EMPLOYMENT AGREEMENT

 

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                                                                    EXHIBIT 10.3

 

                              EMPLOYMENT AGREEMENT

 

      This EMPLOYMENT AGREEMENT is hereby entered into by and between US

AIRWAYS, INC., a Delaware corporation having its principal place of business at

Crystal Park Four, 2345 Crystal Drive, Arlington, Virginia 22227 (the "Company")

and ALAN W. CRELLIN (the "Executive"), as of the 27th day of September, 2005.

 

                               W I T N E S S E T H

 

       WHEREAS, the Executive has the responsibilities and duties of the position

of Executive Vice President-Operations for the Company; and

 

      WHEREAS, the Board and the Human Resources Committee of the Board believe

it to be in the best interests of the Company to enter into this Agreement to

properly document the terms and conditions of the Executive's employment with

the Company including, but not limited to, the duties and obligations of the

parties under circumstances in which there is a Change of Control of the

Company;

 

      NOW, THEREFORE, in consideration of the mutual promises herein contained,

the Company and the Executive hereby agree as follows:

 

                                   ARTICLE I

 

                                   DEFINITIONS

 

       1.1 Accrued Obligations shall mean any amounts of Reduced Base Salary plus

any accrued and unused vacation pay that has been earned but not yet paid by the

Company, determined as of the Executive's Date of Termination.

 

      1.2 Agreement shall mean this Employment Agreement between the Company and

the Executive.

 

      1.3 Affiliate shall mean any parent, brother-sister or subsidiary

corporation of the Company, any joint venture in which the Company owns at least

a 50 percent interest, and any partnership, limited liability partnership or

limited liability corporation in which the Company or any of its wholly-owned

Affiliates owns at least a 50 percent interest.

 

      1.4 Base Salary shall mean the basic rate of pay and does not include any

additional compensation in the form of benefits or perquisites and does not

include any reductions to the basic rate of pay.

 

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      1.5 Board shall mean the Board of Directors of Group or the Board of

Directors of the Company, as applicable.

 

      1.6 Cause shall mean:

 

            (a) willful and continued failure to substantially perform his

duties with the Company within fifteen (15) days after a written demand for

substantial performance is delivered to the Employee which identifies the manner

in which the Company believes that the Employee has not substantially performed

his duties;

 

            (b) unlawful or willful misconduct which is economically injurious

to, or injurious to the reputation or good will of, the Company or to any entity

in control of, controlled by or under common control with the Company (and its

successors);

 

            (c) indictment for or conviction of, or a plea of guilty or nolo

contendere, to a felony charge;

 

            (d) habitual drug or alcohol abuse that impairs the Employee's

ability to perform the essential duties of his position; or

 

            (e) embezzlement, fraud or any other illegal act against the Company

or any illegal act committed in connection with the Executive's performance of

his duties.

 

      1.7 Change of Control shall mean the occurrence of any of the following

events on or after the Effective Date of this Agreement:

 

            (a) Acquisition of Substantial Percentage. The acquisition by an

   individual, entity or group (within the meaning of Section 13(d)(3) or

   14(d)(2) of the Securities Exchange Act of 1934 ("the 1934 Act")) of

   beneficial ownership (within the meaning of Rule 13d-3 promulgated under the

   1934 Act) of 30% or more of either (i) the then outstanding shares of common

   stock of the Company's parent, US Airways Group, Inc. ("Group")(the

   "Outstanding Group Common Stock") or (ii) the combined voting power of the

   then outstanding voting securities of Group entitled to vote generally in the

   election of directors (the "Outstanding Group Voting Securities"); provided,

   however, that the following acquisitions shall not constitute a Change of

   Control:

 

            (1) any acquisition directly from Group;

 

            (2) any acquisition by Group or any of its subsidiaries;

 

            (3) any acquisition by any employee benefit plan (or related trust)

            sponsored or maintained by Group or any of its subsidiaries;

 

            (4) any acquisition by any corporation with respect to which,

            following such acquisition, more than 85% of, respectively, the then

            outstanding shares of common stock of such corporation and the

            combined voting power of the then outstanding voting securities of

            such corporation entitled to vote generally in the election of

            directors, is then beneficially

 

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            owned, directly or indirectly, by all or substantially all of the

            individuals and entities who were beneficial owners, respectively,

            of the Outstanding Group Common Stock and Outstanding Group Voting

            Securities in substantially the same proportions as their ownership,

            immediately prior to such acquisition, of the Outstanding Group

            Common Stock and Outstanding Group Voting Securities, as the case

            may be; or

 

            (5) any acquisition by an individual, entity or group that, pursuant

            to Rule 13d-1 promulgated under the 1934 Act, is permitted to, and

            actually does, report its beneficial ownership of Outstanding Group

            Common Stock and Outstanding Group Voting Securities on Schedule 13G

            (or any successor Schedule); provided further, that if any such

            individual, entity or group subsequently becomes required to or does

            report its ownership of Outstanding Group Common Stock and

            Outstanding Group Voting Securities on Schedule 13D (or any

            successor Schedule) then, for purposes of this Section, such

            individual, entity or group shall be deemed to have first acquired,

            on the first date on which such individual, entity or group becomes

            required to or does so file, beneficial ownership of all of the

            Outstanding Group Common Stock and Outstanding Group Voting

            Securities beneficially owned by it on such date; or

 

            (b) Change of Majority of Board Members. Individuals who, as of the

   Effective Date of this Agreement, constitute the Board (the "Incumbent

   Board") cease for any reason to constitute at least a majority of the Board;

   provided, however, that any individual becoming a director subsequent to the

   date hereof whose election, or nomination for election by Group's

   shareholders, was approved by a vote of at least a majority of the directors

   then comprising the Incumbent Board shall be considered as though such

   individual were a member of the Incumbent Board, but excluding, for this

   purpose, any such individual whose initial assumption of office occurs as a

   result of either an actual or threatened election contest (as such terms are

   used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) or

   other actual or threatened solicitation of proxies or consents; or

 

            (c) Reorganization, Merger or Consolidation. There is consummated a

   reorganization, merger or consolidation, in each case, with respect to which

   all or substantially all of the individuals and entities who were the

   beneficial owners, respectively, of the Outstanding Group Common Stock and

   Outstanding Group Voting Securities immediately prior to such reorganization,

   merger or consolidation, beneficially own, directly or indirectly, less than

   85% of, respectively, the then outstanding shares of common stock and the

   combined voting power of the then outstanding voting securities entitled to

   vote generally in the election of directors, as the case may be, of the

   corporation resulting from such reorganization, merger or consolidation (or

   any parent thereof) in substantially the same proportions as their ownership,

   immediately prior to such reorganization, merger or consolidation of the

   Outstanding Group Common Stock and the Outstanding Group Voting Securities,

   as the case may be; or

 

            (d) Disposition of Assets. Approval by the shareholders of Group of

   a complete liquidation or dissolution of Group or the consummation of the

   sale or other

 

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   disposition of all or substantially all of the assets of Group,

   other than to a corporation with respect to which, following such sale or

   other disposition, more than 85% of, respectively, the then outstanding

   shares of common stock of such corporation and the combined voting power of

   the then outstanding voting securities of such corporation entitled to vote

   generally in the election of directors is then beneficially owned, directly

   or indirectly, by all or substantially all of the individuals and entities

   who were the beneficial owners, respectively, of the Outstanding Group Common

   Stock and Outstanding Group Voting Securities immediately prior to such sale

   or other disposition in substantially the same proportion as their ownership,

   immediately prior to such sale or other disposition, of the Outstanding Group

   Common Stock and Outstanding Group Voting Securities, as the case may be.

 

      1.8 Change of Control Date shall mean the first date on which a Change of

Control occurs.

 

      1.9 Change of Control Period shall mean the period beginning on the Change

of Control Date and ending on the day two (2) years thereafter.

 

      1.10 Company shall mean US Airways, Inc., a Delaware corporation, and its

Affiliates, including its successors and assigns.

 

      1.11 Date of Termination means final date of the Executive's employment.

 

      1.12 Disability shall mean a mental or physical impairment or injury of

the Executive which is determined to result in his total and permanent inability

to perform the essential functions of his position without reasonable

accommodation, as determined by the Board of Directors based on professional

medical and/or psychological opinions, or the Executive's eligibility to receive

disability benefits under the terms and conditions of the Company's long-term

disability policy, based on an "own occupation" definition under the policy

 

      1.13 Effective Date shall mean the date of the emergence of Group and the

Company from the protection of the U.S. Bankruptcy Court, as defined by

Paragraph 1.63 of the Joint Plan of Reorganization of US Airways Group, Inc. and

its Affiliated Debtors, dated August 9, 2005, as amended and confirmed by that

certain Findings of Fact, Conclusions of Law and Order Confirming the Joint Plan

of Reorganization, dated September 16, 2005.

 

      1.14 Good Reason shall mean:

 

            (a) the assignment to the Executive of any duties materially

inconsistent with the Executive's position, authority, duties or

responsibilities as contemplated by this Agreement, or any other action by the

Company which results in a material diminution in such position, authority,

duties or responsibilities; provided, that the Executive has delivered a written

notice to the Company which identifies the manner in which the Executive

believes that the assignment or other Company action would meet the provisions

of this paragraph, and the Company has had at least fifteen (15) days following

delivery of the written notice to correct the assignment or action and has not

done so;

 

            (b) the failure by the Company to reelect the Executive to a

position with materially similar or greater duties than the position held by the

Executive on the Effective Date;

 

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provided, that the Executive has delivered a written notice to the Company which

identifies the manner in which the Executive believes that the Company action

would meet the provisions of this paragraph, and the Company has had at least

fifteen (15) days following delivery of the written notice to correct the action

and has not done so;

 

            (c) any material failure by the Company to comply with the material

provisions of this Agreement; provided that the Executive has delivered a

written notice to the Company which identifies the manner in which the Executive

believes that the Company has failed to meet the material provisions of this

Agreement, and the Company has had at least fifteen (15) days following delivery

of the written notice to correct any such failure and has not done so;

 

            (d) after a Change of Control Date, any failure of the Company (i)

to pay Reduced Base Salary, (ii) to maintain the Executive's Annual Bonus and

Long-Term Incentive Plan target percentages at the same level as immediately

prior to the Change of Control, (iii) to maintain and contribute to the EDCP (as

defined in Section 4.6 hereof) pursuant to the plan document and this Agreement,

(iv) to provide travel privileges to the Executive and his family as in effect

prior to the Change of Control Date or at least equivalent to travel privileges

provided to other Key Employees, (v) to provide the Executive with the same

amount of vacation or paid time off as he had prior to the Change of Control,

and (vi) to provide the Executive and the Executive's family with any other

employee benefit plans, programs, policies and practices at a level comparable

to that provided to other active Key Employees of the Company;

 

            (e) the Company's requiring the Executive to be based at any office

or location further than a fifty (50) mile radius from the Washington, D.C.

metropolitan area, except for travel reasonably required in the performance of

the Executive's responsibilities;

 

            (f) any purported termination by the Company of the Executive's

employment otherwise than as expressly permitted by this Agreement; or

 

            (g) any failure by the Company to comply with and satisfy the

successor provisions of Section 11.3 of this Agreement.

 

      1.15 Group shall mean U.S. Airways Group, Inc., the parent of the Company.

 

      1.16 Key Employee shall mean any Executive Vice President of the Company

or, in the event of a Change of Control, any officer of a similar level of

responsibility.

 

      1.17 Notice of Termination shall mean a written notice which (i) indicates

the specific termination provision in this Agreement relied upon, (ii) sets

forth in reasonable detail the facts and circumstances claimed to provide a

basis for termination of the Executive's employment under the provision so

indicated and (iii) if the Date of Termination (as defined below) is other than

the date of receipt of such notice, specifies the Date of Termination (which

date shall be not more than fifteen (15) days after the giving of such notice).

 

       1.18 Proprietary Information shall mean information that meets the

definition of "trade secret" under the laws of the State of Delaware, as well as

any scientific or technical information, design, process, procedure, formula or

improvement that is secret and of value, information that

 

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Group and/or the Company takes reasonable efforts to protect from disclosure and

from which Group and/or the Company derives actual or potential economic value

due to its confidential nature, including, but not limited to, technical or

nontechnical data, formulas, compilations, programs, devices, methods,

techniques, drawings, processes, financial data, lists of actual or potential

customers, price lists, business plans, customer and vendor records, training

and operations materials and memoranda, personnel records, financial information

relating to the business of Group and the Company, accounts, customers, vendors,

employees and affairs of Group and the Company, and any information marked

"confidential" by Group and/or the Company.

 

      1.19 Reduced Base Salary shall mean the Executive's Base Salary as reduced

pursuant to Company agreements with unions, Company executive compensation

guidelines or agreements between the Executive and the Company.

 

      1.20 Term shall mean the period during which this Agreement is effective.

The Term of this Agreement is described in Article III hereof.

 

                                   ARTICLE II

 

                             DUTIES AND RESPONSIBILITY

 

      2.1 Duties and Authority. The Executive is engaged and agrees to perform

services for and on behalf of the Company as its Executive Vice

President-Operations and shall report directly to the Chief Executive Officer.

The Executive shall have such duties and responsibilities as may be assigned to

him by the Company's bylaws or by the Chief Executive Officer. The Executive

agrees to perform such duties diligently and efficiently and in accordance with

the reasonable directions of the Chief Executive Officer. The Executive shall

conduct himself at all times in a business-like and professional manner as

appropriate for his position and shall represent the Company in all respects in

compliance with good business and ethical practices. In addition, the Executive

shall be subject to and abide by the policies and procedures of the Company

applicable to personnel of the Company, as may be adopted from time to time.

 

      2.2 Best Efforts. During his employment with the Company, excluding any

periods of vacation and sick leave to which the Executive is entitled, subject

to the provisions of Section 2.3 below, the Executive shall devote his full

attention, energies and best efforts to rendering services on behalf of the

Company (or its Affiliates) and shall not engage in any outside employment

without the express written consent of the Board.

 

      2.3 Outside Activities. During his employment, it shall not be a violation

of this Agreement for the Executive to (A) serve on corporate, civic or

charitable boards or committees, (B) deliver lectures, fulfill speaking

engagements or teach at educational institutions and (C) invest or trade in

stocks, bonds, commodities or other forms of investment, including real property

if the Executive does not "participate" (within the meaning of Treas. Reg.

Sections 1.469-5(f) and 1.469-5T(f)) in such investments, so long as such

activities do not significantly interfere with the performance of the

Executive's responsibilities as an employee of the Company in accordance with

this Agreement. The Executive may also participate in any interest or activity

 

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which is approved in writing by the Board. At least once each year during this

Agreement, and at any time upon the Board's request, the Executive shall provide

a full disclosure to the Corporate Governance Committee of the Board of his

participation in any corporate, civic and charitable activities (including

service on corporate or charitable boards of directors or trustees). Prior to

pursuing or accepting any board membership, teaching position or any other

activity which will require a significant portion of the Executive's time (other

than those in which he is engaged on the Effective Date), the Executive agrees

to discuss such activity with the Human Resources Committee of the Board.

 

      2.4 No Violation of Other Agreement. By execution of this Agreement, the

Executive hereby warrants and represents to the Company that his acceptance of

this employment arrangement and his performance of the duties and

responsibilities described hereunder will not cause him to violate the terms and

conditions of any obligation or agreement to which he is a party and will not

expose the Company to any liability in connection with any such obligation or

agreement.

 

                                  ARTICLE III

 

                               AT WILL EMPLOYMENT

 

      3.1 At Will Employment. Prior to a Change of Control, this Agreement shall

not have a specified Term. The employment relationship between the Executive and

the Company is one of "at-will employment," which provides that either party to

the Agreement may terminate the Agreement at any time for any reason. The

parties hereto agree that in the event either desires to terminate the

Agreement, the terminating party shall provide the other party written notice of

the termination.

 

      3.2 Automatic Term Provisions Upon Change of Control. As of a Change of

Control Date, this Agreement automatically shall become effective for a two (2)

year Term from that date and shall terminate on the close of business on the

date two (2) years following the Change of Control Date, unless earlier

terminated by the parties pursuant to the provisions hereof.

 

                                   ARTICLE IV

 

                            COMPENSATION AND BENEFITS

 

      4.1 Base Salary. The Company agrees that the Executive's annual Base

Salary is $425,000, which does not include any benefits or perquisites or

reductions. Notwithstanding the foregoing, the Company and the Executive have

agreed to reductions to the Base Salary, which will result in the Executive

receiving an annual Reduced Base Salary of $317,475. Base Salary and Reduced

Base Salary shall be reviewed at least annually by the Human Resources Committee

of the Board and may be increased from time to time based upon performance.

 

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      4.2 Emergence Cash Bonus. Upon the earlier of (a) the date of emergence of

Group and the Company from protection of the U.S. Bankruptcy Court, or (b)

December 31, 2005, if the Executive remains employed on such earlier date, the

Company may, at its discretion, provide the Executive a cash bonus in an amount

to be determined by the Human Resources Committee.

 

      4.3 Equity Incentives.

 

            (a) Restricted Stock Award. If the Executive remains employed by the

   Company at the time of emergence of Group and the Company from protection of

   the U.S. Bankruptcy Court, the Company may, in its discretion, grant to the

   Executive shares of Restricted Stock under the terms of the Company's 2004

   Omnibus Stock Incentive Plan (the "Omnibus Plan") or any successor plan, in

   an amount to be determined by the Human Resources Committee. This grant of

   Restricted Stock shall be made effective as of the date of emergence and

   shall vest and become transferable as follows: 50% of the Restricted Stock

   shall become vested and nonforfeitable as of the date of grant, and 25% of

   the Restricted Stock shall become vested and nonforfeitable on each of the

   next two anniversaries of such date of emergence.

 

            (b) Stock Option Grant. If the Executive remains employed by the

   Company at the time of emergence of Group and the Company from protection of

   the U.S. Bankruptcy Court, the Company may, in its discretion, grant to the

   Executive a nonqualified stock option for shares of the Company's common

   stock, under the terms of the Company's 2004 Omnibus Stock Incentive Plan or

   any successor plan, in an amount to be determined by the Human Resources

   Committee. This stock option shall be granted effective as of the date of

   emergence, shall have a per share exercise price equal to the per share fair

   market value of the common stock on the date of grant, and shall become

   exercisable as follows: 50% of the nonqualified stock option shall become

   exercisable as of the date of grant, and 25% of the nonqualified stock option

   shall become exercisable on each of the next two anniversaries of such date

   of emergence.

 

            (c) Future Grants and Awards. The Executive shall remain eligible to

   receive future grants and awards of restricted stock, options or any other

   equity-based grants or awards as may be made under the terms of the Omnibus

   Plan or any successor plan, as may be determined from time to time by the

   Human Resources Committee. Following a Change of Control, the Executive shall

   receive equity-based grants and awards at a level comparable and with vesting

   and exercisability comparable to any regular and normal course grants and

   awards made to other Key Employees of the Company.

 

      4.4 Annual Bonus. The Executive shall be eligible to participate in the

Company's annual cash bonus program under the Company's Incentive Compensation

Plan, as determined by the Human Resources Committee of the Board or any other

annual bonus plan hereafter approved by the Board ("Incentive Plan"). The annual

bonus under this Section 4.4 shall hereinafter be referred to as the "Annual

Bonus."

 

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      4.5 Long-Term Incentive Plan. The Executive shall be eligible to

participate in the long-term incentive program under the Company's Long-Term

Incentive Plan, as determined by the Human Resources Committee of the Board or

any other long-term incentive plan hereafter approved by the Board ("LTIP").

 

      4.6 Retirement Plans. The Executive shall be eligible to participate in

the US Airways Group, Inc. Funded Executive Defined Contribution Plan and the US

Airways Group, Inc. Unfunded Executive Defined Contribution Plan (the "EDCPs").

While participating in the EDCPs, the Executive shall not be eligible to receive

allocations of any employer contributions under any tax-qualified retirement

plan or to participate in any other nonqualified retirement or deferred

compensation plan sponsored by the Company or Group. EDCP payments reduced after

October 11, 2004 shall be restored in monthly installments over a two-year

period beginning on October 12, 2006 (the "Restoration Payments"), as long as

the Executive remains employed by the Company. Notwithstanding the foregoing, in

the event that the Executive terminates employment at any time before

commencement of the Restoration Payments or during the period that Restoration

Payments are being made due to (i) death, (ii) Disability, (iii) termination by

the Company without Cause, or (iv) termination by the Executive due to Good

Reason, then the Executive shall be immediately eligible to receive a lump sum

payment equivalent to the present value of the Restoration Payments. If the

Executive terminates employment due to termination by the Company for Cause or

due to the Executive's voluntary termination, then no Restoration Payments shall

be made to the Executive's account (and/or directly to the Executive), and if

Restoration Payments have already commenced, such payments shall cease as of the

Date of Termination.

 

      4.7 Welfare and Fringe Benefit Plans. During his employment with the

Company, the Executive shall be eligible to participate in the Company's welfare

and fringe benefit plans pursuant to the Company's plans and policies as in

effect for active Key Employees from time to time. The Company reserves the

right to amend or terminate any of its welfare and fringe benefit plans and

policies (including but not limited to coverages and premium structures) at any

time.

 

      4.8 Business Expenses. During his employment with the Company, the

Executive shall be entitled to receive prompt reimbursement for all reasonable

expenses incurred by the Executive in accordance with the expense reimbursement

policies and procedures of the Company applicable to other active Key Employees.

 

      4.9 Withholding, FICA, FUTA, Etc. Any amount to be paid to the Executive

under the provisions of this Agreement which represents taxable income shall be

subject to, and reduced by, any applicable federal, state or local taxes imposed

by law, included, but not limited to, taxes imposed under Subtitle C of the

Code.

 

                                   ARTICLE V

 

                            TERMINATION OF EMPLOYMENT

 

      5.1 Termination of Employment. The Executive's employment and this

Agreement shall be terminated as follows:

 

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            (a) Death: Immediately upon the date of death of the Executive;

 

            (b) Disability: On the tenth (10th) day following written notice

provided by the Board to the Executive that his employment is being terminated

due to