SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File Number 0-23642
NORTHWEST AIRLINES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4205287
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 LONE OAK PARKWAY, EAGAN, MINNESOTA 55121
(Address of principal executive offices)
(Zip Code)
(612) 726-2111
(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
At July 31, 1996, there were 93,269,984 shares of the registrant's Class A
Common Stock and 3,929,346 shares of the registrant's Class B Common Stock
outstanding.
Northwest Airlines Corporation
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations - Three months and six months
ended June 30, 1996 and 1995. 3
Condensed Consolidated Balance Sheets -
June 30, 1996, December 31, 1995 and June
30, 1995. 4
Condensed Consolidated Statements of Cash
Flows - Six months ended June 30, 1996 and
1995. 5
Notes to Condensed Consolidated Financial Statements 6
The Computations of Primary and Fully Diluted
Earnings Per Common Share, attached hereto and
filed as Exhibits 11.1 and 11.2, and the
Computations of Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Fixed Charges and
Preferred Stock Requirements, attached hereto and
filed as Exhibits 12.1 and 12.2, are incorporated
herein by reference.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security-Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
EXHIBIT INDEX 13
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHWEST AIRLINES CORPORATION
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30 June 30
(Unaudited, in millions except share and per share amounts) 1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Passenger $ 2,228.4 $ 1,959.4 $ 4,163.9 $ 3,647.2
Cargo 186.0 188.9 356.3 368.0
Other 126.0 131.1 285.0 307.2
--------------- --------------- --------------- ---------------
2,540.4 2,279.4 4,805.2 4,322.4
OPERATING EXPENSES
Salaries, wages and benefits 647.9 593.4 1,292.1 1,177.7
Stock-based employee compensation 65.0 102.2 185.1 165.8
Aircraft fuel, oil and taxes 330.5 262.1 636.1 511.1
Commissions 221.8 211.8 425.5 403.6
Aircraft rentals 87.5 86.4 171.6 170.7
Landing fees and other rentals 112.0 124.0 220.7 233.6
Aircraft maintenance materials and repairs 121.6 99.4 245.2 201.2
Depreciation and amortization 93.0 91.3 183.0 180.1
Other 486.4 459.2 936.8 881.6
--------------- --------------- --------------- ---------------
2,165.7 2,029.8 4,296.1 3,925.4
--------------- --------------- --------------- ---------------
OPERATING INCOME 374.7 249.6 509.1 397.0
OTHER INCOME (EXPENSE)
Interest expense, net (65.6) (99.6) (134.2) (203.3)
Interest of mandatorily redeemable preferred
security holder (6.9) -- (13.9) --
Investment income 17.9 15.5 33.2 30.5
Foreign currency gain (loss) 4.4 (5.5) 11.3 (64.6)
Other 6.7 6.1 13.4 11.0
--------------- --------------- --------------- ---------------
(43.5) (83.5) (90.2) (226.4)
--------------- --------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 331.2 166.1 418.9 170.6
Income tax expense 128.4 61.3 162.7 63.2
--------------- --------------- --------------- ---------------
Net Income 202.8 104.8 256.2 107.4
Preferred stock requirements (13.2) (14.6) (26.2) (29.1)
Exchange of preferred stock -- -- -- 59.2
--------------- --------------- --------------- ---------------
Net Income Applicable to Common Stockholders $ 189.6 $ 90.2 $ 230.0 $ 137.5
=============== =============== =============== ===============
Earnings per common share:
PRIMARY
Before effects of exchange of preferred stock $ 1.90 $ .96 $ 2.32 $ .85
Exchange of preferred stock -- -- -- .64
--------------- --------------- --------------- ---------------
Earnings per common share $ 1.90 $ .96 $ 2.32 $ 1.49
=============== =============== =============== ===============
FULLY DILUTED
Before effects of exchange of preferred stock $ 1.72 $ .92 $ 2.10 $ .84
Exchange of preferred stock -- -- -- .59
--------------- --------------- --------------- ---------------
Earnings per common share $ 1.72 $ .92 $ 2.10 $ 1.43
=============== =============== =============== ===============
Average shares used in computation:
PRIMARY 99,679,687 93,658,308 99,025,045 92,445,642
FULLY DILUTED 110,505,764 100,834,134 109,393,597 99,398,505
</TABLE>
See accompanying notes
NORTHWEST AIRLINES CORPORATION
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 December 31 June 30
(Unaudited, in millions) 1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 963.3 $ 850.9 $ 756.4
Short-term investments 366.6 260.7 278.2
Accounts receivable, net 735.0 700.3 808.1
Flight equipment spare parts, net 261.3 268.0 251.5
Prepaid expenses and other 270.5 258.3 281.7
-------- -------- --------
2,596.7 2,338.2 2,375.9
PROPERTY AND EQUIPMENT
Flight equipment, net 3,264.2 3,097.2 3,005.8
Other property and equipment, net 945.7 982.2 1,112.5
-------- -------- --------
4,209.9 4,079.4 4,118.3
FLIGHT EQUIPMENT UNDER CAPITAL LEASES, NET 691.3 710.1 728.8
OTHER ASSETS
International routes, net 763.5 775.7 787.8
Investments in affiliated companies and other 502.7 508.9 421.5
-------- -------- --------
1,266.2 1,284.6 1,209.3
-------- -------- --------
$8,764.1 $8,412.3 $8,432.3
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Air traffic liability $1,139.3 $ 888.4 $1,012.6
Accounts payable and other liabilities 1,503.0 1,560.4 1,416.5
Current maturities of long-term debt and
capital lease obligations 343.0 391.8 245.9
-------- -------- --------
2,985.3 2,840.6 2,675.0
LONG-TERM DEBT 1,980.8 2,137.4 3,678.4
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 746.4 779.1 813.8
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 793.6 772.5 820.5
Pension and postretirement benefits 791.2 831.1 414.4
Other 314.2 306.5 349.2
-------- -------- --------
1,899.0 1,910.1 1,584.1
MANDATORILY REDEEMABLE PREFERRED SECURITY OF
SUBSIDIARY WHICH HOLDS SOLELY NON-RECOURSE
OBLIGATION OF COMPANY 579.1 618.4 --
REDEEMABLE PREFERRED STOCK 1,027.6 945.5 794.8
COMMON STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 1.0 .9 .9
Additional paid-in capital 1,102.7 970.7 774.4
Accumulated deficit (1,288.1) (1,517.8) (1,773.5)
Other (269.7) (272.6) (115.6)
-------- -------- --------
(454.1) (818.8) (1,113.8)
-------- -------- --------
$8,764.1 $8,412.3 $8,432.3
======== ======== ========
</TABLE>
See accompanying notes
NORTHWEST AIRLINES CORPORATION
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30
(Unaudited, in millions) 1996 1995
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 713.5 $ 525.2
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (708.5) (232.6)
Net (increase) decrease in short-term investments (103.6) 320.3
Other, net 4.2 (3.0)
-------- --------
Net cash provided by (used in) investing activities (807.9) 84.7
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale and leaseback transactions 350.0 --
Payments of long-term debt and capital lease obligations (137.5) (323.4)
Other, net (5.7) 1.9
-------- --------
Net cash provided by (used in) financing activities 206.8 (321.5)
INCREASE IN CASH AND CASH EQUIVALENTS 112.4 288.4
Cash and cash equivalents at beginning of period 850.9 468.0
-------- --------
Cash and cash equivalents at end of period $ 963.3 $ 756.4
======== ========
Cash and cash equivalents and unrestricted short-term
investments at end of period $1,208.9 $ 937.8
======== ========
Borrowing capacity under revolving credit facility $ 237.3 $ 275.6
======== ========
</TABLE>
NORTHWEST AIRLINES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements of Northwest Airlines
Corporation ("NWA Corp." or the "Company") included herein have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted as permitted by such rules and regulations. These financial
statements and related notes should be read in conjunction with the
financial statements and notes thereto included in the Company's audited
consolidated financial statements for the year ended December 31, 1995
contained in the Company's Annual Report on Form 10-K for 1995 (the
"Annual Report").
In the opinion of management, the interim financial statements reflect
adjustments, consisting of normal recurring accruals, which are necessary
to present fairly the Company's financial position, results of operations
and cash flows for the periods indicated.
2. The Company's accounting and reporting policies are summarized in Note A
of the Notes to Consolidated Financial Statements in the Annual Report.
Effective with the first quarter 1996 financial reporting, the Company
reports gains (losses) relating to the disposition of assets as operating
expenses instead of in other income (expense) in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This change had no impact on net income, and gains (losses) on the
disposition of assets are excluded from unit cost calculations.
3. Pursuant to amended labor agreements which provide for wage and other
cost reductions aggregating approximately $886 million over a 39 month
period which commenced August 1993, the Company has agreed to issue
common and preferred stock to employees. Note C of the Notes to
Consolidated Financial Statements in the Annual Report contains
additional discussion of the labor cost savings agreements, stock to be
issued to employees and the related accounting treatment. The fifth
installment of shares issuable to the employee trusts, consisting of
2,555,757 shares of Series C Preferred Stock, 4,215,409 shares of Class A
Common Stock and 536,880 shares of Class B Common Stock, was made on
March 1, 1996.
4. The income tax expense is based on estimated annual effective tax rates
which differ from the federal statutory rate of 35% primarily due to
state income taxes and certain nondeductible expenses.
5. As discussed under "Management's Discussion and Analysis of Financial
Condition and Results of Operations --Liquidity and Capital Resources",
the Company entered into agreements providing for the purchase and
financing of 20 Airbus A320 aircraft as well as the rescheduling of
certain Airbus A330 aircraft deliveries. The Company has substitution
rights with respect to the A330 aircraft. This transaction also included
the rescheduling of existing debt to beyond 2000 at lower interest rates.
6. At June 30, 1996, the Company had no borrowings outstanding under its
revolving credit facility. The $237.3 million in borrowing capacity under
such facility along with $1.21 billion of cash, cash equivalents and
unrestricted short-term investments provided the Company with $1.45
billion of available liquidity at June 30, 1996. In May 1996, the Company
used $50 million of existing funds to prepay a portion of its floating
rate term loan under the Company's Credit Agreement and increased the
revolving credit facility by the same amount. In July 1996, the Company
used $125 million of existing funds to prepay an additional portion of
its floating rate term loan. Scheduled maturities of long-term debt
subsequent to June 30, 1996, as adjusted to give effect to the
prepayments, are $228.7 million in 1996 (excluding the $125 million July
prepayment), $93.7 million in 1997, $139.0 million in 1998, $300.2
million in 1999, and $60.5 million in 2000.
7. In June 1996, $524.5 million of equipment trust pass through certificates
were issued in connection with the refinancing of the lessors' bridge
indebtedness associated with 11 leveraged operating leases relating to
two used B747 aircraft and nine new B757 aircraft leased to the Company.
The proceeds related to the issuance of the equipment trust pass through
certificates were used to repay such indebtedness of the lessors.
8. In June 1996, the Company and KLM Royal Dutch Airlines ("KLM") entered
into an agreement pursuant to which the Company agreed to acquire 3,691.2
shares of its Series A Preferred Stock and 2,962.8 shares of its Series B
Preferred Stock held by KLM. On July 1, 1996, the Series A shares were
acquired by the Company in exchange for a $227 million unsecured
promissory note payable December 30, 1996. On July 26, 1996, the Series B
shares were acquired by the Company in exchange for a $152 million
unsecured promissory note payable June 13, 1997. The Company will report
a one-time increase to net income applicable to common stockholders of
approximately $74 million in the third quarter of 1996 and annual
earnings-per-share will benefit by approximately $0.12 until the date at
which the stock would have become subject to mandatory redemption.
9. In accordance with Rule 1-02 (bb) of Regulation S-X, the following
summary data is presented for Northwest Airlines, Inc.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions) Three Months Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C>
Operating revenues $ 2,488.6 $ 2,212.3 $ 4,666.7 $ 4,155.2
Operating expenses 2,123.9 1,972.8 4,184.2 3,782.2
----------- ----------- ----------- -----------
Operating income 364.7 239.5 482.5 373.0
Other income (expense) (41.6) (75.5) (89.1) (206.3)
------------ ----------- ----------- -----------
Income before income taxes 323.1 164.0 393.4 166.7
Income tax expense 120.8 61.3 148.0 72.4
------------ ----------- ----------- -----------
Net income $ 202.3 $ 102.7 $ 245.4 $ 94.3
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(Unaudited, in millions) June 30 December 31 June 30
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current assets $2,152.4 $1,861.1 $1,874.5
Noncurrent assets 5,563.2 5,460.9 5,421.7
Current liabilities 2,736.2 2,535.6 2,586.8
Long-term debt and obligations under capital leases 2,168.2 2,351.8 3,729.1
Deferred credits and other liabilities 1,237.7 1,277.3 910.6
Mandatorily redeemable preferred security of subsidiary 579.1 618.4 --
</TABLE>
See also Note P to Consolidated Financial Statements in the Annual Report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Substantially all of the Company's results of operations are attributable to
Northwest Airlines, Inc. ("Northwest") and the following discussion pertains
primarily to Northwest. The Company's results of operations for interim periods
are not necessarily indicative of such results for an entire year due to
seasonal factors as well as competitive and general economic conditions.
For the quarter ended June 30, 1996, the Company reported unaudited net income
of $202.8 million and operating income of $374.7 million. Primary earnings per
common share were $1.90 ($1.72 fully diluted). Cash, cash equivalents and
unrestricted short-term investments increased $271.1 million over the second
quarter of 1995 to $1.21 billion at June 30, 1996. Additionally, at June 30,
1996, the Company had available $237.3 million in borrowing capacity under its
revolving credit facility providing total available liquidity of $1.45 billion.
Information with respect to the Company's operating statistics follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED % SIX MONTHS ENDED %
JUNE 30 CHG. JUNE 30 CHG.
----------------------- ------ ----------------------- ------
Scheduled service: 1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Available seat miles (ASM) (millions) 23,460.0 21,811.5 7.6 45,645.6 42,271.2 8.0
Revenue passenger miles (millions) 17,561.5 15,780.9 11.3 33,138.0 29,671.0 11.7
Passenger load factor (percent) 74.9 72.4 2.5 pts. 72.6 70.2 2.4 pts.
Revenue passengers (thousands) 13,555 12,571 7.8 25,591 23,714 7.9
Revenue yield per passenger mile (cents) 12.69 12.42 2.2 12.57 12.29 2.3
Passenger revenue per scheduled ASM (cents) 9.50 8.98 5.8 9.12 8.63 5.7
Operating revenue per total ASM (cents) (1) 10.18 9.63 5.7 9.82 9.34 5.1
Operating expense per total ASM (cents) (1) 8.62 8.60 0.2 8.76 8.54 2.6
Operating expense excluding stock-based
compensation per total ASM (cents) (1) 8.34 8.14 2.5 8.35 8.15 2.5
Cargo ton miles (millions) 555.1 555.6 (0.1) 1,042.3 1,079.1 (3.4)
Fuel gallons consumed (millions) 485.8 458.2 6.0 943.8 891.3 5.9
Average fuel cost per gallon (cents) 63.33 54.63 15.9 62.62 54.85 14.2
Number of operating aircraft at end of period 397 370 7.3
Full-time equivalent employees at end of period 46,863 44,324 5.7
</TABLE>
(1) Excludes the estimated revenues or expenses related to the operation of
Northwest's fleet of eight 747 freighter aircraft and MLT Inc.
RESULTS OF OPERATIONS--THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Operating income increased $125.1 million to $374.7 million. The improvement was
largely due to a $269.0 million increase in passenger revenues. Operating
revenue per total ASM increased 5.7% from 9.63 cents to 10.18 cents.
Operating margin increased 3.7 points from 11.0% to 14.7%.
OPERATING REVENUES. Operating revenues were $2.54 billion, an improvement of
$261.0 million (11.5%). System passenger revenues (which represented 87.7% of
total operating revenues) increased $269.0 million (13.7%). The increase was
attributable to a 2.2% increase in system yield, a 3.5% increase (2.5 points) in
passenger load factor and a 7.6% increase in scheduled service ASMs.
Domestic passenger revenue increased $190.0 million (14.5%) to $1.50 billion.
The 6.2% increase in scheduled service ASMs resulting primarily from the
carryover effect of Canadian routes added during 1995 and the addition of
DC9-30, DC10-30 and B757 aircraft which allowed the Company to increase
frequencies to 12 cities and add new service to three cities and a 6.8% increase
in yield were the primary causes of the improved performance. Passenger revenues
were favorably impacted by the lapsed federal taxes on airline tickets and
international departures. See "Other Information - U.S. TRANSPORTATION TAX".
Pacific passenger revenue increased by $35.1 million (6.8%) to $549.6 million
with an 8.4% increase in scheduled service ASMs due primarily to new service to
Beijing, China, additional trans-Pacific frequencies and higher utilization of
existing aircraft and a 6.8% increase (5.1 points) in passenger load factor
which were partially offset by the unfavorable impact of a weaker Japanese yen.
Transatlantic passenger revenue increased $43.9 million (32.1%) to $180.6
million due to an 8.7% increase in yield, a 14.1% increase in scheduled service
ASMs primarily as a result of the addition of the Detroit - Amsterdam route and
a 6.5% increase (5.3 points) in passenger load factor.
OPERATING EXPENSES. Operating expenses increased $135.9 million. While operating
capacity increased 7.6% to 23.5 billion total service ASMs, operating expense
per total service ASM increased 0.2%. Excluding stock-based compensation in both
periods, operating expense per ASM increased 2.5% to 8.34 cents largely related
to increases in passenger load factors and higher fuel prices. Salaries, wages
and benefits expense increased $54.5 million (9.2%) due in part to an increase
in average full-time equivalent employees of 5.7% which was primarily
attributable to the increased flying of 7.6% and increased traffic of 7.8%.
Additionally, included in the increased salaries, wages and benefits expense was
a $18.1 million unfavorable impact on pension expense due to a lower pension
discount rate. Non-cash stock-based employee compensation expense, which is
reported separately from salaries, wages and benefits, is a function of shares
earned by employees and the period-ending common stock price. The stock-based
compensation expense decreased to $65.0 million from $102.2 million for the
second quarter of 1995. The period-ending common stock price was $39.50 per
share at June 30, 1996 and $35.375 at June 30, 1995. The expense for the second
quarter includes the revaluation of the value of stock earned by employees in
the first quarter. Aircraft fuel, oil and taxes increased $68.4 million (26.1%)
to $330.5 million due to an increase of 15.9% in average fuel cost per gallon
and a 6.0% increase in fuel gallons consumed as a result of increased flying.
Also, in October 1995, a 4.3 cents per gallon United States excise tax on
aviation fuel went into effect due to the expiration of an existing exemption.
This new tax increased the Company's operating expenses for the second quarter
of 1996 by $11.0 million, and unless suspended by the government will increase
the Company's annual operating expenses by approximately $50 million based on
Northwest's anticipated 1996 domestic fuel consumption. Aircraft maintenance
materials and repairs increased $22.2 million (22.3%) to $121.6 million due to a
number of factors including the timing of maintenance activities, increased
flying and the impact of a favorable vendor settlement in 1995. Other expenses
grew $27.2 million (5.9%) largely due to increased outside services, selling and
marketing fees and communication expenses, somewhat offset by decreased
passenger charter expenses.
OTHER INCOME AND EXPENSE. Interest expense-net decreased $34.0 million (34.1%)
due in large part to the December 1995 prepayment of the 1989 acquisition loan
and the restructuring of the Company's financing arrangement related to certain
property in Japan described in Notes C and E to Consolidated Financial
Statements in the Annual Report. The foreign currency gain for the three months
ended June 30, 1996 was attributable to balance sheet remeasurement of foreign
currency-denominated assets and liabilities. Foreign currency loss for the three
months ended June 30, 1995 was attributable primarily to charges related to
Japanese yen collar option contracts.
RESULTS OF OPERATIONS--SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Operating income increased $112.1 million (28.2%) to $509.1 million. The
improvement was largely due to a $516.7 million increase in passenger revenues.
Operating revenue per total ASM increased 5.1% from 9.34 cents to 9.82 cents.
Operating margin increased 1.4 points from 9.2% to 10.6%.
OPERATING REVENUES. Operating revenues were $4.81 billion, an improvement of
$482.8 million (11.2%). System passenger revenues (which represented 86.7% of
total operating revenues) increased 14.2%. The increase was attributable to a
2.3% increase in system yield, a 3.4% increase (2.4 points) in passenger load
factor and an 8.0% increase in scheduled service ASMs.
Domestic passenger revenue increased $351.7 million (14.3%) to $2.82 billion.
The increase was due to a 6.0% increase in yield, a 6.3% increase in scheduled
service ASMs and a 1.3% (0.9 points) increase in passenger load factor. Revenues
were favorably impacted by the lapsed federal taxes. See "Other Information -
U.S. Transportation Tax". Pacific passenger revenue increased by $95.8 million
(10.0%) to $1.06 billion with a 9.4% increase in scheduled service ASMs and a
6.9% increase (5.0 points) in passenger load factor, offset somewhat by the
unfavorable impact of a weaker Japanese yen. Transatlantic passenger revenue
increased $69.2 million (31.6%) to $288.1 million due primarily to a 9.6%
increase in yield and a 16.0% increase in scheduled service ASMs.
OPERATING EXPENSES. Operating expenses increased $370.7 million. While operating
capacity increased 8.0% to 45.6 billion total service ASMs, operating expense
per total service ASM increased 2.6%. Operating expense per total ASM excluding
stock-based compensation increased 2.5% to 8.35 cents. Salaries, wages and
benefits expense increased $114.4 million (9.7%) due in part to an increase in
average full-time equivalent employees of 5.7% which was primarily attributable
to the increased flying of 8.0% and increased traffic of 7.9%. Additionally,
included in the increased salaries, wages and benefits expense was a $40.7
million unfavorable impact on pension expense due to a lower pension discount
rate. Non-cash stock-based employee compensation expense, which is reported
separately from salaries, wages and benefits, was $185.1 million, compared to
$165.8 million, an increase of $19.3 million (11.6%). Aircraft fuel, oil and
taxes increased $125.0 million (24.5%) to $636.1 million due to an increase of
14.2% in average fuel cost per gallon and a 5.9% increase in fuel gallons
consumed as a result of increased flying. Also, the 4.3 cents per gallon United
States excise tax on aviation fuel increased the Company's operating expenses
for the six months of 1996 by $21.6 million. Aircraft maintenance materials and
repairs increased $44.0 million (21.9%) to $245.2 million due to a number of
factors including the timing of maintenance activities, increased flying
activity and the impact of a favorable vendor settlement in 1995. Other expenses
grew $55.2 million (6.3%) largely due to increased costs for outside services,
selling and marketing fees, communication expenses and promotions.
OTHER INCOME AND EXPENSE. Interest expense-net decreased $69.1 million (34.0%)
primarily due to the December 1995 prepayment of the 1989 acquisition loan and
the restructuring of the Company's financing arrangement related to certain
property in Japan. The foreign currency gain for the six months ended June 30,
1996 was attributable to balance sheet remeasurement of foreign
currency-denominated assets and liabilities. Foreign currency loss for the six
months ended June 30, 1995 was attributable to a $35.1 million loss on balance
sheet remeasurement of foreign currency-denominated assets and liabilities and a
$29.5 million charge related to Japanese yen collar option contracts.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June 30, 1996
was $713.5 million, a $188.3 million increase compared with the six months ended
June 30, 1995. Investing activities in 1996 pertain primarily to property and
equipment additions. The acquisition of 16 DC-9 aircraft, nine B757 aircraft and
two B727 aircraft and the modification of DC-9 aircraft account for the majority
of the $708.5 million of property additions in 1996. Investing activities in
1995 relate primarily to the net proceeds from short-term investment
transactions. Financing activities in 1996 pertain primarily to the sale and
leaseback of seven of the nine 757-200 aircraft and the payment of debt and
capital lease obligations. In May and July 1996, the Company prepaid $50 million
and $125 million, respectively, of its $300 million floating rate term loan.
Financing activities in 1995 pertain primarily to the payments of long-term debt
and capital lease obligations.
In March 1996, the Company entered into agreements providing for the purchase
and financing of 20 Airbus A320 aircraft (thirteen in 1998 and seven in 1999) as
well as the rescheduling of 16 Airbus A330 aircraft deliveries to eight in each
of 2004 and 2005. The Company has substitution rights with respect to the A330
aircraft. Additionally, this transaction included the rescheduling of $456.9
million of existing debt to beyond 2000 at lower interest rates.
See also Note 8 of Notes to Condensed Consolidated Financial Statements for a
discussion of the purchase by the Company of certain shares of the Company's
Series A and Series B Preferred Stock held by KLM.
OTHER INFORMATION
FOREIGN CURRENCY. In general, as the Japanese yen strengthens (weakens), the
Company's operating income is favorably (unfavorably) impacted and a
nonoperating foreign currency loss (gain) is recognized due to the remeasurement
of net yen liabilities. The Company's yen-denominated revenues exceed its
yen-denominated expenses by approximately 60 billion yen per year and its
yen-denominated liabilities exceed its yen-denominated assets. In recent periods
the yen has weakened as the yen exchange rate has changed from 85 yen to $1 at
June 30, 1995 to 103 yen to $1 at December 31, 1995 to 110 yen to $1 at June 30,
1996.
USE OF FINANCIAL INSTRUMENTS. In order to mitigate its exposure to foreign
exchange rate fluctuations, from time to time the Company uses a collar option
strategy to hedge its anticipated yen-denominated net cash flows. At June 30,
1996 the Company had hedged using collar options approximately 80% of its
remaining 1996 anticipated yen-denominated net cash inflows (34 billion yen). In
the ordinary course of business, the Company manages the price risk of fuel
costs utilizing both regulated exchange traded futures contracts and fuel swap
agreements. Gains or losses on hedge contracts are deferred until the related
fuel inventory is expensed. As of June 30, 1996, the Company had no material
hedges for future fuel requirements.
FULLY DISTRIBUTED EARNINGS PER SHARE. The effect of the accounting for
stock-based compensation on the Company's operating results and earnings per
share may make it difficult to compare its earnings with other companies.
Accordingly, management believes the pro forma "fully distributed" earnings per
share amount, which excludes stock-based compensation and includes all the
shares to be issued to its employees, provides additional information and makes
analysis between years more comparable. On a fully distributed basis, the
Company's net earnings applicable to common stockholders would have been $230.5
million ($2.02 per share) and $346.4 million ($3.03 per share) for the three and
six months ended June 30, 1996, respectively, an improvement of $74.0 million
($0.65 per share) and $100.7 million ($0.87 per share) over the corresponding
periods in 1995. The fully distributed earnings per share for the six months
ended June 30, 1995 includes the effect of $.52 per share increase resulting
from the January 1995 exchange of the Company's preferred stock for common
stock.
U.S. TRANSPORTATION TAX. The U.S. 10% passenger ticket tax applicable to
domestic travel, the 6.25% domestic cargo waybill tax and the $6 per passenger
international departure tax expired on December 31, 1995. Consequently, the
Company ceased collecting these taxes on January 1, 1996. Legislation
reauthorizing these taxes through December 31, 1996 was enacted by Congress on
August 2, 1996. The President is expected to sign this legislation on or before
August 20, 1996, and the tax would go into effect commencing with tickets sold
one week after the date of signing. The impact on future operating income of
such reinstatement is uncertain.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3, "Legal Proceedings" included in the Annual Report
and Part II, Item 1, "Legal Proceedings" included in the Company's Form 10-Q for
the quarter ended March 31, 1996.
NORTHWEST AIRLINES, INC. V. AMERICAN AIRLINES, INC. (U.S.D.C. District of
Minnesota, Civ. No. 4-91-539) ("NW v. AA"). On May 16, 1996, the District Court
stayed all proceedings relating to the trial of the NW v. AA case during the
pendancy of the appeal by American Airlines in the case of AMERICAN AIRLINES,
INC. V. KLM ROYAL DUTCH AIRLINES, INC. (U.S.D.C. District of Minnesota, Civ. No.
4-93-1104) ("AA v. KLM"), a related case presently consolidated with NW v. AA.
The District Court also continued the trial of the NW v. AA case until 60 days
after a decision by the U.S. Eighth Circuit Court of Appeals with respect to the
appeal in the AA v. KLM case.
In re: TRAVEL AGENCY COMMISSION ANTITRUST LITIGATION (U.S.D.C. District of
Minnesota, Multi-District Litigation Docket No. 1058). A trial date of September
4, 1996 has been scheduled.
In the ordinary course of its business the Company is party to various other
legal actions which the Company believes are incidental to the operation of its
business. Although the ultimate outcome of these matters (including those
described above and in the Annual Report) cannot be predicted with certainty and
could have a material adverse effect on the Company's consolidated financial
condition, liquidity and operating results if resolved unfavorably, the Company
believes that the outcome of these actions will not have any such material
adverse effect.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company's Annual Meeting of Stockholders was held on April 26, 1996.
An amendment to the 1994 Northwest Airlines Corporation Stock Incentive Plan
(the "Plan") was submitted to a vote of security holders to increase the number
of shares of Class A Common Stock covered by the Plan from 2,000,000 to
5,000,000.
The votes of the stockholders on this proposal were as follows:
Votes For Votes Against Votes Abstaining Broker Nonvotes
82,020,476 13,202,538 384,848 47,220
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10.1 - Share Exchange Agreement.
Exhibit 10.2 - First Amendment of Share Exchange Agreement.
Exhibit 11.1 - Computation of Primary Earnings per Common
Share.
Exhibit 11.2 - Computation of Fully Diluted Earnings per
Common Share.
Exhibit 12.1 - Computation of Ratio of Earnings to Fixed
Charges.
Exhibit 12.2 - Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Requirements.
Exhibit 27.1 - Financial Data Schedule.
(b) Reports on Form 8-K:
Form 8-K dated June 6, 1996 filing certain documents
associated with the issuance of the equipment trust pass
through certificates.
Form 8-K dated July 3, 1996 filing certain documents
associated with the issuance of the equipment trust pass
through certificates.
SIGNATURE
Pursuant to the requirements 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.
Northwest Airlines Corporation
Dated: August 13, 1996 By: /s/ Mark W. Osterberg
-----------------------
Mark W. Osterberg
Vice President and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10.1 Share Exchange Agreement dated as of June 28, 1996
between Northwest Airlines Corporation and KLM
Royal Dutch Airlines.
10.2 First Amendment of Share Exchange Agreement dated
as of July 25, 1996 between Northwest Airlines
Corporation and KLM Royal Dutch Airlines.
11.1 Computation of Primary Earnings Per Common Share.
11.2 Computation of Fully Diluted Earnings per Common
Share.
12.1 Computation of Ratio of Earnings to Fixed Charges.
12.2 Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Requirements.
27.1 Financial Data Schedule.
SHARE EXCHANGE AGREEMENT
BETWEEN
NORTHWEST AIRLINES CORPORATION
AND
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
DATED AS OF JUNE 28, 1996
------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
<S> <C>
DEFINITIONS................................................. 1
1.1 Defined Terms..................................................................................... 1
ARTICLE II
EXCHANGE OF SHARES.............................................. 5
2.1 Transfer of Shares................................................................................ 5
2.2 Delivery of Shares................................................................................ 5
2.3 Consideration..................................................................................... 5
ARTICLE III
THE CLOSINGS................................................. 6
3.1 The Closing....................................................................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES........................................ 7
4.1 Representations and Warranties of KLM............................................................. 7
4.2 Representations and Warranties of NWA Corp........................................................ 9
ARTICLE V
CONDITIONS PRECEDENT............................................. 10
5.1 Conditions to Series A Closing.................................................................... 10
5.2 Conditions to Series B Closing.................................................................... 12
ARTICLE VI
COVENANTS.................................................. 14
6.1 Consent to Future Dividends; Stock Repurchases.................................................... 14
6.2 Holdback Agreement................................................................................ 16
6.3 Certain Actions................................................................................... 17
ARTICLE VII
INDEMNIFICATION............................................... 17
7.1 Tax Indemnification; Contest...................................................................... 17
Page
ARTICLE VIII
GENERAL PROVISIONS.............................................. 18
8.1 Termination or Abandonment of Agreement........................................................... 18
8.2 Expenses.......................................................................................... 19
8.3 Execution in Counterparts......................................................................... 19
8.4 Notices .......................................................................................... 19
8.5 Governing Law..................................................................................... 20
8.6 Titles and Headings............................................................................... 20
8.7 Successors and Assigns............................................................................ 20
8.8 Entire Agreement; No Oral Waiver.................................................................. 21
8.9 Severability...................................................................................... 21
8.10 No Third-Party Rights............................................................................ 21
8.11 Submission To Jurisdiction....................................................................... 21
8.12 Certain Litigation Matters....................................................................... 22
8.13 Remedies......................................................................................... 22
8.14 Brokers and Finders.............................................................................. 22
8.15 Further Assurances............................................................................... 22
8.16 Letter Agreement................................................................................. 22
SCHEDULES
Schedule I Discounted Payments for Base Values
EXHIBITS
Exhibit A Form of Promissory Note
Exhibit B Form of Series B Purchase Agreement
Exhibit C Form of Series B Put/Call Agreement
Exhibit D Form of Amendment to Series B Registration Rights
Agreement
</TABLE>
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT dated as of June 28, 1996 between
NORTHWEST AIRLINES CORPORATION, a Delaware corporation ("NWA Corp."), and
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a Netherlands corporation ("KLM").
W I T N E S S E T H :
WHEREAS, on the date hereof, KLM is the beneficial owner of
(i) 3,691.2 shares (the "Series A Shares") of NWA Corp.'s Series A Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), and (ii)
2,962.7 shares (the "Series B Shares" and, together with the Series A Shares,
the "Shares") of NWA Corp.'s Series B Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock");
WHEREAS, on the date hereof, in addition to the Series A
Shares and the Series B Shares, KLM is the beneficial owner of 1,308.8 shares of
Series A Preferred Stock and 436.3 shares of Series B Preferred Stock; and
WHEREAS, KLM and NWA Corp. desire to exchange the Series A
Shares and the Series B Shares for the Series A Consideration and the Series B
Consideration (each as defined herein), respectively, upon the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms
defined in the recitals to this Agreement have the meanings assigned to such
terms therein and the following terms have the following meanings:
"Affiliate" when used with respect to another Person, means
any Person who is, whether directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with
such Person. As used herein, "control" means the beneficial ownership
of at least a majority of the equity interests of a Person entitling
the owner of such interests to direct the policies and operations of
such Person.
"Agent Bank Certificate" means a certificate executed by
Citibank, N.A., in its capacity as an agent under the Credit Agreement,
to the effect that NWA Corp. sought but was not able to obtain the
consent of the requisite number of banks parties to the Credit
Agreement to permit the Series B Closing to occur.
"Agreement" means this Share Exchange Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
"beneficially own" has the meaning given such term in Rule
13d-3 under the Securities Exchange Act of 1934, as amended, as in
effect on the date hereof. As used herein, the phrases "beneficial
ownership" and "beneficial owner" have correlative meanings.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which banks are required or authorized by law to be closed
in New York, New York or in Minneapolis, Minnesota.
"Cash" means Dollars paid in immediately available
funds.
"Closing" means each of the Series A Closing and the Series B
Closing, as the context may require.
"Closing Date" means each of the Series A Closing Date and the
Series B Closing Date, as the context may require.
"Consideration Agreements" means, collectively, the Series A
Consideration, the Series B Note, the Series B Purchase Agreement and
the Series B Put/Call Agreement.
"Credit Agreement" means the Credit Agreement dated as of
December 15, 1995 among NWA Corp., NWA, Inc., Northwest Airlines, Inc.,
ABN Amro Bank N.V., as Compliance Agent, Bankers Trust Company, as
Administrative Agent, Chemical Securities Inc., as Syndication Agent,
Citibank, N.A., as Documentation Agent, National Westminster Bank PLC
and First Bank National Association, as Agents, and various lending
institutions parties thereto, as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"Dollars" and "$" mean lawful currency of the United
States of America.
"LIBOR" means the rate per annum that appears on page 3750
provided by the Telerate News Service as of 11:00 A.M., London time, on
the day when a Consideration Agreement is being executed and delivered
(or, if such day is not a day when transactions in the London interbank
market are conducted, the next preceding day when such transactions are
conducted) for deposits of U.S. dollars having a maturity of (i) in the
case of any determination with respect to Series A Consideration, six
months, and (ii) in the case of any determination with respect to
Series B Consideration, twelve months.
"Person" means an individual, partnership, limited liability
company, corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority or
other entity of whatever nature.
"Series A Base Value" means, for each Series A Share, the
present value as of the Series A Closing Date, discounted at a rate of
11.50% per annum, of the payments scheduled to be made in the amounts
and on the dates set forth on Schedule I hereto, divided by the total
number of Series A Shares as of the date of this Agreement. As of July
1, 1996, the aggregate Series A Base Values of the Series A Shares will
be $227,059,957.44.
"Series A Certificate of Designation" means the Amended and
Restated Certificate of Designation, which designated the Series A
Preferred Stock, in the form in which it was filed with Secretary of
State of Delaware on December 28, 1993 as part of NWA Corp.'s Second
Amended and Restated Certificate of Incorporation.
"Series A Closing" has the meaning assigned to such
term in Section 3.1(a).
"Series A Closing Date" has the meaning assigned to such term
in Section 3.1(a).
"Series A Consideration" means a promissory note of NWA Corp.
in a principal amount equal to the aggregate Series A Base Values for
the Series A Shares, bearing interest at a rate per annum equal to
LIBOR plus 1.125%, maturing on December 30, 1996 and otherwise
substantially in the form of Exhibit A hereto.
"Series B Base Value" means, for each Series B Share, the
present value as of the Series B Closing Date, discounted at a rate of
12.00% per annum, of the payments scheduled to be made in the amounts
and on the dates set forth on Schedule I hereto, divided by the total
number of Series B Shares as of the date of this Agreement. If the
Series B Closing Date were July 28, 1996, the aggregate Series B Base
Values of the Series B Shares would be $152,230,206.75.
"Series B Certificate of Designation" means the Amended and
Restated Certificate of Designation, which designated the Series B
Preferred Stock, in the form in which it was filed with Secretary of
State of Delaware on December 28, 1993 as part of NWA Corp.'s Second
Amended and Restated Certificate of Incorporation.
"Series B Closing" has the meaning assigned to such
term in Section 3.1(b).
"Series B Closing Date" has the meaning assigned to such term
in Section 3.1(b).
"Series B Consideration" means any of the following, as
selected by NWA Corp. in accordance with Section 3.1(b) hereof: (i) a
Series B Note, (ii) a Series B Purchase Agreement; (iii) a Series B
Put/Call Agreement; (iv) Cash; or (v) any combination of the foregoing
forms of consideration; provided that the aggregate amount payable
pursuant to such Consideration Agreements shall equal the sum of the
aggregate Series B Base Values of the Series B Shares (less the amount
of Cash, if any, paid on the Series B Closing Date for Series B Shares)
plus, for each Series B Payment Date contemplated by the Consideration
Agreements, an amount equal to (A) the aggregate Series B Base Values
of the Series B Shares to be purchased and sold on such Series B
Payment Date multiplied by (B) LIBOR plus 1.125% multiplied by (C) a
fraction, the numerator of which is equal to the actual number of days
from and including the Series B Closing Date to and including each
applicable Series B Payment Date and the denominator of which is 360.
"Series B Note" means a promissory note of NWA Corp. bearing
interest at a rate per annum equal to LIBOR plus 1.125%, maturing on
June 13, 1997 and otherwise substantially in the form of Exhibit A
hereto.
"Series B Payment Date" means, with respect to any form of
Series B Consideration, the date on which such form of Series B
Consideration becomes payable in cash in accordance with the terms of
such form of Series B Consideration.
"Series B Purchase Agreement" means a Share Purchase Agreement
relating to Series B Shares providing for a Series B Payment Date on or
before June 13, 1997 and otherwise substantially in the form of Exhibit
B hereto.
"Series B Put/Call Agreement" means an agreement substantially
in the form of Exhibit C hereto.
"Series B Registration Rights Agreement" means the Series B
Preferred Stock Registration Rights Agreement, dated as of July 21,
1989, by and among NWA Corp., KLM and certain other stockholders of NWA
Corp. parties thereto, as in effect on the date hereof.
"Stockholders' Agreement" means the Second Amended and
Restated Investor Stockholders' Agreement dated as of December 23, 1993
by and among NWA Corp., KLM and certain other stockholders of NWA Corp.
parties thereto, as in
effect on the date hereof.
ARTICLE II
EXCHANGE OF SHARES
2.1 Transfer of Shares. (a) On the terms and subject
to the conditions contained herein, KLM agrees to transfer to NWA
Corp., and NWA Corp. agrees to acquire from KLM, at the Series A
Closing, all of the Series A Shares.
(b) On the terms and subject to the conditions contained
herein, KLM agrees to transfer to NWA Corp., and NWA Corp. agrees to acquire
from KLM, at the Series B Closing, all of the Series B Shares; provided that, if
the Series B Consideration includes a Series B Purchase Agreement or a Series B
Put/Call Agreement with respect to all or a portion of the Series B Shares, then
that portion of the Series B Shares subject to the Series B Purchase Agreement
and/or Series B Put/Call Agreement, as the case may be, shall be transferred on
the applicable Series B Payment Date(s) (if, in the case of any Series B
Put/Call Agreement, a Series B Payment Date occurs thereunder as a result of an
exercise of an Option (as defined therein) pursuant thereto) and, on the Series
B Closing Date, each of KLM and NWA Corp. shall execute and deliver such Series
B Purchase Agreement and/or Series B Put/Call Agreement, as the case may be.
2.2 Delivery of Shares. (a) At the Series A Closing, KLM shall
deliver to NWA Corp. a certificate or certificates representing all of the
Series A Shares, duly endorsed in blank or accompanied by stock powers duly
executed in blank, with all necessary stock transfer stamps affixed.
(b) At the Series B Closing, KLM shall deliver to NWA Corp. a
certificate or certificates representing all of the Series B Shares, duly
endorsed in blank or accompanied by stock powers duly executed in blank, with
all necessary stock transfer stamps affixed, provided that, if the Series B
Consideration includes a Series B Purchase Agreement or a Series B Put/Call
Agreement with respect to all or a portion of the Series B Shares, then that
portion of the Series B Shares subject to the Series B Purchase Agreement and/or
Series B Put/Call Agreement, as the case may be, shall be delivered on the
applicable Series B Payment Date(s) (if, in the case of any Series B Put/Call
Agreement, a Series B Payment Date occurs thereunder as a result of an exercise
of an Option (as defined therein) pursuant thereto).
2.3 Consideration. (a) At the Series A Closing, NWA
Corp. shall deliver to KLM the Series A Consideration.
(b) At the Series B Closing, NWA Corp. shall deliver to KLM
the Series B Consideration selected by NWA Corp. in accordance with Section
3.1(b) and, if such Series B Consideration includes a Series B Purchase
Agreement and/or a Series B Put/Call Agreement, as the case may be, then, at the
Series B Closing, each of KLM and NWA Corp. shall execute and deliver such
Series B Purchase Agreement and/or Series B Put/Call Agreement, as the case may
be.
ARTICLE III
THE CLOSINGS
3.1 The Closings. (a) The closing of the exchange of the
Series A Shares provided for in this Agreement (the "Series A Closing") shall
take place at the offices of Simpson Thacher & Bartlett at 10:00 a.m., New York
City time, on July 1, 1996 (or as promptly as practicable thereafter following
the satisfaction or waiver of the conditions to the Series A Closing set forth
in Section 5.1), or at such other time and place as the parties hereto shall
agree upon in writing, subject to the satisfaction or waiver of the conditions
to the obligations of the parties to effect the Series A Closing set forth in
Section 5.1 hereof. The time and date of the Series A Closing are herein
referred to as the "Series A Closing Date".
(b) The closing of the exchange of the Series B Shares
provided for in this Agreement (the "Series B Closing") shall take place at the
offices of Simpson Thacher & Bartlett at 10:00 a.m., New York City time, on such
date on or prior to the 30th day following the date of this Agreement (or, if
such 30th day following the date of this Agreement is not a Business Day, on the
next succeeding Business Day) as shall be specified by NWA Corp. to KLM in a
written notice (the "Series B Notice") delivered to KLM not later than two
Business Days prior to the date specified by NWA Corp. in the Series B Notice as
the date of the Series B Closing, or at such other time and place as the parties
hereto shall agree upon in writing, subject to the satisfaction or waiver of the
conditions to the obligations of the parties to effect the Series B Closing set
forth in Section 5.2 hereof. The time and date of the Series B Closing are
herein referred to as the "Series B Closing Date". In the Series B Notice, NWA
Corp. shall select, in NWA Corp.'s sole discretion, the Series B Consideration
that will be delivered at the Series B Closing and, if more than one form of
Series B Consideration is selected by NWA Corp., the number of Series B Shares
(and the corresponding aggregate Series B Base Values of such Series B Shares)
that will be exchanged for each form of Series B Consideration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of KLM. KLM represents and
warrants to NWA Corp. as follows:
(a) KLM is a corporation duly organized and validly
existing under the laws of the Netherlands.
(b) KLM has all requisite corporate power and authority to
execute and deliver this Agreement and each Consideration Agreement to which it
may become a party and to perform its obligations hereunder and thereunder. The
execution and delivery by KLM of this Agreement and each Consideration Agreement
to which it may become a party and the performance of the transactions herein
and therein contemplated to be performed by KLM have been duly authorized by the
Supervisory Board of KLM and no further corporate action on the part of KLM is
necessary to authorize this Agreement or any such Consideration Agreement and
the performance of such transactions. This Agreement has been duly executed and
delivered by KLM and, assuming due authorization, execution and delivery by NWA
Corp., constitutes the legal, valid and binding agreement of KLM, enforceable
against KLM in accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding at law or in equity). Each
Consideration Agreement to which KLM may become a party, when duly executed and
delivered by KLM and, assuming due authorization, execution and delivery by NWA
Corp., will constitute the legal, valid and binding agreement of KLM,
enforceable against KLM in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding at law or in
equity).
(c) None of the execution and delivery of this Agreement, the
Consideration Agreements to which KLM may become a party or the performance by
KLM of the transactions contemplated hereby or thereby will (i) violate or
conflict with any of the provisions of the charter or other organizational
documents of KLM, (ii) with or without the giving of notice or the lapse of time
or both, violate or constitute a default under, or result in the acceleration of
or entitle any party to accelerate (whether after the giving of notice or lapse
of time or both) any obligation under any mortgage, indenture, deed of trust,
lease, contract, agreement, license or other instrument or any provision of any
law, order, judgment, decree, restriction or ruling of any governmental
authority to which KLM is a party or by which any of its property is bound or
(iii) result in the creation of any liens, encumbrances, equities or claims upon
any of the Shares, except, in the case of clause (ii) above, for any such events
which, individually or in the aggregate, could not materially adversely affect
the ability of KLM to consummate the transactions contemplated hereby and by
each of the Consideration Agreements which may be executed and delivered
pursuant hereto.
(d) No consent, approval, authorization or order of, or filing
or registration with, any court or governmental agency or body or any other
Person is required for the execution, delivery and performance by KLM of this
Agreement or any of the Consideration Agreements to which KLM may become a party
and the consummation of the transactions contemplated hereby and thereby,
including the exchange of the Shares pursuant hereto and thereto, except for the
release by the Voting Trustee (as defined below) of the 2,754 Series A Shares
held by it pursuant to the Voting Trust (as defined below).
(e) There are no lawsuits, actions, arbitrations or legal or
administrative or regulatory proceedings, charges, complaints or investigations
pending or, to the best knowledge of KLM, threatened against KLM, and KLM is not
a party to, or subject to or bound by, any order, judgment, injunction,
stipulation, award or decree (whether rendered by a court or administrative
agency or by arbitration), in any such case, which could, individually or in the
aggregate, materially adversely affect the ability of KLM to consummate the
transactions contemplated hereby and by each of the Consideration Agreements.
(f) KLM has, and immediately prior to each Closing hereunder
and each Series B Closing under (and as defined in) a Consideration Agreement
KLM will have, good and valid title to the Shares to be exchanged at such
Closing or Series B Closing, as the case may be, free and clear of all liens,
encumbrances, equities or claims, except that, as of the date of this Agreement,
2,754 shares of the Series A Shares are held by Citibank, N.A., as trustee (the
"Voting Trustee"), pursuant to the terms of the Voting Trust Agreement dated as
of March 29, 1990, as amended (the "Voting Trust"), among KLM, NWA Corp.
(formerly known as Wings Holdings Inc.) and Citibank, N.A.; and upon delivery of
such Shares by KLM and delivery of the consideration therefor by NWA Corp.
pursuant hereto or such Consideration Agreement, NWA Corp. will acquire good and
valid title to such Shares, free and clear of all liens, encumbrances, equities
or claims.
(g) Except for 2,754 shares of Series A Preferred Stock which
are held of record by the Voting Trustee and which are beneficially owned by
KLM, KLM is the record and beneficial owner on the date hereof of 5,000 shares
of Series A Preferred Stock (including the Series A Shares) and 3,399 shares of
Series B Preferred Stock (including the Series B Shares), and does not own of
record or beneficially any other shares of any series of preferred capital stock
of NWA Corp.
(h) Neither KLM nor any of its officers, directors, employees
or agents has authorized any Person to act as a broker, finder or in any similar
capacity on behalf of KLM in connection with the transactions contemplated by
this Agreement or any of the Consideration Agreements, other than Merrill Lynch,
Pierce, Fenner & Smith Incorporated, the costs and expenses of which shall be
payable solely by KLM in accordance with Section 8.14 hereof.
4.2 Representations and Warranties of NWA Corp. NWA Corp.
represents and warrants to KLM as follows:
(a) NWA Corp. is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
(b) NWA Corp. has all requisite corporate power and authority
to execute and deliver this Agreement and each Consideration Agreement to which
it may become a party and to perform its obligations hereunder and thereunder.
The execution and delivery by NWA Corp. of this Agreement and each Consideration
Agreement to which it may become a party and the performance of the transactions
herein and therein contemplated to be performed by NWA Corp. have been duly
authorized by the Board of Directors of NWA Corp. and no further corporate
action on the part of NWA Corp. is necessary to authorize this Agreement or any
such Consideration Agreement and the performance of such transactions. This
Agreement has been duly executed and delivered by NWA Corp. and, assuming due
authorization, execution and delivery by KLM, constitutes the legal, valid and
binding agreement of NWA Corp., enforceable against NWA Corp. in accordance with
its terms, except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding at law or in equity). Each Consideration Agreement to which NWA
Corp. may become a party, when duly executed and delivered by NWA Corp. and, in
the case of a Series B Purchase Agreement or a Series B Put/Call Agreement,
assuming due authorization, execution and delivery by KLM, will constitute the
legal, valid and binding agreement of NWA Corp., enforceable against NWA Corp.
in accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding at law or in equity).
(c) None of the execution and delivery of this Agreement, the
Consideration Agreements to which NWA Corp. may become a party or the
performance by NWA Corp. of the transactions contemplated hereby or thereby will
(i) subject to the consents and waivers set forth in Section 6.1 hereof, violate
or conflict with any of the provisions of the charter or other organizational
documents of NWA Corp. or (ii) with or without the giving of notice or the lapse
of time or both, violate or constitute a default under, or result in the
acceleration of or entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any obligation under any mortgage, indenture,
deed of trust, lease, contract, agreement, license or other instrument or any
provision of any law, order, judgment, decree, restriction or ruling of any
governmental authority to which NWA Corp. is a party or by which any of its
property is bound, except, in the case of clause (ii) above, (A) for any such
events which, individually or in the aggregate, could not materially adversely
affect the ability of NWA Corp. to consummate the transactions contemplated
hereby and by each of the Consideration Agreements which may be executed and
delivered pursuant hereto and (B) for the requirement to obtain the consent of
the requisite number of banks parties to the Credit Agreement in order to be
permitted to consummate the Series B Closing.
(d) No consent, approval, authorization or order of, or filing
or registration with, any court or governmental agency or body or any other
Person is required for the execution, delivery and performance by NWA Corp. of
this Agreement or any of the Consideration Agreements to which NWA Corp. may
become a party and the consummation of the transactions contemplated hereby and
thereby, including the exchange of the Shares pursuant hereto and thereto,
except for the consent required pursuant to the Credit Agreement.
(e) There are no lawsuits, actions, arbitrations or legal or
administrative or regulatory proceedings, charges, complaints or investigations
pending or, to the best knowledge of NWA Corp., threatened against NWA Corp.,
and NWA Corp. is not a party to, or subject to or bound by, any order, judgment,
injunction, stipulation, award or decree (whether rendered by a court or
administrative agency or by arbitration), in any such case, which could,
individually or in the aggregate, materially adversely affect the ability of NWA
Corp. to consummate the transactions contemplated hereby and by each of the
Consideration Agreements.
(f) Neither NWA Corp. nor any of its officers, directors,
employees or agents has authorized any Person to act as a broker, finder or in
any similar capacity on behalf of NWA Corp. in connection with the transactions
contemplated by this Agreement or any of the Consideration Agreements.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Series A Closing. (a) The obligations of NWA
Corp. to effect the Series A Closing shall be subject to the satisfaction (or
waiver by NWA Corp.) of the following conditions:
(i) Representations and Warranties and Performance. The
representations and warranties of KLM contained herein shall have been
true and correct in all material respects when made and in addition
shall be true and correct in all material respects at and as of the
Series A Closing Date with the same effect as though made at and as of
the Series A Closing Date. KLM shall have performed in all material
respects all obligations and shall have complied in all material
respects with all covenants and other agreements required by this
Agreement to be performed or complied with by KLM at or prior to the
Series A Closing Date.
(ii) No Injunctions, etc. No injunction or temporary
restraining order shall have been issued and remain in force which
restrains, prohibits or invalidates the Series A Closing or the other
transactions contemplated by this Agreement, including without
limitation the transactions contemplated by this Agreement with respect
to the exchange of the Series A Shares or the Series B Shares.
(iii) No Legal Actions, etc. No legal action or
proceeding shall have been instituted or threatened by any Person that
is not Affiliated with a party hereto seeking to restrain, prohibit or
invalidate the Series A Closing or the other transactions contemplated
by this Agreement, including without limitation the transactions
contemplated by this Agreement with respect to the exchange of the
Series A Shares or the Series B Shares.
(b) The obligations of KLM to effect the Series A Closing
shall be subject to the satisfaction (or waiver by KLM) of the following
conditions:
(i) Representations and Warranties and Performance. The
representations and warranties of NWA Corp. contained herein shall have
been true and correct in all material respects when made and in
addition shall be true and correct in all material respects at and as
of the Series A Closing Date with the same effect as though made at and
as of the Series A Closing Date. NWA Corp. shall have performed in all
material respects all obligations and shall have complied in all
material respects with all covenants and other agreements required by
this Agreement to be performed or complied with by NWA Corp. at or
prior to the Series A Closing Date.
(ii) No Injunctions, etc. No injunction or temporary
restraining order shall have been issued and remain in force which
restrains, prohibits or invalidates the Series A Closing or the other
transactions contemplated by this Agreement, including without
limitation the transactions contemplated by this Agreement with respect
to the exchange of the Series A Shares or the Series B Shares.
(iii) No Legal Actions, etc. No legal action or
proceeding shall have been instituted or threatened by any Person that
is not Affiliated with a party hereto seeking to restrain, prohibit or
invalidate the Series A Closing or the other transactions contemplated
by this Agreement, including without limitation the transactions
contemplated by this Agreement with respect to the exchange of the
Series A Shares or the Series B Shares.
5.2 Conditions to Series B Closing. (a) The obligations of NWA
Corp. to effect the Series B Closing shall be subject to the satisfaction (or
waiver by NWA Corp.) of the following conditions:
(i) Representations and Warranties and Performance. The
representations and warranties of KLM contained herein shall have been
true and correct in all material respects when made and in addition
shall be true and correct in all material respects at and as of the
Series B Closing Date with the same effect as though made at and as of
the Series B Closing Date. KLM shall have performed in all material
respects all obligations and shall have complied in all material
respects with all covenants and other agreements required by this
Agreement to be performed or complied with by KLM at or prior to the
Series B Closing Date.
(ii) Officer's Certificate. NWA Corp. shall have received
an executed certificate, dated the Series B Closing Date, of the Chief
Financial Officer or Senior Vice President and General Counsel of KLM
to the effect set forth in Section 5.2(a)(i) hereto.
(iii) Agent Bank Certificate. NWA Corp. shall not have
delivered to KLM Agent Bank Certificate.
(iv) No Injunctions, etc. No injunction or temporary
restraining order shall have been issued and remain in force which
restrains, prohibits or invalidates the Series B Closing or the other
transactions contemplated by this Agreement, including without
limitation the transactions contemplated by this Agreement with respect
to the exchange of the Series B Shares.
(v) No Legal Actions, etc. No legal action or proceeding
shall have been instituted or threatened by any Person that is not
Affiliated with a party hereto seeking to restrain, prohibit or
invalidate the Series B Closing or the other transactions contemplated
by this Agreement, including without limitation the transactions
contemplated by this Agreement with respect to the exchange of the
Series B Shares.
(b) The obligations of KLM to effect the Series B Closing
shall be subject to the satisfaction (or waiver by KLM) of the following
conditions:
(i) Representations and Warranties and Performance. The
representations and warranties of NWA Corp. contained herein shall have
been true and correct in all material respects when made and in
addition shall be true and correct in all material respects at and as
of the Series B Closing Date with the same effect as though made at and
as of the Series B Closing Date. NWA Corp. shall have performed in all
material respects all obligations and shall have complied in all
material respects with all covenants and other agreements required by
this Agreement to be performed or complied with by NWA Corp. at or
prior to the Series B Closing Date.
(ii) Officer's Certificate. KLM shall have received an
executed certificate, dated the Series B Closing Date, of the Treasurer
or Senior Vice President, General Counsel and Secretary of NWA Corp. to
the effect set forth in Section 5.2(b)(i) hereto.
(iii) No Injunctions, etc. No injunction or temporary
restraining order shall have been issued and remain in force which
restrains, prohibits or invalidates the Series B Closing or the other
transactions contemplated by this Agreement, including without
limitation the transactions contemplated by this Agreement with respect
to the exchange of the Series B Shares.
(iv) No Legal Actions, etc. No legal action or
proceeding shall have been instituted or threatened by any Person that
is not Affiliated with a party hereto seeking to restrain, prohibit or
invalidate the Series B Closing or the other transactions contemplated
by this Agreement, including without limitation the transactions
contemplated by this Agreement with respect to the exchange of the
Series B Shares.
(c) Notwithstanding anything in this Agreement to the
contrary, neither KLM nor NWA Corp. shall have any further liability hereunder
with respect to its obligations in respect of the Series B Closing if the Series
B Closing shall not have occurred due to the failure of the condition specified
in Section 5.2(a)(iii) hereof to be satisfied.
ARTICLE VI
COVENANTS
6.1 Consent to Future Dividends; Stock Repurchases. (a) KLM
hereby unconditionally and irrevocably agrees, to the fullest extent permitted
by applicable law, that, from and after the Series A Closing Date through and
including August 15, 1998, the provisions of (i) the fifth sentence of paragraph
(3)(i) and paragraphs (3)(vi) (other than the last sentence thereof), (3)(vii)
and (5)(iii) of the Series A Certificate of Designation and (ii) the proviso to
paragraph (5)(i) of the Series B Certificate of Designation (such provisions,
the "Relevant Series A Provisions") shall not be applicable to any shares of
Series A Preferred Stock currently owned by KLM or which KLM or any of its
Affiliates may hereafter acquire as a record or beneficial owner, and that KLM
and each of its Affiliates shall not seek to enforce, and hereby waive the
applicability of, such provisions.
(b) KLM hereby unconditionally and irrevocably agrees, to the
fullest extent permitted by applicable law, that, from and after the Series B
Closing Date through and including August 15, 1998, the provisions of paragraphs
(3)(vi) (other than the last sentence thereof), (3)(vii) and (5)(iii) of the
Series B Certificate of Designation (such provisions, the "Relevant Series B
Provisions") shall not be applicable to any shares of Series B Preferred Stock
currently owned by KLM or which KLM or any of its Affiliates may hereafter
acquire as a record or beneficial owner, and that KLM and each of its Affiliates
shall not seek to enforce, and hereby waive the applicability of, such
provisions.
(c) KLM hereby unconditionally and irrevocably agrees that,
from and after the Series A Closing Date (with respect to the Series A Preferred
Stock) and from and after the Series B Closing Date (with respect to the Series
B Preferred Stock), in each case through and including August 15, 1998, NWA
Corp. may, notwithstanding any provision to the contrary in the Series A
Certificate of Designation or the Series B Certificate of Designation, as the
case may be, or otherwise, declare, pay or set apart for payment any dividend on
any of the Junior Securities or Parity Securities or make any payment on account
of, or set apart for payment money for a sinking or other similar fund for, the
repurchase, redemption or other retirement of, any of the Junior Securities or
Parity Securities or any warrants, rights, options or other securities
exercisable for or convertible into any of the Junior Securities or Parity
Securities, or make any distribution in respect of Junior Securities or Parity
Securities, either directly or indirectly, and whether in cash, obligations or
shares of NWA Corp. or other property, and may permit NWA Corp. or any
corporation or other entity directly or indirectly controlled by NWA Corp. to
purchase or redeem any of the Junior Securities or Parity Securities or any
warrants, rights, options or other securities exercisable for or convertible
into any of the Junior Securities or Parity Securities. For purposes of this
Section 6.1(c), the terms "Junior Securities" and "Parity Securities" have the
meanings assigned to such terms in each of the Series A Certificate of
Designation and the Series B Certificate of Designation.
(d) The agreements and waivers contained in Sections 6.1(a),
(b) and (c) shall be applicable to and binding upon all subsequent holders of
the shares of Series A Preferred Stock and Series B Preferred Stock owned by KLM
on the date of this Agreement, but in no event shall such agreements and waivers
survive or have further force or effect after August 15, 1996.
(e) In furtherance of the agreements and waivers contained in
Sections 6.1(a), (b) and (c), KLM hereby agrees that the certificate(s)
representing the shares of Series A Preferred Stock and Series B Preferred Stock
beneficially owned by it at any time prior to August 15, 1998 shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF SECTION 6.1 OF THE SHARE EXCHANGE AGREEMENT DATED AS OF
JUNE 28, 1996 (THE "AGREEMENT") BETWEEN NORTHWEST AIRLINES CORPORATION
(THE "CORPORATION") AND KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., WHICH
PROVIDES THAT CERTAIN PROVISIONS OF THE CORPORATION'S CERTIFICATE OF
DESIGNATION ESTABLISHING THE SERIES OF PREFERRED STOCK OF WHICH THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE A PART, WILL NOT BE
APPLICABLE TO SUCH SHARES DURING THE PERIOD SPECIFIED IN SUCH SECTION
OF THE AGREEMENT TO THE SHARES REPRESENTED BY THIS CERTIFICATE. A COPY
OF THE AGREEMENT IS ON FILE AND AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICES OF THE CORPORATION."
(f) NWA Corp. and KLM agree to use their best efforts to
instruct the escrow agent for purposes of the Escrow (as defined in Section 17
of the Stockholders' Agreement) to enforce and act consistently with the
provisions of this Section 6.1.
(g) In furtherance of this Section 6.1, NWA Corp. may convene
a meeting of its stockholders for the purpose of voting to amend the Series A
Certificate of Designation and/or the Series B Certificate of Designation to
provide that the Relevant Series A Provisions and/or the Relevant Series B
Provisions will not be applicable during the periods specified in this Section
6.1. At any such meeting of stockholders, KLM agrees to vote, and to cause each
Affiliate of KLM that beneficially owns shares of capital stock of NWA Corp. to
vote, all shares of capital stock of NWA Corp. beneficially owned by it and
entitled to vote thereat in favor of such amendments. KLM HEREBY GRANTS TO, AND
APPOINTS EACH OF JOHN H. DASBURG AND DOUGLAS M. STEENLAND, AND ANY SUCCESSOR OR
AGENT OF EITHER THEREOF, KLM'S PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE, TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, WITH
RESPECT TO THE SHARES OF CAPITAL STOCK OWNED BY KLM IN ACCORDANCE WITH THIS
SECTION 6.1(g) AT ANY MEETING OF STOCKHOLDERS. THIS PROXY IS COUPLED WITH AN
INTEREST AND SHALL BE IRREVOCABLE, AND KLM WILL TAKE SUCH FURTHER ACTION OR
EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF
THIS PROXY. The proxy set forth in the second preceding sentence shall terminate
at 12:01 a.m., New York City time, on August 16, 1998.
(h) NWA Corp. hereby agrees that nothing in this Section 6.1
shall be deemed to affect or prevent the accrual and accumulation of dividends
in accordance with the provisions of the Series A Certificate of Designation and
the Series B Certificate of Designation, respectively.
(i) Notwithstanding anything to the contrary contained in this
Section 6.1, if NWA Corp. fails to pay in cash and in full (i) the principal of
and interest on the Series A Consideration on the maturity thereof or (ii) any
amount that becomes due and payable on a Series B Payment Date in accordance
with the terms of any Consideration Agreement and, in either case, such failure
shall not have been cured within five Business Days thereafter, then the
foregoing provisions of this Section 6.1 shall terminate and be of no further
force and effect; provided that no termination of the foregoing provisions of
this Section 6.1 shall invalidate or otherwise impair the effectiveness of any
action taken during the period when this Section 6.1 was in effect and prior to
the last day of such five Business Day period after such failure to pay.
6.2 Holdback Agreements. (a) KLM hereby agrees, during the
period commencing on the date of this Agreement through and including July 31,
1998, not to transfer, sell, assign, exchange, mortgage, pledge, hypothecate or
otherwise dispose of, directly or indirectly, any shares of Series A Preferred
Stock, except (i) to NWA Corp. or (ii) with the prior written consent of NWA
Corp.
(b) (i) KLM hereby agrees, during the period commencing on the
date of this Agreement through and including the earlier of (A) June 1, 1997 and
(B) the 183rd day following the consummation of an offering of securities by NWA
Corp. the proceeds of which are used to pay or prepay the amounts, if any, that
are or become due and payable under the Series A Consideration or any Series B
Consideration, not to transfer, sell, assign, exchange, mortgage, pledge,
hypothecate or otherwise dispose of, directly or indirectly, any Series B
Shares, except (x) to NWA Corp. or (y) with the prior written consent of NWA
Corp.
(ii) KLM hereby agrees, during the period commencing on
the date of this Agreement through and including July 31, 1998, not to transfer,
sell, assign, exchange, mortgage, pledge, hypothecate or otherwise dispose of,
directly or indirectly, any shares of Series B Preferred Stock, except (A) to
NWA Corp., (B) with the prior written consent of NWA Corp. and (C) for Series B
Shares, but solely to the extent that the transfer, sale, assignment, exchange,
mortgage, pledge, hypothecation or other disposition thereof is permitted
pursuant to Section 6.2(b)(i) hereof.
6.3 Certain Actions. If either (a) the Series B Closing does
not occur on or prior to the 30th day following the date of this Agreement (or,
if such 30th day following the date of this Agreement is not a Business Day, on
the next succeeding Business Day) because of the failure of the condition set
forth in Section 5.2(a)(iii) or (b) NWA Corp. fails to pay in cash and in full
any amount that becomes due and payable on a Series B Payment Date in accordance
with the terms of any Series B Consideration and such failure shall not have
been cured within five Business Days thereafter, then as promptly as practicable
after the delivery of an Agent Bank Certificate or after the last day of such
five Business Day period after such failure to pay, as the case may be:
(i) NWA Corp. shall take, in accordance with applicable
law and its Certificate of Incorporation and by-laws, all action
necessary to designate a series of its authorized but unissued
preferred stock having terms identical to the terms of the Series B
Preferred Stock (other than with respect to the liquidation preference
thereof, which shall be $50.00 per share plus accrued and unpaid
dividends thereon) and an aggregate liquidation preference at least
equal to the aggregate liquidation preference of the shares of Series B
Preferred Stock then beneficially owned by KLM (the "New Preferred
Stock");
(ii) KLM shall exchange the shares of Series B Preferred
Stock beneficially owned by KLM for shares of New Preferred Stock with
an aggregate liquidation preference equal to the shares exchanged; and
(iii) NWA Corp. and KLM promptly shall enter into an
amendment to the Series B Registration Rights Agreement, substantially
in the form of Exhibit D hereto; provided, however, that nothing in
this clause (iii) or such amendment shall be deemed to limit, or to
have any effect on, the obligations of KLM pursuant to Section 6.2
hereof.
ARTICLE VII
INDEMNIFICATION
7.1 Tax Indemnification; Contest. (a) NWA Corp. hereby agrees
to indemnify and hold harmless KLM from and against any United States federal
income taxes imposed on a gross income basis, including interest and penalties,
if any ("U.S. Withholding Taxes"), in respect of payments received by KLM for
the Series A Shares and the Series B Shares, or under this indemnity, but only
to the extent that KLM would not have been liable for such U.S. Withholding
Taxes if KLM had sold the Series A Shares and the Series B Shares to an
unrelated third party.
(b) Pursuant to Section 7.1(a) hereof, KLM represents that it
is entitled to the benefits of the income tax treaty between the Kingdom of the
Netherlands and the United States and that, under such treaty, KLM is entitled
to a reduction from 30% to 5% in the rate at which U.S. Withholding Tax is
imposed on dividends received by KLM from NWA Corp. In the event that such
representation is not correct, any indemnification under Section 7.1(a) above
will not exceed the amount which would have been paid if such representation had
been correct. KLM agrees to furnish NWA Corp. with such documents and
certificates as NWA Corp. may reasonably request in connection with KLM's claim
to such reduced rate of U.S. Withholding Tax and any other claims for exemption
from payment of U.S. Withholding Taxes.
(c) Pursuant to Sections 7.1(a) and (b) hereof, NWA Corp.
hereby agrees to withhold a portion of the payments made in exchange for the
Series A Shares and the Series B Shares for U.S. Withholding Taxes only in
respect of the amount of the payments which constitutes accrued dividend income
under Section 305(c) of the Internal Revenue Code or analogous provisions, and
to withhold only 5% of such amount. NWA Corp. will not indemnify KLM under
Section 7.1(a) for such withheld amount.
(d) KLM hereby agrees to notify NWA Corp. in writing, promptly
upon receipt by KLM or one of its Affiliates (but in no event later than 30 days
after receipt), of notice of any pending or threatened United States federal
income tax audit or assessment which may affect the liability of NWA Corp. under
Section 7.1(a) hereof. NWA Corp. shall have the sole right, at the sole cost and
expense of NWA Corp., to represent KLM's interests, in either KLM's name or its
own as appropriate, in any such tax audit (or administrative or court proceeding
relating thereto) and to employ counsel of its choice, select the appropriate
forum, settle or challenge such claim, and make similar relevant decisions and
determinations, all in its sole discretion. KLM shall provide such assistance
and cooperation in respect of any contest as is reasonably requested by NWA
Corp.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Termination or Abandonment of Agreement. This
Agreement may be terminated or abandoned at any time prior to the
Closings hereunder:
(a) by mutual consent of the parties in writing;
(b) by KLM, by written notice to NWA Corp., if there has been
a material breach of any representation, warranty or covenant made in
this Agreement by NWA Corp. and such breach, if it is reasonably
susceptible of being cured, has not been cured within 15 days after
written notice by KLM to NWA Corp. of such breach; or
(c) by NWA Corp., by written notice to KLM, if there has been
a material breach of any representation, warranty or covenant made in
this Agreement by KLM and such breach, if it is reasonably susceptible
of being cured, has not been cured within 15 days after written notice
by NWA Corp. to KLM of such breach.
In the event of any termination of the Agreement as provided
in this Section 8.1, this Agreement shall forthwith become wholly void and of no
further force and effect and there shall be no liability on the part of NWA
Corp. or KLM with respect to any obligations set forth in this Agreement.
Notwithstanding the foregoing provisions of this Section 8.1, but without
prejudice to the provisions of Section 6.1(i) of this Agreement, Sections 6.1,
6.2, 6.3, 7.1, 8.2, 8.5, 8.8, 8.10, 8.11 and 8.12 of this Agreement shall remain
in full force and effect, and termination hereof shall not preclude either party
from suing the other party for breach of this Agreement.
8.2 Expenses. All fees, commissions and other expenses
incurred by any party hereto in connection with the negotiation of this
Agreement and in preparing to consummate the exchange of the Shares and the
other transactions contemplated hereby, including any fees and expenses of their
respective counsel and financial advisors, shall be borne by the party incurring
such fee or expense.
8.3 Execution in Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become a binding agreement when one or more counterparts
have been signed by each party and delivered to the other parties.
8.4 Notices. All notices, request, demands or other
communications provided herein shall be made in writing and shall be deemed to
have been duly given if delivered as follows:
If to NWA Corp.:
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Attention: Senior Vice President, General Counsel
and Secretary
Fax: (612) 726-7123
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson Neely, Esq.
Fax: (212) 455-2502
If to KLM:
Koninklijke Luchtvaart Maatschappij N.V.
Amsterdamseveg 55
1192 G P Amstelveen
The Netherlands
Attention: Senior Vice President and General Counsel
Fax: 011-3120-648-8096
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Daniel Cunningham, Esq.
Fax: (212) 474-3700
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on (i) the date of delivery
if sent by messenger, (ii) on the Business Day following the Business Day on
which delivered to a recognized courier service if sent by overnight courier,
(iii) on the date received, if sent by fax or (iv) on the fifth business day
after the mailing thereof if sent by mail.
8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York as applied to
contracts entered into and to be performed in New York and without regard to the
application of principles of conflict of laws.
8.6 Titles and Headings. Titles and headings to Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
8.7 Successors and Assigns. This Agreement shall not be
assignable by KLM without the prior written consent of NWA Corp. or by NWA Corp.
without the prior written consent of KLM; provided, however, that NWA Corp. may
assign all or any part of its interest in this Agreement to any of its
Affiliates if such Affiliate undertakes in writing to perform NWA Corp.'s
obligations hereunder and provided, further, that no such assignment shall
relieve NWA Corp. of its obligations hereunder and NWA Corp. shall
unconditionally guarantee the performance by such assignee of the obligations of
NWA Corp. hereunder pursuant to a written instrument satisfactory to KLM. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors in interest and assigns.
8.8 Entire Agreement; No Oral Waiver. This Agreement, the
Consideration Agreements and the certificates and other documents contemplated
hereby constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements,
understandings and representations, whether oral or written, of the parties in
connection therewith. No covenant or condition or representation not expressed
in this Agreement shall affect or be effective to interpret, change or restrict
this Agreement. No prior drafts of this Agreement and no words or phrases from
any such prior drafts shall be admissible into evidence in any action, suit or
other proceeding involving this Agreement or the transactions contemplated
hereby. This Agreement may not be changed or terminated orally, nor shall any
change, termination or attempted waiver of any of the provisions of this
Agreement be binding on any party unless in writing signed by the parties
hereto. No modification, waiver, termination, rescission, discharge or
cancellation of this Agreement and no waiver of any provision of or default
under this Agreement shall affect the right of any party thereafter to enforce
any other provision or to exercise any right or remedy in the event of any other
default, whether or not similar.
8.9 Severability. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
8.10 No Third-Party Rights. Nothing in this Agreement,
expressed or implied, shall or is intended to confer upon any Person other than
the parties hereto or their respective successors or assigns, any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement.
8.11 Submission To Jurisdiction. Each of the parties
hereto hereby irrevocably unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to or arising from this Agreement, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the United States
of America sitting in the Southern District of New York;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to its address set forth in Section 8.4; and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other appropriate jurisdiction.
8.12 Certain Litigation Matters. Each party hereto agrees that
the fact of this Agreement, the subject matter hereof, any prior communications
or understandings with respect hereto or thereto or the subject matter hereof or
thereof shall not be referred to in any manner in any litigation pending on the
date hereof to which KLM and NWA Corp. both are parties, or any appeal or
retrial thereof, including without limitation in any recital of facts or
procedural history or in support of or to provide a basis for any claim,
counterclaim, defense or assertion of any kind therein.
8.13 Remedies. In the event of any failure or refusal by any
party to comply with any covenant or agreement contained in this Agreement the
other party shall have the right to pursue the remedy of specific performance.
8.14 Brokers and Finders. Each party shall bear all costs and
expenses, and shall indemnify the other party for all costs and expenses,
relating to the retention by such party of any finder or broker in connection
with the transactions contemplated by this Agreement.
8.15 Further Assurances. From time to time, at the reasonable
request of the other party hereto and without further consideration, each party
hereto shall execute and deliver such additional documents and take all such
further action as may be necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
8.16 Letter Agreement. NWA Corp. hereby confirms and
agrees that nothing in this Agreement shall be deemed to amend or
affect NWA Corp.'s obligations under that certain letter
agreement dated December 23, 1993 between NWA Corp. and KLM with
respect to U.S. withholding taxes.
IN WITNESS WHEREOF, the parties have executed, delivered and
entered into this Agreement as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By: /S/ Thomas S. Schreier, Jr.
Name: Thomas S. Schreier, Jr.
Title: Vice President - Finance
& Asst. Treasurer
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ
N.V.
By: /S/ H.A. Petermeijer
Name: H.A. Petermeijer
Title: Finance Manager Holdings
By:
Name:
Title:
Exhibit A to the
Share Exchange Agreement
FORM OF [SUBORDINATED]1/ NOTE
$____________ New York, New York
_________ __, 1996
FOR VALUE RECEIVED, Northwest Airlines Corporation, a Delaware
corporation ("NWA Corp."), hereby unconditionally promises to pay to Koninklijke
Luchtvaart Maatschappij N.V., a Netherlands corporation ("KLM"), on __________
__, 199_ (the "Maturity Date"), in lawful money of the United States of America
and in immediately available funds, the principal amount of ________________
DOLLARS ($_____________). NWA Corp. further agrees to pay interest on the unpaid
principal amount outstanding hereunder from the date hereof in like money at the
rates and on the dates specified herein.
Interest on any unpaid principal amount referred to in the
previous paragraph shall accrue at a rate per annum equal to LIBOR (as defined
in the Share Exchange Agreement dated as of June __, 1996 (the "Share Exchange
Agreement") between NWA Corp. and KLM) plus 1.125% and shall be payable in full
at the Maturity Date.
If all or a portion of the principal amount (including
interest accrued thereon) of this Note shall not be paid at the Maturity Date,
then, for the period from and including the day following the Maturity Date to
and including the day when payment of the unpaid principal amount (including
interest accrued thereon) of this Note is made, the unpaid principal amount
(including interest accrued thereon) of this Note shall accrue interest at a
rate per annum equal to LIBOR plus 3.125%.
Interest payable hereunder shall be calculated on the basis of
a 360-day year for the actual number of days elapsed in the period for which
payable.
KLM shall not be permitted to transfer, assign or pledge all
or any portion of this Note without the prior written consent of NWA Corp.,
which consent shall not be unreasonably withheld.
NWA Corp. may at any time and from time to time prepay this
Note, in whole or in part, without premium, penalty or discount, provided that
at the time of any prepayment accrued interest with respect to any principal
being prepaid shall also be paid.
- --------
1/ For Series A Consideration only.
[Payment of the principal of and interest on this Note is
subordinated in right of payment to the prior payment in full of all
indebtedness of NWA Corp. under the Credit Agreement (as defined in the Share
Exchange Agreement) (including interest accruing thereon after the filing of a
petition or similar action commencing bankruptcy, reorganization or similar
proceedings), whether outstanding on the date of this Note or hereafter incurred
(the "Senior Indebtedness"), but shall rank pari passu with all unsubordinated,
unsecured indebtedness of NWA Corp., other than the Senior Indebtedness.
This Note will be subordinated to Senior Indebtedness in the
following manner:
(a) in the event of any insolvency, bankruptcy or other
similar proceeding relating to NWA Corp. or its property, any voluntary
liquidation, dissolution or other winding up of NWA Corp., or any
assignment for the benefit of its creditors or any other marshalling of
its assets, all Senior Indebtedness shall first be paid in full before
any payment or distribution is made on account of this Note; and
(b) no payment shall be made by NWA Corp. on account of
principal of or interest on this Note if there shall have occurred a
default in the payment of the principal of or interest on any Senior
Indebtedness, or if there shall have occurred, or such payment would
create, an event of default (or an event which, with the giving of
notice or the passage of time or both, would become an event of
default) with respect to any Senior Indebtedness permitting the holders
thereof to accelerate the maturity thereof, unless and until such
default or event of default shall have been cured or waived or shall
have ceased to exist.]
[Any obligations of NWA Corp. relating to or arising from this
Note, including payment of the principal hereof and interest hereon, shall rank
pari passu with any and all obligations of NWA Corp. under the Credit Agreement
and any unsubordinated, unsecured indebtedness of NWA Corp.]
NWA Corp. hereby waives presentment, demand, protest
and all other notices of any kind.
The following events shall constitute "Events of Default"
hereunder: (a) NWA Corp. fails to pay the principal amount hereof or any
interest thereon on the Maturity Date; or (b)(i) NWA Corp. shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction,
- --------
2/ For Series A Consideration only.
3/ For Series B Consideration only.
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or NWA Corp.
shall make a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against NWA Corp. any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against NWA Corp. any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) NWA Corp. shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) NWA Corp. shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay its debts
as they become due. Upon the occurrence of any Event of Default, KLM may declare
the entire outstanding principal amount hereof and accrued unpaid interest
immediately due and payable.
No payment of principal or interest under this Note or other
payment required to be made by NWA Corp. by the terms of this Note shall be
subject to any right of set-off, counterclaim, defense, abatement, suspension,
deferment or reduction for any reason whatsoever.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS ENTERED INTO AND
TO BE PERFORMED IN NEW YORK AND WITHOUT REGARD TO THE APPLICATION OF PRINCIPLES
OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, NWA Corp. has caused this Note to
be duly executed the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By:____________________________
Name:
Title:
Exhibit B to the
Share Exchange Agreement
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT dated as of ________ __, 1996 (this
"Agreement") between NORTHWEST AIRLINES CORPORATION, a Delaware corporation
("NWA Corp."), and KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a Netherlands
corporation ("KLM").
W I T N E S S E T H:
The parties hereto hereby agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein, terms
which are defined in the Share Exchange Agreement and used herein are used
herein as so defined and the following terms have the following meanings:
"Exchange Agreement Date" means June 28, 1996.
"Purchase Price" means, on the Series B Payment Date
hereunder, an amount equal to the sum of the aggregate Series B Base
Values of all Series B Shares to be purchased and sold on such Series B
Payment Date, plus an amount equal to (A) the aggregate Series B Base
Values of all such Series B Shares multiplied by (B) LIBOR plus 1.125%
multiplied by (C) a fraction, the numerator of which is equal to the
actual number of days from and including the date of the Share Exchange
Agreement to and including such Series B Payment Date and the
denominator of which is 360; provided that, if the Purchase Price for
any Series B Shares shall not be paid on the Series B Payment Date
pursuant to this Agreement, then, solely with respect to such Series B
Shares, for the period from and including the day following such Series
B Payment Date to and including the day when payment of the Purchase
Price is made, the percentage stated in clause (B) above shall be
"3.125%".
"Series B Payment Date" means __________, 199_.1/
"Series B Shares" means an aggregate of _______ shares of
Series B Preferred Stock.
"Share Exchange Agreement" means the Share Exchange Agreement
dated as of June 28, 1996 between NWA Corp. and KLM, as amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
SECTION 2. Purchase and Sale. KLM unconditionally
agrees to sell to NWA Corp., and NWA Corp. unconditionally agrees
- --------
1/ Insert date not later than June 13, 1997.
to purchase from KLM, at the Series B Closing (as defined in Section 5), all of
the Series B Shares.
SECTION 3. Delivery of Shares. At the Series B Closing, KLM
shall deliver to NWA Corp. a certificate or certificates representing all of the
Series B Shares, duly endorsed in blank or accompanied by stock powers duly
executed in blank, with all necessary stock transfer stamps affixed.
SECTION 4. Consideration. At the Series B Closing, NWA Corp.
shall deliver to KLM by wire transfer in immediately available funds to an
account specified by KLM in writing to NWA Corp. no fewer than two Business Days
prior to the Series B Payment Date, an amount in Cash equal to the Purchase
Price for the Series B Shares.
SECTION 5. Closing. The closing of the purchase and sale of
the Series B Shares provided for in this Agreement (the "Series B Closing")
shall take place at the offices of Simpson Thacher & Bartlett at 10:00 a.m., New
York City time, on the Series B Payment Date, or at such other time and place as
the parties hereto shall agree upon in writing.
SECTION 6. Legend; Transfers of Series B Shares. All of the
Series B Shares shall be marked with a legend in the following form:
"THESE SHARES ARE SUBJECT TO AN AGREEMENT TO PURCHASE
THAT IS BINDING ON ALL HOLDERS HEREOF. THE PURCHASE
PRICE AND THE OTHER TERMS OF SUCH AGREEMENT ARE
CONTAINED IN THE SHARE PURCHASE AGREEMENT DATED AS OF
____________, 1996 BETWEEN NORTHWEST AIRLINES
CORPORATION AND KONINKLIJKE LUCHTVAART MAATSCHAPPIJ
N.V."
KLM shall not sell or otherwise transfer any of the Series B
Shares to any Person except to the extent permitted by the Share Exchange
Agreement. Any transferee of the Series B Shares (other than any transferee in a
transfer permitted by the Share Exchange Agreement) shall be bound by this
Agreement as if it were KLM and KLM shall continue to be bound hereby as to any
Series B Shares which it continues to own following any such transfer.
SECTION 7. Miscellaneous. (a) Execution in Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become a binding agreement when
one or more counterparts have been signed by each party and delivered to the
other parties.
(b) Notices. All notices, request, demands or other
communications provided herein shall be made in accordance with the provisions
of Section 8.4 of the Share Exchange Agreement.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York as applied to
contracts entered into and to be performed in New York and without regard to the
application of principles of conflict of laws.
(d) Titles and Headings. Titles and headings to Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
(e) Successors and Assigns. This Agreement shall not be
assignable by KLM without the prior written consent of NWA Corp. or by NWA Corp.
without the prior written consent of KLM; provided, however, that NWA Corp. may
assign all or any part of its interest in this Agreement to any of its
Affiliates if such Affiliate undertakes in writing to perform NWA Corp.'s
obligations hereunder, and provided further that no such assignment shall
relieve NWA Corp. of its obligations hereunder and NWA Corp. shall
unconditionally guarantee the performance by such assignee of the obligations of
NWA Corp. hereunder pursuant to a written instrument satisfactory to KLM. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors in interest and assigns.
(f) Entire Agreement; No Oral Waiver. This Agreement, the
Share Exchange Agreement, the other Consideration Agreements and the
certificates and other documents contemplated hereby and thereby constitute the
entire agreement among the parties pertaining to the subject matter hereof and
supersede all prior and contemporaneous agreements, understandings and
representations, whether oral or written, of the parties in connection
therewith. No prior drafts of this Agreement and no words or phrases from any
such prior drafts shall be admissible into evidence in any action, suit or other
proceeding involving this Agreement or the transactions contemplated hereby.
This Agreement may not be changed or terminated orally, nor shall any change,
termination or attempted waiver of any of the provisions of this Agreement be
binding on any party unless in writing signed by the parties hereto. No
modification, waiver, termination, rescission, discharge or cancellation of this
Agreement and no waiver of any provision of or default under this Agreement
shall affect the right of any party thereafter to enforce any other provision or
to exercise any right or remedy in the event of any other default, whether or
not similar.
(g) Severability. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
(h) Submission To Jurisdiction. Each of the parties
hereto hereby irrevocably unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to or arising from this Agreement, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the United States
of America sitting in the Southern District of New York;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to its address set forth in Section 8.4 of the Share Exchange
Agreement; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other appropriate jurisdiction.
(i) Remedies. In the event of any failure or refusal by any
party to comply with any covenant or agreement contained in this Agreement the
other party shall have the right to pursue the remedy of specific performance.
(j) Brokers and Finders. Each party shall bear all costs and
expenses, and shall indemnify the other party for all costs and expenses,
relating to the retention by such party of any finder or broker in connection
with the transactions contemplated by this Agreement.
(k) Further Assurances. From time to time, at the reasonable
request of the other party hereto and without further consideration, each party
hereto shall execute and deliver such additional documents and take all such
further action as may be necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
(l) Bankruptcy. If (i) NWA Corp. shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or NWA
Corp. shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against NWA Corp. any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against NWA Corp. any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) NWA Corp. shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) NWA Corp. shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay its debts
as they become due, then KLM shall have the right to accelerate the date of the
Series B Closing by notice delivered to NWA Corp.
IN WITNESS WHEREOF, the parties have executed, delivered and
entered into this Agreement as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By:
Name:
Title:
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ
N.V.
By:
Name:
Title:
By:
Name:
Title:
Exhibit C to the
Share Exchange Agreement
PUT/CALL AGREEMENT
PUT/CALL AGREEMENT dated as of ________ __, 1996 (this
"Agreement") between NORTHWEST AIRLINES CORPORATION, a Delaware corporation
("NWA Corp."), and KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a Netherlands
corporation ("KLM").
W I T N E S S E T H:
The parties hereto hereby agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein, terms
which are defined in the Share Exchange Agreement and used herein are used
herein as so defined and the following terms have the following meanings:
"Call Option" means the option to purchase shares of Series B
Preferred Stock granted to NWA Corp. under Section 3 hereof.
"Exchange Agreement Date" means June 28, 1996.
"Exercise Price" means, on any Series B Payment Date
hereunder, an amount equal to the sum of the aggregate Series B Base
Values of the Series B Shares to be purchased and sold on such Series B
Payment Date, plus an amount equal to (A) the aggregate Series B Base
Values of such Series B Shares multiplied by (B) LIBOR plus 1.125%
multiplied by (C) a fraction, the numerator of which is equal to the
actual number of days from and including the date of the Share Exchange
Agreement to and including such Series B Payment Date and the
denominator of which is 360; provided that, if the Exercise Price for
any Series B Shares shall not be paid on any Series B Payment Date
pursuant to this Agreement, then, solely with respect to such Series B
Shares, for the period from and including the day following such Series
B Payment Date to and including the day when payment of the Exercise
Price is made, the percentage stated in clause (B) above shall be
"3.125%".
"Options" means the collective reference to the Put
Option and the Call Option.
"Put Option" means the option to sell shares of Series B
Preferred Stock granted to KLM under Section 2 hereof.
"Series B Payment Date" means the Business Day immediately
following the date of exercise of an Option hereunder; provided that
the Series B Payment Date shall not be later than June 16, 1997.
"Series B Shares" means an aggregate of _______ shares of
Series B Preferred Stock.
"Share Exchange Agreement" means the Share Exchange Agreement
dated as of June 28, 1996 between NWA Corp. and KLM, as amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
SECTION 2. Put Option. (a) NWA Corp. hereby grants to KLM an
irrevocable option to sell to NWA Corp. (and, upon exercise of such option in
accordance herewith, NWA Corp. agrees to purchase from KLM) the Series B Shares
owned by KLM on the date of exercise of the Put Option, on the terms and
conditions set forth herein.
(b) (i) At any time during business hours and before 5:30
p.m., New York City time, on any of June 11, 1997, June 12, 1997 or June 13,
1997, KLM may exercise the Put Option, as a whole and not in part, by delivering
to NWA Corp. at its address and in the manner specified in Section 8.4 of the
Share Exchange Agreement, a written notice of KLM's election to exercise the Put
Option for the Exercise Price set forth herein, which notice shall specify the
Series B Payment Date requested by KLM (if other than the next succeeding
Business Day). Unless otherwise instructed in writing by KLM, payment of the
purchase price for the Series B Shares to be purchased on such Series B Payment
Date shall be made by wire transfer for the account of KLM to Citibank, N.A.,
New York, New York, Account No. 40642577. The Put Option may be exercised only
on one occasion and shall not be exercisable if the Call Option previously has
been exercised (on one or more occasions) with respect to all of the Series B
Shares, unless Series B Payment Date(s) with respect to all of the Series B
Shares subject to the Call Option have occurred, but the purchase(s) and sale(s)
of all the Series B Shares with respect thereto have not occurred.
(ii) The closing of the purchase and sale of the Series B
Shares in connection with any Put Option exercise (the "Series B
Closing") shall take place at the offices of Simpson Thacher & Bartlett
at 10:00 a.m., New York City time, on the Series B Payment Date, or at
such other time and place as the parties hereto shall agree upon in
writing. At the Series B Closing:
(A) KLM shall deliver to NWA Corp. a certificate or
certificates representing all of the Series B Shares with respect to
which the Put Option has been exercised, duly endorsed in blank or
accompanied by stock powers duly executed in blank, with all necessary
stock transfer stamps affixed; and
(B) NWA Corp. shall pay, by wire transfer in immediately
available funds to the account specified by KLM in its notice of
exercise of the Put Option, an amount in cash equal to the Exercise
Price for such Series B Shares.
SECTION 3. Call Option. (a) KLM hereby grants to NWA Corp. an
irrevocable option to purchase from KLM (and, upon exercise of such option in
accordance herewith, KLM agrees to sell to NWA Corp.), on one or more occasions
and from time to time, any or all of the Series B Shares owned by KLM on the
date of exercise of the Call Option, on the terms and conditions set forth
herein.
(b) (i) At any time during business hours and before 5:30
p.m., New York City time, on any Business Day occurring from and including the
date hereof and ending on and including June 3, 1997, NWA Corp. may exercise the
Call Option, as a whole or from time to time in part, by delivering to KLM at
its address and in the manner specified in Section 8.4 of the Share Exchange
Agreement, a written notice of NWA Corp.'s election to exercise the Call Option
for the Exercise Price set forth herein, which notice shall specify the Series B
Payment Date requested by NWA Corp. (if other than the next succeeding Business
Day) and the number of Series B Shares which NWA Corp. desires to purchase
pursuant to such exercise; provided that any such Series B Payment Date
specified in such notice shall in no event be later than June 10, 1997. Unless
otherwise furnished in writing to NWA Corp. by KLM following KLM's receipt of
the notice of exercise pursuant to this Section 3(b)(i), payment of the purchase
price for the Series B Shares elected to be purchased on such Series B Payment
Date shall be made by wire transfer for the account of KLM at Citibank, N.A.,
New York, New York, Account No. 40642577.
(ii) The Series B Closing in connection with any Call Option
exercise shall take place at the offices of Simpson Thacher & Bartlett
at 10:00 a.m., New York City time, on the Series B Payment Date, or at
such other time and place as the parties hereto shall agree upon in
writing. At the Series B Closing:
(A) KLM shall deliver to NWA Corp. a certificate or
certificates representing all of the Series B Shares subject to such
exercise of the Call Option, duly endorsed in blank or accompanied by
stock powers duly executed in blank, with all necessary stock transfer
stamps affixed; and
(B) NWA Corp. shall pay, by wire transfer in immediately
available funds to the account specified by KLM in Section 3(b)(i), an
amount in cash equal to the Exercise Price for such Series B Shares.
SECTION 4. Legend; Transfers of Series B Shares. All of the
Series B Shares shall be marked with a legend in the following form:
"THESE SHARES ARE SUBJECT TO AN OPTION TO PURCHASE THAT
IS BINDING ON ALL HOLDERS HEREOF. THE EXERCISE PRICE
AND THE OTHER TERMS OF SUCH OPTION ARE CONTAINED IN THE
PUT/CALL AGREEMENT DATED AS OF ____________, 1996 BETWEEN
NORTHWEST AIRLINES CORPORATION AND KONINKLIJKE
LUCHTVAART MAATSCHAPPIJ N.V."
KLM shall not sell or otherwise transfer any of the Series B
Shares to any Person except to the extent permitted by the Share Exchange
Agreement. Any transferee of the Series B Shares (other than any transferee in a
transfer permitted by the Share Exchange Agreement) shall be bound by this
Agreement as if it were KLM and KLM shall continue to be bound hereby as to any
Series B Shares which it continues to own following any such transfer.
SECTION 5. Miscellaneous. (a) Execution in Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become a binding agreement when
one or more counterparts have been signed by each party and delivered to the
other parties.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York as applied to
contracts entered into and to be performed in New York and without regard to the
application of principles of conflict of laws.
(c) Titles and Headings. Titles and headings to Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
(d) Successors and Assigns. This Agreement shall not be
assignable by KLM without the prior written consent of NWA Corp. or by NWA Corp.
without the prior written consent of KLM; provided, however, that NWA Corp. may
assign all or any part of its interest in this Agreement to any of its
Affiliates if such Affiliate undertakes in writing to perform NWA Corp.'s
obligations hereunder, and provided further that no such assignment shall
relieve NWA Corp. of its obligations hereunder and NWA Corp. shall
unconditionally guarantee the performance by such assignee of the obligations of
NWA Corp. hereunder pursuant to a written instrument satisfactory to KLM. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors in interest and assigns.
(e) Entire Agreement; No Oral Waiver. This Agreement, the
Share Exchange Agreement, the other Consideration Agreements and the
certificates and other documents contemplated hereby and thereby constitute the
entire agreement among the parties pertaining to the subject matter hereof and
supersede all prior and contemporaneous agreements, understandings and
representations, whether oral or written, of the parties in connection
therewith. No prior drafts of this Agreement and no words or phrases from any
such prior drafts shall be admissible into evidence in any action, suit or other
proceeding involving this Agreement or the transactions contemplated hereby.
This Agreement may not be changed or terminated orally, nor shall any change,
termination or attempted waiver of any of the provisions of this Agreement be
binding on any party unless in writing signed by the parties hereto. No
modification, waiver, termination, rescission, discharge or cancellation of this
Agreement and no waiver of any provision of or default under this Agreement
shall affect the right of any party thereafter to enforce any other provision or
to exercise any right or remedy in the event of any other default, whether or
not similar.
(f) Severability. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
(g) Submission To Jurisdiction. Each of the parties
hereto hereby irrevocably unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the courts of the United States of America
sitting in the Southern District of New York;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to its address set forth in Section 8.4 of the Share Exchange
Agreement; and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other appropriate jurisdiction.
(h) Remedies. In the event of any failure or refusal by any
party to comply with any covenant or agreement contained in this Agreement the
other party shall have the right to pursue the remedy of specific performance.
(i) Brokers and Finders. Each party shall bear all costs and
expenses, and shall indemnify the other party for all costs and expenses,
relating to the retention by such party of any finder or broker in connection
with the transactions contemplated by this Agreement.
(j) Further Assurances. From time to time, at the reasonable
request of the other party hereto and without further consideration, each party
hereto shall execute and deliver such additional documents and take all such
further action as may be necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement.
(k) Bankruptcy. If (i) NWA Corp. shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or NWA
Corp. shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against NWA Corp. any case, proceeding or other action
of a nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against NWA Corp. any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) NWA Corp. shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) NWA Corp. shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay its debts
as they become due, then, notwithstanding anything to contrary contained in this
Agreement, so long as the last date on which the Put Option may be exercised
hereunder shall not have occurred, KLM shall have the immediate right to
exercise the Put Option.
IN WITNESS WHEREOF, the parties have executed, delivered and
entered into this Agreement as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By:
Name:
Title:
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ
N.V.
By:
Name:
Title:
By:
Name:
Title:
Exhibit D to the
Share Exchange Agreement
FIRST AMENDMENT dated as of ______ __, 1996 (this "First
Amendment") to the Series B Preferred Stock Registration Rights Agreement, dated
as of July 21, 1989 (as the same may be further amended, supplemented or
otherwise modified from time to time, the "Registration Rights Agreement"),
originally by and among NORTHWEST AIRLINES CORPORATION (formerly known as Wings
Holdings, Inc.), a Delaware corporation (the "Company"), ELDERS FINANCE INC.,
BANKERS TRUST NEW YORK CORPORATION, KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
("KLM") and WINGS ASSOCIATES, L.P.
W I T N E S S E T H:
WHEREAS, the Company has requested the Holders (as defined in
the Registration Rights Agreement) to amend the Registration Rights Agreement in
the manner provided for herein; and
WHEREAS, the Holders are willing to agree to the requested
amendments upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein, the undersigned hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Registration Rights Agreement and used herein shall have the
meanings given to them in the Registration Rights Agreement.
2. Amendment of Section 1. The definition of "Registrable
Securities" in Section 1 of the Registration Rights Agreement is hereby amended
by deleting in its entirety the first sentence thereof and substituting in lieu
thereof a new first sentence which shall read as follows:
"'Registrable Securities' shall mean any Series B Preferred
Stock issued or issuable pursuant to the Purchase Agreement, any Series
B Preferred Stock which may be issued or distributed in respect thereof
by way of stock dividend or stock split or other distribution,
recapitalization or reclassification and any New Preferred Stock (as
defined in the Share Exchange Agreement dated as of June 28, 1996
between the Company and KLM) issued and exchanged for shares of Series
B Preferred Stock."
3. Amendment to Section 2. Section 2 of the Registration
Rights Agreement is hereby amended by deleting in its entirety paragraph (f)
thereof and substituting in lieu thereof a new paragraph (f) which shall read as
follows:
"(f) Selection of Underwriters. (i) If a requested
registration pursuant to this Section 2 involves an underwritten
offering initiated at KLM's request, KLM shall have the right, in its
sole discretion, to select the investment banker or bankers and
managers to administer the offering.
(ii) Except as otherwise provided in clause (i) above, if a
requested registration pursuant to this Section 2 involves an
underwritten offering, the Company shall have the right to select the
investment banker or bankers and managers to administer the offering;
provided, however, that such investment banker or bankers and managers
shall be reasonably satisfactory to Holders of a majority of the
Registrable Securities which the Company has been requested to
register."
4. Amendment of Section 5. Section 5 of the Registration
Rights Agreement is hereby amended as follows:
(a) by adding the phrase "(only with respect to preferred
equity securities or any securities convertible into or exchangeable or
exercisable for preferred equity securities)" after the phrase "and the
Company hereby also so agrees" in the fourteenth line of paragraph (a)
thereof; and
(b) by deleting therefrom each reference to the words "equity
securities" appearing in the fifteenth and seventeenth lines of
paragraph (a) thereof and substituting in lieu thereof the words
"preferred equity securities".
5. No Other Amendments; Confirmation. Except as expressly
amended hereby, the provisions of the Registration Rights Agreement are and
shall remain in full force and effect.
6. GOVERNING LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS
ENTERED INTO AND TO BE PERFORMED IN NEW YORK AND WITHOUT REGARD TO THE
APPLICATION OF PRINCIPLES OF CONFLICT OF LAWS.
7. Counterparts. This First Amendment may be executed by one
or more of the parties hereto on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By:
Name:
Title:
HOLDERS:
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ
N.V.
By:
Name:
Title:
RICHARD C. BLUM & ASSOCIATES -- NWA
PARTNERS, L.P.
By:
Name:
Title:
FIRST AMENDMENT dated as of July 25, 1996 (this "First
Amendment") to the Share Exchange Agreement, dated as of June 28, 1996 (as the
same may be further amended, supplemented or otherwise modified from time to
time, the "Share Exchange Agreement"), between NORTHWEST AIRLINES CORPORATION, a
Delaware corporation ("NWA Corp.") and KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.,
a Netherlands corporation ("KLM").
W I T N E S S E T H:
WHEREAS, NWA Corp. and KLM desire to amend the Share Exchange
Agreement in the manner provided for herein; and
WHEREAS, NWA Corp. and KLM are willing to agree to the
requested amendments upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein, the undersigned hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Share Exchange Agreement and used herein shall have the meanings
given to them in the Share Exchange Agreement.
2. Amendment of the Recitals. The recitals of the Share
Exchange Agreement are hereby amended as follows:
(a) by deleting in its entirety the first Whereas clause
thereof and substituting in lieu thereof a new first Whereas clause
which shall read as follows:
"WHEREAS, on the date hereof, KLM is the beneficial owner of
(i) 3,691.2 shares (the "Series A Shares") of NWA Corp.'s Series A
Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), and (ii) 2,962.8 shares (the "Series B Shares" and, together
with the Series A Shares, the "Shares") of NWA Corp.'s Series B
Preferred Stock, par value $.01 per share (the "Series B Preferred
Stock");" and
(b) by deleting in its entirety the second Whereas clause
thereof and substituting in lieu thereof a new second Whereas clause
which shall read as follows:
"WHEREAS, on the date hereof, in addition to the Series A
Shares and the Series B Shares, KLM is the beneficial owner of 1,308.8
shares of Series A Preferred Stock and 436.2 shares of Series B
Preferred Stock; and"
3. Amendment to Subsection 1.1. Subsection 1.1 of the Share
Exchange Agreement is hereby amended by deleting in its entirety the definition
of "Series B Base Value" appearing therein and substituting in lieu thereof the
following new definition:
"Series B Base Value" means, for each Series B Share, the
present value as of the Series B Closing Date, discounted at a rate of
12.00% per annum, of the payments scheduled to be made in the amounts
and on the dates set forth on Schedule I hereto, divided by the total
number of Series B Shares as of the date of this Agreement. If the
Series B Closing Date were July 28, 1996, the aggregate Series B Base
Values of the Series B Shares would be $152,235,344.99."
4. No Other Amendments; Confirmation. Except as expressly
amended hereby, the provisions of the Share Exchange Agreement are and shall
remain in full force and effect.
5. GOVERNING LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS
ENTERED INTO AND TO BE PERFORMED IN NEW YORK AND WITHOUT REGARD TO THE
APPLICATION OF PRINCIPLES OF CONFLICT OF LAWS.
6. Counterparts. This First Amendment may be executed by one
or more of the parties hereto on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By: /S/ Joseph E. Francht, Jr.
Name: Joseph E. Francht, Jr.
Title: Senior Vice President
Finance and Treasurer
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
By: /S/ H.A. Petermeijer
Name: H.A. Petermeijer
Title: Finance Manager Holdings
EXHIBIT 11.1
<TABLE>
<CAPTION>
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS) Three months ended June 30 Six months ended June 30
-------------------------------- --------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Reconciliation of net income applicable to common
stockholders:
Net income before preferred stock requirements $ 202.8 $ 104.8 $ 256.2 $ 107.4
Preferred stock requirements (13.2) (14.6) (26.2) (29.1)
-------------- -------------- -------------- --------------
Income applicable to common stockholders
before exchange of preferred stock 189.6 90.2 230.0 78.3
Exchange of preferred stock -- -- -- 59.2
-------------- -------------- -------------- --------------
Net income applicable to common stockholders $ 189.6 $ 90.2 $ 230.0 $ 137.5
============== ============== ============== ==============
Reconciliation of weighted average number of shares
outstanding to amount used in primary earnings
per share computation:
Weighted average number of common shares
outstanding, excluding shares issued to
employee trusts 81,954,755 80,867,076 81,841,806 80,507,423
Weighted average number of common shares earned by
employees since August 1, 1993 due to the exercise
of the Series C Preferred Stock special conversion
option in February 1994 15,339,779 9,844,933 14,652,924 9,161,872
Stock options issued reduced by the number of
shares which could have been purchased with
the proceeds from exercise of such options 2,385,153 2,946,299 2,530,315 2,776,347
-------------- -------------- -------------- --------------
Weighted average number of common shares
outstanding, as adjusted 99,679,687 93,658,308 99,025,045 92,445,642
============== ============== ============== ==============
Earnings per common share - primary:
Before exchange of preferred stock $ 1.90 $ .96 $ 2.32 $ .85
Exchange of preferred stock -- -- -- .64
-------------- -------------- -------------- --------------
Earnings per common share $ 1.90 $ .96 $ 2.32 $ 1.49
============== ============== ============== ==============
</TABLE>
Exhibit 11.2
<TABLE>
<CAPTION>
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS) Three months ended June 30 Six months ended June 30
-------------------------------- --------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Reconciliation of net income applicable to common
stockholders:
Net income before preferred stock requirements $ 202.8 $ 104.8 $ 256.2 $ 107.4
Preferred stock requirements (13.2) (14.6) (26.2) (29.1)
Addback: Series C Preferred Stock requirements -- 2.3 -- 4.4
--------------- --------------- --------------- ------------
Income applicable to common stockholders
before exchange of preferred stock 189.6 92.5 230.0 82.7
Exchange of preferred stock -- -- -- 59.2
--------------- --------------- --------------- ------------
Net income applicable to common stockholders, as adjusted $ 189.6 $ 92.5 $ 230.0 $ 141.9
=============== =============== =============== ============
Reconciliation of weighted average number of shares
outstanding to amount used in fully diluted earnings
per share computation:
Weighted average number of common shares
outstanding, excluding shares issued to
employee trusts 81,954,755 80,867,076 81,841,806 80,507,423
Weighted average number of common shares earned by
employees since August 1, 1993 due to the exercise
of the Series C Preferred Stock special conversion
option in February 1994 15,339,779 9,844,933 14,652,924 9,161,872
Weighted average number of shares of Series C
Preferred Stock earned by employees since August 1,
1993 for which the special conversion option was not
elected and assumed to be converted to common stock 10,826,077 6,948,079 10,341,327 6,466,008
Stock options issued reduced by the number of
shares which could have been purchased with
the proceeds from exercise of such options 2,385,153 3,174,046 2,557,540 3,263,203
--------------- --------------- --------------- ------------
Weighted average number of common shares
outstanding, as adjusted 110,505,764 100,834,134 109,393,597 99,398,506
=============== =============== =============== ============
Earnings per common share assuming full dilution:
Before exchange of preferred stock $ 1.72 $ .92 $ 2.10 $ .84
Exchange of preferred stock -- -- -- .59
--------------- --------------- --------------- ------------
Earnings per common share $ 1.72 $ .92 $ 2.10 $ 1.43
=============== =============== =============== ============
</TABLE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------------------
1996 1995 1996 1995
------- ------- ------- -------
EARNINGS:
<S> <C> <C> <C> <C>
Income before income taxes $ 331.2 $ 166.1 $ 418.9 $ 170.6
Less: Income from less than 50%
owned investees 6.8 2.1 10.6 1.8
Add:
Rent expense representative of interest (1) 47.7 49.6 93.8 96.0
Interest expense net of capitalized interest 62.0 96.3 127.7 196.8
Interest of mandatorily redeemable
preferred security holder 6.9 -- 13.9 --
Amortization of debt discount and expense 3.6 3.3 6.5 6.5
Amortization of interest capitalized 0.7 0.8 1.5 2.0
------- ------- ------- -------
ADJUSTED EARNINGS $ 445.3 $ 314.0 $ 651.7 $ 470.1
======= ======= ======= =======
FIXED CHARGES:
Rent expense representative of interest (1) $ 47.7 $ 49.6 $ 93.8 $ 96.0
Interest expense net of capitalized interest 62.0 96.3 127.7 196.8
Interest of mandatorily redeemable
preferred security holder 6.9 -- 13.9 --
Amortization of debt discount and expense 3.6 3.3 6.5 6.5
Capitalized interest 1.4 3.7 3.6 6.1
------- ------- ------- -------
FIXED CHARGES $ 121.6 $ 152.9 $ 245.5 $ 305.4
======= ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES 3.66 2.05 2.65 1.54
======= ======= ======= =======
</TABLE>
(1) Calculated as one-third of rentals, which is considered representative
of the interest factor.
EXHIBIT 12.2
<TABLE>
<CAPTION>
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK REQUIREMENTS
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------- -----------------
1996 1995 1996 1995
------- ------- ------- -------
EARNINGS:
<S> <C> <C> <C> <C>
Income before income taxes $ 331.2 $ 166.1 $ 418.9 $ 170.6
Less: Income from less than 50%
owned investees 6.8 2.1 10.6 1.8
Add:
Rent expense representative of interest (1) 47.7 49.6 93.8 96.0
Interest expense net of capitalized interest 62.0 96.3 127.7 196.8
Interest of mandatorily redeemable
preferred security holder 6.9 -- 13.9 --
Amortization of debt discount and expense 3.6 3.3 6.5 6.5
Amortization of interest capitalized 0.7 0.8 1.5 2.0
------- ------- ------- -------
ADJUSTED EARNINGS $ 445.3 $ 314.0 $ 651.7 $ 470.1
======= ======= ======= =======
FIXED CHARGES:
Rent expense representative of interest (1) $ 47.7 $ 49.6 $ 93.8 $ 96.0
Interest expense net of capitalized interest 62.0 96.3 127.7 196.8
Interest of mandatorily redeemable
preferred security holder 6.9 -- 13.9 --
Preferred stock requirements 21.6 23.1 42.8 46.2
Amortization of debt discount and expense 3.6 3.3 6.5 6.5
Capitalized interest 1.4 3.7 3.6 6.1
------- ------- ------- -------
FIXED CHARGES $ 143.2 $ 176.0 $ 288.3 $ 351.6
======= ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK REQUIREMENTS 3.11 1.78 2.26 1.34
======= ======= ======= =======
</TABLE>
(1) Calculated as one-third of rentals, which is considered representative
of the interest factor.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 963
<SECURITIES> 367
<RECEIVABLES> 759
<ALLOWANCES> 24
<INVENTORY> 261
<CURRENT-ASSETS> 2,597
<PP&E> 5,769
<DEPRECIATION> 1,559
<TOTAL-ASSETS> 8,764
<CURRENT-LIABILITIES> 2,985
<BONDS> 0
1,028
0
<COMMON> 1
<OTHER-SE> (455)
<TOTAL-LIABILITY-AND-EQUITY> 8,764
<SALES> 2,540
<TOTAL-REVENUES> 2,540
<CGS> 0
<TOTAL-COSTS> 2,166
<OTHER-EXPENSES> (44)
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> (66)
<INCOME-PRETAX> 331
<INCOME-TAX> 128
<INCOME-CONTINUING> 203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 203
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.72
</TABLE>
