EXHIBIT 10.2
[Redacted] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED
BY BRACKETS AND THE WORK "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.
CONFIDENTIAL
As of June 13, 2005
US Airways Group, Inc.
2345 Crystal Drive
Arlington, VA 22227
US Airways, Inc.
2345 Crystal Drive
Arlington, VA 22227
America West Holdings Corporation
111 West Rio Salado Pkwy.
Tempe, Arizona 85281
America West Airlines, Inc.
111 West Rio Salado Pkwy.
Tempe, Arizona 85281
General Electric Capital Corporation
c/o GE Commercial Aviation Services LLC
201 High Ridge Road
Stamford, CT 06927-4900
Re: Master Merger Memorandum of Understanding ("Merger 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"), America West Holdings Corporation
("Holdings"), America West Airlines, Inc. ("AWA"), General Electric
Capital Corporation, acting through its agent GE Commercial Aviation
Services LLC ("GECC"; and together with GE Commercial Aviation Services
LLC ("GECAS"), GE Engine Services, Inc. and GE Engine Services -
Dallas, LP (collectively, "GE Engine Services"), and General Electric
Company, GE Transportation Component ("GEAE") and their respective
affiliates, the "GE Entities")/Amendment to Original MOU (as
hereinafter defined)
Ladies and Gentlemen:
This Merger MOU, when countersigned by the respective parties, shall set forth
our understanding with respect to the restructuring of certain of the
indebtedness and obligations of
CONFIDENTIAL
US Airways and Group to the GE Entities, and the restructuring of certain of the
indebtedness and obligations of Holdings and AWA to the GE Entities, both in
connection with that certain merger transaction described in the Agreement and
Plan of Merger filed on May 20, 2005 with the Bankruptcy Court as defined below
(the "Merger"), which understanding was reached in separate negotiations with
each of such respective parties in connection with the related matters contained
herein.
I. Relationship to Original MOU
Reference is made to the Amended and Restated Master Memorandum of
Understanding, dated as of November 24, 2004 (as amended prior to the date
hereof, the "Original MOU"), among US Airways, Group and the GE Entities. Terms
used herein and in the Supplemental Merger Term Sheets (as defined below) and
not otherwise defined have the meanings given to them in the Original MOU.
The parties hereto agree that the Original MOU remains in effect and operative
in connection with the Merger and that this Merger MOU shall be interpreted as
being supplemental to the Original MOU, with the result that the Phase II
Transactions and the Exit Transactions as described in the Original MOU, as
supplemented hereby, shall continue to be implemented in the manner provided by
the Original MOU except as otherwise expressly provided to the contrary herein.
In accordance with the foregoing statement of intent concerning the
supplementary nature of this Merger MOU to the Original MOU, the parties hereto
agree that the Original MOU and this Merger MOU shall be interpreted to the
maximum extent possible in a manner that reconciles any inconsistencies between
them; provided, however, that, in the event of a direct irreconcilable conflict
between the Original MOU and this Merger MOU, the terms of this Merger MOU shall
control. In furtherance of the foregoing, the Global Events of Default stated in
the Original MOU are hereby deleted in their entirety and replaced with each of
the Merger Events of Default hereunder and, accordingly, each Merger Event of
Default hereunder shall constitute a Global Event of Default under the Original
MOU and in each document referencing the Original MOU.
II. Supplemental Terms regarding the Original MOU to provide for Certain
Additional Restructuring Transactions.
A. US Airways and AWA Lease and Finance Arrangements
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"), and in conjunction
with the Merger, US Airways and AWA wish to obtain and GECAS is willing to
provide (both during the Chapter 11 Case and upon the effective date of a plan
of reorganization ("Plan of Reorganization") confirmed by the Bankruptcy Court
(the "Emergence" and "Emergence Date", as the case may be) that provides for the
Merger and other transactions contemplated hereby in accordance with this Merger
MOU, and both prior to the closing of the Merger and upon closing of the Merger
as provided herein) the following transactions to
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CONFIDENTIAL
supplement the Phase II Transactions and Exit Transactions contemplated by the
Original MOU: (i) certain lease modifications to shorten the terms of various
leases with respect to certain GECC aircraft leased to US Airways, and with
respect to certain GE Entities' aircraft leased to AWA, and certain related
lease amendments, as described in Exhibit A; (ii) certain acknowledgments
regarding the existing bridge facility to US Airways from a GE Entity and
certain lease modifications related to the rent under various leases, as
described in Exhibit B; (iii) certain arrangements in respect of regional jet
leases and financings with US Airways, as described in Exhibit C; (iv) certain
modifications to the financing provided by GE Entities to AWA in respect of
Spare Parts, as described in Exhibit D; (v) certain amendments to the Phase II
Transactions between GECAS and US Airways, as described in Exhibit E; and (vi)
certain modifications with respect to certain of the contracts between US
Airways and GE Engine Services and GEAE, as described in Exhibit F.
B. General Conditions
Each of the transactions and modifications described herein is to occur,
together with the Phase II Transactions and Exit Transactions described in the
Original MOU, as supplemented hereby, pursuant to the terms and conditions set
forth in the following applicable term sheets attached as Exhibits A through F
(each, a "Supplemental Merger Term Sheet" and, collectively, the "Supplemental
Merger Term Sheets"). Certain of the transactions and modifications described in
the Supplemental Merger Term Sheets are scheduled to take effect as described
therein prior to the Emergence Date and the closing of the Merger (the
"Pre-Merger Transactions"); and others are scheduled to take effect upon or
after the Emergence Date and the closing of the Merger as described in the
attached Supplemental Merger Term Sheets (the "Merger Transactions" and,
together with the Pre-Merger Transactions, the Phase II Transactions and the
Exit Transactions, the "Restructuring Transactions").
The parties further acknowledge and agree that (i) the Restructuring
Transactions contemplated in this Merger MOU and the Original MOU are comprised
of several separate interrelated transactions (each of which is individually
described in its respective Term Sheet), and (ii) each Pre-Merger Transaction,
Merger Transaction, Phase II Transaction and Exit Transaction is expressly
conditioned upon the consummation of every other Pre-Merger Transaction, Merger
Transaction, Phase II Transaction and Exit Transaction, as applicable. In no
event shall any Supplemental Merger Term Sheet be viewed as a stand-alone
transaction. Accordingly, each of the transactions and modifications
contemplated by the Supplemental Merger Term Sheets must be evidenced by
executed definitive agreements in order to effectuate the Restructuring
Transactions.
Each of the Pre-Merger Transactions, the Merger Transactions, the Phase II
Transactions and the Exit 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 Merger MOU or in the schedules to the Original MOU or in the applicable
Supplemental Merger Term Sheet or Term Sheet); provided, however, that to the
extent an individual transaction under any of the Supplemental Merger Term
Sheets to this Merger MOU or the Term Sheets to the Original MOU is consummated
prior to the Merger and/or the Emergence Date, and without waiving or otherwise
affecting any of the other terms
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CONFIDENTIAL
and conditions of the Original MOU or the Term Sheets, this Merger MOU or the
Supplemental Merger Term Sheets, such transaction shall be effective
nevertheless and shall not be reversed or rescinded even if the Merger and/or
such emergence does not occur.
Each and every obligation of US Airways or Group to a GE Entity, or of Holdings
or AWA 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 Merger MOU, the Original MOU and the Supplemental Merger Term Sheets
hereunder and the Term Sheets thereunder (such obligations, the "Restructuring
Obligations") will be, subject to the last sentence of this paragraph, (i)
cross-defaulted to each and every Restructuring Obligation unless such
cross-default has specifically been waived by the affected GE Entity or in this
Merger MOU or in the Original MOU or in the Supplemental Merger Term Sheets or
Term Sheets, as applicable, 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"). Upon Emergence, any agreement between US Airways
and/or Group and a GE Entity, or Holdings and/or AWA and a GE Entity, which
contains a cross-default to other obligations owing a GE Entity shall be amended
to include any obligations of US Airways or AWA, and their affiliates, to a GE
Entity, subject to any qualifications and conditions in such cross-default
provision. After the Emergence Date and consummation of the Merger, (x) US
Airways and Group shall guarantee each and every obligation of Holdings and/or
AWA to a GE Entity, or to another party where nonperformance of such obligation
could impose an obligation on a GE Entity, existing under any transaction
between any GE Entity and Holdings and/or AWA or their respective affiliates
(the "AWA Obligations"), (y) Holdings and AWA shall guarantee each and every
obligation of Group and/or US Airways to a GE Entity, or to another party where
nonperformance of such obligation could impose an obligation on a GE Entity,
existing under any transaction between any GE Entity and Group and/or US Airways
or their respective affiliates (the "US Airways Obligations," together with the
AWA Obligations, the "Obligations"), and (z) to the extent a new holding company
is formed in connection with the Merger and survives the Merger ("Newco") it
shall guarantee all Obligations. Notwithstanding anything herein to the contrary
but without limiting the conditions for any Restructuring Transaction or the
effect of a Merger Event of Default or Global Event of Default, prior to the
Emergence Date and consummation of the Merger, (i) no default under, or failure
to perform, any US Airways Obligation or Restructuring Obligation by US Airways
or Group shall give rise to any obligation or liability of Holdings or AWA on
account of any such default under or failure to perform such US Airways
Obligation or Restructuring Obligation and (ii) no default under, or failure to
perform, any AWA Obligation or Restructuring Obligation by Holdings or AWA shall
give rise to any obligation or liability of US Airways or Group on account of
any such default under or failure to perform such AWA Obligation or
Restructuring Obligation.
III. Confidentiality
Each of the parties hereto acknowledges that this Merger MOU and the related
Supplemental Merger 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
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CONFIDENTIAL
matter of this Merger MOU; (C) professional advisors advising them concerning
the subject matter of this Merger MOU provided that US Airways, Group, Holdings,
AWA shall cause such outside professional advisors to keep such information
confidential; (D) the ATSB, provided that US Airways and AWA 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 investor that
is acceptable to GECC and GEAE in terms of permitting disclosure of this Merger
MOU and attached Supplemental Merger Term Sheets or information contained herein
or therein, 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', Group's,
Holdings' and AWA's labor unions, (ii) any lender, potential lender, or
participant that is acceptable to GECC and GEAE in terms of permitting
disclosure of this Merger MOU and attached Supplemental Merger Term Sheets or
information contained herein or therein, (iii) any material stakeholder in US
Airways' and Group's proposed restructuring that is acceptable to GECC and GEAE
in terms of permitting disclosure of this Merger MOU and attached Supplemental
Merger Term Sheets or information contained herein or therein, (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 Supplemental Merger Term Sheets that are the subject hereof.
IV. Binding Obligations and Miscellaneous
Subject to the conditions set forth in Schedule A and Schedule B hereto with
respect to the Pre-Merger Transactions and the Merger Transactions, and the
conditions in the Original MOU and the Term Sheets thereunder, this Merger MOU
and the Supplemental Merger Term Sheets are intended to create binding legal
obligations among the parties. Reference is made to the milestones, provisions
and events described in Schedule C hereto, with each of which Group and US
Airways agree to comply or cause compliance (as the same may be amended, and
failure to comply or cause compliance with any of which for any reason
whatsoever shall constitute a "Merger Event of Default").
This Merger 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.
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CONFIDENTIAL
Once this Merger 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 Supplemental Merger Term Sheets herein and in the Original MOU.
This Merger MOU shall be governed by and construed in accordance with the laws
of the State of New York, and 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.]
6
IN WITNESS WHEREOF, this Merger MOU was entered into the day and year first
above written.
For and on behalf of
US AIRWAYS GROUP, INC.
Name: /s/ Stephen Morrell
----------------------------------------------
Title: Treasurer
----------------------------------------------
US AIRWAYS, INC.
By: /s/ Stephen Morrell
----------------------------------------------
Name: Vice President - Finance and Treasurer
----------------------------------------------
Title:
--------------------------------------------
AMERICA WEST HOLDINGS CORPORATION
By: /s/ Derek J. Kerr
-----------------------------------
Name: Derek J. Kerr
-----------------------------------
Title: Chief Financial Officer
-----------------------------------
AMERICA WEST AIRLINES, INC.
By: /s/ Derek J. Kerr
-----------------------------------
Name: Derek J. Kerr
-----------------------------------
Title: Chief Financial Officer
-----------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
Name: /s/ Keith Helming
-----------------------------------
Title: Vice President
-----------------------------------
GENERAL ELECTRIC COMPANY, GE TRANSPORTATION COMPONENT
Name: /s/ Scott Hankins
--------------------------------------------
Title: Financing Counsel
--------------------------------------------
SCHEDULE A
Pre-Merger Transaction Conditions
In addition to the conditions precedent set forth in the Supplemental Merger
Term Sheets attached to this Merger MOU, the obligations of each of the parties
hereto to consummate each Pre-Merger Transaction shall be subject to the
satisfaction (or waiver) of the following conditions precedent on or before the
closing date of the applicable Pre-Merger Transaction:
1. Consummation of each Phase II Transaction.
2. Satisfactory negotiation, review and agreement of definitive
documentation, including legal review, for the Phase II Transactions
and Pre-Merger Transactions in form and substance acceptable to US
Airways and Group, or Holdings and AWA, as applicable, 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 Holdings, AWA, 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 Transactions with GE Entities on or
prior to the earlier of the date provided for assumption of such lease
or executory contract in the Supplemental Merger Term Sheets or
Emergence.
5. Judicial Order of the Bankruptcy Court approving all transactions
related to this Merger MOU, on or before June 30, 2005, 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.
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 for which
invoices have been provided on the earlier of 15 days after being
submitted or one business day prior to the closing of the applicable
Pre-Merger Transaction. The GE Entities will endeavor to submit
invoices on a monthly basis. Except for costs directly related to the
removal of AWA Aircraft prior to consummation of the Merger (for which
AWA shall be responsible), US Airways/Group shall be responsible for
all such costs and expenses.
7. No Merger Event of Default has occurred and is continuing.
7. No event of default or material breach beyond any applicable notice and
cure period under any agreement between Holdings, AWA or any of their
affiliates, on the one hand,
and any GE Entity, on the other hand (including without limitation, any
default arising on account of any cross-default of any lease ) shall
have occurred and be continuing other than those expressly waived in
writing by a GE Entity.
SCHEDULE B
Merger Transaction Conditions
In addition to the conditions precedent set forth in the Supplemental Merger
Term Sheets attached to this Merger MOU, the obligations of each of the parties
hereto to consummate each Merger Transaction shall be subject to the
satisfaction (or waiver) of the following conditions precedent on or before the
closing date of the applicable Merger Transaction:
1. Consummation of the Phase II Transactions and each other Pre-Merger
Transaction, and concurrent consummation of the Exit Transactions.
2. Satisfactory negotiation, review and agreement of definitive
documentation, including legal review, for the Merger Transactions and
Exit Transactions in form and substance acceptable to US Airways and
Group on the one hand, or Holdings and AWA on the one hand, as
applicable, 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
structure, business plan, regional carrier arrangements, ownership
structure, equity ownership, listing and public securities
arrangements, exit financing arrangements) respecting Holding, AWA, US
Airways and Group satisfactory to GECAS, GECC, GE Engine Services, or
GEAE, as applicable, in their sole discretion up to and including the
date of confirmation of the Plan of Reorganization and the approved
Disclosure Statement (each as approved by GECAS as herein provided).
4. Assumption of all leases and executory contracts as modified in
accordance with the Restructuring Transactions with GE Entities on or
prior to the earlier of the date provided for assumption of such lease
or executory contract in the Supplemental Merger Term Sheets or
Emergence.
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 for which
invoices have been provided on the earlier of 15 days after being
submitted or one business day prior to the closing of the applicable
Merger Transaction. The GE Entities will endeavor to submit invoices on
a monthly basis. Except for costs directly related to the removal of
AWA Aircraft prior to consummation of the Merger (for which AWA shall
be responsible), US Airways/Group shall be responsible for all such
costs and expenses.
6. No Merger Event of Default has occurred and is continuing.
7. GECAS approval, in its sole discretion, of the merger business plan
(including both mainline and regional operations), ownership, capital
and governance structures for Holdings, AWA, Group, US Airways and
Newco up to and including the date of
confirmation of the Plan of Reorganization and the approved Disclosure
Statement (each as approved by GECAS as herein provided).
8. Airbus contribution of at least $100,000,000 in additional liquidity.
9. Final resolution of all ATSB issues, acceptable to GECAS in its sole
discretion.
10. At least $500,000,000 of equity commitments for the Merger (which
commitments may include a fully committed and underwritten shareholder
or creditor equity rights offering).
11. Cross-Guaranties by Group, US Airways, Holdings, AWA and Newco of all
Obligations.
13. No event of default or material breach beyond any applicable notice and
cure period under any agreement between Holdings, AWA or any of their
affiliates, on the one hand, and any GE Entity, on the other hand
(including without limitation, any default arising on account of any
cross-default of any lease) shall have occurred and be continuing other
than those expressly waived in writing by a GE Entity.
14. No material adverse change in the reasonable discretion of GECAS in the
business, operations, financial conditions, or prospects of Newco as
the merged business of Group, US Airways, Holdings and AWA from that
contemplated in the Plan of Reorganization and the Disclosure Statement
(each as approved by GECAS as herein provided) since the date of
confirmation of the Plan of Reorganization, and Emergence and
consummation of the Merger in accordance with such Plan of
Reorganization and Disclosure Statement.
SCHEDULE C
Merger Events of Default
1. Continued compliance with each of the following milestones during the
Chapter 11 Case:
DATE MILESTONE
June 30, 2005 Judicial order approving the GE Entity
transactions under this Merger MOU.
June 30, 2005 Filing of Plan of Reorganization and substantive
Disclosure Statement, each in form and substance
as reasonably acceptable to GECAS
June 30, 2005 Filing of S-4 and other securities filings
consistent with the Disclosure Statement.
July 31, 2005 Judicial order approving AWA's bid to
merge with US Airways pursuant to the
Merger as the winning bid, in form and
substance reasonably acceptable to GECAS.
August 31, 2005 Final resolution of all ATSB issues, acceptable
to GECAS in its sole discretion.
September 30, 2005 Entry of a final order confirming a Plan of
Reorganization, each of which being consistent
with the terms of the Restructuring Transactions
and reasonably acceptable to GECAS.
October 31, 2005 Emergence Date and Consummation of the Merger.
2. Continued compliance by US Airways with the following financial
covenants (expressed in millions of US dollars):
Month End Jun Jul Aug Sept
Cumulative
EBITDAR* [Redacted]
Unrestricted
Liquidity [Redacted]
3. No event of default or material breach beyond any applicable notice and
cure period under any agreement between US Airways, Group or any of
their affiliates, on the one hand, and any GE Entity, on the other hand
(including without limitation, any default arising on account of any
cross-default or upon the rejection of any lease) shall occur other
than those expressly waived in this Merger MOU or in the Original MOU
or the Supplemental Merger Term Sheets or Term Sheets or otherwise in
writing by a GE Entity, and Excepted Obligations as currently defined
in the 2001 Facility (collectively, 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), shall occur.
5. No failure to substantially complete the Sale-Leaseback Phase II
Transactions by July 1, 2005.
- ----------
* Measured starting April 2004.
CONFIDENTIAL
EXHIBIT A
AIRCRAFT EARLY REMOVAL TERM SHEET
EXCEPT AS EXPRESSLY SET FORTH IN THE MERGER MOU OR IN THE ORIGINAL MOU, OR IN
THE RESPECTIVE SUPPLEMENTAL MERGER TERM SHEETS OR TERM SHEETS ATTACHED THERETO,
US AIRWAYS SHALL PERFORM ALL OF ITS OBLIGATIONS UNDER ANY EXISTING AIRCRAFT
LEASE CONTRACT OR OTHER AGREEMENT WITH ANY GE ENTITY BOTH DURING THE CHAPTER 11
CASE AND UPON EMERGENCE FROM CHAPTER 11 PURSUANT TO CONSENSUAL 1110 AGREEMENTS
EFFECTIVE DURING THE PENDENCY OF DEBTORS' CHAPTER 11 CASES, OR AMENDMENTS TO
PRE-PETITION AGREEMENTS; IT BEING AGREED THAT, EXCEPT AS OTHERWISE SET FORTH IN
THIS MERGER MOU OR IN THE ORIGINAL MOU, OR IN THE RESPECTIVE SUPPLEMENTAL MERGER
TERM SHEETS OR TERM SHEETS ATTACHED THERETO OR ANY ORDERS OF THE BANKRUPTCY
COURT APPROVING THE SAME, 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 US
AIRWAYS' OBLIGATIONS UNDER THE BANKRUPTCY CODE, INCLUDING, WITHOUT LIMITATION
SECTION 1110 OF THE BANKRUPTCY CODE.
PART I - US AIRWAYS REMOVALS:
Subject to consummation of the Merger or, as applicable, Part III below, the
leases between US Airways and the applicable GE Entities in respect of the
aircraft described below shall be amended to change the expiry dates of such
leases to remove such aircraft from service prior to the current lease expiry
date and redeliver such aircraft to the applicable GE Entity without any
liability in the nature of rejection claim damages arising therefrom. For any
aircraft having a revised expiry date prior to the Milestone Date for Emergence
and consummation of the Merger, such aircraft shall nevertheless be redelivered
on the revised date, provided that, except as otherwise provided in Part III
below, on such date (i) no Merger Event of Default shall have occurred and be
continuing and (ii) no public announcement or SEC filing by any of Group, US
Airways, Holdings, or AWA, and no applicable government authority announcement,
shall have been made to the effect or which has the effect that any significant
term or condition of the Merger will not be complied with or met by the
applicable Milestone or that a Milestone will not otherwise be met.
11X B734: 11x B734 aircraft single investor leases
will be amended to have expiry dates in
2009 on the dates described in Part A-I.1
of Schedule A to this Exhibit A. Any
purchase or renewal options shall be
deleted. In addition, the leases will be
amended to provide the applicable GE Entity
an early termination option to remove all
or a portion of 5x B734's starting in July
2007 and 6x B734's in 2008, exercisable on
or before October 31, 2006 (such early
termination dates are set forth in Part
A-I.1 of Schedule A to this Exhibit A)
unless as of September 30, 2006, US Airways
has either (i) achieved a corporate credit
rating of at least [Redacted] (not on
negative credit watch) or (ii) holds
consolidated unrestricted cash of at least
[Redacted] and achieved at least [Redacted]
of the cumulative consolidated EBITDAR for
the period from Emergence through September
30, 2006, as set forth in the final
disclosure statement, as approved
by the Bankruptcy Court in respect of
the Plan of Reorganization.
7X B733: 7x B733 aircraft leases will be amended to
have lease expiry dates between December
2005 and February 2006, as described in
Part A-I.2 of Schedule A to this Exhibit A.
GECAS and US Airways hereby agree on the
schedule for engine swaps among such 7x
B733 aircraft as described
in Part A-I.2(a) of Schedule A to
this Exhibit A.
6X A319/320 In connection with the closing of the Phase
II Transactions, 6x A319/320 leases will be
amended to have lease expiry dates between
September 2005 and November 2005, as
described in Part A-I.3 of Schedule A to
this Exhibit A.
1X B733 1x B733 (msn [Redacted]) aircraft on
operating lease will be amended to have a
lease expiry date of September 1, 2005, as
described in Part A-I.4 of Schedule A to
this Exhibit A.
1X B733 1x B733 (msn [Redacted]) aircraft on
operating lease has been or will be
rejected with the consent of the applicable
GE Entity and will be redelivered on or
about June 14, 2005, as described in Part
A-I.4 of Schedule A to this Exhibit A.
15X B733/SILS 15x B733 aircraft single investor leases as
described in Part A-I.5 of Schedule A to
this Exhibit A shall be removed from
service and redelivered to the applicable
GE Entity between July 2005 and February
2006. The existing lessee extension options
on 2x of these GE Entity-owned B733
aircraft (msn [Redacted] and [Redacted])
will be amended to be one (1) month; all
other lessee extension options with respect
to the remaining 13x of these GE
Entity-owned B733 aircraft will
2
be terminated. Each such expiry date is
described in Part II of Schedule A to this
Exhibit A. GECAS and US Airways hereby
agree on the schedule for engine swaps
among such 15x 733 aircraft as described in
Part A-I.5(a) of Schedule A to this
Exhibit A.
PART II [Redacted]
PART III - REDELIVERIES NOT DEPENDANT ON MERGER:
Regardless of whether or not the Merger is consummated or a Merger Event of
Default has occurred prior to the date of redelivery, the parties agree that the
lease expiry dates for aircraft identified with a "*" on Schedule A or B to this
Exhibit A will be amended as described in Part I and II above. [Redacted]
PART IV - RELATED SPARE ENGINE LEASE EARLY TERMINATIONS:
As a result of the fleet reductions noted above, and so long as US Airways
remains in compliance with the sparing ratio set forth in the CFM56-3 Agreement
and CFM56-5 Agreement, as applicable, the expiry dates for certain US Airways
spare engine leases (contemplated in the Phase II Transaction) shall be amended
to terminate early as follows:
CFM56-5B 1 of the CFM56-5B spare engine leased
pursuant to the Phase II Transaction, as
selected by US Airways on 60 days' prior
notice, will expire on or about November
2005.
CFM56-3B: Up to 5x CFM56-3B spare engines leased
pursuant to the Phase II Transaction, as
selected by US Airways on 60 days' prior
notice, will be redelivered early by US
Airways at the rate of one spare engine for
every fifth Boeing 737-300 returned to the
applicable GE Entity.
PART V - RELATED REDELIVERY CONDITION LEASE AMENDMENTS.
The applicable GE Entity and US Airways, or AWA and the applicable GE Entity,
will amend the leases for certain aircraft to provide for revised redelivery
conditions for the following aircraft that are to be removed pursuant to this
Exhibit A. The redelivery concession amendments in respect of US Airways
aircraft scheduled for redelivery prior to the Milestone Date for Emergence and
consummation of the Merger will be effective upon Emergence and consummation of
the Merger; it being understood that the relevant GE Entity will permit US
Airways to defer compliance with the applicable redelivery conditions to the
extent of such concession, and permit US Airways to calculate amounts owed to
the applicable lessor utilizing the concession (the obligation of US Airways to
pay such concession amount being deferred), until the Milestone Date for
Emergence and consummation of the Merger for aircraft scheduled for redelivery
prior thereto whereupon if Emergence and consummation of the Merger have not
occurred the deferred amounts shall be due and payable and if Emergence and
consummation of
3
the Merger shall have occurred they shall be discharged. Except as expressly
provided below, all redelivery condition obligations detailed in the respective
leases shall otherwise remain in effect.
[Redacted] [Redacted]
US AIRWAYS AIRCRAFT: For the US Airways Airbus aircraft to be
returned between September 2005 and
November 2005, pursuant to this Exhibit A,
GECAS agrees to limit any payment owed
under the maintenance payment formulas at
redelivery with respect to engines under
the respective leases to an average of
[Redacted] per engine ([Redacted] in the
aggregate).
US Airways and AWA agree that the maximum amount of the redelivery concession to
be realized by them, collectively, as a result of the amended redelivery
conditions provided herein in respect of the subject aircraft shall be
[Redacted] in the aggregate.1 Once such aggregate amount has been reached, then
US Airways and/or AWA shall pay and otherwise perform all redelivery
requirements in full when due. [Redacted] The redelivery concession amount is to
be confirmed upon redelivery of each applicable aircraft and a running total of
the aggregate amount of the redelivery concessions shall be maintained.
Prior to Emergence, any redelivery payments payable by any applicable GE Entity
to US Airways will first be netted against any redelivery payments payable to
any applicable GE Entity from US Airways, and, subject to the provisions of the
first paragraph of this Part V, any net balance remaining after such netting
will be refunded to US Airways upon Emergence and consummation of the Merger,
provided that there is no Merger Event of Default.
- ----------
(1) Anything herein to the contrary notwithstanding, AWA, but not US Airways,
shall be entitled to realize any redelivery concessions, subject to the
collective maximum aggregate amount of [Redacted] thereof, associated with any
AWA aircraft redelivered pursuant to Part III above.
4
CONFIDENTIAL
SCHEDULE A TO EXHIBIT A
US Airways Early Removal Dates
Part A-I.1
Early Termination Return Date
Tail# MSN A/C Type Expiry Date*
[Redacted] [Redacted] 737-400 7/15/07 6/2/09
[Redacted] [Redacted] 737-400 10/15/07 12/2/09
[Redacted] [Redacted] 737-400 11/15/07 9/2/09
[Redacted] [Redacted] 737-400 11/15/07 6/2/09
[Redacted] [Redacted] 737-400 12/15/07 7/2/09
[Redacted] [Redacted] 737-400 1/15/08 9/2/09
[Redacted] [Redacted] 737-400 2/15/08 8/2/09
[Redacted] [Redacted] 737-400 3/15/08 9/17/09
[Redacted] [Redacted] 737-400 4/15/08 10/21/09
[Redacted] [Redacted] 737-400 5/15/08 10/29/09
[Redacted] [Redacted] 737-400 6/15/08 10/6/09
* US Airways shall have the right to swap aircraft and early termination dates
within 90 days after the applicable GE Entity's exercise of the early
termination option, and advise GECAS of any swaps of engines on such aircraft
within such 90 day period so long as such engines meet the redelivery
requirements.
Part A-I.2
Tail# MSN A/C Type Return Date
[Redacted] [Redacted] B737-300 12/1/05
[Redacted] [Redacted] B737-300 2/1/06
[Redacted] [Redacted] B737-300 2/1/06
[Redacted] [Redacted] B737-300 1/15/06
[Redacted] [Redacted] B737-300 1/15/06
[Redacted] [Redacted] B737-300 1/15/06
[Redacted] [Redacted] B737-300 1/15/06
Part A-I.2(a)
[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]
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[Redacted] [Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted] [Redacted]
Part A-I.3
Tail# MSN A/C Type Return Date
[Redacted] [Redacted] A319-200 9/30/05
[Redacted] [Redacted] A319-200 11/1/05
[Redacted] [Redacted] A320-200 10/1/05
[Redacted] [Redacted] A320-200 10/1/05
[Redacted] [Redacted] A320-200 11/1/05
[Redacted] [Redacted] A320-200 11/1/05
Part A-I.4
Tail# MSN A/C Type Return Date
[Redacted] [Redacted] B737-300 6/14/05
[Redacted] [Redacted] B737-300 9/1/05
Part A-I.5
Tail# MSN A/C Type Return Date
[Redacted] [Redacted] B737-300 1/7/06
[Redacted] [Redacted] B737-300 2/10/06
[Redacted] [Redacted] B737-300 2/7/06
[Redacted] [Redacted] B737-300 1/30/06
[Redacted] [Redacted] B737-300 1/31/06
[Redacted] [Redacted] B737-300 7/5/05
[Redacted] [Redacted] B737-300 12/10/05
[Redacted] [Redacted] B737-300 10/28/05
Tail# MSN A/C Type Return Date
[Redacted] [Redacted] B737-300 10/15/05
[Redacted] [Redacted] B737-300 11/14/05
[Redacted] [Redacted] B737-300 12/10/05
[Redacted] [Redacted] B737-300 10/17/05
[Redacted] [Redacted] B737-300 12/9/05
[Redacted] [Redacted] B737-300 11/14/05
[Redacted] [Redacted] B737-300 12/10/05
Part A-I.5(a)
[Redacted] [Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted] [Redacted]
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[Redacted] [Redacted] [Redacted] [Redacted] [Redacted]
SCHEDULE B TO EXHIBIT A
AWA Early Removal Dates
[Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted]
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[Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted] [Redacted]
EXHIBIT B
US AIRWAYS AIRCRAFT RENTAL AMENDMENTS TERM SHEET
BRIDGE FACILITY No change to the Bridge Facility described in
Exhibit E to the Original MOU.
BOEING AIRCRAFT US Airways and GECC shall implement the "true-up"
payment as provided in Part 2 of Exhibit A to the
Original MOU, determined as of June 30, 2005, in
satisfaction of all then remaining rental payment
obligations on account of the 15 x B733 and 10 x
B752 SIL Aircraft through said date, and shall
thereupon amend the leases relative to such Boeing
SIL Aircraft and the 11 x B734 SIL Aircraft
(collectively, the "Boeing SIL Aircraft Leases")
to provide for payment of rentals from and after
July 1, 2005 at the post-Emergence Date levels
referenced in the Original MOU, and specifically
in respect of the 11x B734 SILs, at the rate of
[Redacted] per month. The lease amendments will
further provide that the difference between the
current rental payment under the Boeing SIL
Aircraft Leases and such reduced rental payment
(the "Deferred Rent") will be treated as
hereinafter provided. Except as provided below, US
Airways will not be required to provide any lump
sum cash or Convertible Notes in respect of the
B734 SIL rent reduction as previously provided for
in the B737-400 SIL Restructure Option pursuant to
the Original MOU. The assumption of the Boeing SIL
Aircraft Leases, as
modified and amended by, and subject to, the provisions
of this Exhibit B to the Merger MOU, shall be approved
by the Bankruptcy Court no later than June 30, 2005,
and only return conditions, rents through the later of
the Emergence Milestone Date (as it may be extended by
mutual agreement) or return of the Aircraft, and
Deferred Rents shall be entitled to administrative
priority pursuant to Section 503(b)(1)(A) and 507(a)(i)
of the Bankruptcy Code; if the Merger is not
consummated by the Milestone Date for Emergence and
consummation of the Merger, the terms of such Boeing
SIL Aircraft Leases, including rents (including amounts
and payment dates, with US Airways being given credit
for any payments previously made), return conditions
and expiry dates shall be the original terms set forth
in such Boeing SIL Aircraft Leases, subject to the
limitation on administrative claims described above,
and US Airways shall have the benefit of the provisions
of the Original MOU in respect of the Boeing SIL
Aircraft, subject to the terms and conditions therein.
CRJ AIRCRAFT Rents on 23x CRJ200 aircraft on lease from the
applicable GE Entities to US Airways will be
restructured so that the quarterly rents of each
aircraft will be reduced to [Redacted] per quarter
(for existing 14x CRJ-200 SILs as described in
Part I of Schedule A to this Exhibit B) and
[Redacted] per quarter (for 9x CRJ-200 aircraft
subject to the Phase II Transaction as described
in Part II of Schedule A to this Exhibit B) for a
period of 30 months post Emergence and
consummation of the Merger. The deferred amount
will be added to the rents payable over the 24
month period immediately following the 30 month
deferral period such that applicable GE Entities'
lease economics are maintained. The 14x existing
CRJ-200 SILs will be extended by 3 months each.
This lease restructuring is subject to
manufacturer's consent and continuation of
manufacturer support. Permanent long term leases
for 16x CRJ aircraft (9x CRJ-200s, and 7x CRJ-700s
post-petition leases as described in Part III of
Schedule A to this Exhibit B) shall be entered
into on or before July 29, 2005 ("Permanent RJ
Leases"). Each Permanent RJ Lease will be a
post-petition agreement, but only rent payable
through the later of the Emergence Milestone Date
(as the parties may agree to extend it) or the
return of the Aircraft and return condition
obligations shall be afforded administrative
expense status, and all other claims under such
lease, including any rejection damage claims,
shall be unsecured pre-petition claims.
SCHEDULE A TO EXHIBIT B
PART I
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
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[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
PART II
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
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[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
PART III
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
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[Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
EXHIBIT C
REGIONAL JET LEASE TRANSACTIONS TERM SHEET
EXISTING RJ Any future RJ lease commitments directly to US Airways, as described
LEASE COMMITMENT in Exhibit B to the Original MOU are eliminated, whether or not
the Merger is consummated.
THIRD PARTY EMB LEASE The applicable GE Entities will provide single investor or operating
COMMITMENT leases to third party carriers acceptable to GECAS for 10x
EMB-170/190/195 aircraft delivering between 2007 and 2008 on a schedule
and on terms to be agreed and acceptable to GECAS, conditional on
manufacturer support and order stream relief to be acceptable to GECAS
and agreed with the manufacturer and on the third party carrier meeting
certain financial tests to be agreed and acceptable to GECAS. [Redacted]
3X EMB-170 LEASES The applicable GE Entities will provide single investor or operating
leases to Republic Airways for 3x already produced EMB-170 aircraft on
terms to be agreed, conditional on manufacturer support and order
stream relief to be acceptable to GECAS and separately agreed with the
manufacturer, [Redacted]
15X EMB CONSENT TO The applicable GE Entities to consent to assignment of up to 15x
LEASE ASSIGNMENT EMB-170 leases to Republic with acceptable US Airways backstop from
Republic-US Airways Jet Service Agreement,and subject to manufacturer
consent and continuation of manufacturer support, [Redacted]
EXHIBIT D
AWA SPARE ENGINE AND PARTS LOAN
[Redacted]
EXHIBIT E
PHASE II SALE-LEASEBACK TRANSACTIONS
SPARE ENGINE As per the Exhibit C of the Original MOU and
SALE-LEASEBACKS irrespective of whether or not the Merger is
consummated, purchase prices for each of the
fourteen (14) CFM56-3B2 engines to be purchased
by the applicable GE Entity and leased-back to US
Airways will be reduced by [Redacted] ([Redacted]
in the aggregate) to reflect GECAS's estimate of
the current condition of each engine. For all of
the CFM56-3B2 Spare Engines pursuant to the Phase
II Transaction, US Airways shall receive a
[Redacted] per engine ([Redacted] in the
aggregate) maintenance adjustment payment from
the applicable GE Entity at redelivery of each
CFM56-3B Spare Engine payable under the terms of
the lease.
2001 CREDIT AGREEMENT GECC agrees to defer the May 16, 2005 2001 Loan
amortization payment (but not the interest then
due, which has been paid) of [Redacted] to June
17, 2005.
RESTATED 2001 CREDIT The 2001 Credit Agreement shall be amended and
AGREEMENT restated (the "Restated 2001 Credit Agreement"),
as described in Part I of Exhibit D to the
Original MOU. If the Merger is consummated,
scheduled amortization on the Restated 2001
Credit Agreement will be amended to provide that
amortization will begin in September 2006 (rather
than September 2005) with quarterly principal
payments of:
- [Redacted]
- [Redacted]
- [Redacted]
If the Merger is not consummated, then the
amortization of Restated 2001 Credit Agreement
shall be as set forth in Part I of Exhibit D to
the Original MOU.
US Airways may sell all of the 4x CRJ700 aircraft
(to be collateral for the Restated 2001 Credit
Agreement) and GECC will release the liens on
such aircraft with an early principal repayment
on the Loan outstanding under the Restated 2001
Credit Agreement of [Redacted] (reduced ratably
to reflect any principal repayments).
EXHIBIT F
May 19, 2005
US Airways, Inc.
US Airways Group, Inc.
America West Airlines, Inc.
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,"
and together with the CFM56-3 Agreement and the CFM56-5
Agreement, the "US Airways Agreements");
(iv) Rate Per Engine Hour Management Agreement (Contract No.
S-970611) between America West Airlines, Inc. ("America West")
and GE Engine Services -- Dallas, LP ("GEES -- Dallas") (as
same has been or may be amended, the "AWA Agreement," and
together with the US Airways Agreements, the "Agreements")
Gentlemen/Ladies:
This term sheet is being entered into in connection with the proposed merger of
US Airways and America West (such merger being referred to as the "Merger"), and
in connection with the pending cases of US Airways, US Airways Group, Inc.
("Group") and certain of their affiliates (the "Chapter 11 Case") under Chapter
11, Title 11 of the United States Code (the "Bankruptcy Code") that were
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"), and with reference to the MOU (as defined below) to which
this term sheet will be attached. The following sets forth the understandings
that have been reached among US Airways, Group, America West, GEES and GEES --
Dallas in relation to the Agreements. Capitalized terms not defined herein have
the meanings given those terms in the US Airways Agreements and/or the AWA
Agreements, as applicable.
Each of US Airways and America West seek forgiveness of certain obligations
arising under their respective Agreements, deferral of other obligations arising
thereunder, and certain amendments thereto. GEES and GEES -- Dallas 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.
US Airways, acting as debtor-in-possession in the Chapter 11 Case, acknowledges
that the US Airways Agreements have been assumed with approval of the Bankruptcy
Court under Section 365 of the Bankruptcy Code, subject to the limitations on
claims set forth in Exhibit H of the Initial MOU (as defined below), all as
provided for in Orders of the Bankruptcy Court entered on December 17, 2004
(Docket No. 1431) and February 4, 2005 (Docket No. 1763), and as set forth in
the Omnibus Agreement, effective December 30, 2004, entered into pursuant
thereto.
The parties agree as follows:
1. The provisions of this term sheet, the transactions contemplated
herein and the obligations of the parties hereto shall be of no
force and effect until satisfaction of each of the following
conditions:
A. No default shall have occurred and be continuing by US Airways
or America West under their respective Agreements, or with
respect to any other obligation between US Airways, Group or
America West and/or any of their respective affiliates, on the
one hand, and General Electric Company and/or any of its
affiliates (each a "GE Party"), on the other hand, including,
but not limited to, the obligations of US Airways, Group,
America West and/or the merged airline under this term sheet
(the "GE Obligations"), except (a) any payment default that
relates solely to a good faith dispute regarding the
performance of GEES or GEES -- Dallas or any other GE Party
under any engine maintenance agreement (including, without
limitation, the Agreements) between US Airways, Group or
America West or any of their respective affiliates, on the one
hand, and GEES or GEES -- Dallas or any other GE Party, on the
other, (b) any lease payment default that relates solely to a
good faith dispute regarding the return of an aircraft past
the scheduled or mutually agreed-upon termination of the lease
of such aircraft, provided that none of US Airways, America
West or any of their respective affiliates is operating such
aircraft, and (c) any obligations or defaults that have been
forgiven, deferred or waived pursuant to this term sheet, the
MOU, the Initial MOU (as defined below), any letter agreement
or otherwise, so long as, with respect to any deferral, such
payments are made at the time specified in this term sheet,
the MOU, the Initial MOU, any such letter agreement or as
otherwise agreed by the parties (a "Cross-Default");
B. US Airways and America West have reached agreements with
General Electric Capital Corporation ("GECC") and its
affiliates in contemplation of the Merger, which will be
evidenced by a Master Memorandum of Understanding to be
entered into among America West, US Airways, Group and GECC
(acting on behalf of itself and its affiliates) (the "MOU"),
reflecting the transactions described in that certain GECC
Restructuring Outline of even date herewith;
C. US Airways, Group and America West, and their respective
affiliates shall be in compliance with all of their
obligations under the MOU and any other term sheets
attached thereto, and all applicable conditions precedent
contained in the MOU and any other term sheets attached
thereto shall be satisfied;
D. On or before October 31, 2005, the effective date shall have
occurred under US Airways' Chapter 11 plan of reorganization
(the "Chapter 11 Plan") under which it (or its successor under
the Chapter 11 Plan) continues to operate as an airline; and
E. The Merger is completed in connection with the Chapter 11 Plan
by October 31, 2005.
2. US Airways, Group and America West shall be jointly and severally
responsible for reimbursement of reasonable legal fees paid by GEES
and GEES -- Dallas 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.
GEES and GEES -- Dallas agree to share the same law firms.
3. The parties intend that this term sheet will be attached to the MOU,
which will be submitted for approval by the Bankruptcy Court in the
Chapter 11 Case no later than June 30, 2005. This term sheet and
each of the transactions contemplated herein shall become effective
only upon approval by the Bankruptcy Court pursuant to an order
which (a) shall be in form and substance acceptable to GEES and GEES
-- Dallas, in their sole discretion, and (b) shall not be subject to
an appeal, motion for re-hearing or reconsideration, or petition for
writ of certiorari, and the time to file such appeal, motion or
petition shall have expired. If the MOU and this term sheet are not
submitted and approved by the Bankruptcy Court on or before such
date, then each of the parties hereto may, at its 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, and to execute same promptly upon approval of the
MOU and this term sheet, and in no event later than thirty days
following such approval. The parties agree that this term sheet and
any final agreements resulting from this term sheet will be subject
to the confidentiality provisions contained in paragraph 14, below.
4. In addition to the agreement of GEES to waive removal charges with
respect to the Engines identified by serial numbers on Exhibit A
hereto, as provided for pursuant to the Initial MOU, defined below,
US Airways and America West shall, in accordance with the removal
schedule contained in Exhibit B hereto, have the right to remove
from their respective Agreements the Engines (including spare
Engines, subject to compliance with the spare engine ratio
requirements of the Agreements), identified by serial number on
Exhibit B hereto (the "Removed Engines") and, subject to the absence
of any Cross-Default, GEES and GEES -- Dallas shall waive all
removal charges owing by US Airways and America West in connection
with the removal of the Removed Engines from such Agreements, up to
an amount not to exceed [Redacted] in the aggregate.
5. US Airways shall, in accordance with the removal schedule contained
in Exhibit C hereto, have the right to remove from the CFM56-5
Agreement up to [Redacted] Engines (comprised of [Redacted]
installed and, subject to compliance with the spare engine ratio
requirements of the Agreement, [Redacted] spare), identified by
serial number in such Exhibit C. Reconciliation for Engines removed
shall be determined as provided in the CFM56-5 Agreement. The
parties agree that all removal credits owed by GEES to US Airways in
connection with the Engines removed (in the approximate amount of
[Redacted]) shall be applied to reduce the outstanding balance of
the Deferred Charges, in the amount of approximately [Redacted],
owing by US Airways to GEES under the CFM56-5 Agreement, which
balance is further evidenced by US Airways' Term Note effective
November 24, 2004.
6. GEES agrees that the Deferred Obligations (as defined in the initial
Memorandum of Understanding among the parties thereto dated November
24, 2004, as amended (the "Initial MOU")) in the amount of
[Redacted], owing to GEES by US Airways on the Petition Date, shall
be reduced by [Redacted], which represents the difference between
(i) the payment received by GEES from the owner of ESN 722240
following US Airways' lease rejection and abandonment of the Engine
in the Chapter 11 Case, and (ii) the not yet invoiced removal charge
associated with such Engine (which shall be considered paid). The
remaining balance of the Deferred Obligations, in the amount of
[Redacted], shall be paid in installments of [Redacted] (and
interest accrued thereon), due on June 30, 2005, and [Redacted] (and
interest accrued thereon), due on the earlier of the effective date
of the Chapter 11 Plan and September 30, 2005.
7. Following expiration or earlier termination of the CF6-80C2
Agreement, GEES shall have the last right of offer with respect to
any engine maintenance agreement for US Airways' CF6-80C2 fleet
(whether operated by US Airways or in any combination with America
West). In the event that GEES' proposal is competitive with
proposals received by US Airways (or the merged airline) from
vendors of comparable recognized reputation, then US Airways (or the
merged airline) shall enter into an engine maintenance agreement
with GEES for this fleet.
8. The CFM56-5 Agreement shall be extended to a term of [Redacted]
years, terminating [Redacted], and US Airways shall waive its rights
granted in Section 2.6 of Amendment No. 2 to the CFM56-5 Agreement,
effective December 30, 2004, to convert to exclusive T&M or
terminate the CFM56-5 Agreement on [Redacted].
9. In lieu of the existing provisions contained in the CFM56-3
Agreement and the AWA Agreement governing minimum monthly payments,
each of the Agreements shall be amended to provide that, for so long
as both Agreements remain in effect, the minimum monthly payment on
account of accrued Engine flight hours for the two Agreements
together shall equal [Redacted].
10. [Redacted]
11. [Redacted]
12. Without prejudice to the respective obligations of GEES and GEES --
Dallas under the Agreements, which shall at all times remain in full
force and effect subject to their terms, the parties acknowledge
that GEES and GEES -- Dallas shall not be liable for compliance with
engine return conditions provided for in any lease or other
agreements of US Airways or America West with respect to Engines
maintained under the Agreements.
13. The terms and conditions contained in this term sheet comprise a
non-severable package of concessions and incentives, made and given
in the context of the continuing agreements between the GE Parties
and US Airways, Group or America West and/or their respective
affiliates. Therefore, any default under any GE Obligation which is
not excepted under paragraph 1(A) hereof, owed to, or affecting any
guaranty of, those certain GE Parties comprised of General Electric
Company, GE Transportation Component, and all affiliates of General
Electric Company reporting to its GE Transportation Component ("GE
Transportation Obligations") shall constitute a default under all
other GE Transportation Obligations. Without limiting the rights and
remedies of the GE Parties at law or in equity, upon the occurrence
of any default with respect to the GE Transportation Obligations,
all charges waived by GEES and GEES -- Dallas under this term sheet,
the outstanding balance of the Deferred Obligations, and the
outstanding balance of the Deferred Charges under the CFM56-5
Agreement, as may be adjusted as provided herein, shall become
immediately due and payable.
14. The parties hereto acknowledge that this term sheet and the exhibits
annexed hereto and the Agreements 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 boards(s) of directors; (B)
employees working on the subject matter of this term sheet; (C)
professional advisors advising them concerning the subject matter of
this term sheet provided that US Airways, Group, America West and
such outside professional advisors execute, or have executed, a
confidentiality agreement in form and substance acceptable to GEES
and GEES -- Dallas; (D) the ATSB, provided that US Airways and
America West 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 GEES and GEES -- Dallas are
redacted, in each case, as they shall request in their 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 GEES
and GEES -- Dallas shall request in their sole discretion, 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 GEES and GEES -- Dallas. A written summary
of the transactions approved by GEES and GEES -- Dallas in advance
of disclosing such summary, may be provided to (i) US Airways' labor
unions, (ii) any lender, potential lender, or participant, (iii) any
material stakeholder in US Airways' proposed restructuring, (iv) the
Creditors' Committee (but only if such summary has been redacted in
a manner satisfactory to GEES and GEES -- Dallas 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 GEES and GEES -- Dallas. The parties agree that the
terms of this paragraph will survive any termination, through
expiration or otherwise, of this term sheet.
15. Notwithstanding anything herein to the contrary, the agreement of
each of US Airways, Group and America West to the modifications and
amendments to the Agreements as set forth herein is subject to the
satisfactory review of the US Airways Agreements by America West,
and the AWA Agreements by US Airways, as applicable, prior to the
approval of the MOU by the Bankruptcy Court, and, subject to
paragraph 14 hereof, GEES and GEES -- Dallas shall reasonably
cooperate with such parties in connection with such review process.
16. Anything herein to the contrary notwithstanding, the obligations of
the applicable parties under each of paragraphs 2 and 6 hereof shall
be immediately effective upon the approval of the MOU by the
Bankruptcy Court as set forth herein, without regard to the other
conditions precedent, as set forth in paragraph 1 hereof.
17. This term sheet 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.
18. This term sheet 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.
This term sheet has been executed as of the date first above written.
US AIRWAYS, INC.
By: /s/ Stephen Morrell
---------------------------------
Title: Vice President and Treasurer
---------------------------------
US AIRWAYS GROUP, INC.
By: /s/ Stephen Morrell
---------------------------------
Title: Treasurer
--------------------------------
AMERICA WEST AIRLINES, INC.
By: /s/ W. Douglas Parker
-------------------------
Title: Chief Executive Officer
GE ENGINE SERVICES, INC.
By: /s/ illegible
---------------------------------
Title: Vice President
--------------------------------
GE ENGINE SERVICES -- DALLAS, LP
By: GE Engine Services - Dallas, Inc.
----------------------------------------
General Partner
By: /s/ illegible
-----------------------------------
Title: Vice President
--------------------------------
With respect to paragraph 11, agreement confirmed:
CFM INTERNATIONAL, INC.
By: /s/ illegible
------------------------------------------
Title: Finance Director, CFM International
---------------------------------------
[EXHIBITS A-C REDACTED]