Restructuring Program Term Sheet
US Airways Group, Inc. (the Company), US Airways, Inc. (US Airways) and the Association of Flight Attendants (the Association) intend to negotiate and document the following terms and conditions with respect to the Association's participation in the Company's restructuring program (Restructuring Program):
| Effective Date: | July 1, 2002 |
| Contract Extension: | The amendable date of the 2000 US Airways Flight Attendant collective bargaining agreement (the "Agreement") will be extended to December 31, 2008. |
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Revisions to Hourly Pay Rates: |
The hourly pay rates contained
in Section 3 of the Agreement will be revised as follows, and as indicated
on Attachment A:
Effective July 1, 2002, the hourly wage rates set forth in Section 3.A of the Basic Agreement will be equal to 95 percent of the hourly rates that were in effect immediately prior to the effective date of the Agreement (May 1, 2000). Effective January 1, 2004, the hourly wage rates set forth in Section 3.A of the Basic Agreement will be equal to the hourly rates that were in effect immediately prior to the effective date of the Agreement (May 1, 2000). Effective January 1, 2004, on each successive January 1, through and including January 1, 2008, the hourly rates will be increased by an additional 2%. In no event shall an hourly rate in effect as of June 30, 2002, be reduced if that rate, when computed at 85 hours per month produces less than $30,000 annually. The parties may reconvene to negotiate productivity improvements to offset the wage decreases outlined above. |
| No-Furlough Clause: | Section 1.E of the Agreement will be deleted. |
| MidAtlantic Airways: | Furloughed US Airways flight attendants will be provided job opportunities at MidAtlantic Airways in seniority order and in accordance with protocols established by the parties. |
| Longevity Pay: | Longevity Pay: Section 3.Q will be discontinued effective July 1, 2002 and, effective January 1, 2004, reinstated to the May 1, 2003 level (as proposed by AFA). |
| Per Diem: | Effective July 1, 2002, the
hourly payment for meal expenses under Section 4.A will be decreased to
$1.20 per trip hour for domestic and $1.50 for international.
Effective January 1, 2004, the hourly payment for meal expenses will be increased to $2.00 per trip hour for domestic and $2.20 for international. |
| Crew Meals: | Section 4.3 of the Agreement will be eliminated. |
| Uniform Allowance: | Section 6.A.3 of the Agreement will be eliminated. |
| Deadheading: | As an exception to Section
14.A.1.a, during the period from July 1, 2002 through December 31, 2003,
all deadheading at Company request shall be paid at 50% but will continue
to be credited at 100%.
Effective January 1, 2004, deadheading shall be paid and credited as provided in Section 14.A.1.a of the Agreement. |
| Vacation: | For the period beginning July
1, 2002 and ending on December 31, 2003, any flight attendant taking seven
(7) or more consecutive vacation days will be paid at the applicable 0-17
year rate specified in Section 7.B.1 of the Agreement.
For the period beginning July 1, 2002 and ending on December 31, 2003, vacation accrual rates shall be reduced by 20%. |
| Sick Leave: | Effective July 1, 2002, sick leave accrual under Section 8.B.1 shall be reduced to four hours (4:00) of sick leave credit per month, other than for 55-Hour Option flight attendants, for whom the accrual rate shall be reduced to two hours (2:00) of sick leave credit for each month of service. |
| Reserve Override: | Section 3.N of the Agreement will be deleted. |
| Health Plans: | Sections 22.A of the Basic Agreement, Letter #1 (Managed Care) and all related sections or letters of agreement establishing any obligation to provide health insurance will be rescinded, and the Company's sole obligation to provide health insurance will be as proposed by the Company on June 12, 2002. |
| Preferred Stock: | In exchange for a temporary 5% wage reduction with a snap back in 2004, the Company will issue Convertible Preferred Stock as described in Attachment A. |
| Governance: | 1 seat on the Board of
Directors to represent and be designated jointly by all employee groups --
no supermajority voting rights, etc. Board member to be a reputable
member of the business community not employed by the Company or any of the
unions.
Labor Advisory Committee |
|
Negotiation Fees and Expenses: |
The Company will pay agreed-upon fees and expenses incurred by the Association in connection with the review, design, negotiation, approval, ratification and implementation of the Restructuring Program. |
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Documentation and Approvals: |
The Association's participation in the Restructuring Program will additionally be contingent on full and complete documentation of this Term Sheet in a manner acceptable to the Company, US Airways and the Association, approval by the Association, membership ratification, and approval by the Company. |
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US Airways Group, Inc. Response to AFA Proposal Preferred Stock Term Sheet |
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| I. General |
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| Issuer: | US Airways Group, Inc. (the "Issuer"). |
| Securities: | Series A Preferred Stock of the Issuer (the "Series A Preferred Stock"), Series B Convertible Preferred Stock of the Issuer (the "Series B Convertible Preferred Stock"), and Series C Preferred Stock of the Issuer (the "Series C Preferred Stock," and, together with the Series A Preferred Stock and Series B Convertible Preferred Stock, the "Securities"). $500 million in Series A Preferred Stock will be issued on the effective date of the wage concessions which may, at the election of the Issuer, be exchanged for Series B Convertible Preferred Stock following the authorization of sufficient share of the Company's common stock by its shareholders. Dividends on the Securities shall be payable, at the election of the Issuer, in shares of Series C Preferred Stock for the first 8 years. |
| Holders: | Initially, one or more Employee Stock Ownership Plans for the benefit of members of all employee groups of US Airways, Inc. ("Airways") (excluding officers of the Issuer and Airways) (the "Holders"). |
| Allocations: | [Mechanics to be established.] |
|
Transfers by Participants: |
In accordance with securities law guidelines. |
| Aggregate Stated Value: | $500 million. |
| Effective Date: | The effective date of the wage concessions (the "Effective Date"). |
| Charter Amendment: | The Issuer will covenant to use commercially reasonable efforts to, promptly following the Effective Date, prepare and mail a proxy statement with respect to an amendment of the Issuer's Certificate of Incorporation to increase the authorized common stock of the Issuer (the "Charter Amendment") to a level which is sufficient, in the reasonable discretion of the Issuer's Board of Directors, to permit the conversion of the Series B Convertible Preferred Stock into the Issuer's common stock. |
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II. Series A Preferred Stock |
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| Dividend Rate: | 7.0% per annum increased by 1.0% per annum
on each anniversary of the Effective Date up to a maximum rate of 15.0%
per annum (the "Series A Dividend"); provided that such
increase in the Series A Dividend rate shall not become effective until
the utilization by the Issuer of all of its net operating losses (the "Rate
Suspension"). The series A Dividend shall be payable
annually in arrears.
If the Charter Amendment is not approved by a requisite vote of the stockholders of the Issuer on or before the first anniversary of the Effective Date, the Rate Suspension will be revoked until the Charter Amendment is so approved, at which time the Rate Suspension shall be reinstated and the Series A Dividend shall return to 7.0% per annum. |
| PIK Dividends: | Dividends due on the first eight payment dates shall be payable, at the election of the Issuer, in either cash or Series C Preferred Stock at par. |
| Redemption: | 20% of the Series A Preferred Stock shall be redeemed out of funds legally available therefore on each of the 11th through 15th anniversaries of the Effective Date for its face value plus accrued but unpaid dividends. |
| Exchange: | All the Series A Preferred Stock shall be
exchanged for Series B Convertible Preferred Stock following the approval
of the Charter Amendment by a requisite number of the Issuer's
stockholders as follows:
(i) at the option of the Issuer, at any time; and (ii) at the option of the Holders, at any time after the 8th anniversary of the Effective Date. |
| Voting Rights: | The Series A Preferred Stock shall have such voting rights as are required by law. Voting shall be on a pass-through basis by participants in the Holders. |
| Registration Rights: | None. |
| Merger of the Issuer: | Series A Preferred Stock shall remain stock of the surviving company upon a merger of the Issuer. |
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III. Series B Convertible Preferred Stock
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| Dividend Rate: | 7.0% per annum (the "Series B Dividend"). The Series B Dividend shall be payable annually in arrears. |
| PIK Dividends: | Dividends due on the first eight payment dates shall be payable, at the election of the Issuer, in either cash or Series C Preferred Stock at par. |
| Conversion by Holders: | The Holders may convert Series B Convertible Preferred Stock into shares of the Issuer's common stock at a conversion price of $15 per share (the "Conversion Price"), subject to customary anti-dilution adjustments, (a) at any time after the later of (i) December 31, 2009, and (ii) the utilization by the Issuer of all of its net operating losses, or (b) upon an ownership change (as defined in Section 382 of the Internal Revenue Code of 1986, as amended) of the Issuer; provided that such ownership change is not a result of action by an employee group. |
| Redemption: | 20% of the Series B Convertible Preferred
Stock shall be redeemed out of funds legally available therefore on each
of the 11th through 15th anniversaries of the Effective Date for its face
value plus accrued but unpaid dividends.
The Issuer may redeem all or any portion of the Series B Convertible Preferred Stock at 80% of its face value plus accrued but unpaid dividends if the closing price of one share of the Issuer's common stock exceeds the Conversion Price for more than 20 consecutive trading days. |
| Anti-Dilution: | The certificate of designation of the Series B Convertible Preferred Stock will contain customary anti-dilution provisions. |
| Voting Rights: | The Series B Convertible Preferred Stock shall have such voting rights as are required by law. Voting shall be on a pass-through basis by participants in the Holder. |
| Registration Rights: | None. |
| Merger of the Issuer: | Series B Convertible Preferred Stock shall remain stock of the surviving company upon a merger of the Issuer. |
| IV. Series C
Preferred
Stock
|
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| Dividend Rate: | 7.0% per annum (the "Series C Dividend"). The Series C Dividend shall be payable annually in arrears. |
| Dividends: | Dividends due on the first eight payment dates shall be payable at the election of the Issuer, in either cash or Series C Preferred Stock at par. |
| Redemption: | 20% of the Series C Preferred Stock shall be
redeemed out of funds legally available therefore on the 11th through 15th
anniversaries of the Effective Date for its face value plus accrued but
unpaid dividends.
The Issuer may redeem all or any portion of the Series C Preferred Stock at its face value plus accrued but unpaid dividends if the closing price of one share of the Issuer's common stock exceeds the Conversion Price for more than 20 consecutive trading days. |
| Voting Rights: | The Series C Preferred Stock shall have such rights as are required by law. Voting shall be on a pass-through basis by participants in the Holder. |
| Registration Rights: | None. |
| Merger of the Issuer: | Series C Convertible Preferred Stock shall remain stock of the surviving company upon a merger of the Issuer. |