<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission File No. 0-17895
MESABA HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1616499
- ---------------------------------- ----------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7501 26th Avenue South
Minneapolis, Minnesota 55450
----------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 726-5151
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of June 20, 1996 was approximately $133,980,000.
As of June 20, 1996, there were 12,760,046 shares of Common Stock of the
registrant issued and outstanding.
<PAGE>
FORM 10-K/A INDEX
Page
----
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . 1
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . 2
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED WITH THIS REPORT.
(3) Exhibits
10U. Term Sheet Proposal for the Acquisition of Saab 340 Aircraft by
Mesaba Aviation, Inc. dated March 7, 1996 (certain portions
omitted and filed separately with the Commission pursuant to a
confidential treatment request.)
10V. Letter Agreement regarding Saab 340BPlus Acquisition Financing
dated March 7, 1996 (certain portions omitted and filed
separately with the Commission pursuant to a confidential
treatment request.)
10W. Letter Agreement of April 26, 1996 relating to Airline Services
Agreement between Mesaba Aviation, Inc. and Northwest Airlines,
Inc. (certain portions omitted and filed separately with the
Commission pursuant to a confidential treatment request.)
- 1 -
<PAGE>
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: October 14, 1996 MESABA HOLDINGS, INC.
By /s/ Bryan K. Bedford
---------------------
Bryan K. Bedford
President and Chief Executive Officer
- 2 -
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
- ----------- -------
10U. Term Sheet Proposal for the Acquisition of Saab 340 Aircraft by
Mesaba Aviation, Inc. dated March 7, 1996 (certain portions
omitted and filed separately with the Commission pursuant to a
confidential treatment request.)
10V. Letter Agreement regarding Saab 340BPlus Acquisition Financing
dated March 7, 1996 (certain portions omitted and filed
separately with the Commission pursuant to a confidential
treatment request.)
10W. Letter Agreement of April 26, 1996 relating to Airline Services
Agreement between Mesaba Aviation, Inc. and Northwest Airlines,
Inc. (certain portions omitted and filed separately with the
Commission pursuant to a confidential treatment request.)
<PAGE>
TERM SHEET PROPOSAL
FOR THE ACQUISITION OF SAAB 340 AIRCRAFT BY
MESABA AVIATION, INC.
BUYER/SUBLESSEE: Mesaba Aviation, Inc. ("Mesaba")
SELLER: Saab Aircraft of America, Inc. ("SAAI")
SUBLESSOR: Fairbrook Leasing, Inc. ("FLI")
POTENTIAL ASSIGNEE: Northwest Aircraft Inc. ("NAI")
NAI GUARANTOR: Northwest Airlines, Inc. ("NWA")
FIRM AIRCRAFT: Thirty (30) new Saab 340BPLUS aircraft ("New Aircraft") and
twenty (20) used Saab 340A aircraft ("340A Aircraft")
OPTION AIRCRAFT: Ten (10) new Saab 340BPLUS aircraft ("Option New Aircraft"),
and twelve (12) used Saab 340A aircraft ("Option 340A Aircraft")
SUMMARY
SAAI proposes to sell thirty (30) New Aircraft to Mesaba, in six (6)
"Groups" of five (5) aircraft each. Mesaba will also acquire options for ten
(10) Option New Aircraft, in two (2) Groups of five (5) aircraft each. FLI
will provide, and Mesaba will utilize, sublease financing for all Groups
(except that for one Group in 1997 and one Group in 1998, Mesaba may elect to
purchase the Aircraft from SAAI for a fixed price, and may, at its option,
then utilize debt financing to be arranged by FLI.)
FLI proposes to sublease twenty (20) 340A Aircraft to Mesaba, subject to
existing subleases. Mesaba will also acquire options for twelve (12) Option
340A Aircraft.
Under certain circumstances, Mesaba may assign to NAI its rights to
purchase, sublease or debt-finance Aircraft.
NEW AIRCRAFT COMMERCIAL TERMS
DOCUMENTATION: The primary agreement is the Saab 340B Aircraft
Acquisition Agreement dated as of March 1, 1996 between
Mesaba and SAAI (the "Acquisition Agreement"), as
supplemented by ten "Exhibits" and four "Letter
Agreements".
SPECIFICATION: Thirty (30) New Aircraft, built to Saab 340B Type
Specification 72PJS0329, Revision D dated August 1995
(Exhibit B), with the optional equipment selected by
Mesaba and listed in Exhibit C, including active noise
system, cold weather kit, leather seat covers,
<PAGE>
supplementary cabin cooling and heating systems, TCAS II and the Universal
global positioning system ("GPS"). Until certification for factory
intallation (expected before January 1, 1997) is obtained, New Aircraft will
be completely provisioned for the Universal GPS, and SAAI will supply to
Mesaba, at no additional cost to Mesaba, the components for Mesaba to install
post-delivery.
DELIVERY SCHEDULE: To be determined, based on the provisions of Annex 1.
DELIVERY LOCATION: Mesaba's facility in either Minneapolis, Minnesota or
Detroit, Michigan, as specified by Mesaba for any
particular New Aircraft or Option New Aircraft. Mesaba
shall indemnify SAAI for any state and local sales and
use taxes. Mesaba shall provide positive space travel
back to Sweden for three (3) crew members who deliver
each Aircraft.
PRICING: The purchase price for each New Aircraft is * . Mesaba
will pay SAAI Advance Payments of * per New Aircraft
upon the signing of this Term Sheet, and an additional
* per New Aircraft upon execution and delivery
of the Acquisition Agreement, for a total of * in Advance
Payments per New Aircraft and an aggregate Advance
Payment for New Aircraft of *.
METRO III
TRADE-INS: An affiliate of SAAI will assume the operating lease
payment obligations for the * Metro III aircraft operated
by Mesaba and identified in Letter Agreement No. 1, * .
SPARE PARTS
CREDITS: As more fully described in Letter Agreement No. 2, on
the date the Acquisition Agreement becomes fully
effective, SAAI will grant Mesaba Spare Parts Credits in
the aggregate amount of * , applicable toward the
purchase of aircraft and propeller spare parts from
SAAI, and available for Mesaba's use as described in
Letter Agreement No. 2. If Mesaba has not taken
delivery of all thirty (30) New Aircraft and all
twenty (20) 340A Aircraft by December 31, 1998, then
SAAI will cancel Spare Parts Credits in the amount of
* for each such undelivered Aircraft.
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
2
<PAGE>
*
SPARE PARTS
DISCOUNT: Mesaba shall be entitled to a discount of * off the
standard catalog list price for the purchase of
spare parts (including propeller spare parts) from SAAI,
as provided in Letter Agreement No. 2, Paragraph 2.
*
TRAINING: The training programs for pilots and mechanics
described in Exhibit G, Section 4 will be provided for
up to * of Mesaba's pilots (the initial training cadre)
and up to * of Mesaba's mechanics, and SAAI will also
provide Mesaba, at *, with fifteen (15) hours of
simulator time (with Mesaba instructor) for each of up
to * of Mesaba's pilots, all as stated in Letter
Agreement No. 2, Paragraphs 5 and 6. In addition,
SAAI will provide, at no additional charge, flight
attendant training *, and will provide information on
the Saab 340 aircraft in support of Mesaba's development
of its own training materials.
*
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
3
<PAGE>
*
PARTS LEASES: SAAI and Mesaba will agree on a list of insurance
spare parts with a value not to exceed * (the "Lease
Spares"). Subject to requirements of other Saab 340
operators from time-to-time, SAAI agrees to keep the
Lease Spares on hand at its U.S. facility. During the
first ten (10) years after the Delivery Date of the
first 340A Aircraft to Mesaba, should Mesaba need to
lease one or more of the Lease Spares to cover a
temporary requirement, SAAI will provide such Lease
Spares (if available) on lease at *.
TECH REPS: Notwithstanding Section 2.a of Exhibit G, SAAI agrees to
assign and locate one (1) Field Technical Representative
each at Mesaba's Detroit and Minneapolis facilities,
each for * from the commencement of Saab 340
operations at such facility. Thereafter for *, SAAI
agrees to assign one (1) Field Technical
Representative to Mesaba, for a total commitment of *.
*
OPTION NEW
AIRCRAFT: As more fully described in Letter Agreement No. 4, ten
(10) new Saab 340BPLUS aircraft built to the same
specification as the New Aircraft, with the same optional
equipment. The purchase price is *
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
4
<PAGE>
*
OPTION TERMS: Mesaba will pay SAAI * Option Fee of * to be paid upon
the signing of this Term Sheet and * upon the execution
and delivery of the Acquisition Agreement, for an
aggregate Option Fee for Option New Aircraft of *.
Mesaba must exercise its option to purchase the Option
New Aircraft on or before December 31, 1998. The first
Option New Aircraft will be delivered in the month that
is nine (9) months after the month following Mesaba's
exercise of its option, with the remaining delivery
schedule to be mutually agreed, but at a rate not to
exceed a total of two (2) Option New Aircraft and Option
340A Aircraft per month. Mesaba must pay SAAI an Advance
Payment of * at the time it exercises its option to
purchase each Option New Aircraft.
NEW AIRCRAFT FINANCING OPTIONS AND TERMS
DOCUMENTATION: The primary agreement is the Financing Agreement for Saab
340A and 340B Aircraft dated as of March 1, 1996 between
Mesaba and FLI (the "Financing Agreement"), which is
supplemented by seven Exhibits, among which are the
agreed forms of lease and sublease for New Aircraft
and Option New Aircraft (each referred to below, for
convenience only, as a "Sublease"). The following is
a summary of selected elements of the Financing
Agreement that apply to New Aircraft and Option New
Aircraft:
COMMITMENTS OF
FLI AND MESABA: FLI shall provide, and Mesaba shall utilize the Sublease
financing described more fully in Section 5(a), for all
Groups of New Aircraft and Option New Aircraft, unless it
notifies FLI at least ninety (90) days in advance of
the scheduled delivery month of the first New Aircraft
or Option New Aircraft in such Group that it elects
to purchase the Aircraft in that Group from SAAI as
provided in the Acquisition Agreement; but (as
described in Letter Agreement No. 4, Paragraph 3)
Mesaba may elect to so purchase no more than one of
Groups 2, 3 and 4 and no more than one of Groups 5, 6,
7 and 8.
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
5
<PAGE>
DEBT FINANCING: If Mesaba does elect to so purchase a Group, then it may
also require FLI to provide or arrange senior secured
debt financing or leveraged lease debt financing for all
Aircraft in such Group, as more fully described in
Section 5(b). *
TERM OF SUBLEASES: The term of each Sublease will be seventeen (17) years;
at FLI s option such term for any Aircraft may be
increased by the addition of a stub period of up to
three (3) months between its delivery and the
commencement of a permanent Sublease.
BASIC RENT: For New Aircraft, Basic Rent will be * For Option New
Aircraft, Basic Rent shall be *
340A SUBLEASE FINANCING TERMS
DOCUMENTATION: The primary agreement is the Financing Agreement. The
Sublease for each 340A Aircraft and Option 340A Aircraft
shall be in the form of Exhibit D to the Financing
Agreement, subject to changes (as provided in Section
5(a)(v)) required for conformance with the Head Lease in
effect with respect to such Aircraft. The following is a
summary of selected elements of the Financing Agreement
that apply to 340A Aircraft and Option 340A Aircraft:
COMMITMENTS OF
FLI AND MESABA: As more fully described in Sections 3(a) and 4, FLI shall
deliver to Mesaba, and Mesaba shall sublease from FLI,
twenty (20) 340A Aircraft, and Mesaba will pay FLI, upon
the signing of this Term Sheet, * , for a total of * , in
Advance Payments.
SPECIFICATION: As more fully described in Annex 2 hereto (which
supersedes Exhibit C to the draft
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
6
<PAGE>
Financing Agreement), the 340A Aircraft will be
configured with 34 seats, forward galley and aft
lavatory, with cold weather kit, leather seat covers,
TCAS II and supplementary cabin heating system. (Section
3(d)). *
DELIVERY SCHEDULE: To be determined, based on the provisions of Annex 1.
DELIVERY LOCATION: At the facility where each Aircraft has been refurbished
or another, mutually agreed location so as to minimize
the tax impact of such delivery. Mesaba shall indemnify
FLI for any state and local sales or use taxes. Mesaba's
pilots shall ferry each Aircraft from the refurbishment
facility to the delivery location and then to Mesaba's
operations base, but FLI will assist Mesaba by providing
pilots for as many as the first three (3) deliveries,
until Mesaba has trained sufficient pilots on the Saab
340 to reasonably accommodate such delivery flights.
TERM OF SUBLEASES: At FLI's option, and depending on the remaining term of
the applicable Head Lease, the term of each Sublease will
be between 72 and 96 months (Section 5(a)(ii)), *
BASIC RENT: *
OPTION 340A
AIRCRAFT: As many as twelve (12) Option 340A Aircraft, offered in
an initial set of five (5) aircraft ("Group A") and a
second set of seven (7) aircraft ("Group B"). The Option
340A Aircraft will have the same specification, Sublease
term and Basic Rent as the 340A Aircraft. The earliest
delivery date for the first Option 340A Aircraft will be
in the month after the scheduled delivery month of the
30th New Aircraft (and no sooner than * after the
month in which the option was exercised), with
remaining delivery schedule to be mutually agreed,
but at a rate not to exceed two (2) Option New
Aircraft and Option 340A Aircraft per month, subject,
only in the case of Group B Option 340A Aircraft, to
such aircraft being "Available" as defined in Section
3(a) of the Financing Agreement.
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
7
<PAGE>
The option to sublease either Group must be exercised no
later than December 31, 1998. The option to sublease
Group B cannot be exercised unless Mesaba has also
exercised its option to acquire all of the Option New
Aircraft.
RIGHTS ASSIGNABLE TO NORTHWEST AIRCRAFT AND NORTHWEST AIRLINES
PURCHASE RIGHTS: Mesaba shall have the right to assign to NAI its right to
purchase New Aircraft and Option New Aircraft under the
Acquisition Agreement (as limited by the provisions of
Letter Agreement No. 3, Paragraph 1).
NEW AIRCRAFT
SUBLEASE FINANCING: As more fully described in Section 5(a)(vi) of the
Financing Agreement, on ninety (90) days notice as
provided in Section 5(c), Mesaba may assign to NAI its
right to take delivery of any Group of Aircraft under
Sublease financing, if NWA fully guarantees NAI's
obligations and NAI assumes all of Mesaba's obligations,
*
REVERSE ASSIGNMENT
RIGHT: NAI shall have the one-time right under each Sublease of
a New Aircraft or Option New Aircraft to assign such
Sublease to Mesaba, if Mesaba assumes all of NAI's
obligations. *
NEW AIRCRAFT
DEBT FINANCING: As more fully described in Section 5(b)(iv), on ninety
(90) days notice (as provided in Section 5(c)), Mesaba
may assign to NAI its right to take delivery of any Group
subject to a debt financing described in Section 5(b), if
NWA fully guarantees NAI's obligations and NAI assumes
all of Mesaba's obligations.
340A SUBLEASE
FINANCING: As more fully described in Section 5(a)(vii), Mesaba may
assign all of its 340A Aircraft Subleases and the right
to acquire as yet undelivered 340A Aircraft to NWA in the
event the Airline Services Agreement between Mesaba and
NWA is not renewed before March 31, 1997, if NWA assumes
all of Mesaba's obligations.
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
8
<PAGE>
TERMS APPLICABLE TO ALL FINANCINGS
*
SUBORDINATION: As more fully described in Section 5(a)(iv) of the
Financing Agreement, any sublease from FLI to Mesaba, NA
or NWA shall be subject and subordinate to any applicable
Head Lease.
MODIFICATIONS: As more fully described in Section 5(a)(v), Mesaba will
cooperate with FLI in structuring a lease-in-lease-out
transaction for New Aircraft or Option New Aircraft and
in modifying the form of Sublease (Exhibit D to the
Financing Agreement) for 340A Aircraft and Option 340A
Aircraft so the Sublease will not conflict with the Head
Lease in effect with respect to such Aircraft.
ADMINISTRATIVE
QUIET ENJOYMENT: As provided in Section 4(b) of the form of Sublease
(Financing Agreement Exhibit D).
HEAD LEASE
PASSTHROUGH: As described in Section 24 of the form of Sublease
(Exhibit D to the Financing Agreement), FLI will pass
through to Mesaba such EBO * and renewal rights as it
negotiates with the Head Lessor. FLI also agrees to
pass through to Mesaba the return conditions it
negotiates with the Head Lessor *; FLI will endeavor
to obtain provisions in the Head Lease to the effect
that major conponents that are covered by "power-by
the-hour" agreements automatically satisfy return
conditions for such components if such agreements are
current and in good standing, subject to the
agreement of each affected vendor.
SPARE PARTS LIEN: As more fully provided in Section 5(f), Mesaba shall
grant FLI a first priority security interest in all
spare parts for Saab aircraft provided hereunder or
acquired through application of Spare Parts Credits,
to secure Mesaba's obligations under all financings
through 2005.
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
9
<PAGE>
CONDITIONS PRECEDENT AND EFFECT OF THIS TERM SHEET
DOCUMENTATION: 1. The Acquisition Agreement
2. Letter Agreements Nos. 1 through 4
3. The Financing Agreement
4. Letter Agreement Dated March 7, 1996 between Saab
Aircraft AB and Mesaba.
CONDITIONS
PRECEDENT: None of the above-listed agreements shall be effective
unless and until (1) all such agreements have been signed
by each party thereto and delivered to all respective
counterparties, (2) SAAI shall have received the Advance
Payments * for the New Aircraft and the Option Fee * for
the Option New Aircraft, (3) FLI shall have received the
Advance Payments * for the 340A Aircraft and the Option
Fee * for the Option 340A Aircraft and (4) NWA shall have
approved the transactions contemplated by such final
documentation. In the event that one or more of these
conditions precedent shall not have been either satisfied
or waived by the party to receive such signed document or
payment, then all payments shall be immediately
refundable to Mesaba.
EFFECT OF THIS
TERM SHEET: By signing this Term Sheet, SAAI, FLI and Mesaba evidence
their agreement to negotiate, execute and deliver
definitive documentation in substantially the form and
substance of the 2/18/96 drafts of the above-listed
documents no later than April 15, 1996; provided,
however, that in the event of any conflict between the
terms set forth in this Term Sheet and any such draft,
the terms set forth in this Term Sheet shall prevail.
VALIDITY AND LAW: This Term Sheet is to be governed in all respects by the
laws of the State of New York, including all matters of
construction, validity and performance. It shall not be
effective unless and until (1) it has been signed by and
delivered to each other party, (2) SAAI shall have
received * Advance Payments for the New Aircraft * the
Option Fee for the New Aircraft * , (3) FLI shall have
received the Advance Payments * for the 340A Aircraft *
Option Fee for the Option 340A Aircraft, all on or before
March 7, 1996. It shall be null and void if on or before
March 7, 1996, (1) either FLI or SAAI notifies Mesaba in
writing that the Board of Directors of Saab Aircraft AB
has
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
10
<PAGE>
failed to approve the transactions contemplated hereby or (2) Mesaba notifies
both SAAI and FLI that its Board of Directors has failed to approve the
transactions contemplated hereby.
PUBLICITY: All of the information and content of this Term Sheet
(specifically including, without limitation, Basic Rent
provisions) shall remain confidential until all three
parties agree otherwise. SAAI and FLI acknowledge the
importance of confidentiality in light of the status of
Mesaba's parent company, Mesaba Holdings, Inc., as a
publicly-traded company. Mesaba recognizes the
difficulty of such information remaining secret, and
agrees to authorize a press release as soon as possible
after its Board approval of the transaction is obtained.
Mesaba agrees to permit SAAI and FLI to review and
comment in advance any proposed public disclosures
involving information about the transactions contemplated
by this Term Sheet and the Documents listed above.
Signed on March 7, 1996.
Mesaba Aviation, Fairbrook Leasing, Saab Aircraft of
Inc. Inc. America, Inc.
By: /s/ Bryan K. Bedford By: /s/ Henrik Schroder By: /s/ Mark D. Pugliese
-------------------- ------------------- --------------------
Bryan K. Bedford Henrik Schroder Mark D. Pugliese
President and CEO President and CEO Executive Vice President
and General Counsel
By: /s/ Gena H. Laurent By: /s/ Steven M. Wallace
------------------- ---------------------
Gena H. Laurent Steven M. Wallace
Assistant Vice Vice President -
President Product Support
11
<PAGE>
ANNEX 1
DETERMINATION OF DELIVERY SCHEDULE
FOR NEW AIRCRAFT AND 340A AIRCRAFT
The thirty (30) New Aircraft and twenty (20) 340A Aircraft shall be delivered
commencing May 1996 and continuing through May 1998. Subject to the following
constraints, SAAI shall determine the mix of New Aircraft and 340A Aircraft for
each calendar quarter at least three (3) months in advance of each quarter:
1. Two Aircraft will be delivered each month.
2. No more than five (5) New Aircraft will be delivered in 1996.
3. No New Aircraft will be delivered before September 1996.
4. No New Aircraft will be delivered in any July.
5. By the end of 1997, at least seventeen (17) New Aircraft will be delivered.
6. SAAI and Mesaba will cooperate with each other, particularly during the
early part of the delivery cycle, in establishing delivery dates and
accommodating each other's reasonable requests for flexibility.
<PAGE>
ANNEX 2
SAAB 340A CONFIGURATION
Interior Panel Refurbishment
New Carpeting
Leather Seat Covers
New Exterior Paint
Interchangeability of Propellers
WEU to Mod. 5
EFIS Fan SB
ACT Inlet Connectors
Lucas Brushes for Generators
C-Check and Structural Inspections
Cold Weather Kit
Supplementary Heating
TCAS II
34 Passenger Seats
Forward Galley
Aft Lavatory
<PAGE>
EXHIBIT 10V
[LETTERHEAD]
March 7, 1996
Mesaba Aviation, Inc.
7501 26th Avenue South
Minneapolis, MN 55450
Attention: Bryan K. Bedford
President and CEO
Copy: Northwest Airlines, Inc.
5101 Northwest Drive
Department A4010
St. Paul, MN 55111-3034
Attention: Joseph E. Francht
Senior Vice President & Treasurer
Copy: Northwest Aircraft, Inc.
5101 Northwest Drive
Department A5000
St. Paul, MN 55111-3034
Attention: Daniel B. Matthews
Vice President
Re: Saab 340BPLUS Acquisition Financing
-----------------------------------
Gentlemen:
Saab Aircraft Finance Corporation ("SAFC") proposes to sublease thirty (30) new
Saab 340BPLUS aircraft ("Aircraft") for initial delivery to Mesaba Aviation,
Inc., a Northwest Airlink company, on the following basis:
AIRCRAFT GROUPINGS
The Aircraft will be grouped into six (6) separate groups containing five (5)
Aircraft (each a "Group"), with all Aircraft in the first Group to be delivered
before December 31, 1996. The remaining Groups shall contain on the average 1.5
aircraft deliveries per month, excluding July.
<PAGE>
AIRCRAFT SUBLEASE
Subject to Mesaba's not exercising any of the below stated options ninety
(90) days prior to the scheduled delivery month of the first Aircraft in each
Group (such options being available only for a maximum of one Group in 1997
and one Group in 1998, however), concurrent with the delivery of each
Aircraft for which Mesaba has not exercised any of the options within each
Group, SAFC (or an affiliate thereof) will enter into a sublease agreement
("sublease") with either Mesaba Aviation, Inc. ("Mesaba") or Northwest
Aircraft, Inc. ("Northwest Aircraft"), (either referred to as "Sublessee")
such determination to be made by Mesaba and approved by Northwest Airlines,
Inc. ("NWA") by prior written notice to be given to SAFC no later than 60
days prior to the commencement of each sublease. If no determination has
been received prior to the sixty (60) day period, then the sublessee shall be
construed to be Mesaba. * At any time during the sublease, Northwest Aircraft
shall have (in addition to any rights to sub-sublease the Aircraft as
provided in the form of Sublease) a one-time option to assign its position as
sublessee to Mesaba, * Subleases to either Sublessee shall contain terms and
conditions typically available to NWA in the marketplace for U.S. leveraged
leases as discussed with Capstar Partners. SAFC shall have the right to lease
Aircraft directly to either Mesaba or Northwest Aircraft, as the case may be
for an interim period of up to three (3) months, after which the 17-year
sublease term shall commence. Each sublease shall be subject and subordinate
to the head lease arranged by SAFC *
GROUP DEBT FINANCING OPTIONS
As an alternative to the Sublease, at Mesaba's sole option (to be approved by
NWA), subject to Mesaba having exercised such option * prior to the scheduled
delivery month of the first Aircraft in each Group, SAFC shall arrange one of
the below specified debt financing structures by either having an SAFC affiliate
provide the debt financing or arrange to have a third party provide the debt
financing. In either case, the terms and conditions of such debt financing shall
be of generally acceptable market terms and conditions at the time of the
funding for transactions of similar kind and nature, and the documentation for
such financings shall contain terms and conditions typically available to NWA in
the U.S. marketplace for similar financings as discussed with Capstar Partners.
1. Senior secured debt financing for the purchase by Mesaba or Northwest
Aircraft of the Aircraft in an amount not to exceed * , for a maximum 10 year
term, with semi-annual payments in arrears, with equal amortization per
payment period, with no balloon at the end of term. If the debt is extended to
Mesaba the interest
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
2
<PAGE>
rate on the purchase debt for each Aircraft, for which the option has been
exercised within such Group, shall be fixed at the 5.5-year U.S. Treasury
Note yield plus *, at the time of the Aircraft delivery, and a guarantee fee
paid to SAFC equal to * . If the debt is extended to Northwest Aircraft, Inc.
with a payment and performance guaranty from NWA, the interest rate on the
purchase debt for each Aircraft, for which the option has been exercised
within such Group, shall be fixed at the 5.5-year U.S. Treasury Note yield
plus a fixed percentage p.a. available in the market, based solely on the
credit worthiness of the Northwest Airlines, Inc. credit and a senior secured
collateral position in the Aircraft * ; PROVIDED, however that such interest
rate shall in no event exceed the interest rate available to Mesaba
hereunder, or
2. Senior secured non-recourse debt financing into a third party leveraged
lease in an amount not to exceed * , for a maximum 17 year term, with semi-
annual payments in arrears, with no balloon at the end. If the debt is extended
to a lessor for a lease to Mesaba the interest rate on the debt for each
Aircraft, for which the option has been exercised within such Group, shall be
fixed at the 10-year U.S. Treasury Note yield plus 2.00% p.a., at the time of
the Aircraft delivery, and a guarantee fee paid to SAFC equal * . If the debt
is extended to a lessor for a lease to Northwest Aircraft, with a payment and
performance guaranty from NWA, the interest rate on the debt for each
Aircraft for which the option has been exercised within such group, shall be
* , based solely on the credit worthiness of the NWA credit and a senior
secured collateral position in the Aircraft, * ; PROVIDED, however that such
interest rate shall in no event exceed the interest rate available to Mesaba
hereunder.
PURCHASE OPTION
Subject to Mesaba's having exercised the option at least ninety (90) days
prior to the scheduled delivery month of the first Aircraft in each Group, to
the extent that Mesaba or Northwest Aircraft have not exercised an option to
use the Sublease or any of the Debt Financing Options, SAFC will cause SAAI
to sell the Aircraft to either Mesaba or Northwest Aircraft, as determined in
the written option notice, for a purchase price of * due upon delivery of
each Aircraft.
In addition to other commitments made to Mesaba including, without limitation,
the lease or sublease of used Saab 340A aircraft, which SAFC shall also make
available to NWA on the same terms and conditions, such determination to be
agreed upon between Mesaba and NWA, this letter sets forth SAFC's commitment
with respect to thirty (30) new Saab 340B Aircraft and the general understanding
as to the sublease financing, debt financing and purchase options available to
Mesaba or NWA. It is understood between the parties that any commitment on the
part of NWA, Northwest Aircraft, Mesaba or SAFC is subject to Finance Committee
and board approval of NWA, board approval of Mesaba, credit committee approval
of SAFC by no later than March 7, 1996 as well as negotiation and execution of
definitive aircraft purchase, financing and lease documentation to be executed
by no later than April 15, 1996. Notwithstanding anything to the contrary set
forth herein, no commitment contained herein shall be binding on NWA, Northwest
- ---------------
* Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
3
<PAGE>
Aircraft or Mesaba until approval of this specific transaction has been obtained
from NWA following the date hereof.
If acceptable to Mesaba, NWA and Northwest Aircraft, please evidence agreement
or acknowledgment by signing below and returning an originally executed copy,
otherwise this offer will expire on March 8, 1996.
Saab Aircraft Finance Corporation
By: /s/ Henrik Schroder
----------------------------
Henrik Schroder
President
By: /s/ Gena H. Laurent
----------------------------
Gena H. Laurent
Assistant Vice President
Agreed to and Accepted by:
Mesaba Aviation, Inc.
By: /s/ Bryan K. Bedford
----------------------------
Bryan K. Bedforid
President and CEO
Acknowledged by:
Northwest Airlines, Inc.
By: /s/ Joseph E. Francht, Jr.
----------------------------
Name: Joseph E. Francht, Jr.
Title: Senior Vice President
Finance and Treasurer
Acknowledged by:
Northwest Aircraft, Inc.
By: /s/ Daniel B. Matthews
----------------------------
Name: Daniel B. Matthews
Title: Vice President
4
<PAGE>
April 18, 1996
Mr. Bryan K. Bedford
President and CEO
Mesaba Airlines
7501 26th Avenue South
Minneapolis, MN
Dear Bryan:
This Side Letter to the Airline Services Agreement ("Agreement") dated September
15, 1988, as amended, between Mesaba Aviation, Inc. and Northwest Airlines,
Inc., sets forth the revised compensation methodology to be utilized during the
period January 1, 1996 through March 31, 1997 ("Interim Period"). Except as is
expressly discussed below, all other terms and conditions of the Agreement shall
remain unchanged.
COST PER ASM TARGET LEVELS
Mesaba agrees to achieve systemwide Cost per ASM levels consistent with the
following schedule:
CALENDAR QUARTER
- --------------------------------------------------------------------------------
1Q96 2Q96 3Q96 4Q96 1Q97
--------- --------- --------- --------- ---------
Cost per ASM * * * * *
Northwest shall not be obligated to make any ASM payments in excess of the Cost
per ASM levels set forth above ("ASM Cap Rate"). *
It is understood by Mesaba and Northwest that the ASM Cap Rate includes *
of additional annual Dash 8 expenses (Exhibit A) transferred to Mesaba, which
were previously paid for directly by Northwest, and Mesaba hereby agrees that it
is responsible for payment of such costs. *
REDUCED COST SHARING
To the extent that Mesaba is able to cut costs to a level below the quarterly
ASM Cap Rate, Northwest and Mesaba shall share such savings equally until the
actual system Cost per ASM reaches * , below which Mesaba shall retain
all savings. The calculation of actual cost per ASM versus the ASM Cap Rate
shall be reconciled quarterly, and shall be settled on the first wire transfer
date after such reconciliation.
*Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
<PAGE>
PER PASSENGER FEES
Mesaba shall receive * per passenger for all revenue passengers which fly
on Mesaba flights. A passenger flying on a one-stop flight into the hub city
shall be treated as a single passenger for calculating the per passenger fees
(i.e. this passenger does not get counted for each segment).
PERFORMANCE BONUSES
The Performance Bonus calculations shall be based upon a controllable completion
factor goal of * and a controllable on-time performance goal of *
(arrival within * minutes). Mesaba shall receive a bonus of * per
passenger, for all passengers if the goals are achieved. Mesaba shall pay
penalties in accordance with Section JP-4.5.C of the Agreement for completion
factor and on-time shortfalls.
Sections JP-4.5.A (Northwest Contribution Margin Bonus) and JP-4.5.B (Cost per
ASM target range) of the Agreement shall no longer apply.
FUEL ADJUSTMENT
Effective January 1, 1996 and throughout the term of this agreement, Mesaba
shall submit to Northwest a monthly reconciliation of its cost per gallon of
into-plane aircraft fuel. Northwest shall reimburse Mesaba for all into-plane
fuel costs incurred by Mesaba in excess of * and Mesaba will reimburse
Northwest (through a set-off from revenue wire transfers to Mesaba) for all
into-plane fuel costs of less than * based on actual monthly usage.
Mesaba agrees to pay Northwest a fee of * /month for services related to
fuel administration provided by Northwest during the term of this agreement.
*
*
SCHEDULING
Northwest agrees to use all commercially reasonable efforts to identify and
implement Mesaba growth opportunities in 1996. Northwest also agrees to a
conduct a quarterly schedule coordination meeting.
Except as expressly set forth herein, the Agreement shall remain in full force
and effect. All capitalized terms not otherwise defined herein shall have the
meaning set forth in the Agreement.
This Side Letter shall in all respects be subject to the terms and conditions of
the Agreement except that in the event of an inconsistency between the Agreement
and this Side Letter, the terms and conditions of this Side Letter shall
prevail.
Accepted and Agreed to this 26 day of April 1996.
*Confidential portions omitted and filed separately with the Commission
pursuant to a confidential treatment request.
<PAGE>
/s/Neal Cohen /s/Bryan K. Bedford
- ------------------------------ ------------------------------
Neal Cohen Bryan K. Bedford
Vice President President and CEO
Northwest Airlines, Inc. Mesaba Airlines, Inc.
