Document:

Republic Airways Holdings Exhibit 10.4 3 31 05

Exhibit
10.4

CONFIDENTIAL
TREATMENT

REQUESTED
PURSUANT TO RULE 24b-2

 

 

AMENDMENT
No. 9 TO PURCHASE AGREEMENT DCT-014/2004

This
Amendment No. 9 to Purchase Agreement DCT-014/2004, dated as of March
31st, 2005
(“Amendment No. 9”) relates to the Purchase Agreement DCT-014/2004 (the
“Purchase Agreement”) between Embraer - Empresa Brasileira de Aeronáutica S.A.
(“Embraer”) and Republic Airline Inc. (“Buyer”) dated March 19, 2004 as amended
from time to time (collectively referred to herein as “Agreement”). This
Amendment No. 9 is between Embraer and Buyer, collectively referred to herein as
the “Parties”.

This
Amendment No. 9 sets forth additional agreement between Embraer and Buyer
relative [*]
Conditional Aircraft and Option Aircraft.

Except as
otherwise provided for herein all terms of the Purchase Agreement shall remain
in full force and effect. All capitalized terms used in this Amendment No. 9,
which are not defined herein shall have the meaning given in the Purchase
Agreement. In the event of any conflict between this Amendment No. 9 and the
Purchase Agreement the terms, conditions and provisions of this Amendment No. 9
shall control. 

WHEREAS, in
connection with the Parties’ agreement above mentioned, the Parties have now
agreed to amend the Purchase Agreement as provided for below:

NOW,
THEREFORE, for good and valuable consideration which is hereby acknowledged
Embraer and Buyer hereby agree as follows:

1.
Conditional Aircraft: 

1.1 The
opening paragraph of Article 22, the delivery schedule table and the first
paragraph of Article 22.1 of the
Purchase Agreement shall be deleted and replaced by the following:

“Subject
to confirmation by Buyer as described below, Buyer shall have the right to
purchase up to twenty (20) additional Aircraft (the "Conditional Aircraft"), to
be delivered on the
last day of the applicable month set forth below or such earlier date in such
month specified pursuant to Article 7.1:

 

	
       

      Conditional
      A/C

       
	
       

      Delivery
      Month

       
	
       

      Conditional
      A/C

       
	
       

      Delivery
      Month

       

	
      1
	
      Apr
      2006
	
      12
	
      [*]

	
      2
	
      [*]
	
      13
	
      [*]

	
      3
	
      [*]
	
      14
	
      [*]

	
      4
	
      [*]
	
      15
	
      [*]

	
      5
	
      [*]
	
      16
	
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      6
	
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      7
	
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      8
	
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      [*]

	
      9
	
      [*]
	
      20
	
      [*]

	
      10
	
      [*]
	
      21
	
      Jan
      2007

	
      11
	
      [*]
	 	 

22.1 Buyer's
right to purchase [*] shall be
subject to Buyer giving notice to Embraer of its election to purchase
[*] on or
before [*] and
[*] shall be
subject to [*]. Buyer
shall be allowed to confirm the acquisition of all or part of [*].”

1.2. The
second paragraph of Article 22.1 shall remain unchanged.

____________

*
Confidential

CERTAIN
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 24b-2
OF THE SECURITIES EXCHANGE ACT OF 1934. THE OMITTED MATERIALS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

2.
Option Aircraft: The
opening paragraph of Article 23 and delivery schedule table of the Purchase
Agreement shall be deleted and replaced by the following:

 

“Buyer
shall have the option to purchase [*], to be
delivered on the
last day of the applicable month set forth below or such earlier date in such
month specified pursuant to Article 7.1:

 

	
      “Option
      Aircraft
	
      Delivery
      Month
	
      Option
      Aircraft
	
      Delivery
      Month

	
      1
	
      Feb
      2007
	
      21
	
      [*]

	
      2
	
      [*]
	
      22
	
      [*]

	
      3
	
      [*]
	
      23
	
      [*]

	
      4
	
      [*]
	
      24
	
      [*]

	
      5
	
      [*]
	
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      [*]

	
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      [*]
	
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      9
	
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      10
	
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      11
	
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      12
	
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      14
	
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      15
	
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      16
	
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      [*]

	
      18
	
      [*]
	
      38
	
      [*]

	
      19
	
      [*]
	
      39
	
      [*]

	
      20
	
      [*]
	
      40
	
      Apr
      2009”

 

 

3.
Miscellaneous: All other
provisions of the Agreement which have not been specifically amended or modified
by this Amendment No. 9 shall remain valid in full force and effect without any
change.

[Remainder
of page intentionally left in blank]

__________

*
Confidential

 

 

IN
WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 9 to Purchase Agreement to be
effective as of the date first written above.

 

 

 

	 
      EMBRAER
      - Empresa Brasileira de Aeronáutica S.A.
	 	 	
       

      Republic
      Airline Inc. 

	/s/ Frederico
      Fleury Curado	 	 	/s/ Bryan
      Bedford
	
      

    	 	 	
      

    
	Name: Frederico Fleury
      Curado
Title: Executive Vice President Civil Aircraft
	 	 	
      Name: Bryan Bedford
Title:
      President

       

 

	 	 	 	 
	/s/ Flavio Rimoli	 	 	Date: March 31, 2005
	
      

    	 	 	
      Place: Indianapolis, IN, USA

	
      Name: Flavio
      Rimoli
Title: Sr.
      Vice President Airline Market

      Date: March 31, 2005

      Place: Sao Jose Dos Campos, SP, Brazil
	 	 	

	 	 	 	 
	Witness: /s/ Carlos Martins Dutra	 	 	Witness: /s/ Lars-Erik Arnell
	
      

    	 	 	
      

    
	Name: Carlos Martins Dutra
	 	 	Name: Lars-Erik
ArnellRepublic Airways Holdings Exhibit 10.5 3 31 05

 

Exhibit
10.5

CONFIDENTIAL
TREATMENT

REQUESTED
PURSUANT TO RULE 24b-2

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.

 

 

 

 

 

 

 

 

 

 

 

CERTAIN
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 24b-2
OF THE SECURITIES EXCHANGE ACT OF 1934. THE OMITTED MATERIALS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

	
      TABLE
      OF CONTENTS

		
      Page

	
      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

		
      Page

	
      ARTICLE
      V GOVERNANCE
	
      16

	
      Section
      5.01
	
      Board
      of Directors
	
      16

	
      Section
      5.02
	
      Director’s
      Liability and Indemnification
	
      17

	 	 
	
      ARTICLE
      VI PRE-CLOSING COVENANTS
	
      17

	
      Section
      6.01
	
      Taking
      of Necessary Action 
	
      17

	
      Section
      6.02
	
      Notifications
	
      18

	
      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 MISCELLANEOUS29
	
      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	 Repubic
      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

 

	
      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

 

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);

 

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 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, 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.

 

“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.

 

“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.

 

“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.

 

“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.

 

“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.

 

“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).

 

“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.

 

(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.

 

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.

 

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.

 

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 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. 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 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).

 

(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.

 

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 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 Initital 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.

 

 

 

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 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 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. 

 

(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.

 

(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.

 

(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 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 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.

 

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. 

 

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:
      (202 862-7320 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
	 
	     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.

 

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. 

 

 

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/ Joseph M.
  Jacobs
	 	
      

      Name:
      Joseph M. Jacobs
	 	Title:
President

 

 

		 	 
	 	REPUBLIC AIRWAYS
      HOLDINGS INC.
	
	 
 	 
 
		By:  	/s/ Bryan
Bedford
		
      

      Name:
      Bryan Bedford
		Title: President and
  CEO

 

 

		 	 
		US AIRWAYS
      GROUP, INC.
	
	 
 	 
 
		By:  	/s/ Ronald E.
    Stanley
		
      

      Name:
      Ronald E. Stanley
		Title: Exec. V. P. &
      CFO 

 

		 	 
	 	US AIRWAYS,
      INC.
	 
 	 
 	 
 
	 	By:  	/s/ Ronald E. Stanley
		
      

      Name:
      Ronald E. Stanley
	 	Title: Exec. V.P. &
    CFO

 

 

	 	 	 

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 Air Transportation Stabilization Board
(“ATSB”).

 

 

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
[*] 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 [*].

 

(c)  Termination. 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, including without limitation, any termination or
rejection under Section 365 of the Bankruptcy Code, the Slot License will
terminate and Investors’ damages as a consequence will be limited to allowed
administrative claims for any obligations thereunder arising before the date of
breach and allowed general unsecured pre-petition claims for future damages
resulting from the rejection or termination of the Jet Service Agreements and
for obligations that become due and payable after the date of breach. 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 unamortized amount of
the purchase price for such Slots (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 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. 

 

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.

 

*
Confidential

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

	
      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
	 
	
      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.
	 	 	 	 
	 	 	 	 
	
      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.
	 	 	 

 

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.

 

[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.]

 

[*]

 

*
Confidential

 

 

 

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.

 

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 [*], (ii)
plus any pay down of debt on account of the Currently Owned Aircraft from the
date of the Investment Agreement to Closing, (iii) less assumed depreciation of
$55,000 per aircraft per month, commencing October 1, 2005 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 [*],
assuming [*], 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 

 

*
Confidential

 

 

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).

 

(f)  Transition
of Owned and Leased Aircraft. Beginning
the later of [*] 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.

 

*
Confidential

 

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):

[*]

[*]

[*]

(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 380 miles and approximately a 10.2 hour daily block hour
utilization, 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 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.

 

(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 by any
aircraft supplier 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 aircraft supplier flying 50-seater aircraft that makes an equity
investment in connection with the Plan in the Company which equates to at least
[*] in each
aircraft in such aircraft supplier’s fleet then flying for US Airways; provided,
however, that with respect any such other aircraft supplier, at such time as US
Airways has reduced the size of such other aircraft supplier’s 50-seater fleet
being operated by US Airways to a point where such other aircraft supplier’s
investment in US Airways equates to at least [*] 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 aircraft
supplier.

 

(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). 

 

*
Confidential

 

(g) If
(i) the Slot Option has not been exercised, (ii) (x) the Company exercises its
option to require the Investor to purchase New Common Stock under Section 2.01
of the Investment Agreement and (y) the
Investor has not consummated the purchase of New Common Stock other than as a
result 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) and (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, 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. 

 

(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
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.
Pre-emergence claims of Chautauqua for breach of the Jet Service Agreements
(including the New Jet Service Agreement) shall be limited to allowed
administrative claims for any obligations thereunder arising before the date of
breach and allowed general unsecured pre-petition claims for future damages
resulting from the rejection or termination of the Jet Service Agreements and
for obligations that become due and payable after the date of
breach.

 

 

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

*
Confidential

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:

 

	 	
      EMB-170
	
      EMB-190

	
      [*]
	 	 
	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	 	 	 
	
      [*]
	 	 
	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	 	 	 
	
      [*]
	 	 
	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	 	 	 
	
      [*]
	 	 
	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	 	 	 
	
      [*]
	 	 
	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	 	 	 
	
      [*]
	 	 
	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	 	 	 
	
      [*]
	 	 
	
      [*]
	
      [*]
	
      [*]

	
      [*]
	
      [*]
	
      [*]

	 	 	 
	
      [*]
	
      [*]
	
      [*]

*
Confidential

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.

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.

 

EXHIBIT
F

LEASE
FORMULA

	 	 	 	 	 	 	 
	
      [*]
	 	 	 	 	
      [*]
	
      [*]

	
      [*]
	
      [*]
	 	 	 	
      [*]
	
      [*]

	
      [*]
	
      [*]
	 	 	 	 	 
	
      [*]
	
      [*]
	 	 	 	 	 
	
      [*]
	
      [*]
	 	 	 	 	 
	
      [*]
	
      [*]
	 	 	 	 	 
	
      [*]
	
      [*]
	 	 	 	 	 
	
      [*]
	
      [*]
	 	 	 	 	 
	
      [*]
	
      [*]
	 	 	 	 	 
	 	 	 	 	 	 	 
	
      [*]
	
      [*]
	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	
      [*]
	 	 	 	 	 	 
	
      [*]

	
      [*]

	
      [*]

*
Confidential

 

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%.

SCHEDULE
3.03

APPROVALS
REQUIRED OF THE COMPANY AND THE OPERATING COMPANIES IN CONNECTION WITH THE
TRANSACTIONS

[To be
provided supplementally]

SCHEDULE
3.06

 

 

SUBSIDIARIES
OF THE COMPANY

 

US
Airways, Inc.

Piedmont
Airlines, Inc.

PSA
Airlines, Inc.

Material
Services Company, Inc.

Airways
Assurance, Ltd.

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.

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. 

SCHEDULE
4.03

APPROVALS
REQUIRED BY THE INVESTOR 

IN
CONNECTION WITH THE TRANSACTIONS

[To be
provided supplementally]

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