Bonds, the Trustee may intervene on behalf of Bondholders and, subject to the provisions of Section 9.01(i), shall do so if requested in writing by the Owners of a majority in aggregate principal amount of all Bonds then outstanding. SECTION 9.06. SUCCESSOR TRUSTEE. Any corporation or association into which the Trustee may be merged, or with which it may be consolidated, or to which it may sell, lease or transfer its corporate trust business and assets as a whole or substantially as a whole, shall be and become successor Trustee hereunder and shall be vested with all the trusts, powers, rights, obligations, duties, remedies, immunities and privileges hereunder as was its predecessor, without the execution or filing of any instrument on the part of any of the parties hereto. SECTION 9.07. RESIGNATION BY THE TRUSTEE. The Trustee may at any time resign from the trusts hereby created by giving sixty (60) days written notice by registered or certified mail to the Issuer, the Company and the Owner of each Bond, and such resignation shall take effect at the appointment of a successor Trustee pursuant to the provisions of Section 9.09 hereof and acceptance by the successor Trustee of such trusts. If no successor Trustee shall have been so appointed and have accepted appointment within forty-five (45) -39- 44 days of the giving of written notice by the resigning Trustee as aforesaid, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. SECTION 9.08. REMOVAL OF THE TRUSTEE. The Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Trustee, the Issuer and the Company and signed by the Owners of a majority in aggregate principal amount of Bonds then Outstanding, or (so long as no event of default is then existing under Section 6.1 of the Agreement or under Section 8.01 of this Indenture) by the Company by written instrument delivered to the Trustee and the Issuer, and such removal shall only take effect at the appointment of a successor Trustee pursuant to the provisions of Section 9.09 hereof and acceptance by the successor Trustee of such trusts. SECTION 9.09. APPOINTMENT OF SUCCESSOR TRUSTEE. In case the Trustee hereunder shall: (a) resign pursuant to Section 9.02 or 9.07 hereof; (b) be removed pursuant to Section 9.08 hereof; or (c) be dissolved, taken under the control of any public officer or officers or of a receiver appointed by a court, or otherwise become incapable of acting hereunder, a successor shall be appointed by the Issuer at the direction of the Company; provided, that if a successor Trustee is not so appointed within ten (10) days after notice of resignation is mailed or instrument of removal is delivered as provided under Sections 9.02, 9.07 and 9.08 hereof, respectively, or within ten (10) days of Issuer's knowledge of any of the events specified in (c) hereinabove, then the Owners of a majority in aggregate principal amount of Bonds then outstanding, by an instrument or concurrent instruments in writing signed by or on behalf of such Owners, may designate a successor Trustee. Every such successor Trustee appointed pursuant to the provisions of this Section shall meet the requirements of Section 9.02 hereof and shall be a trust company or bank in good standing, shall be eligible to serve as Trustee under the Act, and willing to accept the trusteeship and all other terms and conditions hereunder under the terms and conditions of this Indenture. In case at any time the Trustee shall resign and no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Article IX prior to the date specified in the notice of resignation as the date when such resignation shall take effect, the Owner of any Bond may apply to any court of competent jurisdiction to appoint a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee. SECTION 9.10. CONCERNING ANY SUCCESSOR TRUSTEES. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Issuer and the Company, an instrument in writing accepting such appointment hereunder, -40- 45 and thereupon such successor shall become fully vested with all the trusts, powers, rights, obligations, duties, remedies, immunities and privileges of its predecessor; but, nevertheless, (l) such predecessor shall, on the written request of the Issuer at the direction of the Company, execute and deliver an instrument transferring to such successor Trustee all the trusts, powers, rights, obligations, duties, remedies, immunities and privileges of such predecessor hereunder and (2) such predecessor shall deliver all securities and moneys held by it as Trustee hereunder (net of any amounts owing to it hereunder) to its successor. Should any instrument in writing from the Issuer be required by any successor Trustee for more fully and certainly vesting in such successor the trusts, powers, rights, obligations, duties, remedies, immunities and privileges hereby vested in the predecessor any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer at the expense of the Company. The resignation of any Trustee and the instrument or instruments removing any Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article, shall be filed or recorded by the successor Trustee in each recording office, if any, where the Indenture or a financing statement relating thereto shall have been filed or recorded. SECTION 9.11. APPOINTMENT OF CO-TRUSTEE. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture or the Agreement, and in particular in case of the enforcement thereof on default, or in the case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take any action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate or co-trustee. The following provisions of this Section are adapted to these ends. In the event that the Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and only to the extent that the Trustee by the laws of any jurisdiction (including particularly the State) is incapable of exercising such powers, rights and remedies and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them. Should any instrument in writing from the Issuer be required by the separate or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer at the expense of the Company; provided, that if an event of default shall have occurred and be continuing, if the Issuer does not execute any such instrument within fifteen -41- 46 (15) days after request therefor (which request shall contain notification of such fifteen (15) day deadline), the Trustee shall be empowered as an attorney-in-fact for the Issuer to execute any such instrument in the Issuer's name and stead. In case any separate or co-trustee or a successor to either shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate or co-trustee. The Trustee shall be entitled to remove any co-trustee so appointed by the Trustee upon written notice to such co-trustee, the Issuer and the Company. ARTICLE X SUPPLEMENTAL INDENTURES SECTION 10.01. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF BONDHOLDERS. The Issuer and the Trustee may without the consent of or notice to any of the Bondholders enter into an indenture or indentures supplemental to this Indenture for any one or more of the following purposes: A. to add to the covenants and agreements of, and limitations and restrictions upon, the Issuer in this Indenture other covenants, agreements, limitations and restrictions to be observed by the Issuer which are not contrary to or inconsistent with this Indenture as theretofore in effect; B. to grant to or confer or impose upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority, security, liabilities or duties which may lawfully be granted, conferred or imposed and which are not contrary to or inconsistent with this Indenture as heretofore in effect; C. to cure any ambiguity or omission or to cure, correct or supplement any defective provision of this Indenture in each case in such manner as shall not adversely affect the Bondholders; D. to evidence the appointment of a separate Trustee or a co-trustee or to evidence the succession of a new Trustee hereunder; E. to comply with the requirements of the Trust Indenture Act of 1939, as from time to time amended; F. to subject to this Indenture additional revenues, properties or collateral; G. to provide for the issuance of coupon bonds (provided, however, that the Issuer and the Trustee have received an opinion of Bond Counsel to the affect that issuance of such coupon bonds complies with the applicable laws and will not -42- 47 adversely affect the exclusion from gross income for federal income tax purposes of interest on any of the Bonds); H. to provide for the use or discontinuance of a book entry system; I. to maintain ratings on the Bonds; J. to preserve the exemption from Federal income taxes of interest on the Bonds, or any of them; or K. to modify, alter, amend or supplement this Indenture in any other respect which is not adverse to the Bondholders and which does not involve a change described in clauses (a), (b), (c) or (d) of the first paragraph of Section 10.02 hereof and which, in the judgment of the Trustee, is not to the prejudice of the Trustee. SECTION 10.02. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS. Exclusive of supplemental indentures covered by Section 10.01 hereof and subject to the terms and provisions contained in this Section, and not otherwise, the holders of not less than a majority in aggregate principal amount of the Bonds then outstanding shall have the right, from time to time, anything contained in this Indenture to the contrary notwithstanding, to consent to and approve the execution by the Issuer and the Trustee of such other indenture or indentures supplemental hereto for the purpose of modifying, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however, that nothing in this Section contained shall permit or be construed as permitting without the consent of the owners of 100% in aggregate principal amount of the Bonds then outstanding (a) an extension of the maturity date of the principal of or the interest on any Bond issued hereunder, or (b) a reduction in the principal amount of, or premium, if any, on, any Bond or the rate of interest thereon, or (c) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of the Bonds the owners of which are required to consent to such supplemental indenture. If at any time the Issuer shall request the Trustee to enter into any such supplemental indenture for any of the purposes allowed by this Section, the Trustee shall, at the request of the Issuer and upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed in substantially the manner provided in the first paragraph of Section 3.04 hereof with respect to redemption of Bonds. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the Corporate Trust Office of the Trustee for inspection by all Bondholders. If, within sixty (60) days or such longer period of time as shall be prescribed by the Issuer following the mailing of such notice, the Owners of not less than a majority or 100%, as the case may be, in aggregate principal amount of the Bonds outstanding at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as herein provided, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to -43- 48 enjoin or restrain the Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. The Issuer shall have the right to extend from time to time the period within which such consent and approval may be obtained from Bondholders. Upon the execution of any such supplemental indenture as in this Section permitted and provided, this Indenture shall be and be deemed to be modified and amended in accordance therewith. SECTION 10.03. CONSENTS TO SUPPLEMENTAL INDENTURES. Anything herein to the contrary notwithstanding, a supplemental indenture under this Article X which affects any rights or obligations of the Company shall not become effective unless and until the Company shall have consented to the execution and delivery of such supplemental indenture. The Company shall be given prior written notice of the proposed execution and delivery of any supplemental indenture whether or not its rights or obligations are affected. In this regard, the Trustee shall cause notice of the proposed execution and delivery of any such supplemental indenture together with a copy of the proposed supplemental indenture to be mailed by certified or registered mail to the Company at least fifteen (15) days prior to the date of the first mailing of notice of the proposed execution of such supplemental indenture as hereinbefore in Section 10.02 provided. The Company shall be deemed to have consented to the execution and delivery of any such supplemental indenture if the Trustee does not receive at its principal corporate trust office a letter of protest or objection thereto signed by or on behalf of the Company on or before 4:30 o'clock P.M., New York time, of the fifteenth day after the mailing of said notice and a copy of the proposed supplemental indenture. SECTION 10.04. RELIANCE ON OPINIONS OF COUNSEL. The Issuer and the Trustee may rely on an opinion of Counsel to the effect that any supplemental indenture entered into by the Issuer and the Trustee complies with the provisions of this Article X and an opinion of Bond Counsel that any such supplemental indenture does not adversely affect the exclusion from federal gross income of interest on the Bonds. ARTICLE XI AMENDMENT OF AGREEMENT SECTION 11.01. AMENDMENTS, ETC., TO AGREEMENT NOT REQUIRING CONSENT OF BONDHOLDERS. The Issuer and the Company may, with the written consent of the Trustee, but without the consent of or notice to any of the Bondholders, enter into any amendment, change or modification of the Agreement (a) as may be required by the provisions of the Agreement or this Indenture, (b) for the purpose of curing any ambiguity or formal defect or omission in the Agreement, (c) to preserve the exemption from Federal income taxes of interest on the Bonds, or any of them, (d) to change Exhibit A to the Agreement in accordance with the provisions of the Agreement or the Project Certificate or (e) in connection with any other change therein which is not to the prejudice of the Trustee or the Owners of the Bonds. -44- 49 SECTION 11.02. AMENDMENTS, ETC., TO AGREEMENT REQUIRING CONSENT OF BONDHOLDERS. Except for the amendments, changes or modifications as provided in Section 11.01 hereof, the Issuer and the Company shall not enter into, and the Trustee shall not consent to, any other amendment, change or modification of the Agreement without mailing of notice to, and the written approval or consent of, the Owners of not less than a majority in aggregate principal amount of the Bonds at the time outstanding given and procured as provided in this Section; provided, however, that nothing in this Section or Section 11.01 hereof shall permit or be construed as permitting without the consent of the owners of 100% in aggregate principal amount of the Bonds then outstanding (a) an extension of the time of the payment of any amounts payable under Section 4.2(a) of the Agreement, or (b) a reduction in the amount of any payment or in the total amount due under Section 4.2(a) of the Agreement or (c) a reduction in the aggregate principal amount of the Bonds required for consent to an amendment of the Agreement. If at any time the Issuer and the Company shall request the consent of the Trustee to any such proposed amendment, change or modification of the Agreement, the Trustee shall, at the request of the Issuer and upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be mailed to the Owners of Bonds in the same manner as provided by the first paragraph of Section 3.04 hereof with respect to redemption of Bonds. Such notice shall briefly set forth the notice of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file with the Trustee for inspection by all Bondholders. If, within sixty (60) days, or such longer period as shall be prescribed by the Issuer in its reasonable judgment, following the mailing of such notice, the Owners of not less than a majority or 100%, as the case may be, in aggregate principal amount of the Bonds outstanding at the time of the execution of any such amendment, change or modification shall have consented to and approved the execution thereof as herein provided, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Company or the Issuer from executing the same or from taking any action pursuant to the provisions thereof, or the Trustee from consenting thereto. The Issuer shall have the right to extend from time to time the period within which such consent and approval may be obtained from Bondholders. Upon the execution of any such amendment, change or modification as in this Section permitted and provided, the Agreement shall be and be deemed to be modified, changed and amended in accordance therewith. SECTION 11.03. RELIANCE ON OPINIONS OF COUNSEL. The Issuer and the Trustee may rely upon an opinion of Counsel to the effect that any proposed amendment, change or modification to the Agreement will comply with the provisions of this Article XI and an opinion of Bond Counsel that any such amendment, change or modification does not adversely affect the exclusion from federal gross income of interest on the Bonds. -45- 50 ARTICLE XII MISCELLANEOUS SECTION 12.01. CONSENTS, ETC., OF BONDHOLDERS. Any consent, approval, direction or other instrument required by this Indenture to be signed and executed by the Bondholders may be in any number of concurrent writings of similar tenor and may be signed or executed by such Bondholders in person or by agent appointed in writing. Proof of the execution of any such consent, approval, direction or other instrument or of the writing appointing any such agent, if made in the following manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any action taken under such request or other instrument, namely: (a) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the Person signing such instrument or writing acknowledged before him the execution thereof, or by affidavit of any witness to such execution or in any other manner satisfactory to the Trustee; (b) The fact of ownership of Bonds and the amount or amounts, numbers and other identification of such Bonds, and the date of acquiring the same shall be proved by the registration books of the Issuer maintained by the Trustee pursuant to Section 2.03 hereof. SECTION 12.02. LIMITATION OF RIGHTS. With the exception of rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any person other than the parties hereto, the Company and the Owners of the Bonds any legal or equitable right, remedy or claim under or in respect to this Indenture. This Indenture and all of the covenants, conditions and provisions hereof are intended to be and being for the sole and exclusive benefit of the parties hereto, the Owners of the Bonds and the Company as herein provided. SECTION 12.03. SEVERABILITY. If any provision of this Indenture shall be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or Sections in this Indenture contained, shall not affect the remaining portions of this Indenture, or any part thereof. SECTION 12.04. NOTICES. Except as otherwise expressly provided herein, all notices, certificates or other communications hereunder shall be sufficiently given and shall be -46- 51 deemed given on the day on which the same have been mailed by first class mail postage prepaid, or delivered by hand, or sent by telecopy or similar facsimile transmission, as follows: if to the Issuer, c/o Lewis and Roca, LLP., 40 North Central Avenue, Phoenix, Arizona 85004-4429, or to telecopy number (602) 262-5311; if to the Company, at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, or to telecopy number (602) 693-8953, Attention: Treasurer; if to the Trustee, at 3300 North Central Avenue, 15th Floor, Phoenix, Arizona 85012, Attention: Corporate Trust Services; provided, however, that notice to the Trustee shall be deemed given when received by the Trustee. A duplicate copy of each notice, certificate or other communication given hereunder by either the Issuer or the Trustee to the other shall also be given to the Company. The Issuer, the Company and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 12.05. HOLIDAYS. Except as otherwise expressly set forth herein, if the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Indenture, is not a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided in this Indenture. SECTION 12.06. COUNTERPARTS. This Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 12.07. APPLICABLE LAW. The power and authority of the Issuer to issue the Bonds and the rights and obligations of the Issuer hereunder shall be governed by and construed in accordance with the laws of the State, except that the Trustee's rights, duties, immunities and its standard of care in the performance of its responsibilities under this Indenture shall be governed by and construed in accordance with the laws of the state in which is located the Trustee's Corporate Trust Office. SECTION 12.08. CAPTIONS. The captions or headings in this Indenture are for convenience only and in no way define, limit, or describe the scope or intent of any provisions or sections of this Indenture. SECTION 12.09. NOTICE REGARDING CANCELLATION OF CONTRACTS. As required by the provisions of Section 38-511, Arizona Revised Statutes, as amended, notice is hereby given that political subdivisions of the State of Arizona or any of their departments or agencies may, within three (3) years of its execution, cancel any contract, without penalty or further obligation, made by the political subdivisions or any of their departments or agencies on or after September 30, 1988, if any person significantly involved in initiating, negotiating, securing, drafting or creating the contract on behalf of the political subdivisions or any of their departments or agencies is, at any time while the contract or any extension of the contract is in effect, an employee or agent of any other party to the contract in any capacity or a consultant to any other party of the contract with respect to the subject matter of the contract. The cancellation shall be effective when written notice from the chief -47- 52 executive officer or governing body of the political subdivision is received by all other parties to the contract unless the notice specifies a later time. The Trustee covenants and agrees not to employ as an employee, agent or, with respect to the subject matter of the Indenture, a consultant, any person significantly involved in initiating, negotiating, securing, drafting or creating this Indenture on behalf of the Issuer within three (3) years from the execution hereof, unless a waiver is provided by the Issuer. IN WITNESS WHEREOF, THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, Arizona, has caused these presents to be signed in its name and behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and to evidence its acceptance of the trusts hereby created Norwest Bank Arizona, N.A. has caused these presents to be signed in its name and behalf as of the first day of April, 1998. THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA By ------------------------------------- President Attest: - ---------------------------------- Assistant Secretary NORWEST BANK ARIZONA, N.A., as Trustee By /s/ illegible ------------------------------------- Its Assistant Vice President -48- 53 IN WITNESS WHEREOF, THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA, has caused these presents to be signed in its name and behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary, and to evidence its acceptance of the trusts hereby created Norwest Bank Arizona, N.A. has caused these presents to be signed in its name and behalf by one of its and its official seal to be hereunto affixed, and the same to be attested by one of its , all as of the first day of April, 1998. THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA By /s/ illegible ---------------------------------- President Attest: /s/ illegible - ---------------------------------- Assistant Secretary NORWEST BANK ARIZONA, N.A., as Trustee By ----------------------------------- Its -------------------------------- (SEAL) Attest: - ---------------------------------- Its ------------------------------ -49- 54 EXHIBIT I INVESTOR LETTER April 2, 1998 City of Phoenix Phoenix, Arizona The Industrial Development Authority of the City of Phoenix, Arizona Re: THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF PHOENIX, ARIZONA AIRPORT FACILITIES REFUNDING BONDS (AMERICA WEST AIRLINES, INC. PROJECT) SERIES 1998 Ladies and Gentlemen: The undersigned, [insert name of purchaser] (the "Purchaser"), has purchased $29,300,000 principal amount of the Bonds. In connection with such purchase, The Industrial Development Authority of the City of Phoenix, Arizona (the "Issuer") and the City of Phoenix, Arizona (the "City") require that the Purchaser make certain representations as to the Purchaser's willingness to accept the risks of investing in the Bonds, the Purchaser's investigation of such risks, and such other matters. Accordingly, the Purchaser represents and warrants to the Issuer, the City, and other addressees hereof as follows: A. QUALIFICATION. The Purchaser is either a "qualified institutional buyer" (a "Qualified Institutional Buyer") within the meaning of Rule 144A of the Securities Act of 1933 (the "Securities Act") or a non-natural "accredited investor" as defined in Rule 501 of Regulation D of the United States Securities and Exchange Commission (an "Accredited Investor"). The Purchaser can bear the economic risk of the purchase of the Bonds and has such knowledge and experience in business and financial matters, including the analysis of the purchase of similar investments, as to be capable of evaluating the merits and risks of an investment in the Bonds on the basis of the information requested and reviewed by us and our review as described herein. B. NO REGISTRATION; TRANSFERABILITY. The Purchaser acknowledges that the Bonds are not currently required to be, have not been, and are not intended to be, registered under the Securities Act or registered or otherwise qualified under the securities laws of any EXHIBIT I 55 state or other jurisdiction, and that any sale or other transfer of the Bonds may be only in accordance with such laws. The Bonds are rated "____" by Moody's Investors Service, Inc., and their transferability is limited to Qualified Institutional Buyers or Accredited Investors. C. INDEPENDENT EVALUATION; WAIVER OF ISSUER'S DUE DILIGENCE; RELEASE. The Purchaser has independently evaluated the factors associated with its investment decision. The Purchaser has been given full and complete access to and has been furnished with all information requested by the Purchaser regarding the Company, and has conducted such other investigations relating to the Issuer, the Company, the Project, and the Bonds, as in the opinion of the Purchaser was necessary in connection with its purchase of the Bonds. The Purchaser acknowledges that the Issuer, the members of its Board of Directors, its officers, Quarles & Brady, its counsel and Villanueva & Company, its financial advisor and the City and its City Council and agents of any of the foregoing (each individually an "Issuer Party" and all collectively the "Issuer Parties") have not undertaken to furnish information to the Purchaser, or to ascertain the accuracy or completeness of any information that may have been furnished to the Purchaser by or on behalf of the Issuer or the Company relating to the operations, financial conditions or future prospects of the Company or the Project and that none of the Issuer Parties have made any representations concerning the accuracy or completeness of any information supplied to the Purchaser or relating to the Company and the Project. The Purchaser hereby waives any requirements of due diligence in investigation or inquiry on the part of any of the Issuer Parties and all claims, actions, or causes of action which the Purchaser may have directly or indirectly from or relating to any action which the Issuer and its Board of Directors or the City and its City Council took, or could have taken, in connection with the issuance and sale of the Bonds to the Purchaser. D. DISCLOSURE STATEMENT. We have carefully read the Limited Offering Memorandum relating to the Bonds in its entirety and understand the risks described therein and understand and acknowledge that there may be other risks in such investment which are not described therein. We acknowledge that the Bonds are a speculative investment and that there is a high degree of risk in such investment. E. SOPHISTICATION. The Purchaser is sufficiently knowledgeable and experienced in financial and business matters, including the purchase and ownership of municipal and other tax-exempt obligations, to be able to evaluate the risks and merits of the investment represented by the purchase of the Bonds, and is capable of and has made its own investigation of the Borrower and the Project in connection with its decision to purchase the Bonds. F. LEGAL AUTHORIZATION. The Purchaser is duly and legally authorized to purchase the Bonds, and the Purchaser is duly and legally authorized to execute this Investor Letter. The Purchaser has satisfied itself that the Bonds are a lawful investment for it under all applicable laws. F. SPECIAL LIMITED OBLIGATIONS. The Purchaser understand that the Bonds are special limited, and not general obligations of the Issuer payable solely from the revenues received by Norwest Bank Arizona, National Association, as trustee (the "Trustee"). The I-2 56 Purchaser understands that the Bonds are not secured by any obligations or the pledge of any monies received or to be received from taxation or from the State of Arizona (the "State") or any political subdivision or taxing district thereof (including, without implied limitation, the Issuer or the City), and that the Bonds will never represent or constitute a general obligation, debt, or bonded indebtedness of the City, the State, or any political subdivision thereof, and that no right will exist to have taxes levied by the City, the State, or any political subdivision thereof, for the payment of the principal of, premium, if any, and interest on the Bonds, and that payment of the principal of, premium, if any, and interest on the Bonds depends upon the general credit of the Company. The Purchaser understands that the Issuer has no taxing power. H. SURVIVAL. All representations of the Purchaser contained herein shall survive the sale and delivery of the Bonds to the Purchaser as representations of fact existing as of the date of execution and delivery of this Investor Letter. I. DEFINED TERMS. The initial capitalized terms not defined herein shall the meaning ascribed to such terms in the Indenture of Trust which secures the payment of the Bonds. J. WAIVER OF DUE DILIGENCE. Notwithstanding anything to the contrary herein, the Purchaser waives any requirement of due diligence and investigation or inquiry on the part of any of the Issuer Parties. The above representations are provided solely for the benefit of the addressees of this Investor Letter and may not be relied upon by or furnished to any other person without our prior written consent. ______________________________ By __________________________________________ __________________________________________ Its ________________________________________ [Note: The signatory must be Chief Financial Officer or other executive officer.] I-3 EX-27.1 5 EX-27.1
5 0000706270 AMERICA WEST AIRLINES, INC. 1 U.S. DOLLARS 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1 165,079 64,423 100,634 (4,072) 27,141 435,743 1,029,269 (337,933) 1,619,618 552,461 0 0 0 0 741,314 1,619,618 0 990,442 0 868,287 0 1,500 17,935 114,502 49,921 0 0 0 0 64,581 0 0
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