EXHIBIT 10.9
CONFIDENTIAL
[REDACTED] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS AND THE WORD "REDACTED", HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES
AND EXCHANGE ACT OF 1934, AS AMENDED.
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 th
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 in Exhibit A; (ii) certain lease and other arrangements in respect of
future regional jet acquisitions by US Airways (the "Regional Jet Lease
Transactions") as described in Exhibit B; (iii) certain sale-leaseback
transactions as described in Exhibit 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 in Exhibit D; (v) a new bridge financing
facility as further described in Exhibit E (the "Bridge Facility"); and (vi)
waiver of registration penalties for the [REDACTED] EETC as described in Exhibit
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 in Exhibit 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 in Exhibit 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 as
Exhibits A through 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
2
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
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
3
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 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 in Schedule A, Schedule B and Schedule 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 in Schedule 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.]
4
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
-------------------------------
5
GENERAL ELECTRIC CAPITAL CORPORATION
Name: /s/ Michael Kreidberg
--------------------------
Title: Vice President
-------------------------
6
GENERAL ELECTRIC COMPANY, GE TRANSPORTATION COMPONENT
Name: /s/ John Falconi
--------------------------
Title: Vice President
-------------------------
7
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.
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.
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.
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
* Phase II Condition Precedent
2. Continued compliance with the following financial covenants (expressed in
millions of US dollars):
Month End Dec Jan Feb Mar Apr May Jun
- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
Cumulative
EBITDAR* [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]
Unrestricted
Liquidity** [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 more than
a [REDACTED]% deviation from plan levels.
** To be reset, if necessary, at [REDACTED]% of plan levels on or before
December 15, 2004.
REDACTED COPY
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
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 Upon Bankruptcy Court approval of the
AIRCRAFT: 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
7
in the A321 Leases).
MODIFICATION OF RENTAL Upon US Airways' emergence from the Chapter 11
AMOUNTS: 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 GECC will provide US Airways with the option to
OPTION: 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.
8
SCHEDULE A TO EXHIBIT A
(DESCRIPTION OF THE [REDACTED] A321 LEASES)
[SCHEDULE REDACTED]
9
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.
10
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.
11
SCHEDULE D TO EXHIBIT A
(DESCRIPTION OF THE 757 SIL TRANSACTIONS)
[SCHEDULE REDACTED]
12
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.
8
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
9
emergence from the 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.
10
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
11
inception;
(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
12
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.
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
14
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.
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 Notes will be payable in full
on the Maturity Date.
16
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 liquidation in the
Chapter 11 Case;
17
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 The documentation with respect to the Bridge
AND COVENANTS: 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 The conditions to the closing of the Bridge
CLOSING: Facility transaction will include those on
Schedules A and B to the Master MOU.
CONDITIONS PRECEDENT TO Draw-downs under the Bridge Facility shall be,
DRAWDOWN: 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.
18
SCHEDULE A TO EXHIBIT E
BRIDGE
FACILITY
FUNDING
WEEK [REDACTED] 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]
19
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.
20
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 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.
21
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) 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.
Section 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
22
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 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").
US Airways and Group seek forgiveness of certain obligations arising under the
Agreements,
24
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. The parties
will undertake to agree upon definitive documents prior to the hearing date, so
that
25
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. GEES agrees to forgive and release US Airways from the following obligations
under the Agreements:
[REDACTED] Agreement
- Payment of the [REDACTED] and [REDACTED], described in Section 1,
Article III, Paragraph E.
- Payment of the [REDACTED] and [REDACTED], described in Section 1,
Article III, Paragraph F.
- Payment of the [REDACTED] and [REDACTED], described in Section 1,
Article III, Paragraph G.
[REDACTED] Agreement
- Payment of the [REDACTED] and [REDACTED], described in Section 1,
Article III, Paragraph G.
- Payment of [REDACTED], [REDACTED] through the date of this term sheet,
under Section 1, Article III, Paragraph H [REDACTED]. For sake of
clarity, US Airways shall remain liable for payment of the [REDACTED]
and [REDACTED] from and after the date of this term sheet, all as
provided in (and subject to) such paragraph and Section 1, Article
III, Paragraph I, including, but not limited to, the provisions of
those paragraphs for forgiveness of a portion of the [REDACTED] under
certain circumstances. US Airways' obligation to pay the [REDACTED]
shall be documented in a promissory note.
- Purchase of one [REDACTED] scheduled for [REDACTED].
[REDACTED]Agreement
- Payment of the[REDACTED] and [REDACTED], described in Section 1,
Article III, Paragraph F.
5. GEES agrees to defer payment by US Airways of [REDACTED] arising under the
Agreements during the months of [REDACTED], detailed in [REDACTED] hereto (the
"Deferred Obligations"). US Airways shall repay the Deferred Obligations,
[REDACTED], on the earlier of [REDACTED] (the "Termination Date") and the date
that is [REDACTED] following confirmation of debtors' plan of reorganization.
6. The parties agree:
- to extend the [REDACTED] Agreement for an additional term of
[REDACTED] years. Existing contract terms and conditions shall
continue during the extension.
- that US Airways shall have a one-time option, upon notice given not
later than [REDACTED], to either (a) convert the [REDACTED] Agreement
to an exclusive [REDACTED] arrangement, effective [REDACTED], provided
the GEES proposal for such arrangement is competitive with proposals
received by US Airways from vendors of comparable recognized
reputation, or (b) terminate the [REDACTED] Agreement.
26
- that [REDACTED] of the [REDACTED] Agreement shall be deleted.
- that GEES shall have [REDACTED] with respect to [REDACTED] for Group's
[REDACTED] and, if any, [REDACTED]. In the event that [REDACTED],
Group or US Airways shall enter into a [REDACTED] with [REDACTED] for
these [REDACTED].
- that, subject only to the amendments expressly set forth in this term
sheet, the Agreements shall be assumed by US Airways and Group by
execution of definitive documents on or before the [REDACTED], and
shall continue in full force and effect as amended. Thereafter,
subject to paragraph 2 of this term sheet, US Airways and Group shall
perform their obligations under the amended Agreements as they become
due, including, but not limited to, [REDACTED] under Section 1,
Article III (A)(3) of the [REDACTED] Agreement.
- that the [REDACTED] engine build standard will be [REDACTED] near the
end of the Agreement, without further financial adjustment, yet in
such a way that US Airways' financial exposure due to engine lease
return conditions is not harmed.
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
27
following overhaul as one of the following:
- - To be returned to fleet.
- - Rejected/abandoned.
- - 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.
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Very truly yours,
GENERAL ELECTRIC COMPANY
By: /s/ John Falconi
------------------------------------
Title: Vice President
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
29
Agreed to and Accepted:
US AIRWAYS GROUP, INC.
By: /s/ Eilif Serck-Hanssen
---------------------------------
Title: Senior Vice President Finance
& Treasurer
30
EXHIBIT A
GE-Snecma Aircraft
N563US
N352US
N353US
N354US
N355US
N356US
N575US
31
EXHIBIT B
DEFERRED OBLIGATIONS
EES - USAIRWAYS TERM SHEET AGREEMENT, EXHIBIT B
PREPETITION
INVOICE# DESCRIPTION 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
32