Exhibit 10.3

 

Execution Copy

 

INVESTMENT AGREEMENT

 

dated as of March 15, 2005

 

among

 

WEXFORD CAPITAL LLC,

 

REPUBLIC AIRWAYS HOLDINGS INC.,

 

US AIRWAYS GROUP, INC.

 

and

 

US AIRWAYS, INC.

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TABLE OF CONTENTS

 

             Page

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ARTICLE I DEFINITIONS    2     Section 1.01   Definitions    2 ARTICLE II
ISSUANCE AND PURCHASE OF NEW COMMON STOCK    10     Section 2.01   Issuance and
Purchase of New Common Stock    10     Section 2.02   Slots Option    10    
Section 2.03   Closing    10     Section 2.04   Terms of Additional Investments
   11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY    11    
Section 3.01   Corporate Organization and Qualification    11     Section 3.02  
Authorization; No Contravention    12     Section 3.03   Consents; No Conflicts
   12     Section 3.04   Court Orders    12     Section 3.05   Capitalization;
Securities    12     Section 3.06   Subsidiaries    13     Section 3.07  
Company Reports; Financial Statements    13     Section 3.08   Information
Provided    14     Section 3.09   Absence of Certain Changes or Events    14    
Section 3.10   Property    14     Section 3.11   Taxes    14     Section 3.12  
Financial Advisors and Brokers    14     Section 3.13   Insurance    15    
Section 3.14   Regulatory Status    15     Section 3.15   Collective Bargaining
Agreements and Employee Contracts    15 ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF THE INVESTOR    15     Section 4.01   Organization    15    
Section 4.02   Authorization of Agreements    15     Section 4.03   Consents; No
Conflicts    16     Section 4.04   Financial Advisors and Brokers    16    
Section 4.05   Ownership of Equity Securities; Purpose of Investment    16    
Section 4.06   Citizenship    16     Section 4.07   Financing    16 ARTICLE V
GOVERNANCE    16     Section 5.01   Board of Directors    16     Section 5.02  
Directors’ Liability and Indemnification    17 ARTICLE VI PRE-CLOSING COVENANTS
   17     Section 6.01   Taking of Necessary Action    17     Section 6.02  
Notifications    18

 

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    Section 6.03   Republic Aircraft Transaction    18     Section 6.04  
Definitive Existing Jet Service Agreement    18     Section 6.05   Maintenance
of Properties: Insurance    18     Section 6.06   Delivery of Reports    19    
Section 6.07   HSR    19     Section 6.08   Notification from Investor    19    
Section 6.09   Business Plan    19     Section 6.10   Effectiveness Prior to
Omnibus Order    20 ARTICLE VII ADDITIONAL COVENANTS    21     Section 7.01  
Financial and Other Information    21     Section 7.02   Publicity    21    
Section 7.03   Registration Rights and Listing of New Common Stock    21    
Section 7.04   Restrictions on Sale    21     Section 7.05   Additional Jet
Service Aircraft    22     Section 7.06   Investor Financing    22     Section
7.07   Chautauqua Pre-Petition Claim    22 ARTICLE VIII CONDITIONS    22    
Section 8.01   Conditions to Investor’s Obligations    22     Section 8.02  
Conditions to the Company’s Obligations    26 ARTICLE IX TERMINATION    28    
Section 9.01   Termination of Agreement    28     Section 9.02   Effect of
Termination    28 ARTICLE X MISCELLANEOUS    29     Section 10.01   Fees and
Expenses    29     Section 10.02   Survival of Representations and Warranties   
29     Section 10.03   Specific Performance    29     Section 10.04   General
Interpretive Principles    29     Section 10.05   Notices    30     Section
10.06   Entire Agreement; Amendment    31     Section 10.07   Counterparts    31
    Section 10.08   Governing Law    31     Section 10.09   Successors and
Assigns    32     Section 10.10   No Third-Party Beneficiaries    32     Section
10.11   Confidentiality    32

 

EXHIBIT A-1    Slots Option EXHIBIT A-2    Gates EXHIBIT B    Republic Aircraft
Transaction EXHIBIT C    Amendments to Original Jet Service Agreement EXHIBIT D
   Terms of New Jet Service Agreement EXHIBIT E    Additional Jet Service
Aircraft EXHIBIT F    Lease Formula

 

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Schedule 1    Shares of New Common Stock Schedule 3.03    Approvals Required of
the Company and the Operating Companies in connection with the Transactions
Schedule 3.06    Subsidiaries of the Company Schedule 3.07(a)    SEC Reports Not
Filed Schedule 3.15    Status of Collective Bargaining Agreements and Employment
Agreements Schedule 4.03    Approvals Required by the Investor in connection
with the Transactions

 

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INVESTMENT AGREEMENT

 

THIS INVESTMENT AGREEMENT (together with all exhibits and schedules hereto and
as the same may be amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof, the “Agreement”), dated as of March 15,
2005, by and among Wexford Capital LLC, a Connecticut limited liability company,
on its own behalf and on behalf of its affiliated funds and managed accounts
(collectively, “Wexford”), Republic Airways Holdings Inc., a Delaware
corporation (“Republic”, and together with Wexford, the “Investor”), US Airways,
Inc., a Delaware corporation, and its successors (including, as the context may
require, on or after the Effective Date, as reorganized pursuant to the
Bankruptcy Code) (“US Airways”) and US Airways Group, Inc., a Delaware
corporation, and its successors (including, as the context may require, on or
after the Effective Date, as reorganized pursuant to the Bankruptcy Code) (the
“Company”).

 

W I T N E S S E T H:

 

WHEREAS, on September 12, 2004, the Company and certain of its Subsidiaries (the
“Debtor Subsidiaries” and together with the Company, the “Debtors”) filed
voluntary petitions (the “Cases”) for protection under chapter 11 of the United
States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy
Court for the Eastern District of Virginia, Alexandria Division (the “Bankruptcy
Court”) to enable the Debtors to be restructured pursuant to one or more plans
of reorganization (collectively, the “Plan”);

 

WHEREAS, the Debtors have continued in the possession of their assets and in the
management of their businesses pursuant to Sections 1107 and 1108 of the
Bankruptcy Code;

 

WHEREAS, in connection herewith US Airways intends to enter into and, subject to
the Omnibus Order, assume (under Section 365 of the Bankruptcy Code) an amended
and restated jet service agreement with Chautauqua, having the terms set forth
on Exhibit C (as amended and restated, the “Existing Jet Service Agreement”);

 

WHEREAS, pursuant to the Plan, the reorganized Company intends to cancel the
existing outstanding Equity Securities of the Company upon the Effective Date
and issue the New Common Stock;

 

WHEREAS, subject to the other terms and conditions contained herein, the
Investor desires to commit to provide equity financing to the Company;

 

WHEREAS, if the Company decides to draw down such commitment, then the
reorganized Company intends to issue and sell to the Investor, and the Investor
intends to purchase from the reorganized Company, the New Common Stock (such
purchase, issuance and sale, the “Investment”) in exchange for the Investment
Price;

 

WHEREAS, the parties intend that the transactions contemplated hereby will be
implemented by, and take effect subject to the occurrence of the Effective Date
and simultaneously with the consummation of, the Plan (except as to those
transactions that are expressly intended to take effect at another date);

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WHEREAS, the parties intend that all of the transactions contemplated hereby are
intended to be treated as a single integrated transaction subject to the
approval of the Bankruptcy Court as soon as reasonably practicable after the
date hereof and as part of a settlement of issues related to the Original Jet
Service Agreement; and

 

WHEREAS, the Company and the Investor desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated herein;

 

NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows, in the case of the Company, subject to Bankruptcy Court approval of
this Agreement:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:

 

“Additional Jet Service Aircraft” has the meaning set forth in Exhibit E.

 

“Affiliate” means, with respect to any specified Person, a Person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the specified Person, where “control”
(including the terms “controlling,” “controlled by” and “under common control
with”) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract, or otherwise; provided,
however, that when used with respect to the Company, “Affiliate” shall not
include Retirement Systems of Alabama Holdings LLC or any entity that would be
deemed an Affiliate of the Company solely by virtue of RSA’s being a stockholder
in the Company.

 

“Agreement” has the meaning set forth in the preamble hereto.

 

“Air Wisconsin DIP Agreement” means the Junior Secured Debtor-in-Possession
Credit Facility Agreement dated as of February 18, 2005, by and among US
Airways, Inc., as Borrower, certain affiliates thereof as guarantors, and
Eastshore, as lender, as amended, supplemented or otherwise modified from time
to time.

 

“Amended Business Plan” has the meaning set forth in Section 6.09(b) hereof.

 

“Approvals” has the meaning set forth in Section 8.01(d) hereof.

 

“ATSB Lender Parties” has the meaning set forth in the definition of “ATSB Loan
Agreement” below.

 

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“ATSB Loan Agreement” means that certain $1,000,000,000 Loan Agreement, dated as
of March 31, 2003, among the Company, the Operating Companies and the ATSB
Lender Parties specified therein (the “ATSB Lender Parties”), together with all
agreements and instruments entered into in connection therewith, including,
without limitation, the cash collateral orders relating to the Company’s and the
Operating Companies’ use of cash collateral during the pendency of the Cases, in
each case as amended, supplemented or otherwise modified from time to time.

 

“Bankruptcy Code” has the meaning set forth in the recitals hereto.

 

“Bankruptcy Court” has the meaning set forth in the recitals hereto.

 

“Board” means the board of directors of the Company (including, with respect to
periods following the Effective Date, the reorganized Company).

 

“Business Day” means any day other than a Saturday, Sunday or a day on which
banking institutions of the State of New York are authorized by law or executive
order to close.

 

“Bylaws” means the bylaws of the Company, as amended from time to time
(including, with respect to periods following the Effective Date, the bylaws of
the reorganized Company).

 

“Cases” has the meaning set forth in the recitals hereto.

 

“Certificate of Incorporation” means the Certificate of Incorporation of the
Company, as amended from time to time, including any certificate of designation
relating to any Equity Securities of the Company (including, in each case, with
respect to periods following the Effective Date, of the reorganized Company).

 

“Certificated Air Carrier” means a Citizen of the United States holding an
aircraft operating certificate issued pursuant to Chapter 447 of Title 49 of the
United States Code or any analogous successor provision of the United States
Code, for aircraft capable of carrying ten or more individuals or 6,000 pounds
or more of cargo or that otherwise is certified or registered to the extent
required to fall within the purview of 11 U.S.C. § 1110 or any analogous
successor provision of the Bankruptcy Code.

 

“Chapter 11” means Chapter 11 of the Bankruptcy Code.

 

“Chautauqua” means Chautauqua Airlines, Inc.

 

“Citizen of the United States” has the meaning given to such term in Section
40102(a)(15) of Title 49 of the Transportation Code, or any subsequent
legislation that amends, supplements or supersedes such provisions.

 

“Closing” means the closing of the issuance, sale and purchase of the New Common
Stock pursuant to Section 2.01 hereof.

 

“Closing Date” has the meaning set forth in Section 2.03(a) hereof.

 

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“Collective Bargaining Agreements” means collectively the collective bargaining
agreements between (A) US Airways and (i) the Transport Workers Union Locals
545, 546 and 547, as modified during the Cases with the Bankruptcy Court’s
approval pursuant to the October 26, 2004 Consent Order Approving Modifications
to Debtors’ Collective Bargaining Agreements With Certain Groups Within the
Transport Workers Union, (ii) the Communications Workers of America, AFL-CIO, as
modified during the Cases with the Bankruptcy Court’s approval pursuant to the
January 6, 2005 Consent Order Approving Modifications to Debtors’ Collective
Bargaining Agreement with the Communications Workers of America; (iii) the Air
Line Pilots Association, International, as modified during the Cases with the
Bankruptcy Court’s approval pursuant to the October 26, 2004 Consent Order
Approving Modifications to the Debtors’ Collective Bargaining Agreement with the
Air Line Pilots Association, International; (iv) the Association of Flight
Attendants-CWA, AFL-CIO which was approved by the Bankruptcy Court’s January 11,
2005 Order Approving Debtors’ Entry Into Collective Bargaining Agreement with
the Association of Flight Attendants-CWA, AFL-CIO; and (v) the International
Association of Machinists and Aerospace Workers: Mechanical and Related
(District 142), Maintenance Training Specialists (District 142), and Fleet
Service (District 141), which were approved by the Bankruptcy Court’s January
27, 2005 Order Approving Debtors’ Entry into Collective Bargaining Agreements
with the International Association of Machinists and Aerospace Workers; (B)
Allegheny Airlines and (i) the Air Line Pilots in the service of Allegheny
Airlines, Inc. as represented by the Air Line Pilots Association, effective May
1, 1999; (ii) the Mechanics and Related Employees in the service of Allegheny
Airlines, Inc. as represented by the Air Line Pilots Association, International,
effective April 2, 2001; and (iii) the International Brotherhood of Teamsters,
effective December 16, 2001; (C) Piedmont Airlines and (i) the Association of
Flight Attendants, AFL-CIO, effective October 31, 2001; (ii) the Air Line Pilots
Association, International, effective May 16, 2000; (iii) the International
Association of Machinists and Aerospace Workers: Flight Dispatchers (District
141), effective March 1, 1999; Mechanic & Related (District 141), effective
January 25, 1999; and, Stock Clerks (District 141), effective September 29,
2000; (D) PSA Airlines and (i) the Air Line Pilots Association, International,
effective May 10, 2002; (ii) the Association of Flight Attendants, AFL-CIO,
effective January 1, 1997; (iii) the International Association of Machinists and
Aerospace Workers: Air Transport (District 141M), effective September 24, 2001;
and (iv) the International Brotherhood of Teamsters, effective March 3, 1997.

 

“Company” has the meaning set forth in the preamble hereto.

 

“Confirmation Order” means a Final Order of the Bankruptcy Court approving the
Plan.

 

“Contractual Obligation” means, as to any Person, any obligation arising out of
any indenture, mortgage, deed of trust, contract, agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound (including, without limitation, any debt security issued by
such Person).

 

“Creditors’ Committee” means the Committee of Unsecured Creditors appointed in
the Cases pursuant to Section 1102 of the Bankruptcy Code.

 

“DCA” means Ronald Reagan Washington National Airport.

 

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“Debtors” has the meaning set forth in the recitals hereto.

 

“Debtor Subsidiaries” has the meaning set forth in the recitals hereto.

 

“Disclosure Statement” means a disclosure statement with respect to the Plan.

 

“Eastshore” means Eastshore Aviation, LLC.

 

“Effective Date” means the effective date of the Plan.

 

“Equity Securities” shall mean (i) capital stock of, or other equity interests
in, any Person, (ii) securities convertible into or exchangeable for shares of
capital stock, voting securities or other equity interests in such Person or
(iii) options, warrants or other rights to acquire the securities described in
clauses (i) and (ii), whether fixed or contingent, matured or unmatured,
contractual, legal, equitable or otherwise.

 

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

 

“Existing Jet Service Agreement” has the meaning set forth in the recitals
hereto.

 

“FAA” means Federal Aviation Administration.

 

“Final Approved Business Plan” has the meaning set forth in Section 6.09(b)
hereof.

 

“Final Order” means an order or judgment of the Bankruptcy Court, or other court
of competent jurisdiction, as entered on the docket in the Cases or the docket
of any other court of competent jurisdiction, that has not been reversed,
stayed, modified or amended, and as to which the time to appeal or seek
certiorari or move for a new trial, reargument or rehearing has expired, and no
appeal or petition for certiorari or other proceedings for a new trial,
reargument or rehearing has been timely taken, or as to which any appeal that
has been taken or any petition for certiorari that has been timely filed has
been withdrawn or resolved by the highest court to which the order or judgment
was appealed or from which certiorari was sought or the new trial, reargument or
rehearing shall have been denied or resulted in no modification of such order.

 

“Fully Diluted Basis” means the number of shares of New Common Stock, without
duplication, which are issued and outstanding or owned or held, as applicable,
at the date of determination plus the number of shares of New Common Stock
issuable pursuant to any Equity Securities then outstanding convertible into or
exchangeable or exercisable for (whether or not subject to contingencies or
passage of time, or both) shares of New Common Stock, exclusive of shares of New
Common Stock issuable to General Electric Capital Corporation (“GECC”) in
accordance with the Convertible Note (the “GECC Convertible Note”) to be
received by GECC upon the Debtors emergence from the Cases pursuant to that
certain Master Memorandum of Understanding and related term sheets entered into
as of November 24, 2004, among the Debtors and GECC.

 

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“GAAP” means U.S. generally accepted accounting principles as in effect at the
relevant time or for the relevant period.

 

“Gates Option” has the meaning set forth in Exhibit A-1.

 

“Gates” shall mean all of the right, title, privilege, interest and authority
held by the Operating Companies in connection with the right to use or occupy
space at three (3) gates at DCA and two (2) gates at LGA for the
embarkation/boarding and debarkation/deboarding of passengers, including but not
limited to, related preferential use or exclusive use holdrooms and jetways, and
shall include related airport facilities necessary for an air carrier to conduct
scheduled operations at such airports including ticket counter space, baggage
claim and makeup space, and administrative office space, all as more
specifically set forth on Exhibit A-2.

 

“GECC” has the meaning set forth in the definition of “Fully Diluted Basis”
above.

 

“GECC Convertible Note” has the meaning set forth in the definition of “Fully
Diluted Basis” above.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

“Hearing” means the hearing conducted in the Cases in the Bankruptcy Court
seeking approval of the Motion and the Omnibus Order.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations promulgated thereunder.

 

“Independent Director” means a member of the Board of the reorganized Company
who meets the standards for independence of the Nasdaq National Market or the
national stock exchange on which the New Common Stock is then quoted or listed
as of the time of such determination.

 

“Initial Business Plan” has the meaning set forth in Section 6.09(a) hereof.

 

“Initial Business Plan Review Period” has the meaning set forth in Section
6.09(a) hereof.

 

“Investor” has the meaning set forth in the preamble hereto.

 

“Investor Director” means any member of the Board or the reorganized Company
nominated by the Investor in accordance with Section 5.01 hereof.

 

“Investment” has the meaning set forth in the recitals hereto.

 

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“Investment Price” has the meaning set forth in Section 2.01 hereof.

 

“Jet Service Agreements” means the Existing Jet Service Agreement and the New
Jet Service Agreement, and individually, a Jet Service Agreement.

 

“Law” means any law, treaty, statute, ordinance, code, rule or regulation of a
Governmental Authority or judgment, decree, order, writ, award, injunction or
determination of an arbitrator or court or other Governmental Authority.

 

“LGA” means La Guardia Airport.

 

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever intended for security (including any conditional sale or other
title retention agreement, any easement, right of way or other encumbrance on
title to real property, and any financing lease having substantially the same
economic effect as any of the foregoing).

 

“Material Adverse Effect” means any condition, circumstance or event or series
of conditions, circumstances or events that, individually or in the aggregate,
has had or could reasonably be expected to have (a) a material adverse effect on
the condition (financial or otherwise), properties, assets, business, results of
operations or prospects of the Company and its Subsidiaries taken as a whole, or
(b) could reasonably be expected to prevent or limit or restrict in any material
respect the Company or any of its Subsidiaries or the Investor from performing
their respective obligations hereunder or under any of the Transaction Documents
to which any of them are a party or consummating any of the transactions
hereunder or thereunder, provided that, in addition to and not by way of
limitation of the foregoing, any of the following shall be deemed to constitute
a Material Adverse Effect: (i) a material increase in the cost of fuel over the
cost assumed in the most recent Final Approved Business Plan or (ii) a terrorist
event or war (whether declared or not) that causes the cessation or any material
interruption of a material portion of the Operating Companies’ business
operations.

 

“Motion” means the motion and any supporting papers seeking approval of the
Transactions, in form and substance reasonably acceptable to the Investor and
providing, inter alia, not less than a ten (10) day notice period prior to the
Hearing and providing for confidential treatment of portions of the Transaction
Documents as mutually agreed by the Company and the Investor.

 

“New Common Stock” has the meaning set forth in Section 2.01 hereof.

 

“New Jet Service Agreement” has the meaning set forth in Exhibit A-1 hereto.

 

“Omnibus Order” means the Final Order of the Bankruptcy Court authorizing the
Company and its Subsidiaries to enter into and execute definitive Transaction
Documents and approving the Transactions under Sections 105, 363, 364 and 365 of
the Bankruptcy Code and applicable Bankruptcy Rules, in form and substance
reasonably acceptable to the Investor and the Company.

 

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“Operating Companies” means US Airways, PSA Airlines, Inc., a Pennsylvania
corporation, Piedmont Airlines, Inc., a Maryland corporation and Material
Services Company, Inc., a Delaware corporation.

 

“Original Jet Service Agreement” means the Jet Service Agreement between
Chautauqua and US Airways, dated March 19, 1999, as amended through the date
hereof.

 

“Owned Aircraft Leaseback” has the meaning set forth in Exhibit B hereto.

 

“Person” means any individual, corporation, company, association, partnership,
limited liability company, joint venture, trust, unincorporated organization, or
Governmental Authority.

 

“Plan” has the meaning set forth in the recitals hereto.

 

“Postpetition,” when used with respect to any agreement, instrument or any
obligation arising thereunder, any claim or proceeding or any other matter,
means an agreement or instrument that was first entered into or first became
effective, an obligation, claim or proceeding that first arose or was first
instituted, or another matter that first occurred, after the commencement of the
Cases.

 

“Regulatory Approvals” means, to the extent necessary in connection with the
consummation of the transactions contemplated by the Transaction Documents, any
and all certificates, permits, licenses, franchises, concessions, grants,
consents, approvals, orders, registrations, authorizations, waivers, variances
or clearances from, or filings or registrations with, Governmental Authorities
(and shall not include clearance or approval under the HSR Act or any other Law
that may require waiting periods prior to consummation of the Transactions).

 

“Representatives” means, with respect to any Person, such Person’s officers,
directors, employees, agents, attorneys, accountants, consultants, equity
financing partners or financial advisors or other Person associated with, or
acting on behalf of, such a Person.

 

“Republic” has the meaning set forth in the preamble hereto.

 

“Republic Aircraft Transaction” means the aircraft purchase and lease
transactions described more specifically in Exhibit B.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“SEC Reports” has the meaning set forth in Section 3.07(a) hereof.

 

“Securities Act” means the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

 

“Slot” means all of the rights and operational authority now or hereafter
acquired or held by any of the Operating Companies in and to the operating
authority granted by the FAA pursuant to Title 14 of the United States Code of
Federal Regulations, Part 93, Subparts K and S (as amended from time to time by
regulation or statute, or any successor or recodified regulation) to conduct one
Instrument Flight Rules (as defined under the federal aviation regulations)
landing or takeoff operation in a specified time period at LGA or DCA.

 

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“Slots Option” means the option described more specifically in Exhibit A-1.

 

“Subsidiary” means as to any Person, any other Person of which more than fifty
percent (50%) of the shares of the voting stock or other voting interests are
owned or controlled, or the ability to select or elect more than fifty percent
(50%) of the directors or similar managers is held, directly or indirectly, by
such first Person or one or more of its Subsidiaries or by such first Person and
one or more of its Subsidiaries.

 

“Substantial Investor” means a new investor who, individually or together with
such investor’s Affiliates, invests in the aggregate at least $100 million in
New Common Stock in the reorganized Company in connection with the Plan, which
shall include Eastshore (to the extent it qualifies as such in the Air Wisconsin
DIP Agreement) and, if the Closing occurs, the Investor. For purposes of the
definition in the immediately preceding sentence, an investor and its Affiliates
shall be deemed one and the same Substantial Investor if they satisfy the
criteria of such definition.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties,
fees, deductions, charges or withholdings imposed by any Governmental Authority.

 

“Title 14” means Title 14 of the United States Code, as amended and in effect
from time to time, and the regulations promulgated pursuant thereunder.

 

“Title 49” means Title 49 of the Code of Federal Regulations, as amended and in
effect from time to time.

 

“Transactions” means the execution, delivery and performance of this Agreement
and the issuance of New Common Stock hereunder, and the execution, delivery and
performance of the documents described in Articles II, V and VIII hereof, in
each case by the applicable party thereto, including, without limitation, the
Slots Option, the Gates Option, the Jet Service Agreements, the documents
relating to the Republic Aircraft Transaction and the payment of fees to the
Investor as provided herein.

 

“Transaction Documents” means this Agreement, the Plan, the Confirmation Order,
the documents described in Articles II, V and VIII and all other documents
necessary to consummate the Transactions and other arrangements contemplated
hereby.

 

“Transportation Code” means Title 49 of the United States Code which, among
other things, recodified and replaced the U.S. Transportation Code of 1958 and
the regulations promulgated thereunder, or any subsequent legislation that
amends, supplements or supersedes such provisions.

 

“Unrestricted Commuter Slots” means the Slots allocated by FAA as commuter slots
under Title 14 of the United States Code of Federal Regulations, Part 93,
Subparts K and S (as amended from time to time by regulation or statute, or any
successor or recodified regulation), to which no restrictions or limitations
apply (other than those expressly set forth in such Subparts).

 

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“US Airways” has the meaning set forth in the preamble hereto.

 

“Wexford” has the meaning set forth in the preamble hereto.

 

ARTICLE II

 

ISSUANCE AND PURCHASE OF NEW COMMON STOCK

 

Section 2.01 Issuance and Purchase of New Common Stock.

 

Upon the terms and subject to the conditions set forth in this Agreement, and in
reliance upon the representations and warranties hereinafter set forth, the
Investor grants to the Company an option to require the Investor to purchase for
an aggregate purchase price of one hundred twenty five million dollars
($125,000,000) (the “Investment Price”), that number of shares of common stock
of the reorganized Company (the “New Common Stock”) on a Fully Diluted Basis
determined in accordance with Schedule 1 attached hereto; provided, however,
that in no event shall the New Common Stock issuable to the Investor on a Fully
Diluted Basis as of the Effective Date represent less than 19.2308% of the total
New Common Stock of the reorganized Company. Notwithstanding the immediately
preceding sentence, to the extent that Eastshore agrees to amend the Air
Wisconsin DIP Agreement to provide for a reduction in its equity ownership in
the Company on a Fully Diluted Basis below 19.2308% in the event that any
Substantial Investor makes an investment in the Company, the Investor will also
agree to a comparable (on a pari passu basis with Eastshore and on terms and
conditions no less favorable to the Investor as are accorded to Eastshore in
connection with such agreement) reduction in its equity ownership in the Company
on a Fully Diluted Basis; provided, that in no event shall Investors’ equity
ownership on a Fully Diluted Basis be reduced below 16.6666%. At the Closing, if
the Company exercises the option described above, the reorganized Company will
issue, sell and deliver to the Investor, and the Investor will purchase from the
reorganized Company, the New Common Stock in accordance with the first sentence
of this Section 2.01. The foregoing option shall be deemed terminated and
cancelled if the Company shall not have given the Investor written notice at
least sixty (60) days prior to the Effective Date of its exercise of the option
(indicating the amount it will require Investor to purchase) and such notice
shall be irrevocable unless otherwise consented to by the Investor in its sole
discretion.

 

Section 2.02 Slots Option. Subject to the terms and conditions hereof, the
Investor hereby grants US Airways (and its successor under the Plan) the Slots
Option.

 

Section 2.03 Closing. (a) Subject to the satisfaction or, if permissible, waiver
of the conditions set forth in Sections 8.01 and 8.02 hereof, the Closing shall
take place at the offices of Arnold & Porter LLP, 555 Twelfth Street, NW,
Washington D.C. 20004, at 10:00 a.m., Washington D.C. time, on the Effective
Date or at such other time, date and place as the parties may agree (the date on
which the Closing occurs, the “Closing Date”); provided that the parties shall
use commercially reasonable efforts to have the Closing take place on the
Effective Date.

 

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(b) At the Closing, (i) the reorganized Company shall deliver to the Investor
certificates representing the shares of Common Stock to be purchased by, and
sold to, the Investor pursuant to Section 2.01 hereof (registered in the names
and in the denominations designated by the Investor at least two Business Days
prior to the Closing Date), together with the other documents, certificates and
opinions to be delivered pursuant to Section 8.01 hereof, and (ii) the Investor,
in full payment for the shares of Common Stock to be purchased by, and sold to,
the Investor pursuant to Section 2.01 hereof, shall pay to the reorganized
Company as provided in Section 2.01 hereof, an aggregate amount equal to (x) the
Investment Price minus (y) any amounts due as of the Closing Date to the
Investor pursuant to Section 10.01 hereof (such payment to be made in
immediately available funds by wire transfer to the account designated by the
Company, or by such other means as may be agreed between the parties hereto),
and shall deliver the certificate required pursuant to Section 8.02(a) hereof.

 

Section 2.04 Terms of Additional Investments. If the Company, the Operating
Companies or any of their respective Affiliates provides to any Person
(including, but not limited to, any other Substantial Investor) that commits to
acquire any shares of New Common Stock or any other Equity Securities of the
reorganized Company in connection with the Plan, any terms relating to such
acquisition more favorable than those applicable to the Investor pursuant to
this Agreement, then, in each such case, the Company shall provide written
notice to the Investor of such more favorable terms (the “Notice”). Within ten
(10) Business Days following receipt of the Notice, the Investor may by written
notice to the Borrower elect to accept any of the more favorable terms to apply
to the Investor hereunder. If the Investor does not so elect within such ten
(10) Business Day period, the Investor shall have waived its right to accept the
more advantageous terms that were described in the Notice. Anything in this
Section 2.04 to the contrary notwithstanding, the election provided to the
Investor herein shall not be applicable with respect to any distributions of New
Common Stock, subscription rights, or securities exchangeable for or convertible
into equity securities in the reorganized Company to the extent that the
distributions of such securities and rights are to any creditors, shareholders,
management, or employees of the Company or of any of its Subsidiaries, or on
account of the GECC Convertible Note, in connection with the Plan.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to, and agrees with, the Investor as
follows:

 

Section 3.01 Corporate Organization and Qualification. Each of the Company, each
Operating Company and each of their respective Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, and, pursuant to Sections 1107 and 1108 of the Bankruptcy Code and
the orders of the Bankruptcy Court, has all requisite power and authority to
carry on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, does not result in a Material Adverse Effect,
is qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required.

 

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Section 3.02 Authorization; No Contravention. The Transactions to be consummated
by the Company and the Operating Companies are within the respective corporate
powers of the Company and the Operating Companies (subject and after giving
effect to any required approvals of the Bankruptcy Court (including, without
limitation, to the extent applicable, the Confirmation Order) and the Plan) and
have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement and each other Transaction Document entered
into as of the date hereof have been duly executed and delivered by the Company
and the Operating Companies party thereto (as applicable) and constitute
(subject and after giving effect to any required approvals of the Bankruptcy
Court (including, without limitation, to the extent applicable, the Confirmation
Order) and the Plan), a legal, valid and binding obligation of the Company and
such Operating Companies, respectively, enforceable in accordance with its
terms.

 

Section 3.03 Consents; No Conflicts. Except as set forth on Schedule 3.03
hereto, with respect to the Company and the Operating Companies, the
consummation of the Transactions (i) does not require any consent or approval
of, registration or filing with, or any other action by, any Governmental
Authority (subject and after giving effect to any required approvals of the
Bankruptcy Court (including, without limitation, to the extent applicable, the
Confirmation Order) and the Plan), except such as have been obtained or made and
are in full force and effect and except where failure to obtain such consent,
approval, registration, filing or other action has not had a Material Adverse
Effect, (ii) will not violate (A) any applicable law or regulation or (B) the
charter, bylaws or other organizational documents of the Company or any of its
Subsidiaries or any order of any Governmental Authority and except, in each
case, where such violation of applicable law or regulation has not had a
Material Adverse Effect, (iii) will not violate or result in a default under any
Postpetition agreement or Postpetition loan agreement or any other Postpetition
indebtedness agreement or instrument of indebtedness binding upon the Company,
any Operating Company or any of their respective Subsidiaries or its assets
except where such default or violation has not had a Material Adverse Effect and
(iv) will not result in the creation or imposition of any Lien on any assets or
properties of the Company or any of its Subsidiaries.

 

Section 3.04 Court Orders. Subject and after giving effect to any required
approvals of the Bankruptcy Court (including, without limitation, to the extent
applicable, the Confirmation Order) and the Plan, the performance of any action
by the Company or the Operating Companies required or contemplated by this
Agreement or any other Transaction Document is not restrained or enjoined by any
order of the Bankruptcy Court or by any Governmental Authority (either
temporarily, preliminarily or permanently).

 

Section 3.05 Capitalization; Securities. Upon the Closing and after giving
effect to the Confirmation Order, the Plan and the Investment, the authorized,
issued and outstanding capital stock of the reorganized Company shall consist
solely of New Common Stock. Upon the Closing Date, the New Common Stock to be
issued and delivered to the Investor pursuant to the terms hereof, shall have
been duly authorized and validly issued, fully paid, nonassessable and not
subject to preemptive or similar rights of third parties or reserved for
issuance in accordance with the terms of the Plan and Confirmation Order. The
rights, preferences and privileges of the capital stock of the Company shall be
as set forth in the Certificate of Incorporation of the Company, as amended
pursuant to the Plan and in effect upon the Closing.

 

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Section 3.06 Subsidiaries. As of the Closing Date and after giving effect to the
Plan and Confirmation Order, the reorganized Company will have no Subsidiaries
other than those specifically disclosed in Schedule 3.06(a) and all of the
capital stock of, or other equity interests in, each Subsidiary will have been
validly issued, will be fully paid and non-assessable and will be owned by the
reorganized Company, directly or indirectly in the amounts specified in Schedule
3.06(a), free and clear of all Liens and free of any other restriction
(including, without limitation, any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other equity interest other than
those arising under applicable Law).

 

Section 3.07 Company Reports; Financial Statements. (a) Except as set forth on
Schedule 3.07(a) hereto, the Company has made available (including by filing
publicly by EDGAR with the SEC) to the Investor a true and complete copy of (i)
the Annual Report on Form 10-K of each of the Company and, if applicable, US
Airways for each of the fiscal years ended December 31, 2004, 2003 and 2002;
(ii) the Quarterly Report on Form 10-Q of each of the Company and US Airways for
each of the periods ended March 31, 2004, June 30, 2004 and September 30, 2004;
and (iii) each registration statement, report on Form 8-K, proxy statement,
information statement or other report or statement required to be filed by the
Company or US Airways with the SEC since December 31, 2001 and prior to the date
hereof, in each case, in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the “SEC Reports”). As of their
respective dates, the SEC Reports (i) were timely filed with the SEC; (ii)
complied, in all material respects, with the applicable requirements of the
Exchange Act and the Securities Act; (iii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; and (iv) presented
fairly, in each case in accordance with GAAP applied on a consistent basis
throughout the periods covered (except as stated therein or in the notes
thereto), the financial position and results of operations of the entity to
which such report applies as of the date and for the period set forth therein.
Other than the SEC Reports, neither the Company nor US Airways has filed or been
required to file any other reports or statements with the SEC since December 31,
2001.

 

(b) Each of the consolidated balance sheets (including the related notes and
schedules) included in or incorporated by reference into the SEC Reports fairly
presents, in all material respects, the consolidated financial position of the
entities to which it applies as of the date thereof; and each of the
consolidated statements of income (or statements of results of operations),
stockholders’ equity and cash flows (including the related notes and schedules)
included in or incorporated by reference into the SEC Reports fairly presents,
in all material respects, the results of operations, retained earnings and cash
flows, as the case may be, of the entities to which it applies (on a
consolidated basis) for the periods or as of the dates, as the case may be, set
forth therein, in each case in accordance with GAAP applied on a consistent
basis throughout the periods covered (except as stated therein or in the notes
thereto) and in compliance with the rules and regulations of the SEC.

 

(c) Except as disclosed in the SEC Reports, there were no material liabilities
or obligations of any nature of the Company or any of its Subsidiaries required
under GAAP or the rules and regulations of the SEC to be disclosed as of the
date of such SEC Reports. Since the date of the most recently filed SEC Report,
except as disclosed in this Agreement or the SEC Reports, the Company and its
Subsidiaries have not incurred any material liabilities or obligations other
than those incurred in the ordinary course of such company’s business.

 

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Section 3.08 Information Provided. All representations and warranties made by
the Company in this Agreement, and all written certificates, exhibits and
schedules provided by or on behalf of the Company to the Investor pursuant to
the terms of this Agreement, when considered as a whole, are true and correct in
all material respects and do not contain any untrue statement of material fact
or omit to state any material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which they
were made. To the extent that any such information contained projections, such
projections were prepared in good faith on the basis of (i) assumptions, methods
and tests that are consistent with the Company’s past practices and are believed
by the Company to be reasonable and (ii) information believed by the Company to
have been accurate based upon information available to the Company at the time
such projections were furnished to the Investor. The Company has delivered to
the Investor a true and correct copy of each of the ATSB Loan Agreement and the
Air Wisconsin DIP Agreement, including any amendments, supplements and
modifications through the date hereof.

 

Section 3.09 Absence of Certain Changes or Events. Except for the filing of the
Cases, the transactions contemplated by the Transaction Documents or as
otherwise disclosed in the SEC Reports or this Agreement, (i) the Companies,
taken as a whole, have in all material respects conducted their respective
businesses in the ordinary course of business since December 31, 2003, and (ii)
the Companies have not taken any actions, and no events have occurred since
December 31, 2003, that, individually or in the aggregate, have had a Material
Adverse Effect.

 

Section 3.10 Property. Each of the Company and the Operating Companies has (i)
good, marketable and insurable fee title to (in the case of fee interests in
real property), (ii) valid, and in the case of leasehold interests in real
property, insurable, leasehold interests in (in the case of leasehold interests
in real or personal property), or (iii) good title to (in the case of all other
personal property), all of the properties and assets necessary to the conduct of
its business, in each case except where the failure to have such title or
interest has not had a Material Adverse Effect.

 

Section 3.11 Taxes. Each of the Company and its Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(i) to the extent that the failure to do so has not had a Material Adverse
Effect, (ii) with respect to Taxes that are being contested in good faith by
appropriate proceedings and for which the Company or such Subsidiary, as
applicable, has set aside on its books adequate reserves, and (iii) with respect
to Taxes that relate to a Tax period (or portion thereof) ending on or before
the commencement of the Cases and that first became due and payable after the
time of the commencement of the Cases.

 

Section 3.12 Financial Advisors and Brokers. Except for Seabury Aviation
Advisors LLC and/or its Affiliates (“Seabury”), no Person has acted, directly or
indirectly, as a broker, finder or financial advisor of the Company or any of
the Operating Companies in connection with the Transaction Documents or the
transactions contemplated thereby, and except

 

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for Seabury, no Person acting for or on behalf of the Company or any of the
Operating Companies is entitled to receive any broker’s, finder’s or similar fee
or commission in respect thereof based in any way on any agreement, arrangement
or understanding made by or on behalf of the Company or any of the Operating
Companies. A true and correct copy of the Company’s agreement with Seabury
relating to the Transactions has been delivered to the Investor.

 

Section 3.13 Insurance. The properties, business and operations of the Company
and the Operating Companies are insured or reinsured with financially sound and
reputable insurance companies or by way of self-insurance, in such amounts and
against such risks as are customarily maintained by companies engaged in the
same or similar businesses.

 

Section 3.14 Regulatory Status. Neither the Company, nor any Operating Company
nor any of their respective Subsidiaries is (i) an “investment company” as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (ii) a “holding company” as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935. US Airways is a Certificated Air
Carrier.

 

Section 3.15 Collective Bargaining Agreements and Employment Agreements.
Schedule 3.15 hereto sets forth a true and complete description of the status of
the Collective Bargaining Agreements and any employment agreements with the
Chief Executive Officer or any Executive Vice President of the Company,
including any proposed revisions thereto. Except for the Collective Bargaining
Agreements, as amended or supplemented after the date hereof, there is no
collective bargaining agreement (or equivalent agreement) which is binding on
the Company or any of its Affiliates or to which the Company or any of its
Affiliates is a party. The Company has provided to the Investor true, complete
and correct copies of all the Collective Bargaining Agreements.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

The Investor represents and warrants to, and agrees with, the Company as
follows:

 

Section 4.01 Organization. Wexford Capital LLC is a Connecticut limited
liability company having all requisite power and authority and all requisite
governmental licenses, authorizations, consents and approvals to execute,
deliver and perform its obligations under the Transaction Documents. Republic is
a Delaware corporation having all requisite power and authority and all
requisite governmental licenses, authorizations, consents and approvals to
execute, deliver and perform its obligations under the Transaction Documents.

 

Section 4.02 Authorization of Agreements. The execution, delivery and
performance by the Investor and its Affiliates of their respective obligations
under the Transaction Documents, to the extent that such documents have been
delivered as of such date, and the consummation of the transactions contemplated
by the Transaction Documents, are within the Investor’s and such Affiliates’
powers and have been duly authorized by all necessary action and do not and will
not contravene the terms of their respective governing documents.

 

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Each Transaction Document when delivered will constitute a legal, valid and
binding obligation of the Investor or such Affiliate, as applicable, enforceable
against the Investor or such Affiliate, as applicable, in accordance with its
terms.

 

Section 4.03 Consents; No Conflicts. No Approval (other than approval by the
Bankruptcy Court) is necessary or required in connection with the execution,
delivery or performance by, or enforcement against, the Investor or any
Affiliate thereof of this Agreement or any other Transaction Document, or for
the consummation of the transactions contemplated hereby and thereby, except for
such Approvals listed on Schedule 4.03 hereto or that could not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the ability of the Investor or any such Affiliate to consummate the
Transactions, and all of which have been duly obtained, taken, given or made and
are in full force and effect, except as indicated on Schedule 4.03 hereto or for
Approvals that could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Investor to
consummate the Transactions.

 

Section 4.04 Financial Advisors and Brokers. Other than Affiliates of the
Investor, no Person has acted directly or indirectly as a broker, finder or
financial advisor of the Investor in connection with the Transaction Documents
or the transactions contemplated thereby, and, other than fees that may be
payable to Affiliates of the Investor by the Investor, no Person acting for or
on behalf of the Investor is entitled to receive any broker’s, finder’s or
similar fee or commission in respect thereof based in any way on any agreement,
arrangement or understanding made by or on behalf of the Investor.

 

Section 4.05 Ownership of Equity Securities; Purpose of Investment. The Investor
is acquiring the New Common Stock under this Agreement solely for the purpose of
investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act and applicable state
securities or “blue sky laws”. The Investor is an “Accredited Investor” as such
term is defined in Regulation D of the Securities Act.

 

Section 4.06 Citizenship. The Investor (or its assignee, as permitted by Section
10.09 who acquires the New Common Stock hereunder at the Closing) is a Citizen
of the United States.

 

Section 4.07 Financing. Subject to Section 7.05, the Investor (or its assignee,
as permitted by Section 10.09 who acquires the New Common Stock hereunder at the
Closing) has sufficient and adequate resources to consummate the transactions
contemplated by this Agreement.

 

ARTICLE V

 

GOVERNANCE

 

Section 5.01 Board of Directors. (a) From and after the Closing Date, the
Investor shall have the right to designate three (3) members of the Board of
Directors of the reorganized Company, two (2) of which shall be Independent
Directors qualified as such by the nominating committee of the Board. In
addition to the members designated by the Investor, the

 

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Board of Directors shall include the Chief Executive Officer of the reorganized
Company and not less than two (2) Independent Directors designated by the Chief
Executive Officer after consultation with the Creditors’ Committee, and shall
also include three (3) members, two (2) of which shall be Independent Directors,
designated by each Substantial Investor other than the Investor for each $100
million increment invested by such Substantial Investor in the reorganized
Company in connection with the Plan. Notwithstanding the foregoing, the Investor
shall be entitled to designate three (3) members of the Board of Directors of
the reorganized Company for so long as the Investor and its Affiliates
collectively shall maintain more than 50% of their initial investment in the
reorganized Company hereunder; the right to designate two (2) such members for
so long as they maintain 30% of such initial investment in the reorganized
Company; and the right to designate one (1) such member so long as it maintains
12% of such initial investment in the reorganized Company. All Independent
Directors designated by the Investor or any Substantial Investor shall be
qualified as such by the nominating committee of the Board, subject to the right
of such Investor or Substantial Investor to veto any Independent Director not
designated by such Investor or Substantial Investor, respectively.

 

(b) If the reorganized Company shall issue shares of New Common Stock to any
Substantial Investor who invests less than $200 million in New Common Stock and
is entitled to designate more than three (3) members of the Board of Directors,
the Investor shall be entitled to designate members to the Board of Directors on
the same proportionate basis as such Substantial Investor (and with a
proportionate number to be Independent Directors), and to the extent necessary,
the Board of Directors shall be increased accordingly.

 

Section 5.02 Directors’ Liability and Indemnification.

 

Upon and at all times after consummation of the Plan, the Certificate of
Incorporation shall contain provisions that (i) eliminate the personal liability
of the Company’s former, present and future directors for monetary damages
resulting from breaches of their fiduciary duties to the fullest extent
permitted by applicable Law and (ii) require the Company, subject to appropriate
procedures, to indemnify the Company’s former, present and future directors and
executive officers to the fullest extent permitted by applicable Law.

 

ARTICLE VI

 

PRE-CLOSING COVENANTS

 

Section 6.01 Taking of Necessary Action. (a) Each of the parties hereto agrees
to use its commercially reasonable efforts promptly to take or cause to be taken
all actions and promptly to do or cause to be done all things necessary, proper
or advisable under applicable Laws and regulations to consummate and make
effective the Transactions in accordance with the terms hereof (including,
without limitation, the preparation, negotiation and execution of mutually
satisfactory Transaction Documents). Without limiting the foregoing, the
Investor and the Company will cause their respective Affiliates to enter into
and perform any Transaction Documents to which any such Affiliates are properly
parties (subject in each case to the exercise of the Company’s option in Section
2.01, the exercise of the Slots Option and the other terms and conditions
contained herein).

 

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(b) The Company and US Airways shall use commercially reasonable efforts to
obtain as promptly as possible after the date hereof the entry of the Omnibus
Order.

 

(c) The Company shall use commercially reasonable efforts to, and cause its
Subsidiaries to, take all action necessary or advisable to maintain the right to
operate their respective Slots at LGA and DCA in compliance in all material
respects with the terms, conditions and regulations set forth in Part 93 of
Title 14 of the Code of Federal Regulations, including the usage and reporting
requirements set forth in Section 93.227 thereof.

 

(d) The Company shall use commercially reasonable efforts to and cause its
Subsidiaries to take all action necessary or advisable to maintain their
respective rights, interests, privileges, title and authority in and to the
Gates at DCA and LGA.

 

Section 6.02 Notifications. At all times prior to the Closing Date, the Investor
shall promptly notify the Company and the Company shall promptly notify the
Investor in writing of any material fact, change, condition, circumstance or
occurrence or nonoccurrence of any event that will or is reasonably likely to
result in the failure to satisfy the conditions to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.02 shall not limit or otherwise affect the remedies available
hereunder to any party giving or receiving such notice.

 

Section 6.03 Republic Aircraft Transaction. If the Company and/or US Airways
exercises and completes the Slots Option, the Investor shall complete the
Republic Aircraft Transaction (subject to the applicable conditions thereto and
to the terms and conditions of Exhibit B). If the Slots Option has not been
exercised, the Investor shall have a one-time option, exercisable by written
notice to the Company at any time during the thirty (30) day period commencing
upon either the Effective Date or the date of termination of this Agreement
(unless such termination is pursuant to Section 9.01(c) or (d) hereof), to
purchase the Owned Aircraft and to assume the leases of the Leased Aircraft
under the terms of the Republic Aircraft Transaction as provided in Exhibit B.
If so exercised, the Company shall cause its Affiliates to enter into the
Republic Aircraft Transaction (subject to the applicable conditions thereto)
within thirty (30) days of delivery of such notification (or such other date as
the Investor and the Company shall agree in writing). Prior to the expiration of
Republic’s option, neither the Company nor US Airways shall, directly or
indirectly, enter into any agreement or arrangement with respect to such Owned
Aircraft and Leased Aircraft that would materially change the Company’s or US
Airways’ ownership interest in such Owned Aircraft or Leased Aircraft.

 

Section 6.04 Definitive Existing Jet Service Agreement. As soon as reasonably
practicable after the entry by the Bankruptcy Court of the Omnibus Order, the
Company and the Investor shall and shall cause their respective applicable
Affiliates to enter into the definitive Existing Jet Service Agreement.

 

Section 6.05 Maintenance of Properties; Insurance. The Company shall and shall
cause its Subsidiaries to (a) keep and maintain the Slots, the Gates and the
aircraft subject to the Republic Aircraft Transaction in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies or by way of self-insurance, insurance
covering such assets in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses.

 

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Section 6.06 Delivery of Reports. The Company and its Subsidiaries shall deliver
to the Investor the reports concerning the operating and financial data of the
Company and its Subsidiaries that are delivered to the ATSB Lender Parties.

 

Section 6.07 HSR. Notwithstanding anything herein to the contrary, the parties
hereto agree to make any required filings and notifications under the HSR Act or
any other antitrust or similar competition Laws of any other country or
jurisdiction in connection with the Transactions as soon as reasonably
practicable and in no event later than 30 days after the Omnibus Order is
entered by the Bankruptcy Court. The Company shall be responsible for the
payment of all filing or other fees associated with making such filings and
notifications.

 

Section 6.08 Notification from Investor. Within two Business Days prior to the
Hearing, Wexford Capital LLC and Republic shall notify the Company in writing as
to the allocation of the rights and obligations of the Investor hereunder in
respect of the obligation of the Investor to make the investment pursuant to
Section 2.01 hereof, subject to the terms and conditions herein, as between
Wexford and Republic, and each of Wexford, Republic and the Company shall
promptly thereafter execute and deliver to each other appropriate documentation
reflecting such allocation. Upon delivery of such notification, only the Persons
identified by the Investor as being responsible for such allocated obligations
shall bear responsibility for such obligations and no other Person otherwise
comprising the Investor shall retain any liability or obligation with respect
thereto. Other than the obligation to make such Investment, subject to the terms
and conditions herein, the obligations of the Investor to consummate any other
Transactions, subject to the terms and conditions herein, shall be performed by
Republic.

 

Section 6.09 Business Plan.

 

(a) Subject to and following the Bankruptcy Court’s entry of the Omnibus Order,
the Company shall prepare and deliver to the Investor not less than twenty-one
(21) days prior to the Closing Date a new business plan and the associated
financial forecasts for the years ending December 31, 2005, 2006 and 2007 for
the reorganized Company and its Subsidiaries, which shall include, without
limitation, projected cash balances, fleet composition, revenues, debt levels,
expenses, cash flows and such other projections and similar data and
information, including the detailed assumptions used to prepare such
projections, as would be required under the Bankruptcy Code to be included in a
disclosure statement related to the Plan (the “Initial Business Plan”). During
the twenty-one day period following the Investor’s receipt of the Initial
Business Plan (such period, the “Initial Business Plan Review Period”), in
addition to and not by way of limitation of the obligations of the Company under
Section 7.01 hereof, the Company shall (and shall cause each of the Operating
Companies to) afford to the Investor, its Affiliates and their respective
Representatives access to all information, data, facilities, properties, books,
contracts, commitments, records (including information regarding any material
pending or threatened legal proceeding to which any of such companies is, or
reasonably expects to be, a party and negotiations relating to any labor
agreements or labor disputes involving the Company or any of its Subsidiaries),
key personnel, officers, independent accountants and legal counsel, including,
without limitation, all data, information and materials underlying the
assumptions in

 

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the Initial Business Plan. Not later than the last day of the Initial Business
Plan Review Period, the Investor shall notify the Company in writing as to
whether the Investor approves or disapproves the Initial Business Plan,
including the assumptions underlying the Initial Business Plan, which
determination shall be made in the sole and absolute discretion of the Investor.
The failure by the Investor to give such notification within such twenty-one
(21) day period shall be deemed an approval of the Initial Business Plan.

 

(b) If at any time and from time to time after the Company shall have delivered
the Initial Business Plan under Section 6.09(a) above (or an Amended Business
Plan (as defined below), the Company makes a material modification or supplement
to the Initial Business Plan, taken as a whole (as modified or supplemented, an
“Amended Business Plan”), the Investor shall have the same rights to approve in
its sole and absolute discretion such Amended Business Plan, in the manner
provided in Section 6.09(a), and the Company’s obligations and the Investor’s
rights under Section 6.09(a) shall apply mutatis mutandis to this Section
6.09(b). The Initial Business Plan or the most recent Amended Business Plan
delivered to and approved by the Investor in accordance with the terms hereof,
is hereinafter referred to as the “Final Approved Business Plan”.

 

(c) If at any time and from time to time on or prior to the Effective Date, the
Company proposes to offer any shares of New Common Stock or any other Equity
Securities of the reorganized Company in connection with the Plan on terms
different, in any material respect, than those contained in this Agreement, the
Company shall promptly, but in any event not less than five (5) Business Days
prior to making an offer to sell such New Common Stock or Equity Securities to a
third party, provide Investor with written notice of its intent to make such
offer (an “Alternative Equity Offer Notice”) describing in detail all of the
material terms and conditions of such offer, including the proposed ancillary
arrangements and closing contingencies relating thereto (an “Alternative Equity
Offer”). Delivery of an Alternative Equity Offer Notice by the Company shall
constitute an irrevocable offer by the Company to the Investor to purchase the
New Common Stock or Equity Securities on the terms and conditions of the
Alternative Equity Offer. The Investor shall have a period of five (5) Business
Days from the date of receipt of such Alternative Equity Offer Notice to notify
the Company in writing of its intention to accept the offer to purchase the New
Common Stock or Equity Securities on the terms and conditions of the Alternative
Equity Offer and the failure to deliver such notice by the Investor shall be
deemed a rejection thereof. If the Company fails to comply with this Section
6.09(c), it will lose certain of its rights under the Jet Service Agreement (as
described in Exhibit C, paragraph 3(g)) to terminate aircraft.

 

Section 6.10 Effectiveness Prior to Omnibus Order. The parties agree that unless
and until the Omnibus Order has been entered, except with respect to the
parties’ obligations under Sections 2.04, 6.01, 6.02, 6.05, 6.08, 7.02, Article
IX and Sections 10.03 through 10.11 of Article X, and any related provisions
regarding the parties’ obligations regarding filing of the Motion and seeking
entry of the Omnibus Order and the negotiation of final forms of the definitive
Transaction Documents, none of the parties hereto (or their Affiliates) shall be
bound or obligated by this Agreement or any of the schedules or exhibits
thereto.

 

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ARTICLE VII

 

ADDITIONAL COVENANTS

 

Section 7.01 Financial and Other Information. From and after the date hereof,
the Company shall (and shall cause each of the Operating Companies to) afford to
the Investor, its Affiliates and their respective Representatives, including
qualified prospective lenders to the Investor that sign appropriate
confidentiality agreements, access, upon reasonable notice and in such manner as
will not unreasonably interfere with the conduct of such companies’ respective
businesses, to their respective facilities, properties, books, contracts,
commitments, records (including information regarding any material pending or
threatened legal proceeding to which any of such companies is, or reasonably
expects to be, a party and negotiations relating to any labor agreements or
labor disputes involving the Company or any of its Subsidiaries), key personnel,
officers, independent accountants and legal counsel; provided, however, that the
Company will not be required to provide access to employee personnel files if
providing such files would be unreasonable or a violation of applicable Law. The
Company shall use its commercially reasonable efforts to cause its lessors of
the Leased Aircraft to cooperate with the Investor, its Affiliates and their
respective Representatives in connection with the Transactions.

 

Section 7.02 Publicity. Except as required by Law or by obligations pursuant to
any listing agreement with or requirement of any national securities exchange or
national quotation system on which the Common Stock is listed, admitted to
trading or quoted, neither the Company (nor any of its Affiliates) nor the
Investor (nor any of its Affiliates) shall, without the prior written consent of
each other party hereto, which consent shall not be unreasonably withheld or
delayed, make any public announcement or issue any press release with respect to
the transactions contemplated by this Agreement. Prior to making any public
disclosure required by applicable Law or pursuant to any listing agreement with
or requirement of any relevant national exchange or national quotation system,
the disclosing party shall consult with the other parties hereto, to the extent
feasible, as to the content and timing of such public announcement or press
release. To the extent either party is required to file this Agreement or any
Transaction Document with the SEC or any other Governmental Authority (including
the Bankruptcy Court), the parties shall consult with each other concerning
information for which confidential treatment will be requested.

 

Section 7.03 Registration Rights and Listing of New Common Stock. After the
consummation of the Plan, the reorganized Company shall use its commercially
reasonable efforts to cause (i) the listing or quotation of the New Common Stock
on a national stock exchange or the NASDAQ National Market System as soon as
reasonably practicable, but in all events not later than 180 days after the
consummation of the Plan, and (ii) a registration statement to be filed and
declared effective upon the expiration of 12 months from the consummation of the
Plan, and shall keep such registration statement effective for two (2) years
thereafter.

 

Section 7.04 Restrictions on Sale. The Investor agrees not to sell any New
Common Stock prior to the earlier of the first anniversary of the Effective Date
and the date that is six (6) months after the date on which shares of New Common
Stock are first distributed under the Plan to the holders of allowed, unsecured
claims in the Cases, and thereafter agrees that

 

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during any six (6) month period the Investor shall not sell, transfer or dispose
of more than twenty-five percent (25%) of the New Common Stock issued to the
Investor in connection with the consummation of the Plan, provided that,
notwithstanding any of the foregoing, the Investor may transfer any of its New
Common Stock to any of its Affiliates, so long as such Affiliate agrees to be
bound by the terms of this Agreement and, if requested by the Company,
Investor’s counsel provides the Company with an opinion that such transfer is
exempt from the registration requirements of the Securities Act. In addition,
the Investor agrees not to sell, transfer or dispose of the New Common Stock in
any manner that will, in one or more transactions involving the Investor, cause
a change of control event for purposes of any of the Collective Bargaining
Agreements in effect on the date hereof or as may be modified after the date
hereof in a manner that does not adversely affect the Investor for purposes of
this restriction.

 

Section 7.05 Additional Jet Service Aircraft. The Investor hereby grants US
Airways the option, if the Closing occurs, to cause the Investor to purchase,
finance, and operate for US Airways in “US Airways Express” service the
Additional Jet Service Aircraft, subject to the terms of and as more fully
described in Exhibit E hereto.

 

Section 7.06 Investor Financing. The Investor shall maintain sufficient and
adequate resources to consummate the transactions contemplated by this Agreement
at the Closing.

 

Section 7.07 Chautauqua Pre-Petition Claim. The Company agrees that the general
unsecured pre-petition claims of Chautauqua under the Original Jet Service
Agreement shall be allowed, none of the Company nor any of its Subsidiaries
shall challenge or dispute (or support any challenge) such claim and the Omnibus
Order shall contain provisions to such effect, provided, however, that the
Company will not be required to cure any default under the Original Jet Service
Agreement in connection with the assumption of the Existing Jet Service
Agreement.

 

ARTICLE VIII

 

CONDITIONS

 

Section 8.01 Conditions to Investor’s Obligations. The obligation of the
Investor to make the Investment pursuant to Section 2.01 hereof is subject to
satisfaction or waiver of each of the following conditions precedent:

 

(a) Definitive Documents. Definitive Transaction Documents necessary to
consummate the Transactions shall have been prepared, negotiated and, to the
extent applicable, executed by the parties (or, as applicable, their
Affiliates), and approval by the Bankruptcy Court of such documents pursuant to
a Final Order, as necessary, shall have been obtained. All Transaction Documents
(in form and substance satisfactory to the Investor), to the extent applicable,
shall have been executed by the parties thereto (other than the Investor and its
Affiliates) on or prior to the Effective Date, shall not have been modified,
shall be in effect and the consummation of the transactions contemplated thereby
shall not be stayed, and all conditions to the obligations of the parties under
the Transaction Documents shall have been satisfied or effectively waived. All
corporate and other proceedings to be taken by the Company or its Affiliates in
connection with the Transaction Documents and the transactions contemplated

 

22

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thereby to be completed at the Closing and documents incident thereto shall have
been completed in form and substance satisfactory to the Investor, and the
Investor shall have received all such counterpart originals or certified or
other copies of the Transaction Documents and such other documents as it may
reasonably request.

 

Without limiting the generality of the foregoing, in connection with the
consummation of the Plan, the reorganized Company and the Investor shall have
entered into certain agreements relative to the Investor’s investment in the
reorganized Company, as follows:

 

(i) The Investor and the reorganized Company shall have entered into a
shareholders agreement with the other Substantial Investor(s) containing
customary terms and conditions reasonably acceptable to the Investor, including,
without limitation, provisions intended to preserve the corporate governance
agreements provided for above, provisions providing appropriate representation
on committees of the Board, and restrictions on transactions by the reorganized
Company or its Subsidiaries with Affiliates and to supercede the provisions in
Sections 7.01, 7.02, 7.03 and 7.04.

 

(ii) The Investor and the reorganized Company shall have entered into an
investor rights agreement with the other Substantial Investor(s) containing
customary terms and conditions reasonably acceptable to the Investor, including,
without limitation, rights typically available to significant equity investors,
including rights commonly referred to as “tag-a-long rights,” “registration
rights” and “piggyback registration rights.”

 

(b) Delivery. The reorganized Company shall have executed and delivered to the
Investor the shares of New Common Stock pursuant to and in accordance with
Section 2.01 hereof.

 

(c) Board Representation. As contemplated by Section 5.01 hereof, the Investor
Directors designated by the Investor shall have been elected or appointed to the
Board effective as of the Closing Date.

 

(d) Approvals. The Company shall have received (i) all material Regulatory
Approvals, which shall have become final (provided that, if an appeal of such
Regulatory Approval is pending and such appeal has a significant possibility of
being resolved adversely to the Company in a manner that would reasonably be
expected to have a material adverse effect on the ability of the Investor or the
Company or their respective Affiliates to consummate the Transactions, this
clause (i) shall be deemed not to be satisfied), and (ii) all other material
approvals, permits, authorizations, exemptions, consents, licenses and
agreements from other third parties that are necessary to permit the
Transactions to be completed or performed as contemplated by the Transaction
Documents and to permit the reorganized Company and its Affiliates to carry on
its business after such transactions in a manner not materially inconsistent
with the manner in which it was carried on prior to the Effective Date (together
with the Regulatory Approvals, the “Approvals”), which Approvals shall not
contain any condition or restriction that, in the Investor’s reasonable
judgment, materially impairs the reorganized Company’s ability to carry on its
business. Subject to the proviso in the first sentence of Section 6.01(a), all
waiting periods imposed by applicable Law (including, without limitation, under
the HSR Act) in connection with the Transactions shall have expired or been
terminated without any action having been taken by any court of competent
jurisdiction restraining, preventing or imposing materially adverse conditions
upon such transactions.

 

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(e) Plan of Reorganization. In connection with the emergence of the Company and
the Operating Companies from Chapter 11 and the consummation of the Plan, the
reorganized Company will have received on the Effective Date cash equity
investments of not less than $350,000,000 (including any loans converted into
equity under the Air Wisconsin DIP Agreement), which with all other equity
capital of the reorganized Company, will be invested only in a single class of
common stock, the New Common Stock, with all such New Common Stock having the
same voting rights, and shall have no other class of capital stock authorized in
its charter other than the New Common Stock. The reorganized Company alone, and
not any Affiliate of the reorganized Company, shall have issued Equity
Securities in connection with the consummation of the Plan.

 

(f) Financial Performance. The financial performance of US Airways during the
calendar quarter and month prior to the Effective Date shall have been
consistent with the most recent Final Approved Business Plan.

 

(g) No Material Adverse Effect. There shall have occurred no Material Adverse
Effect between the date of the most recent Final Approved Business Plan and the
Closing.

 

(h) Effective Date. The Effective Date shall have occurred not later than
December 31, 2005.

 

(i) Compliance with Laws, No Adverse Action or Decision. Since the date hereof,
(i) no Law shall have been promulgated, enacted or entered that restrains,
enjoins, prevents, materially delays, prohibits or otherwise makes illegal the
performance of any of the Transaction Documents; (ii) no preliminary or
permanent injunction or other order by any Governmental Authority that
restrains, enjoins, prevents, delays, prohibits or otherwise makes illegal the
performance of any of the Transaction Documents shall have been issued and
remain in effect, except for such injunctions that, if obtained, could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Investor or the Company or their respective
Affiliates to consummate the Transactions; (iii) no Governmental Authority shall
have instituted any legal proceeding that seeks to restrain, enjoin, prevent,
delay, prohibit or otherwise make illegal the performance of any of the
Transaction Documents, except for any such legal proceedings which have a
significant possibility of being brought to a conclusion which could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Investor or the Company or their respective
Affiliates to consummate the Transactions, and (iv) there is no pending or
threatened investigation or litigation by any other Person relating to the
Transactions which, if determined adversely to the Company or the Investor,
would materially impair or limit the rights and benefits of the Investor under
the Transaction Documents or the economic benefits to the Investor of the
Transactions in the aggregate and which the Investor reasonably believes, based
on the advice of counsel, has a reasonable likelihood of success.

 

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(j) Slots Option. US Airways shall have exercised and consummated the Slots
Option and the purchase of the Owned Aircraft under the Republic Aircraft
Transaction shall have been consummated.

 

(k) Air Wisconsin Jet Service Agreement. The costs with respect to the Air
Wisconsin Jet Service Agreement, taken as a whole, shall not be materially
different in costs to US Airways, on an average stage length of approximately
380 miles and approximately a 10.2 hour daily block hour utilization, to the
terms under the Existing Jet Service Agreement.

 

(l) Representations and Warranties; Covenants. The representations and
warranties of the Company set forth in Article III hereof (without giving effect
to any material adverse effect, materiality or similar qualifier) shall have
been true and correct in all respects on and as of the date hereof and at the
Closing as if made on the Closing Date (except where such representation and
warranty speaks by its terms of a different date, in which case it shall be true
and correct as of such date), except to the extent that such inaccuracies in any
such representation or warranty have not had, and would not, individually or in
the aggregate, have a Material Adverse Effect. The Company shall have performed
in all material respects all obligations and complied with all agreements,
undertakings, covenants and conditions required to be performed by it hereunder
at or prior to the Closing, and the Company shall have delivered to the Investor
at the Closing a certificate in form and substance reasonably satisfactory to
the Investor dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company to the effect that the conditions
set forth in this Section 8.01(1) have been satisfied.

 

(m) Certificate of Incorporation and Bylaws. The Certificate of Incorporation
and Bylaws, as provided for in the Plan, shall contain the terms contemplated
hereby (including, without limitation, relating to governance and capital
structure), shall otherwise be reasonably satisfactory to the Investor and shall
have been filed with and accepted by the Secretary of State of the State of
Delaware and shall have become effective. As of the Closing Date, the Company
shall have delivered to the Investor a complete and correct copy of the
certificates of incorporation and the bylaws or comparable governing instruments
of each of the Operating Companies, in full force and effect as of the Closing
Date.

 

(n) Business Plan. The Investor shall be satisfied, in its sole and absolute
discretion, that (i) from the date of delivery of the Final Approved Business
Plan through the Closing Date, the financial performance of the Company and its
Subsidiaries shall be consistent, in all material respects, with the Final
Approved Business Plan, (ii) the assumptions underlying the Final Approved
Business Business Plan continue to be reasonable as of the Closing Date and
(iii) there shall have been no Material Adverse Effect between the date of
delivery of the Final Approved Business Plan and the Closing Date.

 

(o) Assumption of Material Contracts. All material contractual agreements
necessary for the successful implementation of the Plan shall have been assumed
or be assumable by the Company.

 

(p) Appointment of Chief Executive Officer. The Board of Directors of the
Company shall have appointed as Chief Executive Officer, with effect not later
than and as of the Effective Date, the individual selected by the majority of
the Substantial Investors, voting in proportion to their holdings of New Common
Stock.

 

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(q) No Conversion to Chapter 7. Neither the Company’s Chapter 11 Case nor US
Airways Chapter 11 Case shall have been converted to a case under chapter 7 of
the Bankruptcy Code and no trustee shall have been appointed under any chapter
of the Bankruptcy Code in respect of either such case.

 

(r) Directors’ and Officers’ Insurance. The Company shall have procured and
maintained in full force and effect directors’ and officers’ liability insurance
with respect to members of the Board of Directors of the Company, which
insurance shall be at least $100 million, and shall cover such risks, as is
customary for a corporation in the Company’s and its Affiliates respective
businesses or other similar businesses.

 

(s) Collective Bargaining Agreements. The Collective Bargaining Agreements shall
be in full force and effect, without any material disputes or arbitrations.

 

(t) No Breaches. There shall have been no breaches or defaults by the Company or
any of its Affiliates under any of the Transaction Documents.

 

(u) Approval of Business Plan. The Investor shall have approved the Final
Approved Business Plan in accordance with Section 6.09

 

Section 8.02 Conditions to the Company’s Obligations. The obligation of the
Company to issue and sell the New Common Stock pursuant to Section 2.01 hereof
at the Closing is subject to the Company’s exercise in writing of its option in
Section 2.01 and to the satisfaction or waiver of each of the following
conditions precedent:

 

(a) Representations and Warranties; Covenants. The representations and
warranties of the Investor set forth in Article IV hereof (without giving effect
to any material adverse effect, materiality or similar qualifier) shall have
been true and correct in all respects, on and as of the date hereof and at the
Closing as if made on the Closing Date (except where such representation and
warranty speaks by its terms as of a different date, in which case it shall be
true and correct as of such date), except to the extent that such inaccuracies
have not had, and would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Investor or its
Affiliates to consummate the Transactions. The Investor shall have performed in
all material respects all obligations and complied with all agreements,
undertakings, covenants and conditions required to be performed by it at or
prior to the Closing, and the Investor shall have delivered to the Company at
the Closing a certificate in form and substance reasonably satisfactory to the
Company dated the Closing Date and signed on behalf of a member of the Investor
to the effect that the conditions set forth in this Section 8.02(a) have been
satisfied.

 

(b) Compliance with Laws; No Adverse Action or Decision. Since the date hereof,
(i) no Law shall have been promulgated, enacted or entered that restrains,
enjoins, prevents, materially delays, prohibits or otherwise makes illegal the
performance of any of the Transaction Documents with respect to the transactions
contemplated thereby to be completed at the Closing; (ii) no preliminary or
permanent injunction or other order by any Governmental

 

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Authority or other Person that restrains, enjoins, prevents, delays, prohibits
or otherwise makes illegal the performance of any of the Transaction Documents
shall have been issued and remain in effect, except for such injunctions that,
if obtained, could not, individually or in the aggregate, reasonably be expected
to have a material adverse effect on the ability of the Investor or the Company
or their respective Affiliates to consummate the Transactions; and (iii) no
Governmental Authority shall have instituted any legal proceeding that seeks to
restrain, enjoin, prevent, delay, prohibit or otherwise make illegal the
performance of any of the Transaction Documents, except for any legal
proceedings which have a significant possibility of being brought to a
conclusion which could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Investor or the
Company or their respective Affiliates to consummate the Transactions.

 

(c) Approvals. The Company shall have received (i) all material Regulatory
Approvals (other than waiting periods imposed by applicable Law as referred to
later in this paragraph), which shall have become final (provided that, if an
appeal of such Regulatory Approval is pending and such appeal has a significant
possibility of being resolved adversely to the Company in a manner that would
reasonably be expected to have a material adverse effect on the ability of the
Investor or the Company or their respective Affiliates to consummate the
Transactions, this clause (i) shall be deemed not to be satisfied), and (ii) all
other Approvals, which Approvals shall not contain any condition or restriction
that, in the Company’s reasonable judgment, materially impairs the reorganized
Company’s ability to carry on its business. Without limiting the generality of
clause (ii), any and all required approvals under the ATSB Loan Agreement, the
Air Wisconsin DIP Agreement and any other material financing agreements to which
the Company or any Operating Company is a party shall have been obtained. All
waiting periods imposed by applicable Law (including, without limitation, under
the HSR Act) in connection with the transactions contemplated by the Transaction
Documents shall have expired or been terminated without any action having been
taken by any court of competent jurisdiction restraining, preventing or imposing
materially adverse conditions upon such transactions.

 

(d) Confirmation Order. The Confirmation Order, satisfactory in form and
substance in all respects to the Company, shall have been entered by the
Bankruptcy Court and, once entered, shall not have been modified without the
Company’s prior written consent in any manner materially adverse to the Company,
shall be in effect and shall not have been stayed.

 

(e) Effective Date. The Effective Date shall have occurred.

 

(f) Definitive Documents. Definitive Transaction Documents necessary to
consummate the transactions contemplated herein shall have been prepared,
negotiated and, to the extent applicable, executed by the parties (or, as
applicable, their Affiliates), and approval by the Bankruptcy Court of such
documents, as necessary, shall have been obtained. All Transaction Documents (in
form and substance satisfactory to the Company), to the extent applicable, shall
have been executed by the parties thereto (other than the Company and its
Affiliates) on or prior to the Effective Date, shall not have been modified,
shall be in effect and the consummation of the transactions contemplated thereby
shall not be stayed, and all conditions to the obligations of the parties under
the Transaction Documents shall have been satisfied or effectively waived. All
corporate and other proceedings to be taken by the Investor

 

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or its Affiliates in connection with the Transaction Documents and the
transactions contemplated thereby to be completed at the Closing and documents
incident thereto shall have been completed in form and substance satisfactory to
the Company, and the Company shall have received all such counterpart originals
or certified or other copies of the Transaction Documents and such other
documents as it may reasonably request.

 

(g) Citizenship. The Company shall have received reasonably satisfactory
assurances as it may request that the Investor is a Citizen of the United
States.

 

ARTICLE IX

 

TERMINATION

 

Section 9.01 Termination of Agreement. Subject to Section 9.02 hereof, this
Agreement may be terminated by notice in writing at any time prior to the
Closing by:

 

(a) the Investor or the Company, if the Closing shall not have occurred on or
before December 31, 2005;

 

(b) the Investor, if (i) there shall have been a breach by the Company of any
material representation, warranty, covenant or agreement contained in this
Agreement, which breach would result in the failure to satisfy any condition set
forth in Section 8.01 hereof to the Investor’s obligations and that has not been
cured within thirty (30) days following receipt by the Company of written notice
from the Investor of such breach, or (ii) any condition set forth in Section
8.01 hereof to the Investor’s obligations is not capable of being satisfied;

 

(c) the Company, if (i) there shall have been a breach by the Investor of any
material representation, warranty, covenant or agreement contained in this
Agreement which breach would result in the failure to satisfy any condition set
forth in Section 8.02 hereof to the Company’s obligations and that has not been
cured within thirty (30) days following receipt by the Investor of written
notice from the Company of such breach, or (ii) any condition set forth in
Section 8.02 hereof to the Company’s obligations is not capable of being
satisfied;

 

(d) The Investor, if the Omnibus Order has not been entered by the Bankruptcy
Court by April 20, 2005; and

 

(e) mutual agreement in writing by the Company and the Investor.

 

Section 9.02 Effect of Termination. If this Agreement is terminated in
accordance with Section 9.01 hereof and the transactions contemplated hereby are
not consummated, this Agreement shall become null and void and of no further
force and effect except that (i) the terms and provisions of this Section 9.02
and Article X hereof and, providing the termination does not occur under Section
9.01(c) or (d), the one-time option to acquire the Owned Aircraft and the Leased
Aircraft in Section 6.03, as more fully described in Exhibit B, shall remain in
full force and effect and (ii) any termination of this Agreement shall not
relieve any party hereto from any liability for any breach of its obligations
hereunder. A termination shall not void or affect any of the constituent
transactions consummated prior to such termination or any sections hereof which
by their terms survive termination.

 

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ARTICLE X

 

MISCELLANEOUS

 

Section 10.01 Fees and Expenses. (a) Upon the Effective Date, the Company shall
pay to the Investor non-refundable fully paid fees as follows: (i) $735,000, if
the Slot Option has been exercised, irrespective of whether the Company elects
to cause the Investor to make the investment contemplated hereby, and (ii)
$200,000, if the Slot Option has not been exercised.

 

(b) Except as expressly provided herein or in any Transaction Document, each
party shall bear its own costs and expenses incurred in connection with this
Agreement or any of the Transactions; provided, that, in the event this
Agreement is terminated for any reason or terminates by its terms and the Slot
Option has not been exercised, the Company shall within five (5) Business Days
of such termination reimburse the Investor for all reasonable fees and expenses
incurred by or on behalf of the Investor in connection with the negotiation,
preparation, execution and delivery of the Transaction Documents and the
Transactions, including, but not limited to, reasonable fees and expenses of its
legal counsel and third-party consultants engaged by it to assist in such
transactions and reasonable fees and expenses incurred by the Investor in
connection with any due diligence, collateral reviews and field examinations;
provided, that the aggregate amount of such reimbursement shall not exceed
$200,000. For the avoidance of doubt, any payment to Investor under this Section
10.01(b) is in lieu of and not in addition to any fee earned under Section
10.01(a).

 

(c) All amounts payable under this Agreement shall be paid in immediately
available funds to an account or accounts designated by the recipient of such
amounts, except as otherwise provided herein.

 

Section 10.02 Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement shall survive the
Closing Date.

 

Section 10.03 Specific Performance. The parties hereto specifically acknowledge
that monetary damages are not an adequate remedy for violations of this
Agreement, and that any party hereto may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable Law and to the extent the party seeking such relief would be entitled
to the merits to obtain such relief, each party waives any objection to the
imposition of such relief.

 

Section 10.04 General Interpretive Principles. Whenever used in this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
any noun or pronoun shall be deemed to include the plural as well as the
singular and to cover all genders. The name assigned this Agreement and the
Section captions used herein are for convenience of reference only and shall not
be construed to affect the meaning, construction or effect hereof. Unless
otherwise specified, any references to a party’s “judgment”, “satisfaction” or
words of a similar import shall mean in such party’s sole judgment. Unless
otherwise specified, the terms “hereof,” “herein” and similar terms refer to
this Agreement as a whole (including the Exhibits and Schedules hereto), and
references herein to Articles or Sections refer to Articles or Sections of this
Agreement.

 

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Section 10.05 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given, if delivered personally,
by telecopier or sent by first class mail, postage prepaid, as follows:

 

(i)                      If to the Company, to:

 

US Airways Group, Inc.

2345 Crystal Drive

Arlington, Virginia 22227

Attention: General Counsel

Telecopy No. 703-872-5936

 

With a copy to:

 

Arnold & Porter LLP

555 Twelfth Street, NW

Washington, D.C. 20004

Attention: Brian Leitch, Esq.

Telecopier No. 202-942-5999

 

(ii)                      If to the Investor, to:

 

Wexford Capital LLC

Wexford Plaza

411 West Putnam Avenue

Greenwich, CT 06830

Attention: President and General Counsel

Telecopier: (203) 862-7320 and (203) 862-7312

 

and:

 

Republic Airways Holdings Inc.

8909 Purdue Avenue

Suite 300

Indianapolis, Indiana 46268

Attention: Chief Executive Officer

Telecopier: (317) 484-6060

 

With a copy to:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Attention: Robert Goldstein, Esq.

Telecopier: (212) 593-5955

 

30

--------------------------------------------------------------------------------

and

 

Hogan & Hartson LLP

555 13th Street, N.W.

Washington D.C. 20004

Attention: Robert E. Cohn, Esq.

Telecopier: (202) 637 5910

 

Section 10.06 Entire Agreement; Amendment. This Agreement and the documents
described herein (including the Plan) or attached or delivered pursuant hereto
(including, without limitation, the other Transaction Documents) set forth the
entire agreement between the parties hereto with respect to the transactions
contemplated by this Agreement. Any provision of this Agreement may only be
amended, modified or supplemented in whole or in part at any time by an
agreement in writing among the parties hereto executed in the same manner as
this Agreement. No failure on the part of any party to exercise, and no delay in
exercising, any right shall operate as waiver thereof, nor shall any single or
partial exercise by either party of any right preclude any other or future
exercise thereof or the exercise of any other right. No investigation by a party
hereto of any other party hereto prior to or after the date hereof shall stop or
prevent the exercise of any right hereunder or be deemed to be a waiver of any
such right.

 

Section 10.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same document.

 

Section 10.08 Governing Law. To the extent not governed by the Bankruptcy Code,
this Agreement shall be governed by, and interpreted in accordance with, the
Laws of the State of New York applicable to contracts made and to be performed
in that State without reference to its conflict of laws rules. The parties
hereto agree that the appropriate and exclusive forum for any disputes arising
out of this Agreement solely between the Company and the Investor shall be the
Bankruptcy Court, or if such court will not hear any such suit, the U.S.
District Court for the Southern District of New York, and, the parties hereto
irrevocably consent to the exclusive jurisdiction of such courts, and agree to
comply with all requirements necessary to give such courts jurisdiction. The
parties hereto further agree that the parties will not bring suit with respect
to any disputes arising out of this Agreement except as expressly set forth
below for the execution or enforcement of judgment, in any jurisdiction other
than the above specified courts. Each of the parties hereto irrevocably consents
to the service of process in any action or proceeding hereunder by the mailing
of copies thereof by registered or certified airmail, postage prepaid, to the
address specified in Section 10.06 hereof. The foregoing shall not limit the
rights of any party hereto to serve process in any other manner permitted by the
Law or to obtain execution of judgment in any other jurisdiction. The parties
further agree, to the extent permitted by Law, that final and non-appealable
judgment against any of them in any action or proceeding contemplated above
shall be conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified or exemplified
copy of which shall be conclusive evidence of the fact and the amount of
indebtedness. THE PARTIES AGREE TO WAIVE ANY AND ALL RIGHTS THAT THEY MAY HAVE
TO A JURY TRIAL WITH RESPECT TO DISPUTES ARISING OUT OF THIS AGREEMENT.

 

31

--------------------------------------------------------------------------------

Section 10.09 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the Company’s and the Investor’s successors and assigns. Neither this
Agreement nor any rights or obligations hereunder shall be assignable by any
party hereto without the prior written consent of the other party hereto,
provided that (i) Republic shall be permitted to assign all or any portion of
its rights and obligations hereunder to any of its wholly owned Subsidiaries, so
long as such Subsidiaries are Certificated Air Carriers (if required in
connection with the rights or obligations being assigned) and capable of
performing each of Republic’s obligations and agreements proposed to be
assigned, without any other party’s consent and (ii) Wexford shall be permitted
to assign all or any portion of its rights and obligations hereunder to any of
its Affiliates so long as such Affiliate has the financial resources to perform
each of Wexford’s obligations and agreements proposed to be assigned, without
any other party’s consent; and provided further that such assignee Subsidiary or
Affiliate is not a “major airline” or “low cost carrier”, as such terms are
commonly understood in the airline industry, or an Affiliate thereof.

 

Section 10.10 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended or shall confer upon
any other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except that the provisions of
Section 5.02 (and the provisions relating to directors’ and officers’ insurance)
shall inure to the benefit of and be enforceable by the Investor Directors and
the provisions herein and in the Schedules hereto for the benefit of Chautauqua
shall inure to the benefit of and be enforceable by Chautauqua.

 

Section 10.11 Confidentiality. A version of this Agreement with certain
competitively sensitive information redacted will be filed by the Company with
the Motion. Each party hereto agrees not to disclose the unredacted version of
this Agreement to any third parties (other than disclosure required by the SEC
or any other Governmental Authority (including the Bankruptcy Court) or pursuant
to any listing agreement with or requirement of any relevant national exchange
or national quotation system) without appropriate confidentiality agreements
with such third parties being in place that are reasonably acceptable to the
other parties hereto.

 

32

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, this Agreement has been executed on behalf of the parties
hereto by their respective duly authorized officers, all as of the date first
above written.

 

WEXFORD CAPITAL LLC By:  

/s/

--------------------------------------------------------------------------------

Name:     Title:     REPUBLIC AIRWAYS HOLDINGS INC. By:  

/s/

--------------------------------------------------------------------------------

Name:     Title:     US AIRWAYS GROUP, INC. By:  

/s/

--------------------------------------------------------------------------------

Name:     Title:     US AIRWAYS, INC. By:  

/s/

--------------------------------------------------------------------------------

Name:     Title:    

 

33

--------------------------------------------------------------------------------

EXHIBIT A-1

SLOTS OPTION

 

The completion of the transactions contemplated in this Exhibit A-1 is subject
to the negotiation and execution of definitive documentation incorporating the
terms set forth in this Exhibit A-1 and customary representations, warranties,
covenants and conditions for a transaction of this type, as well as events of
default and remedies in respect thereof. The parties will use reasonable
commercial efforts to complete such definitive documents prior to the entry of
the Omnibus Order. The execution of the definitive documentation for certain
aspects of the transactions described herein will require the consent and
approval of the ATSB Lender Parties.

 

1. Slot/Gate Option. At US Airways’ discretion, upon thirty (30) days’ prior
written notice to the Investor and prior to the Effective Date of the Plan, but
in any event no later than December 31, 2005, US Airways may exercise its option
to sell to Investor and license from Investor the right to use certain Slots at
LGA and DCA which Investor will commit to acquire as follows (the “Slots
Option”) and the Company will provide the Investor with an option to acquire the
Gates under certain specified conditions as specified below:

 

(a) Purchase of Slots. Investor will purchase one hundred thirteen (113)
Unrestricted Commuter Slots at DCA and twenty-four (24) Unrestricted Commuter
Slots at LGA (“Slots”) for an aggregate purchase price of $51.64 million, less
the reasonable legal fees and expenses of the Investor incurred in connection
with the purchase and license back of the Slots. The purchase of the Slots shall
be subject to and concurrent with the consummation of the purchase of the
Currently Owned Aircraft under the Republic Aircraft Transaction. Schedule 1 to
this Exhibit A-1 contains a description of the Slots.

 

(b) Sale/License. Investor will enter into a license agreement with US Airways
(the “Slot License”) to license US Airways’ right to use the Slots for a period
equal to the later term of (a) the Existing Jet Service Agreement or (b) such
other jet service agreement as may be entered into between Republic or its
Affiliate and US Airways relating to the EMB-170 and EMB-190 aircraft
contemplated to be operated pursuant to a jet service agreement in the event the
Republic Aircraft Transaction or the Additional Jet Service Aircraft
transactions are consummated (the “New Jet Service Agreement”, and together with
the Existing Jet Service Agreement, the “Jet Service Agreements”)1. The DCA
Slots will be licensed at an annual license fee in an amount equal to [REDACTED]
of the purchase price, payable monthly in arrears. The LGA Slots will be
licensed at an annual license fee, payable monthly in arrears, in an amount
equal to the level monthly payments sufficient to fully amortize the purchase
price over the earlier of the expiration of the term of the New Jet Service
Agreement or that date on which the Slots or their functional equivalent expire
at an annual interest rate of [REDACTED].

--------------------------------------------------------------------------------

1 The Existing Jet Service Agreement and the New Jet Service Agreement will have
identical terms, except as otherwise contemplated on Exhibit D hereto and shall
be cross-defaulted.

 

34

--------------------------------------------------------------------------------

(c) Termination. In the event that (i) US Airways consummates a chapter 11 plan
of reorganization in the Cases, including a liquidating chapter 11 plan, and
neither it nor its successor under the plan continues to operate as an airline,
and substantially all of US Airways’ flight operations are, therefore,
discontinued, or (ii) US Airways’ 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, substantially all of US
Airways’ flight operations are discontinued, US Airways may reject or terminate
either or both of the Jet Service Agreements by providing ten (10) business days
prior written notice to Chautauqua, Republic or the applicable Republic
Affiliate, as the case may be, and US Airways shall be deemed to have breached
such Jet Service Agreement(s) as of the effective date of the applicable notice
(the “Breach Date”) and Chautauqua, Republic or the applicable Republic
Affiliate, as the case may be, shall have, subject to objection as provided
below: (x) administrative expense claims under sections 503 and 507 of the
Bankruptcy Code for any obligations arising prior to the Breach Date with
respect to the applicable Jet Service Agreement and (y) general unsecured
pre–petition claims under section 502(g) of the Bankruptcy Code for future
damages resulting from such rejection or termination and for obligations that
arise after the Breach Date with respect to the applicable Jet Service
Agreement. In each case the amount of the respective claims shall be subject to
the ordinary claims process, including the right of parties in interest to
object to the amount (but only the amount) of such claims. In the event that US
Airways materially defaults on either of the Jet Service Agreements or the Owned
Aircraft Leaseback or the Jet Service Agreements otherwise terminate, other than
in connection with a material breach by Chautauqua/Republic thereunder, the Slot
License will terminate. A default under the Slot License shall constitute a
default under the Jet Service Agreements giving rise to the Investors’ right to
terminate either or both Jet Service Agreements.

 

(d) Repurchase Option. Provided that US Airways is not in material default under
the Jet Service Agreements, the Owned Aircraft Leaseback or the Slot License, US
Airways will have the right to repurchase all, but not less than all, of the DCA
Slots (by acquiring the equity of the Special Purpose Trust referred to below)
at a price equal to the Investor’s purchase price and the LGA Slots at a price
equal to the greater of the unamortized amount of the purchase price for such
Slots and $1 (the “Repurchase Option”) (a) at any time after US Airways’
emergence from the Chapter 11 Case and prior to the expiration of the term of
the Slot License, or (b) upon the termination of either of the Jet Service
Agreements by US Airways as a result of a material breach by
Chautauqua/Republic. As a condition precedent to the granting of the Repurchase
Option, the Company shall, among other things, grant to the Investor (i.e., the
buyer of the Slots) a perfected security interest in and first lien on the
Repurchase Option and all proceeds thereof (including, without limitation, the
assets acquired upon the exercise of the Repurchase Option) to secure the
Company’s obligations under the Jet Service Agreements. Upon exercise by the
Company of the Repurchase Option, (i) the Slots shall be transferred to a
bankruptcy remote, special purpose trust (the “Special Purpose Trust”) whose
sole beneficial owner will initially be the Investor, who shall immediately
transfer such equity to the Company, (ii) the notice of exercise of such option
shall include a paragraph in which US Airways expressly grants in favor of
Investor a perfected, first priority security interest in the equity of the
Special Purpose Trust, (iii) such interest shall be transferred subject to the
retention by the Investor of a perfected, first priority security interest in
such equity, (iv) such equity will constitute proceeds of and shall be subject
to a perfected security interest and first lien in favor of the Investor and (v)
the Company shall simultaneously cause the Special Purpose

 

- 35 -

--------------------------------------------------------------------------------

Trust to grant to the Investor a perfected, first priority security interest in
the Slots. Provided that the Company or any of its Subsidiaries is not in
default under either of the Jet Service Agreements, the Investment Agreement or
any other document contemplated therein, at the expiration of two (2) years
following exercise of the Repurchase Option, the liens and security interests
shall terminate unless on or prior to such date the Company becomes subject to a
bankruptcy proceeding, in which event the two year period shall be extended for
a period equal to the period it takes to obtain a final order either dismissing
or closing such proceeding.

 

(e) Option to Acquire Gates. Investor will be granted options to acquire
(through sublease, assignment or otherwise) US Airways’ rights to the Gates,
subject to any restrictions contained in the existing underlying leases and to
the receipt of all necessary airport and regulatory approvals and third party
consents (the “Gates Option”).

 

(i) Option Exercise. The Gates Option shall only be exercisable in the event
that US Airways defaults under the Slot License or is in default under either of
the Jet Service Agreements and such default is not cured by US Airways within
thirty (30) days of receipt of written notice of default by Investor; provided
that Investor must exercise the Gates Option within thirty (30) days after the
expiration of such cure period.

 

(ii) Terms. The exercise price for the Gates Option shall be an amount equal to
the fair market value of US Airways’ rights to the Gates determined on a basis
as if no Gates Option existed, to be agreed upon at the time of exercise, or in
the event the parties are unable to agree, to be determined by mandatory binding
baseball arbitration.

 

- 36 -

--------------------------------------------------------------------------------

SCHEDULE 1 TO EXHIBIT A-1

 

DESCRIPTION OF SLOTS

 

DCA HELD COMMUTER SLOTS

 

Arp

--------------------------------------------------------------------------------

  Slot Begin

--------------------------------------------------------------------------------

  Time End

--------------------------------------------------------------------------------

  Slot Type

--------------------------------------------------------------------------------

  Slot Id

--------------------------------------------------------------------------------

 

Day(s) of

Operation

--------------------------------------------------------------------------------

  Preliminary
FAA
COMMENTS
3/9/05

--------------------------------------------------------------------------------

DCA   600   659   A/D   17   12345     DCA   600   659   A/D   22   12345    
DCA   600   659   A/D   33   12345     DCA   600   659   A/D   184   1234567    
DCA   700   759   A/D   43   123456   6-B DCA   700   759   A/D   73   12345    
DCA   700   759   A/D   190   12345     DCA   700   759   A/D   191   12345    
DCA   700   759   A/D   193   12345     DCA   700   759   A/D   202   12345    
DCA   700   759   A/D   233   12345     DCA   800   859   A/D   36   123456  
6-B DCA   800   859   A/D   59   12345     DCA   800   859   A/D   83   123456  
6-B DCA   800   859   A/D   149   123456     DCA   800   859   A/D   150  
123456     DCA   800   859   A/D   177   12345     DCA   800   859   A/D   215  
12345     DCA   900   959   A/D   29   1234567   7-B DCA   900   959   A/D   31
  12345 7   7-B DCA   900   959   A/D   77   12345     DCA   900   959   A/D  
85   123456     DCA   900   959   A/D   89   12345     DCA   900   959   A/D  
108   12345     DCA   900   959   A/D   151   12345     DCA   900   959   A/D  
183   123456   6-B DCA   1000   1059   A/D   3   1234567     DCA   1000   1059  
A/D   21   1234567     DCA   1000   1059   A/D   53   12345 7     DCA   1000  
1059   A/D   79   12345     DCA   1000   1059   A/D   123   12345     DCA   1000
  1059   A/D   131   12345     DCA   1000   1059   A/D   148   12345     DCA  
1000   1059   A/D   168   1234567   7-B DCA   1000   1059   A/D   229   12345 7
  7-B DCA   1100   1159   A/D   11   12345     DCA   1100   1159   A/D   34  
12345 7     DCA   1100   1159   A/D   51   12345 7   7-B

 

- 37 -

--------------------------------------------------------------------------------

Arp

--------------------------------------------------------------------------------

  Slot Begin

--------------------------------------------------------------------------------

  Time End

--------------------------------------------------------------------------------

  Slot Type

--------------------------------------------------------------------------------

  Slot Id

--------------------------------------------------------------------------------

 

Day(s) of

Operation

--------------------------------------------------------------------------------

  Preliminary
FAA
COMMENTS
3/9/05

--------------------------------------------------------------------------------

DCA   1100   1159   A/D   60   12345 7     DCA   1100   1159   A/D   119   12345
    DCA   1100   1159   A/D   212   12345 7     DCA   1100   1159   A/D   219  
1234567     DCA   1200   1259   A/D   7   12345     DCA   1200   1259   A/D   15
  12345 7     DCA   1200   1259   A/D   71   1234567   6-B DCA   1200   1259  
A/D   72   12345     DCA   1200   1259   A/D   100   12345 7     DCA   1200  
1259   A/D   211   1234567     DCA   1200   1259   A/D   231   1234567   6-B DCA
  1300   1359   A/D   6   1234567   6-B DCA   1300   1359   A/D   19   12345 7  
  DCA   1300   1359   A/D   80   12345 7     DCA   1300   1359   A/D   110  
12345 7     DCA   1300   1359   A/D   154   12345 7     DCA   1300   1359   A/D
  180   12345     DCA   1300   1359   A/D   197   1234567   6-B DCA   1300  
1359   A/D   198   1234567     DCA   1300   1359   A/D   210   1234567     DCA  
1300   1359   A/D   220   12345     DCA   1400   1459   A/D   27   1234567    
DCA   1400   1459   A/D   47   12345 7     DCA   1400   1459   A/D   96  
1234567     DCA   1400   1459   A/D   118   12345     DCA   1400   1459   A/D  
120   1234567     DCA   1400   1459   A/D   134   12345 7     DCA   1400   1459
  A/D   174   12345 7     DCA   1400   1459   A/D   226   1234567   6-B DCA  
1500   1559   A/D   35   12345 7     DCA   1500   1559   A/D   48   12345 7    
DCA   1500   1559   A/D   81   12345 7     DCA   1500   1559   A/D   101   12345
7     DCA   1500   1559   A/D   107   12345 7     DCA   1500   1559   A/D   109
  12345 7     DCA   1500   1559   A/D   113   1234567   6-B DCA   1500   1559  
A/D   140   1234567   6-B DCA   1500   1559   A/D   189   12345 7     DCA   1600
  1659   A/D   9   12345 7     DCA   1600   1659   A/D   102   1234567     DCA  
1600   1659   A/D   105   12345     DCA   1600   1659   A/D   124   12345    

 

- 38 -

--------------------------------------------------------------------------------

Arp

--------------------------------------------------------------------------------

  Slot Begin

--------------------------------------------------------------------------------

  Time End

--------------------------------------------------------------------------------

  Slot Type

--------------------------------------------------------------------------------

  Slot Id

--------------------------------------------------------------------------------

 

Day(s) of

Operation

--------------------------------------------------------------------------------

  Preliminary
FAA
COMMENTS
3/9/05

--------------------------------------------------------------------------------

DCA   1600   1659   A/D   129   12345 7     DCA   1600   1659   A/D   160  
1234567     DCA   1600   1659   A/D   167   12345 7     DCA   1700   1759   A/D
  1   12345 7     DCA   1700   1759   A/D   16   1234567   6-B DCA   1700   1759
  A/D   49   12345 7     DCA   1700   1759   A/D   56   12345 7     DCA   1700  
1759   A/D   58   12345 7     DCA   1700   1759   A/D   64   12345 7     DCA  
1700   1759   A/D   76   12345 7     DCA   1700   1759   A/D   91   12345    
DCA   1700   1759   A/D   115   12345 7     DCA   1700   1759   A/D   178  
12345 7     DCA   1800   1859   A/D   2   12345 7     DCA   1800   1859   A/D  
4   12345     DCA   1800   1859   A/D   50   12345 7     DCA   1800   1859   A/D
  61   12345 7     DCA   1800   1859   A/D   182   12345 7     DCA   1800   1859
  A/D   214   12345 7     DCA   1800   1859   A/D   227   12345 7     DCA   1900
  1959   A/D   38   1234567     DCA   1900   1959   A/D   41   12345     DCA  
1900   1959   A/D   65   12345 7     DCA   1900   1959   A/D   67   1234567    
DCA   1900   1959   A/D   93   12345 7     DCA   1900   1959   A/D   142   12345
7     DCA   1900   1959   A/D   153   12345 7     DCA   1900   1959   A/D   179
  12345     DCA   2000   2059   A/D   12   12345 7     DCA   2000   2059   A/D  
45   12345 7     DCA   2000   2059   A/D   68   12345 7     DCA   2000   2059  
A/D   145   12345 7     DCA   2000   2059   A/D   159   12345 7     DCA   2300  
2359   A/D   69   12345 7    

 

Data Current as of March 6, 2005

 

A/D = Slots may be used for either a departure or arrival

 

FAA COMMENTS: “B” INDICATES A SLOT ALLOCATED SUBJECT TO RECALL.

CANNOT BE TRANSFERRED.

 

- 39 -

--------------------------------------------------------------------------------

LGA HELD COMMUTER SLOTS

 

Arp

--------------------------------------------------------------------------------

 

Slot

Begin

--------------------------------------------------------------------------------

 

Time

End

--------------------------------------------------------------------------------

 

Slot

Type

--------------------------------------------------------------------------------

 

Slot

Id

--------------------------------------------------------------------------------

 

Day(s) of

Operation

--------------------------------------------------------------------------------

  Preliminary
FAA
COMMENTS
3/9/05

--------------------------------------------------------------------------------

LGA   600   629   D   2013   12345     LGA   630   659   A   2056   12345    
LGA   730   759   A   2189   12345     LGA   800   829   D   2055   123456    
LGA   900   929   D   2127   12345     LGA   900   929   D   2225   123456   6-B
LGA   930   959   A   2077   12345     LGA   1100   1129   A   2050   12345    
LGA   1100   1129   A   2197   1234567   67-B LGA   1200   1229   A   2091  
12345     LGA   1230   1259   D   2005   12345 7     LGA   1230   1259   D  
2053   12345 7     LGA   1300   1329   A   2155   12345 7   7-B LGA   1330  
1359   D   2144   12345     LGA   1400   1429   A   2113   12345 7     LGA  
1430   1459   D   2137   12345 7     LGA   1430   1459   A   2243   12345    
LGA   1430   1459   A   2246   12345 7     LGA   1500   1529   D   2235  
1234567   6-B LGA   1530   1559   D   2099   12345 7     LGA   1530   1559   D  
2107   12345 7     LGA   1700   1729   A   2131   12345     LGA   1700   1729  
D   2169   12345     LGA   1700   1729   A   2181   12345 7    

 

Data current as of March 6, 2005

 

A or D = Slot may be used for either a departure or arrival depending on type

 

FAA COMMENTS: “B” INDICATES A SLOT ALLOCATED SUBJECT TO RECALL.

CANNOT BE TRANSFERRED.

 

- 40 -

--------------------------------------------------------------------------------

EXHIBIT A-2

 

GATES

 

The completion of the transactions contemplated in this Exhibit A-2 is subject
to the negotiation and execution of definitive documentation incorporating the
terms set forth in this Exhibit A-2 and customary representations, warranties,
covenants and conditions for a transaction of this type, as well as events of
default and remedies in respect thereof. The parties will use reasonable
commercial efforts to complete such definitive documents prior to the entry of
the Omnibus Order. The execution of the definitive documentation for certain
aspects of the transactions described herein will require the consent and
approval of the ATSB Lender Parties.

 

[Floor plans and schematics of gates and related airport facilities at Ronald
Reagan National Airport

and La Guardia Airport to be subject to the Gates Option.]

 

[REDACTED]

 

- 41 -

--------------------------------------------------------------------------------

EXHIBIT B

REPUBLIC AIRCRAFT TRANSACTION

 

The completion of the transactions contemplated in this Exhibit B is subject to
the negotiation and execution of definitive documentation incorporating the
terms set forth in this Exhibit B and customary representations, warranties,
covenants and conditions for a transaction of this type, as well as events of
default and remedies in respect thereof. The parties will use reasonable
commercial efforts to complete such definitive documents prior to the entry of
the Omnibus Order. The execution of the definitive documentation for certain
aspects of the transactions described herein will require the consent and
approval of the ATSB Lender Parties.

 

2. Acquisition of EMB-170 Aircraft.

 

(a) Slots Option Exercised. In the event that US Airways exercises and
consummates the Slots Option, Republic will at the same time purchase the ten
(10) EMB-170 aircraft currently owned by US Airways (the “Currently Owned
Aircraft”) and, at US Airways’ option, and so long as US Airways has arranged
for 100% lease financing to have been made available to Republic at such time
and on terms reasonably acceptable to Republic, the three (3) EMB-170 aircraft
currently committed to be delivered by Embraer (the “EMB Committed Aircraft”
and, in the event the Company acquires the EMB Committed Aircraft prior to the
purchase of the Currently Owned Aircraft by Republic, then together with the
Currently Owned Aircraft, the “Owned Aircraft”; the EMB Committed Aircraft,
together with any Additional Jet Service Aircraft described in Exhibit E, are
the “Growth Aircraft”) and, subject to Republic’s satisfaction with the terms
and conditions thereof and arrangements with respect thereto mutually agreed
upon by Investor, US Airways and GECC, assume the leases for the fifteen (15)
EMB-170 aircraft that are currently leased by US Airways (the “Leased
Aircraft”), and, subject to terms mutually agreed upon among Investor, US
Airways and Embraer, Investor shall further assume US Airways obligations to
purchase additional aircraft from Embraer (the “Aircraft Orders”). Republic
acknowledges that it has no right to any pre-delivery deposits posted with
Embraer on account of the EMB Committed Aircraft.

 

(b) Slots Option Not Exercised. If the Slots Option has not been exercised, the
Investor shall have a one-time option, exercisable by written notice to the
Company at any time during the thirty (30) day period commencing upon either the
Effective Date or the date of termination of the Investment Agreement (unless
such termination is pursuant to Section 9.01(c) or (d) thereof), to purchase the
Owned Aircraft and to assume the leases of the Leased Aircraft under the terms
of this Exhibit B. If so exercised, the Company shall cause its Affiliates to
enter into the Republic Aircraft Transaction (subject to the applicable
conditions thereto) within thirty (30) days of delivery of such notification (or
such other date as the Investor and the Company shall agree in writing).

 

(c) Purchase Price/Debt Assumption. The purchase price for the Owned Aircraft
shall be a price equal to the fair market value of US Airways’ equity in such
aircraft, which shall be $44.0 million for the Currently Owned Aircraft, (i)
less any accrued maintenance costs, which shall be set at a rate of [REDACTED],
(ii) plus any pay down of debt on account of

 

42

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the Currently Owned Aircraft from the date of the Investment Agreement to
Closing, (iii) less assumed depreciation of [REDACTED], commencing [REDACTED]
and (iv) less any loss discovered through inspection of the aircraft that is not
covered by effective warranty. In connection with such purchase Republic will
assume all current debt obligations associated with the Owned Aircraft,
currently in the approximate amount of $169.4 million, subject to assignment to
and assumption by Investor of such outstanding debt and Investor being satisfied
with the terms and conditions of such debt and arrangements with respect thereto
mutually agreed upon by Investor, US Airways and Embraer, and US Airways will
assign to Republic any remaining support package made available by Embraer in
respect of such aircraft. The purchase of the Owned Aircraft is subject to the
inspection of such aircraft by the Investor.

 

(d) Lease of Owned Aircraft. Republic will initially lease the Owned Aircraft
back to US Airways at a monthly rate, payable monthly in advance and determined
in accordance with the Lease Formula (as defined in Exhibit F), for a period
beginning on the purchase date and continuing until the successful completion of
transition of each aircraft to the Republic certificate (the “Owned Aircraft
Leaseback”). In addition to the monthly rates set forth in the Lease Formula,
the monthly lease payments shall include maintenance reserves, determined based
on a rate of [REDACTED], assuming [REDACTED], payable bi-weekly in advance. At
the inception of each lease, US Airways shall pay Republic a deposit of two
months’ lease payments. Concurrent with transferring each aircraft to Republic’s
certificate, Republic will return the two months’ security deposit, any portion
of the rent paid in advance by US Airways for such aircraft pertaining to a
monthly period not fully elapsed and any excess maintenance reserves. Republic
will provide the Company with a monthly reconciliation of maintenance reserves
compared with actual flight hours within fifteen (15) days following the end of
each month and the next lease payment will be adjusted, up or down, to reflect
the actual flight hours.

 

(e) Leased Aircraft. US Airways will assign its rights and Republic will assume
all of US Airways’ obligations under the current lease agreements covering the
Leased Aircraft, subject to US Airways paying any cure costs related thereto and
to Republic’s satisfaction with the terms and conditions of such lease
agreements; such assignment and assumption to occur as the leased aircraft are
transitioned to the Republic Certificate as provided below and begin operation
under the New Jet Service Agreement. To the extent that US Airways has made
payments in the form of security deposits or excess rent payments to or for the
benefit of a lessor which have resulted in payments in excess of the cumulative
amount of GAAP rent (defined as the average periodic rental payments due under
the applicable lease) owing to such lessor, then such excess amount shall be
recaptured by US Airways through lower payments under the Jet Service Agreement
in a manner consistent with recognizing that US Airways should benefit by such
higher initial rent payments. Republic and US Airways agree to negotiate in good
faith to ensure that US Airways obtains the full benefit of such overpayments
during the term of the Jet Service Agreement and so long as US Airways is not in
material breach of any payment obligation under the Jet Service Agreement.
Republic’s obligation to assume any remaining leases of Leased Aircraft to be
assumed shall terminate upon (i) the material breach by the Company of any of
the Transaction Documents or (ii) the termination of the Investment Agreement
(other than a termination under Section 9.01(c) or (d) thereof).

 

- 43 -

--------------------------------------------------------------------------------

(f) Transition of Owned and Leased Aircraft. Beginning the later of [REDACTED]
and sixty (60) days after Republic’s acquisition of the Owned Aircraft and
Leased Aircraft, Republic will use commercially reasonable efforts to transition
the Owned Aircraft and Leased Aircraft to the Republic Certificate at a rate of
three (3) aircraft per month; provided that the Currently Owned Aircraft shall
be transitioned first and, if the EMB Committed Aircraft are acquired by
Republic, the EMB Committed Aircraft shall be the first of the Leased Aircraft
to be transitioned. Without limiting the foregoing, the parties will agree upon
a schedule for the transition of the Owned Aircraft and Leased Aircraft,
including outside dates by which the leases must be assigned to and assumed by
Republic. In the event that the Company leases the EMB Committed Aircraft, the
parties will agree to a schedule for the assumption of such leases.

 

(g) Operation of Owned Aircraft and Leased Aircraft. Upon transition of the
Owned Aircraft and Leased Aircraft as described above, Republic will operate the
Owned Aircraft and Leased Aircraft as US Airways Express under the terms of the
New Jet Service Agreement, as amended in accordance with the terms of Exhibit D.

 

(h) Preferential Hiring. Republic will comply with the terms of Letter of
Agreement #91 to the US Airways – ALPA Collective Bargaining Agreement with
respect to the flight crews currently employed by US Airways’ EMB-170 Division
(“Mid-Atlantic”), and will offer preferential hiring to any flight attendants
and mechanics currently employed at Mid-Atlantic. Furthermore Republic will
comply with such Letter of Agreement #91 associated with any additional
aircraft.

 

(i) Maintenance Facility. In the event the Investor acquires the Owned Aircraft
and the Leased Aircraft, Republic agrees to relocate its EMB-170/-190 heavy
overhaul maintenance facility to a location specified by US Airways that is east
of the Mississippi River and is consistent with Republic maintaining low
operating costs in order to enhance US Airways’ ability to attract additional
financial support, provided that Republic receives local government economic and
other support relative to the establishment of such facility reasonably
satisfactory to the Investor.

 

(j) Purchase of Other Assets. In the event the Investor acquires the Owned
Aircraft and the Leased Aircraft, Investor will purchase, free and clear of all
liens, a flight simulator and a cabin door trainer (together with all licenses
and agreements related to the operation thereof) for an aggregate purchase price
equal to the fair market value thereof of approximately $9.5 million, and will
also purchase certain spare parts and tooling equipment at an aggregate purchase
price equal to the fair market value thereof and not to exceed $5.0 million. Any
such purchase shall be subject to inspection by Investor.

 

(k) Fees of Aircraft Advisor. In the event Investor acquires any Growth
Aircraft, Republic agrees to undertake any obligations owing to US Airways’
aircraft advisor with respect to fees payable in connection with financing
agreements with respect to Growth Aircraft. Any such costs shall be capitalized
with the cost of the aircraft and passed through as a cost to US Airways under
the New Jet Service Agreement and will be incremental to the lease rates
calculated in accordance with the Lease Formula on Exhibit F.

 

- 44 -

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EXHIBIT C

AMENDMENTS TO ORIGINAL JET SERVICE AGREEMENT

 

The Original Jet Service Agreement shall be amended and restated to reflect the
following changes. Except as set forth below, the substantive terms and
conditions of the Original Jet Service Agreement shall not change (although the
form of such agreement will be modified).

 

(1) Existing Jet Service Agreement Costs (as contained in the Original Jet
Service Agreement, with the following modifications):

 

[REDACTED]

 

(2) Comparable Terms to Air Wisconsin. In the Existing Jet Service Agreement, US
Airways will represent to Chautaqua that the costs specified in Section 1 of
this Exhibit C, taken as a whole, are not materially different in costs to US
Airways, on an average stage length of approximately [REDACTED] and
approximately a [REDACTED], to the terms under the Air Wisconsin Airline
Corporation Jet Service Agreement as approved by the Bankruptcy Court on
February 28, 2005.

 

(3) Term. The term of the Original Jet Service Agreement shall be modified as
follows:

 

(a) In the event that US Airways does not exercise the Slots Option, at US
Airways’ option, US Airways shall have the one-time right to terminate up to
five (5) of the ERJ-145 aircraft flown under the Existing Jet Service Agreement,
subject to 60 days’ written notice to Chautauqua prior to the termination of the
first of such aircraft. US Airways may exercise this right by providing notice
prior to the Effective Date (after which date such right shall expire), which
notice shall specify the termination dates for such aircraft.

 

(b) Subject to Section 3(e) below and upon prior written notice delivered not
later than the Effective Date, in the event US Airways exercises and consummates
the Slots Option, at US Airways’ option, US Airways shall have the one-time
right to terminate five (5) ERJ-145 aircraft flown under the Existing Jet
Service Agreement as follows: one (1) ERJ-145 aircraft may be terminated on the
date that is the later of (x) the date each fifth Owned Aircraft or Leased
Aircraft, collectively, is placed into service under the New Jet Service
Agreement or (y) the dates for such termination rights set forth in Schedule I
to this Exhibit C.

 

(c) Subject to Section 3(e) below, in the event US Airways exercises its option
to cause Republic to acquire the Growth Aircraft (and the parties reach
agreement on the delivery dates and other terms and conditions with respect to
such Growth Aircraft), US Airways shall have the right to terminate two (2)
ERJ-145 aircraft flown under the Existing Jet Service Agreement for every five
(5) Growth Aircraft

 

- 45 -

--------------------------------------------------------------------------------

flown under the New Jet Service Agreement as follows: two (2) ERJ-145 aircraft
may be terminated on the date that is the later of (x) the date each fifth such
Growth Aircraft is placed into service under the New Jet Service Agreement or
(y) the dates for such termination rights set forth in Schedule I to this
Exhibit C.

 

(d) At any time and from time to time during the period in which US Airways has
the right to terminate ERJ-145 aircraft flown under the Existing Jet Service
Agreement under any of Section 3(a), Section 3(b), Section 3(c) or Section 3(g)
of this Exhibit C, Chautauqua shall have the right to deliver to US Airways
written notice (a “Preliminary Chautauqua Termination Notice”) that it desires
to terminate up to an aggregate number of ERJ-145 aircraft flown under the
Existing Jet Service Agreement that does not exceed fifteen (15) less any such
aircraft that have been previously terminated under Section 3(a), Section 3(b),
Section 3(c) or Section 3(g) or this Section 3(d). Within 10 Business Days of
receipt of a Preliminary Chautauqua Termination Notice, US Airways shall have
the right to notify Chautauqua as to whether it accepts or rejects (which
acceptance or rejection may be as to all, some or none of the aircraft
designated for termination by Chautauqua in such Preliminary Chautauqua
Termination Notice) Chautauqua’s Preliminary Chautauqua Termination Notice. The
failure of US Airways to deliver such notification within such 10 Business Day
period shall be deemed an acceptance of Chautauqua’s Preliminary Chautauqua
Termination Notice. In the event US Airways gives timely written notice to
Chautauqua that it rejects Chautauqua’s Preliminary Chautauqua Termination
Notice as to any or all of aircraft designated for termination, then the total
number of aircraft that US Airways may terminate under Section 3(a), 3(b), 3(c)
or 3(g) shall be reduced by the number of aircraft so rejected by US Airways (it
being understood and agreed that the aircraft shall be reduced in the
chronological order in which they are then eligible for termination under any of
Section 3(a), 3(b), 3(c) or 3(g)). In the event US Airways accepts (or is deemed
to accept) Chautauqua’s written notice, then Chautauqua shall have the right to
give US Airways written notice (a “Final Chautauqua Termination Notice”), within
not more than sixty (60) days from the acceptance or deemed acceptance of the
Preliminary Chautauqua Termination Notice, as to the date(s) on which some or
all of the aircraft designated for termination in the Preliminary Chautauqua
Termination Notice will be removed from service under the Existing Jet Service
Agreement, and the number of such aircraft to be removed on each such date,
provided, however, that the removal of the first of such aircraft shall commence
no earlier than sixty (60) days, and no later than one hundred twenty (120)
days, from the date of the Final Chautauqua Termination Notice, and the Existing
Jet Service Agreement shall terminate as to each such aircraft on the date
specified in the Final Chautauqua Termination Notice. If Chautauqua does not
give such Final Chautauqua Termination Notice within the required sixty (60) day
period, then Chautauqua may not terminate the aircraft subject to the
Preliminary Chautauqua Termination Notice unless it again complies with the
provisions of this Section 3(d). In the event that Chautauqua exercises its
right under this Section 3(d), US Airways will not be required to terminate more
than two (2) aircraft in any thirty (30) day period.

 

- 46 -

--------------------------------------------------------------------------------

(e) US Airways shall not have the right to terminate ERJ-145 aircraft as
provided for in Sections 3(b) and 3(c) of this Exhibit C in the event and for so
long as US Airways is then flying regional jet aircraft directly or indirectly
owned or operated by any regional jet provider flying as “US Airways Express”
other than (a) Air Wisconsin Airline Corporation, under the Air Wisconsin Jet
Service Agreement (up to a maximum of 70 aircraft) or (b) any other such
regional jet provider flying 50-seater aircraft that makes an equity investment
in connection with the Plan in the Company which equates to at least [REDACTED]
in each aircraft in such regional jet provider’s fleet then flying for US
Airways; provided, however, that with respect any such other regional jet
provider, at such time as US Airways has reduced the size of such other regional
jet provider’s 50-seater fleet being operated by US Airways to a point where
such other regional jet provider’s investment in US Airways equates to at least
[REDACTED] per aircraft, then US Airways may thereafter terminate ERJ-145
aircraft of Chautauqua under the Existing Jet Service Agreement pursuant to
Sections (3)(b) and (3)(c) of this Exhibit C in proportion to the rate at which
US Airways terminates the remaining 50-seater fleet of such other regional jet
provider.

 

(f) The term of the Existing Jet Service Agreement with respect to ERJ-145
aircraft not terminated pursuant to Sections 3(a) or 3(b) of this Exhibit C
shall be March 1, 2013 (i.e., a one-year extension).

 

(g) If (i) the Company exercises its option to require the Investor to purchase
New Common Stock under Section 2.01 of the Investment Agreement and, in
connection therewith, exercises the Slot Option, to be consummated upon the
Investor’s purchase of the New Common Stock, (ii) the Investor has not
consummated the purchase of New Common Stock other than as a result of a failure
of a condition to be satisfied or waived by the Investor under Section 8.01
(other than the condition that the Investor shall have approved the Initial
Business Plan and any Amended Business Plan, or the condition that the Company
shall have consummated the Slot Option, to the extent that such failure to
consummate the Slot Option results from the Investor’s election not to
consummate the purchase of the New Common Stock), (iii) the sale of New Common
Stock is completed with a third party investor in connection with the
consummation of the Plan on terms and conditions substantially identical, in all
material respects, or on terms more favorable to the investor to those contained
in the Investment Agreement and, if more favorable, that were offered to the
Investor under Section 6.09(c) of the Agreement and that the Investor declined
to accept, and (iv) the Slot Option is not and has not been consummated with the
Investor, then US Airways shall have the one-time right to terminate up to ten
(10) additional aircraft flown under the Existing Jet Service Agreement, subject
to six (6) month’s prior written notice to Chautauqua, which notice shall
specify the number of aircraft to be terminated, and upon US Airways’ exercise
of such aircraft termination right, US Airways shall have no further right to
exercise or consummate the Slot Option.

 

(h) Notwithstanding anything in Sections 3(a) through (g) (or Schedule I to this
Exhibit C) to the contrary, (i) in no event may US Airways terminate, in the

 

- 47 -

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aggregate, more than two (2) aircraft in any thirty (30) day period and (ii)
Republic Airways will have the right to designate the specific aircraft to be
terminated.

 

(4) Treatment of Claims. In the event that (i) US Airways consummates a chapter
11 plan of reorganization in the Cases, including a liquidating chapter 11 plan,
and neither it nor its successor under the plan continues to operate as an
airline, and substantially all of US Airways’ flight operations are, therefore,
discontinued, or (ii) US Airways’ 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, substantially all of US
Airways’ flight operations are discontinued, US Airways may reject or terminate
either or both of the Jet Service Agreements by providing ten (10) business days
prior written notice to Chautauqua, Republic or the applicable Republic
Affiliate, as the case may be, and US Airways shall be deemed to have breached
such Jet Service Agreement(s) as of the effective date of the applicable notice
(the “Breach Date”) and Chautauqua, Republic or the applicable Republic
Affiliate, as the case may be, shall have, subject to objection as provided
below: (x) administrative expense claims under sections 503 and 507 of the
Bankruptcy Code for any obligations arising prior to the Breach Date with
respect to the applicable Jet Service Agreement and (y) general unsecured
pre–petition claims under section 502(g) of the Bankruptcy Code for future
damages resulting from such rejection or termination and for obligations that
arise after the Breach Date with respect to the applicable Jet Service
Agreement.

 

- 48 -

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SCHEDULE I TO EXHIBIT C

 

US Airways ERJ-145 Termination Rights

 

Note: hereunder, “DOE” shall mean the Effective Date.

 

US Airways
Termination
Right Date

--------------------------------------------------------------------------------

  Owned/Leased
Aircraft
Terminated

--------------------------------------------------------------------------------

  Airways
Termination
Right Date

--------------------------------------------------------------------------------

  Growth
Aircraft
Terminated

--------------------------------------------------------------------------------

[REDACTED]            

 

The parties will use commercially reasonable efforts to align a termination
right date [REDACTED] with the closest normal schedule change date.

 

- 49 -

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EXHIBIT D

TERMS OF NEW JET SERVICE AGREEMENT

 

The terms of the New Jet Service Agreement shall be substantially identical to
the Existing Jet Service Agreement, with the following modifications:

 

[REDACTED]

 

Upon transition of the Owned Aircraft and Leased Aircraft as described in
Exhibit B, Republic will operate the Owned Aircraft and Leased Aircraft as US
Airways Express under the terms of the New Jet Service Agreement, as amended in
accordance with the terms hereof. The term of the New Jet Service Agreement with
respect to the Owned Aircraft and the Leased Aircraft shall be 10 years from the
date that the first such aircraft goes into service. The term of the New Jet
Service Agreement with respect to any Additional Jet Service Aircraft, if
operated under the New Jet Service Agreement, shall be 10 years from the date
that the first such aircraft goes into service.

 

50

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EXHIBIT E

ADDITIONAL JET SERVICE AIRCRAFT

 

The completion of the transactions contemplated in this Exhibit E is subject to
the negotiation and execution of definitive documentation incorporating the
terms set forth in this Exhibit E and customary representations, warranties,
covenants and conditions for a transaction of this type, as well as events of
default and remedies in respect thereof. The parties will use reasonable
commercial efforts to complete such definitive documents prior to the entry of
the Omnibus Order. The execution of the definitive documentation for certain
aspects of the transactions described herein will require the consent and
approval of the ATSB.

 

In the event that the Closing under the Investment Agreement occurs, the Company
will have the option to have Republic purchase, finance, and operate for US
Airways in US Airways Express service an additional six (6) EMB-170 aircraft and
sixteen (16) additional EMB-170 or EMB-190 aircraft (the “Additional Jet Service
Aircraft”). The agreement to place such aircraft into service is subject to
Republic’s ability to secure financing for such aircraft predicated upon lease
rates calculated in accordance with the Lease Formula on Exhibit F, subject to
mutual agreement on delivery dates and notices.

 

Republic will operate the Additional Jet Service Aircraft as US Airways Express
under the terms of the New Jet Service Agreement, as amended in accordance with
Exhibit D.

 

- 51 -

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EXHIBIT F

LEASE FORMULA

 

[REDACTED]

 

52

--------------------------------------------------------------------------------

SCHEDULE 1

SHARES OF NEW COMMON STOCK

 

In USD millions

 

Investor’s

Investment

--------------------------------------------------------------------------------

 

Additional

Equity
Investment1

--------------------------------------------------------------------------------

 

Pre-Money

Equity

--------------------------------------------------------------------------------

 

Total

Equity Value

--------------------------------------------------------------------------------

 

Investor’s
Equity

Ownership2

--------------------------------------------------------------------------------

  125.0   125.0   250.0   500.0   25.0000 % 125.0   150.0   250.0   525.0  
23.8095 % 125.0   175.0   250.0   550.0   22.7273 % 125.0   200.0   250.0  
575.0   21.7391 % 125.0   225.0   250.0   600.0   20.8333 % 125.0   250.0  
250.0   625.0   20.0000 % 125.0   275.0   250.0   650.0   19.2308 %

--------------------------------------------------------------------------------

1. Includes Eastshore Equity Commitment

2. If new money investment is more than $400 million, Investor’s Equity
Ownership, on a Fully-Diluted Basis, will in no case be lower than 19.2308%.

 

53

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SCHEDULE 3.03

 

APPROVALS REQUIRED OF THE COMPANY AND THE OPERATING COMPANIES IN

CONNECTION WITH THE TRANSACTIONS

 

[To be provided supplementally]

 

54

--------------------------------------------------------------------------------

SCHEDULE 3.06

 

SUBSIDIARIES OF THE COMPANY

 

US Airways, Inc.

Piedmont Airlines, Inc.

PSA Airlines, Inc.

Material Services Company, Inc.

Airways Assurance, Ltd.

 

55

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SCHEDULE 3.07(A)

 

SEC REPORTS NOT FILED

 

Following the distribution to employees of their grants of Common Stock of the
Company as restricted stock in August, 2003, pursuant to the Plan of
Reorganization after emergence from the prior bankruptcy of the Company, a
number of employees complained to several regional offices of the SEC that the
method of distribution and notification of vesting employed by the Company
resulted in giving unfair advantage to some employees and perhaps management
over others. In each instance, the SEC office in question forwarded to the
Company and inquiry requesting an explanation. The Company responded to each
request with a full explanation of the method of distribution and vesting
provisions. The Company did not receive any further communication from the SEC
regarding these complaints. These inquiries arrived and were responded to during
the second half of 2003.

 

56

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SCHEDULE 3.15

 

STATUS OF COLLECTIVE BARGAINING AGREEMENTS

AND EMPLOYMENT AGREEMENTS

 

The Company’s Annual Report on Form 10-K, as filed with the SEC on March 1,
2005, contains a current description of the status of the collective bargaining
and employment agreements.

 

57

--------------------------------------------------------------------------------

SCHEDULE 4.03

 

APPROVALS REQUIRED BY THE INVESTOR

IN CONNECTION WITH THE TRANSACTIONS

 

[To be provided supplementally]

 

58