Exhibit 10.9
Confidential
November 24, 2004
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
US Airways, Inc.
2345 Crystal Drive
Arlington, VA 22227
General Electric Capital Corporation
c/o GE Capital Aviation Services, Inc.
201 High Ridge Road
Stamford, CT 06927-4900
| Re: | Master Memorandum of Understanding (“Master MOU”) among US Airways, Inc. (including, as the context may require, as reorganized pursuant to the Bankruptcy Code, “US Airways”), US Airways Group, Inc. (including, as the context may require, as reorganized pursuant to the Bankruptcy Code, “Group”), and General Electric Capital Corporation, acting through its agent GE Capital Aviation Services, Inc. (“GECC”; and together with GE Capital Aviation Services, Inc. “GECAS”, GE Engine Services, Inc. “GE Engine Services” and General Electric Company, GE Transportation Component “GEAE” and their respective affiliates, the “GE Entities”) |
Gentlemen/Ladies:
This Master MOU, when countersigned by the respective parties, shall set forth our understanding with respect to a restructuring of the indebtedness and obligations of US Airways and Group to the GE Entities, which understanding was reached in separate negotiations with each of such respective parties in connection with the related matters contained herein.
In conjunction with the bankruptcy proceedings of Group and certain of its subsidiaries (including US Airways) under Chapter 11, Title 11 of the United States Code (the “Chapter 11 Case”) commenced on September 12, 2004 (the “Petition Date”) in the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division (the “Bankruptcy Court”), US Airways wishes to obtain and GECAS is willing to provide (both during the Chapter 11 Case and upon emergence pursuant to a plan of reorganization (“Plan of Reorganization”) confirmed by the Bankruptcy Court) the following: (i) certain lease modifications with respect to certain GECC aircraft leased to US Airways as described inExhibit A; (ii) certain lease and other arrangements in respect
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of future regional jet acquisitions by US Airways (the “Regional Jet Lease Transactions”) as described inExhibit B; (iii) certain sale-leaseback transactions as described inExhibit C; (iv) certain modifications to the financing evidenced by the Credit Agreement dated as of November 16, 2001 among US Airways, as Borrower, GECC, as Lender and Group, as Guarantor (as amended, supplemented and modified, the “2001 Facility”) and the Exit Liquidity Facility Agreement dated as of March 31, 2003 among US Airways, as Borrower, GECC, as Lender and Group, as Guarantor (as supplemented and modified, the “2003 Liquidity Facility”) as described inExhibit D; (v) a new bridge financing facility as further described inExhibit E (the “Bridge Facility”); and (vi) waiver of registration penalties for the[REDACTED] EETC as described inExhibit F. In consideration of the foregoing, US Airways has agreed to issue certain Convertible Notes to a GE Entity upon emergence from the Chapter 11 Case, the terms of which are described inExhibit G.
In addition, US Airways wishes to obtain certain modifications with respect to certain of its contracts with GE Engine Services and GEAE, and GE Engine Services and GEAE are willing to modify such provisions of such contracts with US Airways, as further described inExhibit H.
Each of these transactions and modifications is to occur pursuant to the terms and conditions set forth in the following applicable term sheets attached asExhibits Athrough H (each, a “Term Sheet” and, collectively, the “Term Sheets”). Certain of the transactions and modifications described in the Term Sheets are scheduled to take effect upon judicial approval of the Master MOU no later than December 17, 2004 or described in the attached term sheets as a Phase I Transaction (the “Phase I Transactions”); others are scheduled to take effect on January 18, 2004 or described in the attached term sheets as a Phase II Transaction (the “Phase II Transactions”); and others are scheduled to take effect upon US Airways’ exit from bankruptcy or described in the attached term sheets as an Exit Transaction (the “Exit Transactions” and, together with the Phase I Transactions and the Phase II Transactions, the “Restructuring Transactions”).
Exhibit A: | Aircraft Lease Term Sheet | |
Exhibit B: | Regional Jet Lease Transactions Term Sheet | |
Exhibit C: | Sale-Leaseback Term Sheet | |
Exhibit D: | Existing Facilities Term Sheet | |
Exhibit E: | Bridge Facility Term Sheet | |
Exhibit F: | [REDACTED] EETC Term Sheet | |
Exhibit G: | Convertible Note Term Sheet | |
Exhibit H: | GEAE Restructuring Term Sheet | |
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The parties further acknowledge and agree that (i) the Restructuring Transactions contemplated in this Master MOU are comprised of several separate interrelated transactions (each of which is individually described in its respective Term Sheet), and (ii) each Phase I Transaction and Phase II Transaction is expressly conditioned upon the consummation of every other Phase I Transaction and Phase II Transaction. In no event shall any Term Sheet be viewed as a stand-alone transaction. Accordingly, each of the transactions and modifications contemplated by the Term Sheets must be evidenced by executed definitive agreements in order to effectuate the Restructuring Transactions.
Each of the Phase I Transactions, the Phase II Transactions and the Exit Restructuring Transactions shall only take effect on the effective dates and, in each case subject to the satisfaction of applicable conditions, for such transactions (whether such conditions are provided for in the schedules to this Master MOU or in the applicable Term Sheet).
Each and every obligation of US Airways and Group to a GE Entity, or to another party where nonperformance of such obligation could impose an obligation on a GE Entity, which may be created under this Master MOU and the Term Sheets (such obligations of US Airways and Group, the “US Airways Restructuring Obligations”) will be (i) cross-defaulted to each and every US Airways Restructuring Obligation unless such cross-default has specifically been waived by the affected GE Entity or in the Term Sheets and (ii) cross-defaulted with the cash collateral order in respect of the existing loan guaranteed by the Air Transportation Stabilization Board (the “ATSB”) in accordance with the Air Carrier Guarantee Loan Program (the “ATSB Loan”).
Each of the parties hereto acknowledges that this Master MOU and the related Term Sheets contain commercially sensitive and proprietary information. Each of the parties agrees to keep this information strictly confidential and agrees to disclose it to no person other than: (A) their respective board(s) of directors; (B) employees working on the subject matter of this Master MOU; (C) professional advisors advising them concerning the subject matter of this Master MOU provided that US Airways and such outside professional advisors execute a confidentiality agreement in form and substance acceptable to GECC and GE Engine Services; (D) the ATSB, provided that US Airways shall use commercially reasonable efforts to prevent disclosure of such information under the Freedom of Information Act; (E) the Bankruptcy Court during the course of the Chapter 11 Case,provided,however, that no document shall be filed with the Bankruptcy Court unless either there has been obtained prior to the filing thereof an order of the Bankruptcy Court enabling US Airways to file those portions of the documents under seal or portions of such filed documents designated by GECC are redacted, in each case, as GECC shall request in its sole discretion; (F) the professional advisors of the Official Committee of Unsecured Creditors (the “Creditors’ Committee”), but only to the extent that designated portions of such material to be disclosed are redacted, in each case, as GECC shall request in its sole discretion, members of the Creditors’ Committee, and (G) any potential debtor-in-possession (“DIP”) lender and equity investors provided that such entities shall, in each case prior to disclosure, execute a confidentiality agreement in form and substance acceptable to GECC and GEAE. A written summary of the Restructuring
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Transaction, approved by GECC in advance of disclosing such summary, may be provided to (i) US Airways’ and Group’s labor unions, (ii) any lender, potential lender, or participant, (iii) any material stakeholder in US Airways’ and Group’s proposed restructuring, (iv) the Creditors’ Committee (but only if such summary has been redacted in a manner satisfactory to GECC as provided above) or (v) such other third parties as the parties hereto may mutually agree; provided that such parties described in (i) – (v) above have executed a confidentiality agreement in form and substance acceptable to GECC and GE Engine Services. The parties agree that the terms of this Paragraph will survive any termination, through expiration or otherwise, of the Term Sheets that are the subject hereof.
Subject to the conditions set forth inSchedule A,Schedule B andSchedule C hereto with respect to the Phase I Transactions, the Phase II Transactions and the Exit Restructuring Transactions, this Master MOU and the Term Sheets are intended to create binding legal obligations among the parties. Reference is made to the milestones and events described inSchedule D hereto (as the same may be amended, each a “Global Event of Default”).
This Master MOU may not be modified or amended in any manner other than in writing duly executed by or on behalf of all of the parties hereto.
Once this Master MOU has been countersigned, the parties will proceed to finalize appropriate definitive agreements and to commence the other steps that will be necessary or appropriate to complete the transactions contemplated by the Term Sheets.
This Master MOU may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute and be one and the same instrument.
[Signature pages follow.]
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IN WITNESS WHEREOF, this Master MOU was entered into the day and year first above written.
For and on behalf of | ||
US AIRWAYS GROUP, INC. | ||
| Name: | /s/ Eilif Serck-Hanssen | |
Title: | Senior Vice-President Finance & Treasurer | |
| US AIRWAYS, INC. | ||
| Name: | /s/ Eilif Serck-Hanssen | |
Title: | Senior Vice President Finance & Treasurer | |
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| GENERAL ELECTRIC CAPITAL CORPORATION | ||
| Name: | /s/ Michael Kreidberg | |
Title: | Vice President | |
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GENERAL ELECTRIC COMPANY, GE TRANSPORTATION COMPONENT | ||
Name: | /s/ John Falconi | |
Title: | Vice President | |
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Schedule A
Phase I Transaction Conditions
| 1. | Consummation of each Phase I Transaction. |
| 2. | Satisfactory negotiation, review and agreement of definitive documentation, including legal review, for the Phase I Transactions in form and substance acceptable to US Airways and Group on the one hand and to GECAS, GECC, GE Engine Services, or GEAE, as applicable on the other hand. |
| 3. | Bring-down due diligence (including, but not limited to, credit analysis, business review, legal review and review of capital, operating structure (including mainline and regional operations)) respecting US Airways and Group satisfactory to GECAS, GECC, GE Engine Services, or GEAE, as applicable, in their sole discretion. |
| 4. | Approval by the Bankruptcy Court of all transactions on or before December 17, 2004, which order (a) shall be in form and substance acceptable to GECC in its sole discretion and (b) shall not be subject to an appeal, motion for rehearing or reconsideration or petition for writ of certiorari and the time to file such appeal, motion or petition shall have expired. |
| 5. | Payment or reimbursement of all reasonable costs and expenses, including without limitation, reasonable legal fees (including legal fees accruing prior to the Petition Date) of the GE Entities to date. |
| 6. | No occurrence of a Global Event of Default. |
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Schedule B
Phase II Transaction Conditions
| 1. | Consummation of the Phase I Transactions and each Phase II Transaction. |
| 2. | Satisfactory negotiation, review and agreement of definitive documentation, including legal review, for the Phase II Transactions in form and substance acceptable to US Airways and Group on the one hand and to GECAS, GECC, GE Engine Services, or GEAE, as applicable on the other hand. |
| 3. | Bring-down due diligence (including, but not limited to, credit analysis, business review, legal review and review of capital, operating structure (including mainline and regional operations) and governance structure) respecting US Airways and Group satisfactory to GECAS, GECC, GE Engine Services, or GEAE, as applicable, in their sole discretion. |
| 4. | Payment or reimbursement of all reasonable costs and expenses, including without limitation, reasonable legal fees (including legal fees accruing prior to the Petition Date) of the GE Entities to date. |
| 5. | No occurrence of a Global Event of Default. |
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Schedule C
Exit Restructuring Transaction Conditions
| 1. | Consummation of the Phase I and Phase II Transactions and each other Exit Transaction. |
| 2. | Satisfactory negotiation, review and agreement of definitive documentation, including legal review, for the Exit Transactions in form and substance acceptable to US Airways and Group on the one hand and to GECAS, GECC, GE Engine Services, or GEAE, as applicable on the other hand. |
| 3. | Bring-down due diligence (including, but not limited to, plan of reorganization, credit analysis, business review, legal review and review of capital structure, business plan, regional carrier arrangements, ownership structure, equity ownership, listing and public securities arrangements, exit financing arrangements) respecting US Airways and Group satisfactory to GECAS, GECC, GE Engine Services, or GEAE, as applicable, in their sole discretion. |
| 4. | Assumption of all leases and executory contracts as modified in accordance with the Restructuring Transaction with GE Entities on or prior to emergence from the Chapter 11 Case. |
| 5. | The applicable provisions of the Plan of Reorganization and the order confirming the Plan of Reorganization shall be consistent with the terms of the Restructuring Transactions described in this Master MOU. |
| 6. | Payment or reimbursement of all reasonable costs and expenses, including without limitation, reasonable legal fees (including legal fees accruing prior to the Petition Date) of the GE Entities to date. |
| 7. | No occurrence of a Global Event of Default. |
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Schedule D
Global Events of Defaults
| 1. | Continued compliance with the following milestones during the Chapter 11 Case: |
Date | Milestone | |
November 26, 2004 | Filing of motion to approve the global GE transaction | |
December 17, 2004 | Final judicial approval of the global GE transaction | |
December 20, 2004 | Closing of the Bridge Facility | |
January 14, 2005 | Final judicial order granting permanent labor contract, retiree health and pension relief in amounts at least equal to the amount of relief requested in the US Airways’ request for relief | |
January 14, 2005 | Implementation of definitive agreements with a third party or third parties to provide the US Airways with at least $100 million of incremental liquidity, cost reductions or concessions during the Chapter 11 Case | |
January 14, 2005 | Implementation of a program reasonably forecasted to produce a mutually acceptable level of annual savings in non-labor costs from the US Airways’ business plan | |
January 18, 2005 | Final judicial order approving extension of ATSB cash collateral order through June 30, 2005 under current terms revised only for restated and reasonable financial covenants | |
January 18, 2005 | Filing of a substantive plan of reorganization reasonably acceptable to GE | |
January 18, 2005 | Closing of the Phase II Transactions | |
February 18, 2005 | Filing of a substantive disclosure statement reasonably acceptable to GE | |
March 30, 2005 | Commencement of the disclosure statement hearing | |
May 16, 2005 | Commencement of the confirmation hearing | |
May 23, 2005 | Final judicial approval of a plan of reorganization reasonably acceptable to GE | |
June 30, 2005 | Plan of Reorganization implementation and emergence from the Chapter 11 Case | |
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| 2. | Continued compliance with the following financial covenants (expressed in millions of US dollars): |
Month End | Nov | Dec | Jan | Feb | Mar | Apr | May | Jun | ||||||||||||||||
Cumulative EBITDAR* | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | ||||||||
Unrestricted Liquidity** | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | [Redacted | ] | ||||||||
| 3. | No event of default or material breach beyond any applicable notice and cure period under any agreement between US Airways, Group and any GE Entity (including without limitation, any default arising on account of any cross-default or upon the rejection of any lease) other than those expressly waived in the Term Sheets and Excepted Obligations as currently defined in the 2001 Facility (the “Excepted Obligations”). |
| 4. | No continuing default or material breach or the occurrence of any termination event beyond any applicable notice and cure period under the Cash Collateral Order relating to the ATSB Loan and no material breach or event of default beyond any applicable notice and cure period under any Debtor-in-Possession Facility (in each case, irrespective of whether the ATSB has agreed to waive or forebear exercising rights with respect to such default, breach or termination event). |
| * | To be reset, as mutually agreed on or before December 15, 2004 at no more than a[REDACTED]% deviation from plan levels. |
| ** | To be reset, if necessary, at[REDACTED]% of plan levels on or before December 15, 2004. |
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EXHIBIT A
Aircraft Lease Term Sheet
| Lessee: | US Airways, Inc. (“US Airways” or “Lessee”). | |
| Owner Participant: | GECC and/or its subsidiary, affiliate, associated company or assignees. | |
| Lessor: | Any entity in which Owner Participant is the beneficial owner or a subsidiary or affiliate of GECC, as in the relevant lease. | |
Except as indicated below, US Airways shall perform all of its obligations under any existing aircraft lease contract with any Lessor both during the Chapter 11 Case and upon emergence from Chapter 11 pursuant to consensual 1110(a) agreements effective during the pendency of Debtors’ Chapter 11 Cases, or amendments to pre-petition agreements, it being agreed that, except as set forth in the Master MOU or the Term Sheets, the same shall not constitute an assumption of any such agreement or a post-petition contract for purposes of, among other things, Sections 365, 503 and 507 of the Bankruptcy Code, but shall be subject to Lessee’s obligations under Section 1110 of the Bankruptcy Code.
PART 1 – PHASE I TRANSACTIONS
| A. | Existing Operating Leases for the Airbus Aircraft |
[REDACTED] EETC Leases: | The A321 leases between US Airways and the Lessor subject to the[REDACTED] EETC (the “[REDACTED] A321 Leases”) with respect to the aircraft identified on Schedule A hereto will remain unchanged. US Airways acknowledges that Owner Participant has cured the Basic Rent payment payable on September 20, 2004 in the amount of $[REDACTED] (the “Cure Amount”), and GE shall waive cross-default provisions in its other financing agreements with US Airways in respect of the failure of Lessee to make such Basic Rent payment. US Airways shall make: (i) full cure payments on or before December 20, 2004 of all amounts payable under the[REDACTED] A321 Leases other than the Cure Amount and (ii) full contract rental payments (including supplemental rent and other amounts due) and performance under the[REDACTED] A321 Leases during the Chapter 11 Case. | |
| Return of Airbus Aircraft: | The nine (9) A319 aircraft and one (1) A320 aircraft on operating leases will be amended to provide expiry dates according to the return schedule listed as Schedule B to this Exhibit A. Lessee and Lessor will swap the last three aircraft on the list (tail numbers [REDACTED],[REDACTED] and[REDACTED]) with three (3) A319 aircraft currently securing the 2001 Facility bearing tail | |
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| numbers[REDACTED],[REDACTED] and[REDACTED] upon consummation of the Phase II Transactions. | ||
| Amended Redelivery conditions are to be agreed upon no later than December 17, 2004. | ||
| B. | Existing Leases For The Boeing Fleet |
| Rent Payments: | On December 20, 2004, US Airways will pay all amounts then due and payable for the B737-300 Aircraft identified on Schedule C (such transactions, the “Boeing 733 SIL Transactions”) and for the Boeing 757 Aircraft identified on Schedule D (the “Boeing 757 SIL Transactions”, and together with the Boeing 733 SIL Transactions, the “Boeing SIL Transactions”), which payment obligations are deferred to such date, and thereafter through the remainder of the Chapter 11 Case, US Airways shall pay and perform in full, all obligations with respect to the Boeing SIL Transactions and the Boeing 737-400 single investor leases described below. | |
Leveraged Lease B737-400 Aircraft: | Upon Bankruptcy Court approval of the Restructuring Transaction (assumed to be no later than December 17, 2004), GECC will, with respect to the five (5) B737-400 aircraft with manufacturer’s serial number[REDACTED],[REDACTED],[REDACTED],[REDACTED] and[REDACTED], waive cross-default provisions in its other financing agreements with US Airways, and Lessor will relinquish its interest in such aircraft with no resulting claims asserted by the Owner Participant against the bankruptcy estate. | |
| Boeing 737 SIL Aircraft: | In lieu of any extension or purchase options in the Boeing 733 SIL Transactions, Lessee shall have the right to extend the expiry dates on the single investor lease documentation relating to the Boeing 733 SIL Transactions to the dates specified on Schedule C hereto at the rental rate of $[REDACTED] per month. Redelivery conditions to be negotiated prior to December 17, 2004. GE will consider engine swapping arrangements. | |
PART 2 – EXIT TRANSACTIONS
[REDACTED] EETC Cure Payment: | The Cure Amount will be repaid immediately as “Supplemental Rent” under the[REDACTED] A321 Leases, together with interest payable at the default rate (as such default rate is specified in the A321 Leases). |
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Modification of Rental Amounts: | Upon US Airways’ emergence from the Chapter 11 Case, a pre-emergence “true-up” payment for rent accrued and unpaid from the last payment date on the Boeing SIL Transactions to the date immediately prior to the emergence date shall be made at a monthly lease rental rate of $[REDACTED] per month per aircraft, pro rated for partial months. From and after the date of US Airways’ emergence from the Chapter 11 Case, the monthly lease rental rates for the Boeing SIL Transactions shall be paid in advance, pro rated for partial months, and in the amount of $[REDACTED] per month per aircraft. Upon the next payment date after emergence, in respect of the B737-400 single investor lease aircraft, rents shall be paid in advance, pro rated for partial months in the amount of $[REDACTED] per month per aircraft. All amounts noted above reflect the average monthly lease rate across the relevant fleet with variations for individual aircraft within each fleet. | |
B737-400 SIL Restructure Option: | GECC will provide US Airways with the option to restructure any number of the B737-400 single investor leases to monthly rentals (payable in advance) of $[REDACTED] at sixty (60), ninety (90) or one hundred-eighty (180) days following the issuance of Convertible Notes, for cash or Convertible Notes of equal market value under the indicative pricing schedule contained on Schedule E to the Exhibit A. | |
All capitalized terms used herein, but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Master MOU.
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SCHEDULE A TO EXHIBIT A
(Description of the [REDACTED] A321 Leases)
[SCHEDULE REDACTED]
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SCHEDULE B TO EXHIBIT A
(Description of the Airbus Aircraft)
Return Date* |
February 2005 |
March 2005 |
April 2005 |
May 2005 |
June 2005 |
July 2005 |
August 2005 |
September 2005 |
September 2005 |
September 2005 |
| * | Aircraft to be returned pursuant to this schedule are all A319/A320 aircraft with the following tail numbers:[REDACTED],[REDACTED],[REDACTED],[REDACTED],[REDACTED],[REDACTED],[REDACTED],[REDACTED],[REDACTED] and[REDACTED], subject to the swap described in the “Return of Airbus Aircraft” section in Part I of this Exhibit A. US Airways will indicate which specific aircraft apply to the schedule dates above by December 3, 2004. |
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SCHEDULE C TO EXHIBIT A
(Description of the 733 SIL Transactions)
Aircraft Type | Extension Option Date* | |
B737-300 | February 2006 | |
B737-300 | March 2006 | |
B737-300 | April 2006 | |
B737-300 | April 2006 | |
B737-300 | May 2006 | |
B737-300 | May 2006 | |
B737-300 | June 2006 | |
B737-300 | July 2006 | |
B737-300 | November 2006 | |
B737-300 | January 2007 | |
B737-300 | March 2007 | |
B737-300 | April 2007 | |
B737-300 | May 2007 | |
B737-300 | July 2007 | |
B737-300 | August 2007 |
| * | Specific aircraft return schedule to be agreed. |
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SCHEDULE D TO EXHIBIT A
(Description of the 757 SIL Transactions)
[SCHEDULE REDACTED]
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SCHEDULE E TO EXHIBIT A
Illustrative Buy Out Date | ||||||
MSN | 30-Aug-05 | 30-Sep-05 | 31-Dec-05 | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
[REDACTED] | [REDACTED] | [REDACTED] | [REDACTED] | |||
Total | $91.0 | $90.1 | $86.8 | |||
This indicative pricing schedule assumes average monthly rentals of $[REDACTED] through the buy out date. The pricing schedule will be revised and mutually agreed to prior to emergence from the Chapter 11 Case to reflect the final actual buy out dates.
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EXHIBIT B
Regional Jet Lease Transactions Term Sheet
PHASE II & EXIT TRANSACTION
| Lessee: | US Airways, Inc. (“US Airways”) | |
| Lessor: | GECC, acting through its agent GECAS and/or its subsidiary, affiliate, associated company or assignees (“Lessor”). | |
| Regional Jet Aircraft: | Up to thirty-one (31) regional jet aircraft to be acquired by US Airways or via the GECAS order stream. The aircraft to be leased will consist of 70- to 100-seat regional jet aircraft manufactured by Bombardier and/or Embraer in a mix and other terms to be agreed mutually by GECC and US Airways. | |
| Lease Transaction Terms: | In addition to those described in the RJ Leasing Agreement (described below), the Lease Transactions will have the following terms and conditions: | |
| (i)[REDACTED]; | ||
| (ii)[REDACTED]; | ||
| (iii) Lessor’s cost to be determined and subject to GE’s satisfaction; | ||
| (iv) updated credit rating and MAC benchmark and financial covenants to be agreed; | ||
| (v) the Lease Transactions shall not be leveraged leases; and | ||
| (vi) GECC reaching agreement with each aircraft manufacturer, including order stream relief for aircraft leased from US Airways’ order book. | ||
| Interim Leases (Phase II): | Of the aircraft noted above, GECC will lease to US Airways six (6) CRJ-700s beginning between January 18, 2005 and February 28, 2005 and ending the earlier of (i) the date of emergence from the Chapter 11 Case or (ii) June 30, 2005 and cross-defaults shall include the occurrence of a Global Event of Default. Each lease will be a post-petition agreement, but only rent payable through June 30, 2005 (as the parties may agree to extend) and return condition obligations shall be afforded administrative expense status, and all other claims under such lease, including rejection damage claims, would be unsecured pre-petition claims. The leases will be extended upon emergence from the | |
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| Chapter 11 Case based on the terms noted above. | ||
| Timing of SIL Transactions: | GECC will provide US Airways with the remaining regional jet aircraft between 2005 and 2007 roughly on a one for one basis with the removal of GECC’s Airbus and Boeing aircraft from US Airways’ mainline fleet. | |
| PDP Financing: | GECC will have no obligation to provide pre-delivery financing. | |
| Documentation: | On or before January 18, 2005, US Airways and GECC shall execute an agreement reinstating that portion of the RJ Lease Transaction and Debt Financing Agreement dated as of December 18, 2003 (as amended “RJ Leasing Agreement”) pursuant to which GECC will provide the Lease Transactions on terms consistent with the single-investor lease transactions described therein with changes to reflect the terms of this Exhibit B and other modifications as required by GECC and acceptable to US Airways; the obligations under the reinstated RJ Leasing Agreement shall not be afforded administrative expense status. | |
All capitalized terms used herein, but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Master MOU.
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EXHIBIT C
Sale-Leaseback Term Sheet
PHASE II TRANSACTIONS
| Seller/Lessee: | US Airways, Inc. (“US Airways”) | |
| Purchaser/Lessor: | A subsidiary, affiliate, associated company or assignee of GECC (“Purchaser”). | |
| Purchase: | Purchaser will purchase (i) the collateral securing the 2001 Facility: three (3) A319 aircraft, three (3) A320 aircraft, five (5) A321 aircraft, fourteen (14) CFM56- 5B spare engines and fourteen (14) CFM56-3B spare engines and (ii) nine (9) CRJ-200 aircraft and one (1) CRJ-700 aircraft, that are currently mortgage debt financed by GECC, for $640.42 million, pricing assumes the inclusion of engine stands (to the extent included in the 2001 Facility collateral) and eight (8) full QEC kits for the CFM56-5B6 with a purchase price adjustment to be mutually agreed to half-life/half-time conditions of the spare engines at the closing (the “Purchase Price”). | |
| Use of Proceeds: | Seller shall use the sale proceeds to repay in its entirety: | |
(i) first, the 2003 Liquidity Facility;
(ii) second, the GE mortgage debt financing for the CRJs (the “RJ Loans”); and
(iii) third, the 2001 Facility (assuming no purchase price adjustments, leaving a stipulated and agreed loan balance of $14.99 million). | ||
| Closing Date: | Assumed to be January 18, 2005. | |
| Lease Terms: | Initial lease terms shall end on the earlier of (i) emergence from the Chapter 11 Case or (ii) June 30, 2005. | |
| Upon emergence from the Chapter 11 Case, leases will be extended as follows: | ||
| (i) A319 and A320: an average[REDACTED] year term from inception; | ||
| (ii) A321: an average[REDACTED] year term from inception; | ||
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| (iii) CFM56-5B6: an average[REDACTED] year term from inception, with the exception of two (2) spare engines (bare), one of which shall be returned in June 2005 and the other in September 2005; | ||
| (iv) CFM56-3B2: an average[REDACTED] year term from inception, with the exception of three (3) engines which are to be returned as every[REDACTED] Boeing 733 SIL Transaction aircraft is returned; | ||
| (v) CRJ-200 and CRJ-700: per the terms noted in Exhibit B hereto and assuming a purchase of $[REDACTED] million for each CRJ-200 and $[REDACTED] million for each CRJ-700, as adjusted for delivery condition. | ||
| Lease Rentals: | A319: $[REDACTED] A320: $[REDACTED] A321: $[REDACTED] CFM56-5B6 (bare): $[REDACTED] CFM56-5B6 (full QEC): $[REDACTED] CFM56-3B2 (bare): $[REDACTED] CRJ-200/CRJ-700: per the terms noted in Exhibit B hereto. | |
| Rents will be payable monthly in advance. | ||
| Miscellaneous: | Seller shall pay all accrued and unpaid interest and other amounts due under the 2001 Facility and the RJ Loans on the Closing Date. Return conditions for the aircraft and the engines, to be agreed, but in general will allow for half life/half time return conditions for aircraft and same-in/same-out for engines with financial adjustments for differences in actual return conditions but subject to minimum redelivery conditions[REDACTED]. Leases will be cross-defaulted to any obligation to any GE Entity (other than Excepted Obligations), including any Global Event of Default. Documentation for aircraft to be modeled after the existing leases relating to the aircraft listed in Schedule B to Exhibit A. Documentation for engine leases to be modeled after the existing leases relating to the aircraft listed in Schedule B to Exhibit A, with appropriate changes for a spare engine operating lease. Each lease will be a post-petition agreement, but only rent payable through June 30, 2005 (as the parties may agree to extend) and return condition obligations shall be afforded administrative expense status, and all other | |
12
| claims under such lease, including rejection damage claims, would be unsecured pre-petition claims. |
All capitalized terms used herein, but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Master MOU.
13
EXHIBIT D
Existing Facilities Term Sheet
PART 1 –PHASE II TRANSACTIONS
| Borrower: | US Airways, Inc. (“Borrower”) | |
| Lender: | General Electric Capital Corporation (“Lender”). | |
| Amendments: | Upon consummation of the sale-leaseback transaction set forth in Exhibit C, the 2001 Facility shall be amended as follows: | |
| (i) US Airways may make an additional $10 million draw on January 18, 2005 leaving a loan balance of $24.99 million (assuming $14.99 million balance after the sale/leaseback as may be adjusted to reflect the actual Purchase Price); | ||
| (ii) Interest rate will be the sum of (i) three-month US Dollar LIBOR as quoted on Bloomberg Page BBAM 1 (British Bankers Association page) and (ii) 4.25%; | ||
| (iii) interest only during the Chapter 11 Case, payable quarterly in arrears; | ||
| (iv) principal to be repaid ratably over the twenty-four (24) months following the emergence from the Chapter 11 Case; | ||
| (v) Collateral securing the loan will be a third (3rd) lien position subject to first (1st) and second (2nd) lien positions on four (4) CRJ-700 aircraft and a first (1st) lien position on one (1) CF34 spare engine (collectively, the “Collateral”); and | ||
| (vi) additional events of defaults as may be appropriate during the Chapter 11 Case, including a Global Event of Default. | ||
| Special Conditions: | On December 20, 2004, all accrued and unpaid interest relating to the 2001 Facility shall be paid (such payment to be a Phase I Transaction). The principal payment that had been due on November 16, 2004 shall be deferred and paid on the earlier of the consummation of the sale and leaseback transaction or January 18, 2005. | |
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| Satisfaction in GECC’s sole discretion of not more than an aggregate of $62 million of liens prior to GE on the Collateral. | ||
| Subject to consent of the lienholders senior to GE on the Collateral described above and entering into inter-creditor arrangements with such parties acceptable to GE. | ||
PART 2 – EXIT TRANSACTIONS
| Plan of Reorganization: | The Plan of Reorganization shall provide that the 2001 Facility, as amended in accordance herewith, shall be unimpaired. |
All capitalized terms used herein, but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Master MOU.
15
EXHIBIT E
Bridge Facility Term Sheet
PART 1 –PHASE I TRANSACTIONS
| Borrower: | US Airways, Inc. (“Borrower”) | |
| Lender: | General Electric Capital Corporation (“Lender”). | |
Bridge Facility Closing Date: | December 20, 2004. | |
| Facility Loans: | The Lender will make liquidity loans available to Borrower (the “Bridge Facility Loans”) as described on Schedule A hereto. The facility will be cross-collateralized and cross-defaulted with all other GE Entity obligations and will be stipulated and approved as an administrative claim with priority over all other administrative claims other than for aircraft financing deferrals, which shall be pari passu, and only subordinate to “superpriority” administrative claims of the ATSB Loan (including the carve-outs contained therein), post-petition wages and benefits, and new money DIP financing. | |
| Drawing Notices | Each disbursement will be made on the drawdown date specified therefore in Schedule A and Borrower will be deemed to have executed and delivered the Borrowing Notice, unless Borrower notifies Lender to the contrary in writing prior to the LIBOR Setting Date (defined below). | |
| Accreting Grid Note: | Each disbursement of a Bridge Facility Loan made with respect to the Bridge Facility will be evidenced on an accreting grid note (the “Bridge Facility Note”) as described below. | |
| Interest: | The Bridge Facility Note shall bear floating rate interest quarterly in arrears based on the average outstanding daily balance of the Bridge Facility during the preceding quarter. The annual interest rate shall be computed as the sum of (i) three-month US Dollar LIBOR, as quoted on Bloomberg Page BBAM 1 (British Bankers Association page) on the applicable LIBOR Setting Date” and (ii) 4.25%, and such interest rate shall accrue on an actual/360 basis. Interest may be paid in US dollars or in kind at the option of Borrower during the Chapter 11 Case. The “LIBOR Setting Date” shall be the date which is two (2) Business Days in advance of the applicable three-month LIBOR period. | |
| Loan Repayment: | Principal amounts and interest paid in kind due under the Bridge | |
16
| Notes will be payable in full on the Maturity Date. | ||
| Maturity Date: | Upon emergence from the Chapter 11 Case, which Bridge Facility shall be satisfied by the issuance of the Convertible Note described in Exhibit G. | |
| Prepayment: | The Borrower will have the following prepayment rights and obligations: | |
| Optional: The Borrower may prepay the Bridge Facility at par plus accrued interest on any date prior to the applicable Maturity Date. | ||
| Mandatory: Upon the acceleration of the Bridge Facility following an Event of Default (as defined below), Borrower will prepay all amounts outstanding under the Bridge Facility. | ||
| Event of Default: | An event of default will occur if, among other customary events, any of the following occurs, and is continuing (“Event of Default”): | |
(a) Failure to make any payment of principal when due under any Bridge Facility Note or failure to make any payment of interest, fees or other amounts and such failure shall continue unremedied for a period of five (5) business days or more; | ||
(b) Breach of any covenant in any material respect under the Bridge Facility, and such breach remains unremedied after a cure period which shall be determined; | ||
(c) Breach or Event of Default of any cash collateral order in respect of the ATSB Loan or any default under the ATSB Loan (irrespective of whether the ATSB has waived or acted upon such breach or default); | ||
(d) Events of Default that occur and continue with respect to the US Airways Restructuring Obligations or material Events of Default that occur and continue with respect to any other agreement between US Airways or Group and any GE Entity; | ||
(e) The occurrence of an Event of Default under the 2001 Facility, the 2003 Liquidity Facility (if not repaid) or a Global Event of Default; | ||
(f) Other appropriate and customary events of default; | ||
(g) Entry of an order authorizing the conversion of the Chapter 11 Case into a Chapter 7 liquidation or the implementation of a | ||
17
liquidation in the Chapter 11 Case; | ||
(h) Entry of an order authorizing the appointment of a Trustee or an examiner with expanded powers in connection with the Chapter 11 Case; | ||
(i) Entry of an order authorizing the sale of all or substantially all of Borrower’s assets unless consummated as part of a plan of reorganization and contemplated by the Restructuring Documentation; | ||
(j) Suspension of all or substantially all of Borrower’s flight and other operations or entry of an order authorizing the same; or | ||
(k) Filing of a motion by the debtor in the Chapter 11 Case to effectuate (g), (h), (i) or (j). | ||
| The Bridge Facility may be accelerated in full within five (5) business days of an Event of Default and Borrower will be required to pay Lender all principal and interest payments then due and owing plus other enforcement costs, if any. | ||
Representations, Warranties and Covenants: | The documentation with respect to the Bridge Facility will contain representations, warranties and covenants (which will be applicable to US Airways, Group and any of their respective subsidiaries) customarily found in the loan agreements of GECAS or GECC, as applicable, for similar financings. | |
| Conditions Precedent to Closing: | The conditions to the closing of the Bridge Facility transaction will include those on Schedules A and B to the Master MOU. | |
| Conditions Precedent to Drawdown: | Draw-downs under the Bridge Facility shall be, in each case, subject to certain customary conditions and no occurrence of an Event of Default (other than any Excepted Obligations), including a Global Event of Default. | |
All capitalized terms used herein, but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Master MOU.
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SCHEDULE A TO EXHIBIT E
Week | [REDACTED] | Bridge Facility Funding Amount(2) | [REDACTED] | ||||||
Dec 17 - Dec 19 | $ | 19,918,881 | |||||||
Dec 20 - Dec 26 | |||||||||
Dec 27 - Jan 2 | |||||||||
Jan 3 - Jan 9 | 4,365,758 | ||||||||
Jan 10 - Jan 16 | 2,143,523 | ||||||||
Jan 17 - Jan 23 | 1,427,161 | ||||||||
Jan 24 - Jan 30 | 1,428,901 | ||||||||
Jan 31 - Feb 6 | 5,887,479 | ||||||||
Feb 7 - Feb 13 | 415,960 | ||||||||
Feb 14 - Feb 20 | |||||||||
Feb 21 - Feb 27 | |||||||||
Feb 28 - Mar 6 | |||||||||
Mar 7 - Mar 13 | |||||||||
Mar 14 - Mar 20 | [REDACTED | ] | [REDACTED | ] | |||||
Mar 21 - Mar 27 | |||||||||
Mar 28 - Apr 3 | |||||||||
Apr 4 - Apr 10 | |||||||||
Apr 11 - Apr 17 | |||||||||
Apr 18 - Apr 24 | |||||||||
Apr 25 - May 1 | |||||||||
May 2 - May 8 | |||||||||
May 9 - May 15 | |||||||||
May 16 - May 22 | |||||||||
May 23 - May 29 | |||||||||
May 30 - Jun 5 | 6,194,343 | ||||||||
Jun 6 – Jun 12 | 7,364,516 | ||||||||
Jun 13 - Jun 19 | |||||||||
Jun 20 - Jun 26 | |||||||||
Jun 27 - Jun 30 | |||||||||
Total | $ | 55,506,545 | |||||||
| 1 | [REDACTED]. |
| 2 | [REDACTED]. |
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EXHIBIT F
[REDACTED] EETC Term Sheet
PART 1 – PHASE I TRANSACTIONS
Reference is made to that certain Registration Agreement dated as of[REDACTED], by and between US Airways and[REDACTED], and agreed to by[REDACTED], solely in its capacity as trustee of the US Airways Pass Through Trust[REDACTED] (the “Registration Agreement”), which requires US Airways to prepare and file a Registration Statement (as defined in the Registration Agreement) in order to effect an offer to exchange GECC’s holdings of US Airways[REDACTED] Pass Through Certificates, Series[REDACTED] (the “Certificates”) for substantially similar certificates. During the Chapter 11 Case, step-up interest rate is to be waived on the Certificates (in accordance with the terms of the Registration Agreement) (such interest rate, the “Step-up Interest Rate”) until six (6) months after US Airways’ emergence from the Chapter 11 Case. US Airways’ obligations under the Registration Agreement, as modified, shall be assumed pursuant to Section 365 of the Bankruptcy Code or reinstated pursuant to the Plan of Reorganization no later than the date of the consummation of the Plan of Reorganization.
PART 2 – EXIT TRANSACTIONS
Upon US Airways’ emergence from the Chapter 11 Case, GECC will agree to extend, until six (6) months after the date of such emergence from the Chapter 11 Case (the “Extension Period”), the deadline with respect to the exercise of the right to require registration, pursuant to the terms and conditions of the Registration Agreement.
All capitalized terms used herein, but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Master MOU.
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EXHIBIT G
Convertible Note Term Sheet
EXIT TRANSACTION
| Issuer: | US Airways, Inc., as reorganized pursuant to the Bankruptcy Code. | |
| Guarantor | Parent holding company of the Issuer. | |
| Issue: | [___]%* Senior Convertible Notes Due 2020 (the “Notes”) issued on the Issuer’s emergence from the Chapter 11 Case. | |
| Initial Holder: | A GE affiliate. | |
| Principal Amount: | $125,000,000 in denominations of $1,000. | |
| Term: | Fifteen (15) years from issuance. | |
| Amortization: | None prior to maturity; full principal to be repaid at the maturity date except to the extent converted or prepaid. | |
| Interest Rate: | Semi-annually in arrears, in cash, at an annual rate of [___]%*. | |
| Security: | None. | |
| Ranking: | The Notes are senior unsecured obligations and rank equally in right of payment with all existing and future senior unsecured obligations of Issuer. The Notes are senior unsecured and thus are junior to Issuer’s secured obligations to the extent of the value of the collateral securing such secured obligation. | |
| Conversion Rights: | The Holder may convert any number of the Notes into the Issuer’s common stock (the “Common Stock”), at any time, at the Conversion Price. | |
| Conversion Price: | The product of (x) 140-150% (at Issuer’s option) and (y) the average closing price of the Common Stock for the sixty (60) | |
| * | The parties will work together to set a coupon rate for the Notes no later than thirty (30) days prior to the scheduled date of emergence from the Chapter 11 Case which would be reasonably expected to result in the Notes trading at par upon emergence from the Chapter 11 Case (the “Par Value Interest Rate”). Failing agreement on the Par Value Interest Rate, the parties will solicit rate recommendation from three national trading firms and will adopt the average of the three suggested rates. |
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| consecutive trading days following Issuer’s emergence from the Chapter 11 Case and listing on NASDAQ or a national stock exchange from the Chapter 11 Case. | ||
| Transferability: | The Notes will be issued under 11 U.S.C. §1145 upon the Issuer’s emergence from the Chapter 11 Case; the Notes and the underlying Common Stock will be freely transferable by the Holders without registration under the Securities Act of 1933. | |
| Common Stock: | When delivered, the underlying Common Stock will be fully paid and non-assessable and listed on a national stock exchange by one hundred-eighty (180) days following emergence from the Chapter 11 Case. Failure to achieve such listing within one hundred-eighty (180) days of the date of emergence from the Chapter 11 Case will result in customary liquidated damages (i.e., increase in interest rate). | |
| Call Rights: | No call for five (5) years; thereafter, callable, at the option of the Issuer, in (a) cash or (b) Common Stock if the Common Stock has traded at no less than 115% of the Conversion Price for twenty (20) of the thirty (30) trading days prior to the call date. | |
| Put Rights: | “Soft” put right for principal and accrued interest, payable in cash or Common Stock at the option of the Issuer, on the fifth (5th) and tenth (10th) anniversary of issuance. | |
| Mandatory Prepayments: | Mandatory repayment at upon a “fundamental corporate change” with a customary coupon make-whole for public market convertible debt securities of this type. | |
| Anti-Dilution Protections: | The Conversion Price will be subject to customary anti-dilution adjustments, including, without limitation, upon (i) stock or cash dividends, (ii) reclassifications, subdivisions or combinations of the Common Stock, (iii) the issuance of convertible securities, rights or warrants to all holders of Common Stock convertible into or exercisable for Common Stock at less than the then-current market price, (iv) purchases of Common Stock in a tender offer at more than the then-current market price, (v) distribution of the capital stock of an Issuer subsidiary to holders of the Common Stock and (vi) any other distributions of assets or securities by the Issuer to holders of the Common Stock. | |
| Business Combinations: | The Notes will enjoy customary adjustments and protections if the Common Stock is converted into, reclassified into or | |
22
| exchanged for cash, assets or securities. | ||
| Other Terms and Conditions: | The Notes are intended to be public market securities and to trade at par value when issued. Documentation of the Notes will include the terms and conditions customarily found in public market convertible securities of this type. | |
23
EXHIBIT H
GEAE Restructuring Term Sheet
November 25, 2004
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
US Airways, Inc.
2345 Crystal Drive
Arlington, VA 22227
| Re: (i) | CFM56-3 Engine Maintenance Agreement (ESI-96-222G) between US Airways, Inc. (“US Airways”) and GE Engine Services, Inc. (“GEES”) (as amended, the “CFM56-3 Agreement”); |
| (ii) | CFM56-5 Engine Maintenance Agreement (ESI-97-0084W) between US Airways and GEES (as amended, the “CFM56-5 Agreement”); |
| (iii) | CF6-80C2 Engine Maintenance Agreement ( ESI-96-610I) between US Airways and GEES (as amended, the “CF6-80C2 Agreement”); |
| (iv) | CF34-8E5 Maintenance Cost Per Hour (“MCPH”) Engine Service Agreement (ESI-01-0700M-8E5) between US Airways Group, Inc. (“Group”) and GEES (the “CF34-8E5 Agreement”); |
| (v) | CF34-3B1 Time & Material Services Agreement (Proposal No. 1-103898006 Rev 5) between Group and GEES (the “CF34-3B1 Agreement”) (as amended, individually, an “Agreement” and collectively, the “Agreements”) |
Gentlemen/Ladies:
This term sheet is being entered into with reference to the Master MOU, dated November 24, 2004, among US Airways Group, Inc., US Airways, Inc. and General Electric Capital Corporation (the “Master MOU”), and will be attached thereto as Exhibit “H.”
The following sets forth the understandings which have been reached by US Airways, Group, GEES and General Electric Company (“GEC”) in relation to the Agreements and certain other matters. Except as otherwise indicated, capitalized terms not defined herein have the meanings given those terms in each Agreement or in the Master MOU.
US Airways, Group and their affiliates filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code on September 12, 2004 (the “Petition Date”).
24
US Airways and Group seek forgiveness of certain obligations arising under the Agreements, and wish to defer other obligations arising thereunder and to make certain amendments thereto. GEES and GEC are willing to grant such forgiveness, to accept such deferrals and to make such amendments, subject to the terms and conditions contained in this term sheet.
The parties agree as follows:
1. The provisions of this term sheet shall be subject to the conditions that (i) US Airways, Group and their affiliates shall be in compliance with all of their obligations under the Master MOU and the other term sheets attached thereto, and (ii) no default shall have occurred with respect to the US Airways Restructuring Obligations, or with respect to any other obligations between US Airways, Group and/or any affiliate and the GE Entities, except (a) any payments that relate solely to a good faith dispute regarding the performance of GEES or any of its affiliates under any engine maintenance agreement (including, without limitation, the Agreements) between US Airways or any of its affiliates and GEES or any of its affiliates, (b) any lease payments that relate solely to a good faith dispute regarding the return of an aircraft past the scheduled or mutually agreed termination of the lease of such aircraft provided that neither US Airways nor any of its affiliates is operating such aircraft, and (c) any obligations that have been forgiven or deferred pursuant to this term sheet so long as, with respect to any deferral, such payments are made at the time specified in this term sheet (a “Cross-Default”).
2. Notwithstanding any other provision of this term sheet, in the event that, in the currently pending case under the US Bankruptcy Code, (a) US Airways consummates a chapter 11 plan of reorganization, including a liquidating chapter 11 plan, and neither it nor its successor under the plan continues to operate as an airline, and US Airways’ flight operations are, therefore, discontinued, or (b) the case is dismissed or converted to a case under chapter 7 of the Bankruptcy Code or US Airways is otherwise liquidated and, as a result of such dismissal, conversion or liquidation, US Airways discontinues flight operations, then US Airways, Group or GEES may (subject to any applicable notice periods) terminate the Agreements; provided, however, that this sentence shall not apply if US Airways sells a material portion of its assets to any purchaser that is not, prior to entering into the transaction with US Airways, a certificated air carrier (or a member of the same consolidated group). In the event the previous sentence is applicable, the claims of GEES in respect of the Agreements in the pending bankruptcy case shall be limited as follows: (x) GEES shall have an allowed administrative expense priority claim under Bankruptcy Code Section 503(b)(1)(A) in the amount of $1 million, plus a sum equal to any unpaid invoices for services rendered after September 12, 2004, but prior to the date of termination; and (y) GEES shall have an unsecured (except as provided in the next sentence) prepetition claim for all other claims and damages related to the termination or breach of, or any other claims arising under the Agreements. Nothing in this paragraph shall limit the rights of GEES to enforcement of any and all mechanics or similar liens which secure any sums owed to GEES under the Agreements or which arise in connection with services performed thereunder.
3. The parties intend that the Master MOU and the term sheets attached thereto, including this term sheet, will be submitted for approval of the bankruptcy court on December 16, 2004. This term sheet shall become effective upon approval by the court. If the Master MOU and attached term sheets are not submitted and approved by the court on such date, then GEES and GEC may at their option elect not to consummate the transactions described in this term sheet.
25
The parties will undertake to agree upon definitive documents prior to the hearing date, so that documents can be submitted to the court and executed promptly, and in no event later than five days following approval (the “Assumption Date”). The parties agree that this term sheet and any final agreement resulting from this term sheet will be filed with the court under rules which will cause only a redacted counterpart to become publicly available.
4. [REDACTED]
5. [REDACTED]
6. [REDACTED]
7. It is a condition subsequent to the agreements of GEES and GEC under this term sheet that US Airways consummates a chapter 11 plan of reorganization under which it (or its successor under the plan) continues to operate as an airline by the Termination Date. Subject to paragraph 2 of this term sheet, failure of this condition will cause all sums, payment of which has been deferred pursuant to the Agreements, as amended by this term sheet, to become immediately due and payable, and GEES shall not be precluded from the enforcement of any and all mechanics or similar liens which may secure payment of such sums.
8. The full balance of all payments deferred under the Agreements, as amended pursuant to this term sheet (i.e., the Deferred Obligations and the Deferred Charges under the CFM56-5 Agreement), (i) shall be paid unconditionally, without set-off or demand at the time such payments are due and payable in accordance with the Agreements as modified by this term sheet, and (ii) shall accelerate and become immediately due and payable, and shall be paid without notice or demand, upon the occurrence of any Cross-Default. Payments deferred under each Agreement shall accelerate and become immediately due and payable upon termination of such Agreement for any reason other than GEES’ default.
9. Engine overhaul charges for MCPH engines which will remain in US Airways’ fleet will continue to be paid monthly under the terms of the Agreements. Conversely, GE will seek to recover engine overhaul charges for MCPH engines which will be rejected or abandoned by US Airways or affiliates, as debtor-in-possession, from the engine owners. Recovery from engine owners will not affect the obligation of US Airways, Group or their affiliates to pay charges due upon removal of the engines pursuant to the Agreements (but GE will credit any sums received from engine owners against the Deferred Obligations). Removal charges which become due postpetition will be an administrative expense under Section 503(b) of the Bankruptcy Code, and will be due and payable upon removal of such engine pursuant to the Agreements. If any engine in GE’s possession is scheduled to be rejected or abandoned by US Airways or an affiliate, but such rejection or abandonment has not become effective, GE will release the engine to US Airways or such affiliate upon payment of the applicable removal charges. So that GE can take appropriate action, US Airways or Group shall identify each MCPH engine prior to return following overhaul as one of the following:
| • | To be returned to fleet. |
| • | Rejected/abandoned. |
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| • | To be rejected/abandoned—removal charge will be paid upon return to US Airways or an affiliate. |
This paragraph 9 shall not apply with respect to GECAS-owned engines, removed from US Airways’ fleet pursuant to the Master MOU and the term sheets thereunder (the “GECAS Engines”). Reconciliation, including any return-to-service charges and any removal charges and credits with respect to the GECAS Engines, shall be waived.
10. With respect to the GE-Snecma Aircraft listed in Exhibit A, US Airways will cooperate with documentation of permanent leases substantially equivalent to the existing interim leases, and execution of permanent leases no later than December 17, 2004 (which may be held in escrow pending foreclosure). In the event that US Airways does not emerge from bankruptcy, the administrative claim related to such permanent leases shall be limited to three months rent under such leases and performance of return conditions. If required by existing agreements, US Airways will reimburse legal fees owing upon execution of permanent leases.
11. If GEES, GEC or their respective affiliates shall become entitled to file any claim in the chapter 11 case pending with respect to US Airways as the result of a Cross Default, or the failure of a condition precedent or subsequent to any such obligation, or otherwise arising out of this term sheet and the transactions contemplated hereby, such claim shall be deemed timely if filed within 30 days following the date of the breach, failure of condition, or other event giving rise to such claim, notwithstanding any deadline fixed by law or the prior entry of any order setting a bar date for such claim or any equitable argument that might preclude the filing of such a claim.
12. Without limiting any provisions of the Master MOU or other term sheets thereunder, US Airways and Group will be responsible for reimbursement of reasonable legal fees paid by GEC and GEES to their outside counsel in connection with the negotiation, documentation and implementation of this term sheet, including, but not limited to, drafting of definitive documents.
13. Subject to the consent of the ATSB loan parties, if required, (a) on behalf of themselves and their affiliates, US Airways and Group waive their rights under Bankruptcy Code Section 362 solely to the extent necessary in order that GEES may take such actions as necessary, including filing with the appropriate county register of deeds, to retain liens against aircraft engines arising in the ordinary course under Kansas Statute 58-201, following performance of overhaul services, and (b) US Airways agrees that the Agreements shall be amended as necessary to authorize such filings.
| Very truly yours, | ||
| GENERAL ELECTRIC COMPANY | ||
| By: | /s/ John Falconi | |
Title: | Vice President | |
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| GE ENGINE SERVICES, INC. | ||
| By: | /s/ John Falconi | |
Title: | Vice President | |
| Agreed to and Accepted: | ||
| US AIRWAYS, INC. | ||
| By: | /s/ Eilif Serck-Hanssen | |
Title: | Senior Vice President Finance & Treasurer | |
| Agreed to and Accepted: | ||
| US AIRWAYS GROUP, INC. | ||
| By: | /s/ Eilif Serck-Hanssen | |
Title: | Senior Vice President Finance & Treasurer | |
28
EXHIBIT A
GE-Snecma Aircraft
N563US
N352US
N353US
N354US
N355US
N356US
N575US
29
EXHIBIT B
Deferred Obligations
EES - USAirways Term Sheet Agreement, Exhibit B
Invoice# | Description | Prepetition Balance Due | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
Redacted | Redacted | Redacted | |||||
| TOTAL: | $ | 16,335,171.23 | |||||
30