EXHIBIT 99.1
MEMORANDUM OF UNDERSTANDING
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This memorandum of understanding, dated May 23 , 2000 (this
"Agreement"), by and among the parties signatory hereto (each a "party" and
collectively, the "parties"), confirms the mutual understanding of the parties
with respect to the proposed acquisition by an entity to be formed by Robert
L. Johnson ("Johnson") of certain assets (the "Assets") of US Airways Group,
Inc. ("US Airways"), as more specifically identified on the term sheet
attached hereto as Attachment I (the "Term Sheet"). The parties agree that the
Term Sheet, in addition to identifying the Assets, sets forth the principal
terms and provisions to be included in the definitive documentation (the
"Transaction Documents") with respect to the acquisition of the Assets by
Johnson.
1. Definitive Documentation. The parties hereby agree to use their
good faith reasonable best efforts to prepare promptly and, as the case may
be, consistent with the goal of achieving antitrust clearance for the
transactions contemplated by the Merger Agreement, dated as of May 23 , 2000
(the "Merger Agreement"), among US Airways, UAL Corporation ("UAL") and Yellow
Jacket Acquisition Corp., execute and deliver, adopt or provide expanded
agreements and documents reflecting the terms and provisions set forth in the
applicable portion of the Term Sheet and containing other customary and
appropriate provisions for agreements and documents of the type contemplated
by the applicable portion of the Term Sheet (the "Transaction Documents").
2. Satisfaction of Merger Agreement Covenant. The parties agree that
the consummation of the transaction contemplated by the Term Sheet shall be
deemed to satisfy UAL's obligation, pursuant to the first sentence of Section
5.03(a) of the Merger Agreement, to divest the Assets, and provide the assets,
facilities and services set forth on Exhibit A to the Merger Agreement, but
shall not be deemed to satisfy any other obligation of UAL under Section
5.03(a) of the Merger Agreement.
3. No Solicitation. The parties agree that, from the date hereof
until such time as this Agreement is terminated in accordance with its terms,
none of the parties, nor any of their respective directors, officers,
employees, advisors, affiliates or representatives shall (i) solicit,
initiate, encourage, or take any action knowingly to facilitate, any inquiry,
proposal or offer from any person relating to, or that is reasonably likely to
lead to, the making of a proposal by such person to acquire the
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Assets or any portion thereof (a "Competing Proposal") or (ii)
participate in any negotiations or substantive discussions regarding, or
furnish to any person any information with respect to, or otherwise cooperate
in any way with, a Competing Proposal; provided, however, that this Section 3
shall not apply to UAL or any of its directors, officers, employees, advisors,
affiliates or representatives if a Takeover Proposal (as defined in the Merger
Agreement) has been made by anyone other than UAL and UAL or any of its
directors, officers, employees, advisors, affiliates or representatives takes
any of the actions otherwise prohibited by this Section 3 with the goal of
formulating a plan that, in UAL's good faith judgment, is more likely than
this Agreement to result in antitrust clearance for the Merger (as defined in
the Merger Agreement).
4. Conditions. The obligations of Johnson to consummate the
transactions contemplated by this Agreement and the Term Sheet is subject,
among other things, to Johnson having obtained, prior to the closing of the
transactions contemplated by the Merger Agreement, sufficient financing to
acquire the Assets on terms and conditions acceptable in form and substance to
Johnson. As a condition to the execution of definitive agreements relating to
the sale and purchase of the Assets and the provision of the related
facilities and services, Johnson will be required to deliver binding
commitment letters relating to such financing to UAL in form and substance
reasonably acceptable to UAL (it being acknowledged and agreed that such
commitment letters may be subject to conditions typical of transaction of the
type contemplated hereby but shall not be subject to a syndication condition
or a due diligence condition).
5. Binding Agreement. The parties intend to be legally bound by the
terms of this Agreement and the terms set forth on the Term Sheet
notwithstanding that the expanded agreements and documents reflecting the
terms and provisions set forth on the Term Sheet have not been completed and
executed.
6. Termination. This Agreement shall automatically terminate, and
the obligations of the parities hereto shall immediately cease, upon the
occurrence of any of the following events: (i) termination of the Merger
Agreement; (ii) delivery of written notice of termination by any party to the
other parties hereto, which notice may not be delivered before ninety (90)
days from the date first set forth above; or (iii) delivery of written notice
of termination signed by any two parties to the other party.
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7. Expenses. If, prior to the consummation of the transactions
contemplated by this Agreement and the Term Sheet, this Agreement (or the
Transaction Documents) is terminated for any reason other than solely as a
result of a breach by Johnson, then US Airways shall, upon request of Johnson,
reimburse Johnson for up to $2 million of his out- of-pocket expenses incurred
in connection with this Agreement, the Transaction Documents and the
transactions contemplated hereby and thereby, including, without limitation,
reasonable fees and expenses of accountants, attorneys and financial advisors,
and costs and expenses associated with financing of the transactions
contemplated hereby and thereby and regulatory compliance.
8. Miscellaneous. This Agreement may be executed by facsimile in
several counterparts, each of which, when executed by a party hereto, shall be
deemed to be an original and such counterparts shall together constitute one
and the same instrument.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
/s/ Robert L. Johnson
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Robert L. Johnson
UAL CORPORATION
By: /s/ Frederic F. Brace
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Name: Frederic F. Brace
Title: Senior Vice President, Finance
US AIRWAYS GROUP, INC.
By: /s/ Lawrence M. Nagin
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Name: Lawrence M. Nagin
Title: Executive Vice
President - Corporate Affairs and
General Counsel
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ATTACHMENT I
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May 22, 2000
DC Air
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1. PSA Will Be The Vehicle To Create DC Air.
2. Aircraft:
o 8 Dornier 328's, leases transferred from PSA subsidiary, tail
numbers specified by US Airways subject to consent of United,
which consent shall not be unreasonably withheld
o 19 Regional Jets, operated by Mesa and/or Chautauqua, existing
contracts assigned to DC Air (includes one spare)
o 10 Wet-leased B73 7-200 Advanced (JT8D- 1 5 powered) aircraft,
for a transition period
3. Employees (subject to necessary labor approvals):
o Necessary management structure to appropriately manage DC Air's
operations
o The number and type of employees required to operate the 8
Dornier 328s will stay with PSA when it transfers to DC Air
o In transaction, no other US Airways or PSA employees will become
employees of DC Air
o United will provide interim employees for up to six months to
staff "open" positions while DC Air hires and trains, if needed,
at United's cost
4. Transition Wet-Lease for B737-200s:
o 10 aircraft to be wet-leased for initial period of two years
o If necessary, extension beyond two years until DC Air obtains
other aircraft on the market or through a dry-lease arrangement
with United; not to exceed four years total
o Wet-lease rates:
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- Per-aircraft monthly lease rate equal to the weighted
average (based on the number aircraft leased) of rates
currently in place between US Airways and Vanguard and IMP
for B737-200 aircraft, assuming full maintenance life (if
aircraft with less than full maintenance life provided,
maintenance reserves to be adjusted accordingly)
- Pilot rates (i.e., cost per block hour), as follows: (i)
Year 1 at current MetroJet block hour rates; (ii) Years 2
and beyond at US Airways block hour rates unless United
rates have become applicable to US Airways pilots, and in
that case at United block hour rates
- US Airways flight attendant rates (i.e., cost per block
hour) as follows: (i) Year 1 at current US Airways block
hour rates; (ii) Years 2 and beyond at US Airways block
hour rates unless United rates have become applicable to
US Airways flight attendants, and in that case at United
block hour rates
- Line maintenance rates (i.e., cost per visit taking into
account other station activity) at United's cost of
providing service - Maintenance reserves for airframe and
engines at the weighted average (based on the number of
aircraft leased) of rates currently in place between US
Airways and Vanguard and IMP for B737-200 aircraft, and
accounting for remaining maintenance life
o DC Air can discontinue wet lease on any given aircraft with
4-month notice
5. Dry Lease for B737-200s:
o Post wet-lease, at DC Air's option, DC Air and United will
negotiate in good faith a dry-lease arrangement for up to 10
B737-200 Advanced aircraft
6. Slots:
o 119 air carrier (jet) slots and 103 commuter slots at DCA. If
US Airways and/or its subsidiaries own more than 1 03 commuter
slots at DCA, then the number of commuter slots shall be
increased by the amount of such excess, and the number of jet
slots reduced by the amount of such excess, up to 1 3 slots
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o Exact slot times will be determined by United, US Airways and
DC Air, so as to reasonably accommodate United's and DC Air's
scheduled services. The parties recognize that both United and
DC Air will need to make adjustments to ensure that both
parties may offer viable schedules
7. Airport Facilities
o DC Air will assume the following leases:
- Seven gates at DCA, contiguous or reasonably contiguous,
that work for the operation of DC Air (necessary,
sufficient and reasonably suited)
- Gates at other airports served by both United/US Airways
and DC Air, same conditions
- Ticket counter, ramp, aircraft parking, back office space,
etc., same conditions.
- Ground handling equipment, spare parts, and other related
assets, same conditions
o United and DC Air will discuss optimal line maintenance
facility needs for DC Air, and negotiate a solution that is
necessary, sufficient and reasonably suited to DC Air' 5
requirements, with the provision that DC Air may request, and
if reasonably requested (from the perspective of DC Air' s
business needs) United will provide, US Airways' line hangar at
DCA. DC Air will assume the lease of any line maintenance
facilities provided.
8. Services
o If requested by DC Air, United will provide the following
services at "Market Rate" (If a spread exists in market rates,
United will provide services at the low end of rates provided
for comparable goods and services; and DC Air will have
standard industry "out clauses")
- Fuel, including in-aircraft servicing, for a period of
five years
- Station handling, for a period of five years
- Customary occasional use gate agreements, if gate is
available when requested, for a period of seven years
- Maintenance and training related to dry-leased B737-200
aircraft, for a period of five years
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- Access to club facilities, for a period of five years
- Interline ticketing and baggage agreement (standard
industry terms), for a period of five years
9. Consulting Services
o Consulting support as DC Air builds operational experience and
management team, for up to two years, at United' s cost
10. Partnering: DC Air will enter into good faith
negotiations toward partnering (i.e., frequent
flyer/code share relationship, etc.) with other
carriers if reasonably requested by United
11. Assignment: Buyer will not assign rights or
obligations to another entity
12. Change of control: If Buyer ceases to hold majority
equity / control (other than through public offering)
or disposes of all or substantially all of the assets,
United will have no further obligations
13. "No Flip": If Buyer sells majority equity interest /
control (other than through public offering) or
disposes of all or substantially all of the assets,
within three years of startup, if price is above
purchase price then DC Air will pay United the amount
of the excess
14. Price: $141.2 Million
15. Liabilities: Buyer will assume in the definitive
documentation all liabilities primarily related to the
DC Air business
16. Indemnification: United's obligation to indemnify
Buyer in the definitive documentation shall be limited
to (x) in the case of losses relating to any breach of
a representation or warranty, 40% of the purchase price
paid to United by Buyer, and (y) in the case of all
losses, the purchase price paid by Buyer